May 30, 2014 Volume XL, Issue V Vivendi S.A. OTC: VIVEF, Euronext Paris: VIV.PA

Dow Jones Indus: 16,717.17 Initially Probed: Volume XXXIX, Issue I @ €16.02 S&P 500: 1,923.57 Last Probed: Volume XXXIX, Issue XI &XII @ €17.92 Russell 2000: 1,134.50 Trigger: No Index Component: CAC 40 Type of Situation: Business Value, Restructuring

Price: € 19.24 Shares Outstanding (MM): 1,340.8 Fully Diluted (MM) (% Increase): 1,348.7 (0.6%) Average Daily Volume (MM): 5.5 Market Cap (MM): € 25,949 Enterprise Value (MM): € 37,191 Percentage Closely Held: Bolloré SA 5% 52-Week High/Low: € 21.25/14.13

Trailing Twelve Months Price/Earnings: 34.2x

Price/Stated Book Value: 1.4x Introduction Long-Term Debt (MM): € 8,309 Vivendi S.A. (“Vivendi,” “VIV,” or “the Company”) Implied Upside to Estimate of is a French holding company with a collection of leading Intrinsic Value: 30% global telecom and entertainment properties. Since we Dividend: last profiled Vivendi in January 2013, the Company has rapidly accelerated the pace of its strategic review of all Payout: € 1.00 business lines. This has produced the divestiture of its Yield: 5.2% majority stakes in leading video game publisher Net Revenue Per Share: Activision and sub-Sahara African telecom operator TTM: € 9.00 Maroc Telecom for close to €11 billion combined. 2013: € 8.99 Vivendi also acquired Lagardère’s 20% minority stake 2012: € 8.71 in the Company’s Canal+ France subsidiary for €1.0 billion. Most notably, in April 2014 Vivendi agreed Earnings Per Share: to sell its largest business unit (>20% of revenues), TTM: € 0.57 #2 French telecom operator SFR, to French cable 2011: € 0.55 company Numericable for €13.5 billion plus a 20% 2010: € 0.51 equity stake in the combined entity. Excluding the Activision sale, we believe these transactions were Fiscal Year Ends: December 31 struck at favorable prices for Vivendi shareholders. In Company Address: 42 Avenue de Friedland particular, the SFR sale unloaded a capital-intensive 75380 Paris cedex 08 telecom business suffering from a bruising price war at France a valuation (7x EBITDA) well above our prior intrinsic Telephone: (212) 572-1334 value estimate or E.U. average telecom valuations. CEO: Jean-François Dubos Following these strategic actions, we believe Clients of Boyar Asset Management, Inc. own 4,850 shares of Vivendi Vivendi is in a far better position today from both a S.A. common stock at a cost of $25.49 per share. financial and operating perspective. Vivendi’s vast Analysts employed by Boyar’s Intrinsic Value Research LLC do not own conglomerate has shrunk to three businesses, each of shares of Vivendi S.A. common stock. which is a leader in its market: Canal+ Group, the #1

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French pay TV platform that also owns an attractive emerging markets footprint; Universal Music Group, which holds >30% market share in a global music industry that is finally showing signs of promise in the digital era; and GVT, the fastest-growing high-speed broadband and pay TV provider in the extremely attractive Brazilian market.

From a balance sheet perspective, following the close of the pending transactions Vivendi will transition from €11 billion in net debt to €6 billion in net cash. Inclusive of liquid, minority equity investments, pro forma net cash is ~€11 billion or €9/share. The Company’s rapid strategic realignment reflects the burgeoning influence of French investment tycoon Vincent Bolloré, who has been proceeding to revamp the Company’s management and board (including his pending assumption of the chairman’s position) since he acquired a 5% stake in Vivendi in late 2012. Mr. Bolloré has a cash flow-driven, long-term investment philosophy and an equally long- term investment track record to back it up.

In sum, we believe Vivendi is in a far superior position today—financially, operationally, and managerially—than at any time in memory. Yet despite these favorable developments, we believe Vivendi still trades at a substantial discount to intrinsic value. Vivendi shares have gained 28% (total return) since AAF last profiled VIV (vs. 19% CAC 40 price appreciation), but in our view the Company’s intrinsic value has increased at least as steeply given the favorably-priced transactions. Utilizing a sum-of-the-parts valuation and relatively conservative financial projections, we estimate Vivendi’s intrinsic value is approximately €25 per share or 30% above the current price. We see multiple catalysts for closing this discount in the coming years including return of capital to shareholders (Vivendi recently announced a €5 billion capital return but will have capacity for far greater deployment soon), opportunistic divestitures or mergers of any of its 3 business units, and/or the pursuit of accretive acquisitions within the media and content fields. While Vivendi’s large cash hoard presents a risk of being deployed in a value-destroying manner, we are cautiously optimistic this will not be the case given the Company’s new management team and the attractive prospective returns offered by a recapitalization.

Revisiting Vivendi’s Strategic Realignment: Accelerated Schedule In Asset Analysis Focus’s January 2013 report revisiting Vivendi, we discussed the conglomerate’s wave of major transactions since we last featured the Company in 2001. The moves were spurred by the massive debt load and the downfall of former chairman and CEO Jean-Marie Messier that followed a streak of acquisitions culminating with Seagram in December 2000. The subsequent, long-developing repositioning into a telecom and media/entertainment-focused holding company finally concluded with the assumption of full control over #2 French telecom operator SFR via an €8 billion transaction with Vodafone in August 2011. Like much of Vivendi’s historical M&A activity (both in terms of acquisitions and divestitures), this proved ill-timed as the entrance of a fourth French telecom competitor (Iliad SA/Free) in January 2012 produced a value-destroying price war that has yet to fully subside. However, by January 2013 AAF was encouraged by the Company’s ongoing strategic review in conjunction with the departure of its longtime CEO and the arrival of French investment mogul Vincent Bolloré (whose holding company Bolloré Group had acquired a 5% stake in Vivendi in 2012). The potential for Vivendi to split off its telecom businesses and refocus as a content and media company was particularly appealing in light of Vivendi shares’ expanding holding company discount.

Vivendi’s progress with the strategic overhaul over the ensuing 16 months has been much faster than we could have hoped for, and we believe the completed/pending transactions largely were structured at favorable terms. We detail the transactions in the following sections.

SFR By far the most momentous of Vivendi’s recently announced corporate actions is the pending divestiture of the Company’s French mobile telecom unit SFR. SFR had only been wholly owned by Vivendi for a little over 2 years (Vodafone previously held 44%) and accounted for >40% of Vivendi’s consolidated revenue, but Vivendi’s managerial shakeup as well as the deteriorating competitive environment led the Company to review SFR’s strategic role. In November 2013, Vivendi’s supervisory board approved the planned demerger of SFR, which put VIV on the road to formally spinning off SFR following approval at the Company’s June 2014 shareholders’ meeting. However, the board remained open to alternative transactions. As we noted in our December 2013 Forgotten Forty report, management at French cable operator Numericable had recently reiterated its interest in a combination with SFR. Numericable is controlled by French cable/telecom tycoon Patrick Drahi’s Altice Group and gained additional liquidity with its November 2013 IPO. In March 2014, Vivendi

- 34 - Vivendi S.A. disclosed it had received two competing bids for SFR. Numericable offered €11.75 billion cash plus a 32% interest in the combined entity. In addition to Numericable, the third largest French telecom operator Bouygues SA was also revealed to be a highly motivated bidder. Bouygues reportedly made an offer of €10.5 billion cash and a 46% stake in the merged company. A bidding war soon ensued, and following at least 2 rounds of bids from Numericable and 5 bids from Bouygues, in April 2014 Vivendi’s board voted to approve a sale to Numericable. SFR accepted Numericable’s revised offer of €13.5 billion cash plus a 20% stake in the combined SFR-Numericable. Vivendi will retain minority board representation rights at SFR-Numericable as long as it holds its 20% stake, which can be sold or distributed following a one year lockup. Altice also received call options to acquire Vivendi’s minority interest in 3 tranches between the 19th and 43rd months following the close of the transaction. The call options are struck at the then-current market value with a floor price corresponding to Numericable’s pre-announcement share price plus a 5% annual gross-up.

Including the 20% interest in the New SFR—Numericable Group initially valued at approximately €2 billion and an additional €750 million earn-out (if SFR-Numericable’s EBITDA less capex exceeds €2 billion), the accepted deal represented a total value of approximately €16.3 billion, or 6.5x SFR’s consensus 2014E EBITDA of €2.4 billion. According to Vivendi’s estimates, the value exceeded €17 billion or 7x 2014E EBITDA including its share of combined synergies. In either case, we view this as a highly attractive exit price for Vivendi, representing a substantial premium to a median multiple of 6.0x EV/EBITDA for E.U. telecom peers and a larger premium vs. French telecom peer valuations prior to when consolidation talks began to heat up. The valuation also represents a substantial premium to AAF’s prior intrinsic value estimates of 5.0x-5.5x forward EBITDA for SFR and is even roughly in line with Vivendi’s SFR-Vodafone transaction in 2011 (although SFR’s EBITDA was far higher at the time).

The final deal valuation was roughly comparable to Bouygues’ reported final offer of €15.5 billion cash and a 5% stake in Bouygues-SFR. While a combination with Bouygues offered attractive synergy potential within the wireless business, it also would have presented a much greater regulatory hurdle as French competition authorities sent mixed signals on the prospects for allowing 4-to-3 consolidation in the telecom industry. The Numericable deal also allowed Vivendi shareholders greater participation in the upside via SFR-Numericable equity. A combination with SFR will only increase Numericable’s 51% market share in the attractive, underpenetrated French high-speed consumer broadband market, consolidate the number 2 and 3 B2B telecom providers, and provide more cash flow for investment. The combination also presents attractive fixed and mobile product bundling opportunities and Numericable estimates total EBITDA and capex synergies could reach €1 billion. In fact, Numericable shares are already up >50% from the pre-announcement price. The deal is expected to close in 4Q 2014.

Activision Blizzard In July 2013, Vivendi reached an agreement to sell 88% of its controlling (then ~61%) equity stake in publicly-traded U.S. video game publisher Activision Blizzard (ATVI) for $8.2 billion. Vivendi sold 429 million shares directly to ATVI and 172 million shares to a consortium of investors led by ATVI’s CEO Bobby Kotick and chairman Brian Kelly. The $13.60 per share price for the sales represented a 10% discount to ATVI’s pre- announcement share price. In our view, Vivendi should have commanded a premium rather than a substantial discount considering Vivendi was ceding a 53.5% (pre-deal) controlling interest in Activision; the market appeared to agree that ATVI got the better end of the deal, with ATVI shares immediately surging 15% upon the announcement. Further, Activision has continued to beat expectations and shares now trade hands at $20.78. As an alternative, a spinoff-merger of Vivendi’s stake in Activision and a recapitalization (ATVI held $4 billion in cash at the time of the transaction) clearly could have realized substantial incremental value for Vivendi shareholders. On the plus side, the transaction finally concluded the long-lasting uncertainty over Vivendi’s strategic interest and the capital allocation policy at Activision. Additionally, Vivendi retained 83 million ATVI shares (representing an 11.9% interest following the repurchase) eligible for sale under a 15 month staggered lock-up. Vivendi sold 41.5 million of the shares for approximately $850 million ($20.48/share) on May 22, 2014 and expressed its intention to fully exit from the remaining Activision stake in due course.

Maroc Telecom In November 2013, Vivendi reached an agreement with UAE telecom company Etisalat to sell its 53% stake in Maroc Telecom for €4.2 billion. The transaction was completed at a reasonable 6.2x EBITDA, especially considering the uncertainties involved with running a business regulated and 30% owned by the

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Kingdom of Morocco. Following temporary delays related to funding issues and regulatory hurdles with Morocco, the deal was completed in May 2014.

Canal+ France In November 2013, Vivendi acquired Lagardère Group’s 20% minority stake in Canal+ France. This followed years of on-and-off negotiations including explorations toward an IPO of Lagardère’s stake and disputes over participation rights and other lawsuits. The agreement was struck at €1.02 billion. The deal represented a discount to Lagardère’s reported €1.2 billion asking price and a highly attractive multiple for Vivendi of 6.2x Canal+ France’s 2014E EV/EBITDA.

UMG/EMI Divestitures Heading into 2013, Vivendi’s Universal Music Group (UMG) aimed to raise upwards of €500 million from divestitures mandated to satisfy regulatory conditions associated with the €1.4 billion acquisition of EMI in September 2012. The Company was optimistic it could sell assets at a comparable multiple to the 7x EBITDA of the EMI transaction, and ultimately this proved true. The Company raised €679 million in 2013, primarily via the sale of Parlophone Label Group to Warner Music for €591 in July as well as divestments of several smaller labels.

New Management Team Takes Shape Vivendi’s rapid strategic realignment reflects the positive influence of the Company’s managerial shakeup. The far-reaching shakeup has extended from the executive suite to the board room, and can be dated at least to the departure of longtime CEO Jean-Bernard Lévy and several deputies in June 2012 following disagreement with chairman Jean-René Fourtou over the firm’s strategic direction and whether to dismantle the conglomerate. We would also credit the expanding influence of Vincent Bolloré as the key driving factor in the Company’s strategic realignment. Mr. Bolloré’s family holding company Bolloré SA built a 5% stake via additional open market purchases in October 2012 following the sale of Bolloré’s French free-to-air (FTA) TV stations in exchange for Vivendi stock in late 2011. Mr. Bolloré joined Vivendi’s board in December 2012, was named vice chairman in 2013, and in November 2013 the board confirmed Mr. Bolloré will be nominated chairman at the June 2014 shareholders’ meeting. Mr. Bolloré has already begun to repopulate the Company’s executive ranks. On January 1, 2014, Arnaud de Puyfontaine was named senior executive vice president of media and content activities and Hervé Philippe was appointed CFO. Mr. Puyfontaine was reported to be Mr. Bolloré’s preferred candidate and is expected to be named chairman of the management board later this year. Mr. Puyfontaine was most recently EVP of Hearst Magazines International. Mr. Philippe served under Mr. Bolloré as CFO of Havas SA since 2005 and deputy CEO since 2010. Vivendi’s board is also being overhauled. In addition to Mr. Bolloré, 4 new directors have joined Vivendi’s board since 2012 with 3 additional first-time nominees slated for the June 2014 shareholders’ meeting.

Considering Vivendi’s inconsistent strategic direction and languid stock performance over the decade preceding Mr. Bolloré’s arrival, we are optimistic about his assumption of a leadership position. Mr. Bolloré has earned a reputation for shareholder value creation with an astute, very long-term investment philosophy since becoming the 6th generation head of the family holding company in 1981, steering the company from near bankruptcy to a current €11 billion market value. Just looking over the past 10 years, Bolloré SA shares have produced a commendable 773% total return or ~25% CAGR in shareholder value. Mr. Bolloré’s experience in favorably repositioning a legacy holding company could be particularly relevant in the case of Vivendi. Furthermore, we sympathize with his focus on free cash flow generation and preference for low capital intensity businesses, which is already evident in Vivendi’s move away from telecom toward a more focused media and content Company since his arrival. Excluding the Activision divestiture, we believe these transactions have also been executed at relatively favorable valuations. As detailed later, the reorganization will eliminate Vivendi’s debt burden and provide liquidity for Vivendi to unlock shareholder value in the coming years, whether via return of capital and/or new investments.

Business Review and Long-Term Outlook Following the series of recent divestitures, today Vivendi is a much simpler Company from an operational standpoint. Pro forma for the pending SFR divestiture, Vivendi’s operating results are roughly evenly

- 36 - Vivendi S.A. split between 3 assets on an EBITA1 basis: Pay TV operator Canal+ Group, music publisher Universal Music Group (UMG), and Brazilian fixed telecom operator GVT. Per Vivendi’s goal, 100% of operating revenues are now derived from media and content businesses (although we might quibble with the definition of GVT as a traditional media company). As detailed below, we believe each of these businesses holds a leading competitive position with attractive long-term prospects—despite some near- to medium-term headwinds. We would also note Vivendi has minority stakes in or wholly owns several attractive growth stage digital media businesses valued at €1 billion collectively including Spotify (5%), Beats Electronics (~13% prior to the recently-announced $3 billion acquisition by Apple), Vevo (47%), Studio Bagel (60%), Maker Studios (undisclosed minority investment), and Digitick and See Tickets UK (100% each).

Vivendi Business Transformation: 2010 vs. 2013 Pro Forma Post-Transaction (€ million) Fiscal year ended December 31, 2010 2013 Pro Forma Revenue Adj. EBIT1 Revenue Adj. EBIT1 Canal+ Group €4,712 690 5,311 611 Universal Music Group 4,449 507 4,886 511 GVT 1,029 277 1,709 405 SFR 12,577 2,472 – – Activision Blizzard 3,330 692 – – Maroc Telecom Group 2,835 1,284 – – Holding & Corporate (127) – (87) Noncore, intersegment (54) (33) 55 (80) Consolidated Vivendi €28,878 €5,726 €11,961 €1,360

Breakdown of EBITA1

Source: Vivendi Company Presentation

From a geographical perspective, Vivendi’s new footprint is now less concentrated in lower-growth Western Europe with greater focus in higher-growth emerging markets. The Company generates approximately 15% of revenue in Brazil (nearly all from GVT) and has attractive assets in Vietnam and Africa via Canal+.

1 Note: Consolidated results in €millions, unadjusted for results attributable minority owners. GVT has been consolidated since November 12, 2009. Adjusted EBIT (EBITA) measures earnings before interest and taxes (EBIT), amortization of intangible assets acquired through business combinations, impairment of goodwill and other acquired intangibles, impacts related to financial investing transactions, and other financial charges and income.

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Vivendi Geographical Footprint (2013 Revenue Pro Forma)

Rest of World 10% Brazil 15% France 37%

North America 17% Rest of Europe 21%

GVT SA Launched in 2000 and acquired by Vivendi in a series of transactions from 2009-2010, GVT (Global Village Telecom) is an alternative Brazilian wireline telecom provider. GVT provides fixed line, broadband, pay TV and VoIP services. We view GVT as a unique asset in the highly attractive Brazilian residential/SME (small and medium-sized enterprises) broadband Internet market. GVT has an extensive backbone carrying most of its traffic and its own local loop network with fiber to the curb and short last miles, enabling GVT to offer unmatched broadband Internet speeds in many markets. As a newer alternative telecom entrant, GVT also benefits from a nationwide, all-service license without the burdens of universal service requirements or price caps faced by the incumbents who trace back to the privatization of the state-run monopoly at the turn of the century. This allows GVT to selectively target investment toward more attractive markets. GVT passes 10.7 million homes with 4.0 million voice and 2.7 million broadband Internet RGUs (revenue generating units)— 87% of which receive > 10 Mbps data speed. GVT generated €1.7 billion in sales and €707 million EBITDA in 2013.

GVT Historical Financial Performance 2009 2010 2011 2012 2013 Revenues Telecoms €601 €1,029 €1,444 €1,434 €1,382 Pay TV – – €2 €83 €174 Corp. & Wholesale – – – €199 €153 Total Revenues €601 €1,029 €1,446 €1,716 €1,709 Total Revenues in BRL (millions) 1,686 2,413 3,354 4,300 4,862

EBITDA Total EBITDA €240 €431 €601 €740 €707 EBITDA margin 39.9% 41.9% 41.6% 43.1% 41.4% EBITA €114 €277 €396 €488 €405

Capex NA €482 €705 €947 €769 CFFO after capex, pretax unlevered NA € (69) €(147) €(326) €(91)

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GVT posted impressive growth since launching at the turn of the century, with revenue compounding at 40%-plus annually through 2011 while EBITDA margins climbed above 40%. More recently, growth and profitability have been impacted by the marked slowdown in the Brazilian economy and increased telecom pricing competition. Reported revenue growth in euros slowed to 18.6% in 2012 before declining 0.4% to €1.709 billion in 2013 and falling another 7.6% Y/Y to €405 in 1Q14. In addition to the price competition, increased programming and marketing costs associated with pay TV expansion and weaker customer credit performance contributed to a ~140 bps decline in EBITDA margins to 41.4% in 2013.

In addition to the current competitive/macro pressures, the recent deceleration reflects some maturation of GVT’s business from its earlier growth/investment phase. However, we would emphasize that the steep decline in the Brazilian real versus the euro (BRL/EUR down 10% since the start of 2013 and 20% versus year- end 2012) has exacerbated the impact on Vivendi’s consolidated financials. GVT’s telecom lines in service (LIS) still increased 14.4% in 2013 to 6.55 million and were up 15% Y/Y to 6.75 million in 1Q 2014. In constant currency, revenue still increased 28.2% in 2012, 13.1% in 2013 and 12.6% in 1Q14. Notably, GVT also appears to have turned a corner in terms of profitable growth. After years of net investment, capex is slowing (from 55.2% of revenue in 2013 to 45.0% in 2013) and EBITDA less capex turned positive (+€63 million, or 7.6% margin) during 2H 2013. Going forward, Vivendi’s new management team has emphasized GVT will weigh customer credit quality and ARPU (average monthly revenue per user) against a singular focus on customer acquisition. The Company also is implementing a more deliberate pace in its network build-out going forward, targeting markets with the highest profit potential. GVT expanded its network footprint by 299k homes in 1Q 2014 vs. 462k in 1Q 2013.

GVT Customer Base (000s) Lines in Service: 2009 2010 2011 2012 2013 Retail and SME 2,085 3,035 4,372 6,134 7,198 of which Voice 1,396 1,940 2,709 3,489 3,934 Broadband Internet 689 1,095 1,663 2,239 2,621 proportion of broadband >10 Mbps 64% 75% 80% 86% Pay TV 0 0 32 406 643

Longer-term, GVT still possesses a tremendous runway for growth. GVT’s broadband Internet penetration stood at 25.2% of homes passed at 1Q14, up from 24.1% a year earlier but still very far from maturity. Pay TV represents another opportunity. Since launching a pay TV distribution service (utilizing a combination of satellite, DTT, and IPTV delivery) in late 2011, subscribership has rapidly advanced to 715k as of March 31, 2014. Pay TV subscribers increased 58% in 2013 while revenue more than doubled to €174 million. The growth rate in 2013 looks to carry into 2014, with 1Q14 pay TV subs up 55% and revenues up 61.1% Y/Y in constant currency. Just within GVT’s existing broadband customer base alone, there is still plenty of opportunity for incremental pay TV and triple play adoption. Triple play penetration stood at just 26.5% of GVT’s retail broadband base at the end of 1Q 2014. Even without further build-out, homes passed by GVT’s network should continue to grow organically due to Brazil’s attractive demographic trends—population growth, growth in the middle and upper socioeconomic classes, and a continued uptick in the urbanization rate.

Furthermore, despite the prudent slowdown in network expansion, there is still plenty of room for GVT to continue to grow its network coverage over the long-term. GVT holds only a 12.3% broadband share (up 90 bps Y/Y) and 9.15% fixed line share (up 2.03% Y/Y) as of 2013. GVT’s pay TV market share is just 3.8%. GVT’s network covers 10.7 million homes/SMEs vs. the Company’s estimated addressable market of 22 million high- end residential homes and SMEs as of 2009—and likely millions more today. Likewise, GVT had a presence in 150 cities at the end of 2013, less than halfway to its April 2012 target of reaching ~185 cities in 2017. For example, GVT only began to roll-out retail services in Sao Paolo (the largest city in Brazil with a municipal population of 11 million and metro population of 21 million) in late 2013. On a combined basis, these factors should allow GVT to continue to expand homes passed at or close to a double-digit annual rate going forward while growing LIS at a faster rate.

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Universal Music Group Vivendi holds 100% ownership of Universal Music Group (UMG). UMG is a leader within the global music industry, holding the #1 share positions in each of the 3 largest music markets (United States, Japan, and Germany). UMG is the sector’s leading provider of recorded music, and holds a diverse portfolio of record labels across a full spectrum of musical genres.

The record industry has been popularly dismissed as being on its deathbed for at least a decade. Physical music sales have continued to decline at a mid single- to low double-digit annual rate; physical sales declined 12% to $2.4 billion in the U.S. in 2013 according to the Recording Industry Association of America (RIAA). However, UMG and its major competitors in the industry continue to remain quite profitable as, in recent years, declining physical album sales have been offset by digital music and licensing and other alternative revenue growth. Recorded music industry trade revenues from digital channels increased 4.3% in 2013 to account for 39% of industry revenue globally, according to another industry group IFPA.2 Globally, total recorded music trade revenue declined 3.9% in 2013 according to IFPI. However, global revenues declined only 0.1% excluding Japan’s 16.7% decrease attributed to its earlier stage in the digital transition. As illustrated below, overall U.S. music industry revenues have stabilized at $7 billion over the past 4 years due to growth in digital revenues, according to RIAA.

RIAA U.S. Recorded Music Retail Sales, 2010-2013 ($MM) 2010 2011 2012 2013 Download Single $ 1,317.4 $ 1,492.7 $ 1,623.6 $ 1,569.0 Download Album $ 872.4 $ 1,091.4 $ 1,204.8 $ 1,233.5 Kiosk $ 6.4 $ 3.3 $ 3.7 $ 6.1 Music Video $ 36.6 $ 32.4 $ 20.8 $ 16.8 Ringtones & Ringbacks/other mobile $ 448.0 $ 277.4 $ 166.9 $ 97.6 Total Digital Permanent Download $ 2,680.8 $ 2,897.2 $ 3,019.8 $ 2,923.0 % change 8.1% 4.2% -3.2% SoundExchange Distributions (digital performance royalties) $ 249.2 $ 292.0 $ 462.0 $ 590.4 Paid Subscriptions $ 212.4 $ 241.0 $ 399.9 $ 628.1 On-Demand Streaming (Ad-Supported) – – $ 170.9 $ 220.0 Total Digital Subscription & Streaming $ 461.6 $ 533.0 $ 1,032.8 $ 1,438.5 % change 15.5% 93.8% 39.3% Total Digital Value $ 3,142.4 $ 3,430.2 $ 4,052.6 $ 4,361.5 % change 9.2% 18.1% 7.6% Synchronization Royalties $ 188.7 $ 196.5 $ 190.6 $ 189.7 % change 4.1% -3.0% -0.5% Physical $ 3,663.9 $ 3,381.1 $ 2,772.4 $ 2,444.8 % change -7.7% -18.0% -11.8% Total Digital & Physical $ 6,995.0 $ 7,007.8 $ 7,015.6 $ 6,996.0 % change 0.2% 0.1% -0.3%

UMG’s organic results reflect similar patterns. Excluding the impact of the EMI acquisition and subsequent related divestitures as well as currency fluctuations, UMG’s total revenues declined 3.3% in 2012 and were approximately flat in 2013. Digital sales increased 10% in 2012 on a comparable basis and likely grew close to double digits organically in 2013 as well. Digital sales have grown from 39% of UMG’s recorded music revenues in 2011 to 51% in 2013.

More recently, the promise of digital revenues has come into question as total digital permanent download sales (including single songs, albums, music videos, etc.) growth has reversed. After growing 8.1% in

2 http://www.ifpi.org/news/IFPI-publishes-Recording-Industry-in-Numbers-2014 - 40 - Vivendi S.A.

2011 and 4.2% in 2012, U.S. retail sales of digital permanent downloads declined an alarming 3.2% to $2.9 billion in 2013, according to RIAA. Excluding the sharp drop-off in ringtone sales, digital download sales declined a more modest 1.0% to $2.8 billion. According to IFPI, global digital download revenue also declined in 2013, by 2.1% to $3.9 billion.3 This has been attributed to the growth of free (advertising supported) and subscription Internet streaming services like Pandora, Spotify and Rdio. Internet streaming services have generated much skepticism from artists, industry insiders and investors alike given the miniscule royalty rates per song played and the streaming platform providers’ lack of profitability. Likewise, there is a legitimate concern that streaming services cannibalize higher-priced digital music download sales. However, early data suggests this may not be the case. According to the Wall Street Journal in December 2013, “Data reviewed by The Wall Street Journal showed that one major record company makes more per year, on average, from paying customers of streaming services like Spotify or Rdio than it does from the average customer who buys downloads, CDs or both.” 4

With an easy-to-use interface and multi-platform functionality, and instant, unlimited access to tens of millions of songs and a wide range of playlists, streaming services almost undoubtedly increase users’ consumption of music. And at $10/month for the most popular services like Spotify, it is not difficult to accept that streaming customers generate more revenue than the average purchaser of traditional (physical or digital) music. We would still hold some concern that unlimited subscription services logically would cannibalize the highest purchasers of physical/digital music. However, it is essential to remember that subscription services are also replacing digital piracy. Users formerly unwilling to buy songs in favor of illegal downloads are migrating to the higher quality, easier-use streaming platforms. In fact, according to IFPI, digital piracy declined ~10% globally during the 12 months to July 2013, likely in no small part due to adoption of streaming services.

In fact, streaming revenues appear to be increasing far faster than any decline in digital permanent download sales, and we are likely still in the early innings of streaming growth. Digital subscription and other streaming (advertising-based, other Internet and satellite) sales increased 39.3% to $1.4 billion in the U.S. in 2013. Subscription and other streaming contributed 26% of UMG’s digital music revenue in 2013, or ~€440 million. The growth is being led by subscription streaming, which is far more profitable than ad-based streaming services on a per-user basis. Subscription streaming revenue increased 57% in the U.S. last year to $628 million, according to RIAA. Globally subscription streaming sales increased a similar 51.3% to $1.1 billion in 2013, according to music industry group IFPI.5

Source: The Recording Industry Association of America

Source: businessweek.com, BloombergBusinessWeek, May 21, 2014

3 http://nypost.com/2014/03/30/spotify-faces-challenge-from-internet-giants-before-ipo/ 4 http://online.wsj.com/news/articles/SB10001424052702304020704579276123352482930 5 http://www.ifpi.org/news/IFPI-publishes-Recording-Industry-in-Numbers-2014 - 41 - Vivendi S.A.

According to Bloomberg, the number of paid streaming subscribers more than tripled between 2010 and 2013 and this explosive growth rate could continue. Leading subscription service Spotify recently reported over 10 million subscribers globally, and stated it has paid >$1 billion in royalties since 2008. With over 40 million active users (Spotify also offers a more restrictive, free ad-supported version) and the platform expanding from 20 to 56 markets in the past year alone, Spotify subscribership is likely far from a peak. Other subscription streaming services are also still in their infancy or adolescence. According to Rdio CEO Anthony Bay, there are only 30 million music subscribers versus 1 billion (and growing) mobile users globally.6 Pandora still relies heavily on a structurally unprofitable advertising model, but more recently has been attempting to grow subscription revenue. Apple just launched iTunes Radio in fall 2013 and its pending acquisition of Beats Music is in part due to Apple’s high regard for Beats’ upstart (250k subscribers) subscription streaming platform and the desire to bring Jimmy Iovine (UMG’s Interscope Geffen record label head) and Dr. Dre on board to build a better music platform. Apple CEO Tim Cook stated, “We love the subscription service that they built—we think it's the first subscription service that really got it right.” 7 Google is also reportedly nearing the launch of a subscription music service via its YouTube portal, and Amazon is also exploring a streaming service for Prime subscribers. Furthermore, streaming services look very underpriced today (Spotify costs $10/month and Pandora is $5/month) as the upstart platforms fight for subscribers. Subscription services’ ease of use and library depth should lead to higher rates once these services mature.

In terms of other revenue growth sources, we would note that global revenue from broadcast and public performance rights increased 19.0% to $1.1 billion in 2013 according to IFPI. Emerging markets also hold great long-term promise. According to IFPI, digital music revenues grew 124% from 2010-2013 in Latin America, albeit from a low base. Africa is also showing early signs of a budding market, with revenue more than doubling in South Africa in 2013 according to IFPI. Meanwhile, subscription streaming services could someday open up the vast China market historically dominated by piracy.

From a profitability standpoint, UMG and the industry are also showing signs of stability. UMG’s EBITDA margins have remained between 14.6%-14.8% over the past 3 years, and are actually up from 12.8% in 2010 following a €100 million cost reduction initiative. Importantly, UMG’s business has relatively modest capital requirements averaging only ~1% of revenues. In addition to the stabilization in recorded music sales, UMG’s margins also reflect the relatively stable revenue stream and higher margins from UMG’s music publishing business, which controls lyrical and melody copyrights. Music publishing revenue remained ~$650 million between 2011-2013 with ~28% or higher EBITA margins. UMG also operates a unique standalone derivative products/merchandising services business, Bravado. Merchandising and other ancillary revenue has remained steady or grown in recent years and is consistently profitable (~10% EBITA margins).

UMG Historical Financial Performance (€ millions) Revenues: 2008 2009 2010 2011 2012 2013 Physical € 2,589 € 2,234 € 2,128 € 1,789 € 1,756 € 1,665 Digital 842 908 1,033 1,132 1,365 1,705 Licensing & Other 448 396 415 446 548 622 Recorded Music 3,367 3,669 3,992 Music Publishing 638 661 655 Merchandising & Other 227 247 273 Intercompany elimination (35) (33) (34) Total Revenues € 4,650 € 4,363 € 4,449 € 4,197 € 4,544 € 4,886 EBITDA €778 €680 €571 €623 €674 €714 EBITDA margin 16.7% 15.6% 12.8% 14.8% 14.8% 14.6% EBITA €686 €580 €471 €507 €526 €511 CFFO, pre-capex €555 €329 €508 €495 €528 €611 CFFO, pretax/interest €521 €309 €470 €443 €472 €585

6 http://nypost.com/2014/03/30/spotify-faces-challenge-from-internet-giants-before-ipo/ 7 http://online.wsj.com/articles/apple-to-buy-beats-1401308971 - 42 - Vivendi S.A.

In some part, this may reflect cost savings and negotiating leverage from UMG’s (and the industry’s) consolidation in recent years. Following UMG’s acquisition of EMI Recorded Music for €1.4 billion in 2012 (and the divestiture of Parlophone to Warner) the recorded music industry is dominated by the top 3 firms UMG, Warner, and Sony. The top 3 firms hold approximately 85% market share within the U.S. UMG has a roughly 30% or greater market share globally. This gives the dominant firms greater negotiating power regarding everything from artist relationships to digital licensing to sponsorships. Consolidation can also create substantial cost savings and other synergies. UMG targeted €120 million in synergies from the EMI acquisition.

Canal Plus Group Canal Plus Group includes Vivendi’s television and film properties across the content production, pay TV and free-to-air (FTA) programming networks, and content distribution businesses. Canal+ Group’s primary subsidiary is Canal+ France, which is now wholly owned following the recent reacquisition of Lagardère’s 20% stake. Canal+ France is the leading pay-TV programmer in France with 6.0 million individual subscribers and 9.4 million total group subscriptions. The Company’s pay TV business also reaches 2.2 million French speakers internationally, primarily in French-speaking Africa (1.1 million individuals across 30 countries) and Vietnam (604k through its K+ satellite platform JV). Canal+ also has 2.2 million pay TV subscribers in Poland through its 51%-controlled JV, nC+, which offers 10 channels including 4 premium channels. Canal+ Group also includes the Company’s French movie studio, StudioCanal. StudioCanal produces or co-produces ~25 films per year and distributes ~15 films per year in France and operates a home entertainment division. StudioCanal produced €473 million in revenue in 2013, up slightly Y/Y.

Canal+ Individual Subscriptions (000s) Canal+ Group Revenues Source (€ 000s) Mar. 31, 2014 Revenues 2012 2013 Pay TV Mainland France 6,037 Pay-TV Mainland France € 3,593 € 3,544 International 4,382 International Pay-TV € 890 € 1,122 Poland 2,185 FTA channels revenues € 64 € 172 Overseas 486 Studiocanal € 466 € 473 Africa 1,107 Other operations and eliminations - - Vietnam 604 Total Revenue € 5,013 € 5,311

Total Canal+ Group 10,419

Canal+ France’s pay TV platform features a lineup of 6 premium channels offering exclusive original programming (“Les Chaînes Canal+” or “Canal+ Channels”) including top-rated sports content, serialized dramas, and feature films. Canal+ Group also provides a more extensive offering of 21 channels and more recently launched a subscription video on demand (SVOD) platform, CanalPlay. Canal+ channels are distributed across a range of platforms in France including satellite (55% of subscribers as of 2012), ADSL (23%), digital broadcast (17%) and digital cable (5%). Canal+ Group markets directly and through retail partners and ISPs, but retains a direct relationship to the customer from activation to termination. A large percentage of subscribers access Canal+ Channels through Canal+ Group subsidiary CanalSat, which markets and distributes a broader bundle of multichannel pay-TV subscription services through satellite, cable, and IPTV in France. CanalSat offers a subscription package with 150+ premium channels including 17 Canal+ channels and 20 other channels exclusive to CanalSat.

Canal+ has produced relatively modest growth since acquiring French pay TV competitor TPS in 2007, reflecting the consistently challenging economic conditions in France since that time. In 2013, total revenues increased 6.2% (constant currency) driven by international growth and integration of the French free-to-air TV stations acquired from Bolloré in 2012. Revenues declined 0.5% in 2013 on a constant currency and perimeter basis, reflecting macro conditions and some subscriber declines in Poland following the March 2013 Cyfra/N merger into nC+. In France, pay TV revenues declined 1.0% in 2013 reflecting flat subscribership levels and a 110 bps increase in churn partially offset by a €1.0 (2%) increase in ARPU to €44.2. Total EBITDA declined 3.6% in constant terms to €905 million in 2013, reflecting higher programming rights and other content investments in France.

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Canal+ Group Historical Financial Performance 2007 2008 2009 2010 2011 2012 2013 Total Revenue €4,363 €4,554 €4,553 €4,712 €4,857 €5,013 €5,311 EBITDA €628 €774 €870 €920 €913 €940 €905 EBITDA margin 14.4% 17.0% 19.1% 19.5% 18.8% 18.8% 17.0% Adj. EBIT, ex. transaction costs €400 €636 €652 €690 €701 €674 €661

CFFO, before capex €592 €559 €639 €735 €706 €689 CFFO (unlevered, pretax) €317 €383 €328 €410 €484 €476 €478

Subscribers: Pay TV France 9,720 9,760 9,719 9,534 International 2,989 3,186 4,753 5,137 Total Canal+ Group 11,974 12,471 12,709 12,946 14,454 14,617

ARPU (per sub., France) €43.8 €44.7 €46.3 €47.5 €43.2 €44.2 Churn (€/sub., France) 13.0% 12.3% 11.0% 12.1% 13.8% 14.9%

Looking longer-term, we view Canal+ as an underappreciated asset. The Company’s dominant position in France has come under attack in recent years, but Canal+ France has weathered the storm well and we believe this demonstrates the formidable barriers to entry in the pay TV business (especially scale advantages). In France, regulators tried to facilitate competition by awarding TV Numeric digital terrestrial television licenses to launch a pay TV service in 2011, but the service only collected 35,000 subscribers in 2012 and quickly entered liquidation. Qatari broadcaster Al Jazeera launched a pay TV sports network, beIN Sports, in multiple countries including 3 channels in France in June 2012. Backed by the Qatari royal family’s deep pockets and attempting to quickly build a network, beIN Sports aggressively bid for premium sports content and reported 1 million subscribers in France by November 2012. Although this has driven up programming costs, beIN’s road to profitability is unclear; Canal+ suggested beIN lost more than €300 million in its first year and Canal+ even reportedly filed a complaint with the French competition authorities alleging unfair competition. In any case, Canal+ has responded by locking in valuable sports programming content for years to come. In January 2014, Canal+ reached an exclusive agreement to broadcast French Top 14 rugby through the 2018-2019 seasons. Canal+ also locked in top two sets of rights (top 3 matches per week) to French League 1 soccer from the 2016-2017 season through 2019-2020, up from its current offering of the top 2 weekend games through 2015-2016. Canal+ also split Champions League rights with beIn Sports in the April 2014 auction for the 3 seasons beginning 2015-2016. The combined price was an estimated 30% above the prior exclusive deal with Canal+. Canal+ also extended exclusive rights to the English Premier League soccer and Formula One racing in 2013. Overall, according to Vivendi management Canal+ will boost its premium games broadcast slate by ~50% in the coming years.

After years of delay, Netflix also recently announced it plans to enter France in 2014. In our view, this should not be a major concern for Canal+. Canal+ offers a broad range of programming that would be impossible to replicate. Its availability across multiple platforms (including the SVOD service) also offers a superior distribution network versus an Internet-only service, especially given the relatively low penetration of high speed broadband in France. Netflix also faces particular challenges navigating France’s stringent programming regulations that protect nationally developed and French language content and extend the SVOD release window. In any case, as AAF has detailed in our Time Warner reports, we believe HBO has proved that high quality pay TV platforms can grow alongside—rather than in competition to—Netflix. StudioCanal could also be a major beneficiary of Netflix/SVOD growth via monetization of its film library featuring 5,000 films including 2,000-plus titles currently available online. Most importantly from a long-term perspective, it should be remembered that, despite the challenging economic and demographic trends, the French pay TV market is still immature. Pay TV penetration is up nicely from ~40% a decade ago but still remains at ~60% versus ~90% in the U.S. and Benelux regions.

Canal-Plus’ FTA and international businesses also offer a potentially overlooked value source that should become more meaningful bottom-line contributor going forward. The relaunch of French FTA channels D8/D17 after the acquisition and the integration at nC+ in Poland are both proceeding fairly well; on a combined basis they reached breakeven in 2013 vs. €95 million losses in 2012. The African and Vietnam businesses each

- 44 - Vivendi S.A. tap into attractive emerging markets and have experienced tremendous subscribership gains to date. Subscribership increased 53% in Africa and 38% in Vietnam in 2013.

Balance Sheet Transformation Opens New Possibilities Vivendi’s restructuring will have a drastic influence on its balance sheet. Net debt reached €15 billion or ~2x EBITDA during 2012, and stood at €11.2 billion as of March 31, 2014. However, pro forma for proceeds from the subsequently-closed Maroc Telecom deal and the pending SFR-Numericable deal, Vivendi’s balance sheet position would swing to net cash of €6.4 billion, or close to €5 per share. The sale of additional Activision shares in May 2014 will add another €600 million-plus with the remaining stake of roughly equal value likely to be sold in the coming quarters. Adding minority equity investments including the SFR-Numericable stake would add close to €5 billion more, bringing Vivendi’s cash and liquid investment hoard to ~€11 billion or €9 per share. This equates to nearly 50% of Vivendi’s current market capitalization.

Vivendi Historical Consolidated Net Debt and Leverage

€25,000 2.4x 2.3x 2.5x

€20,000 1.4x 1.2x 1.5x €15,000 1.2x 1.0x € 13,419 (millions)

€ 12,027 0.8x 0.8x € 11,097 €10,000 €9,566 Debt

€8,349 €8,073 Debt/EBITDA) 0.5x

Net €5,186 €5,000 €4,344 (Net

€0 € (7,012) ‐0.5x

Dec‐06 Dec‐07 Dec‐08 Dec‐09 Dec‐10 Dec‐11 Dec‐12 Dec‐13 Leverage

Consolidated ‐€5,000 Pro Forma Consolidated Net Debt May 31, 2014 ‐€10,000 Consolidated Leverage Ratio ‐1.5x ‐1.4x

This rapid balance sheet transformation is remarkable, but it begs the question of what will be done with the cash. Such a cash hoard always presents a risk of mismanagement and being squandered in poor investments. Vitally, we believe Vivendi’s balance sheet is now entrusted in better hands under Mr. Bolloré’s leadership given his impressive multi-decade track record, long-term investment philosophy, and large stake in the Company. At the same time, we believe Vivendi has a simple, highly attractive outlet for this excess capital: returning it to shareholders. Given our perception of the Company’s discount to intrinsic value (detailed in the following section), share buyback and/or dividends (assuming reinvestment) offer a highly attractive prospective return profile. Encouragingly, even before Mr. Bolloré’s assumption of the chairman position, in April 2014 the Company already announced plans for an initial €5 billion round of capital returns to shareholders. Vivendi will pay a €1 per share (5.2%) dividend in June 2014, in line with recent years. In light of the divestitures, from an economic perspective the Company has characterized 50% of the payout as reflecting 2013 financial performance and the other half as a return of capital from the recent/pending divestitures. The Company also announced initial plans to return an incremental ~€3.5 billion to shareholders over the 2014-2015 timeframe via share repurchases and/or dividends, to be determined at a later date.

Beyond the upcoming dividend, greater clarity on Vivendi’s capital plan will likely have to wait until after the shareholders’ meeting and the management/board changes are completed in June 2014. However, while the management team has not yet disclosed any leverage targets and they will likely remain flexible, new CFO Hervé Philippe did suggest they could be comfortable with modest (e.g. 2x-3x) leverage depending on the maturity profile of the associated debt and with the intention of maintaining an investment grade credit rating. We would note that at 3x leverage based on Vivendi’s trailing EBITDA, proceeds from the debt issuance plus pro forma cash and liquid investments would exceed €18 billion or greater than 70% of the Company’s current market cap. It does not take heroic assumptions to envision an attractive recap/LBO scenario here.

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We are cautiously optimistic that incremental return of capital to shareholders beyond the €5 billion could be in the pipeline to help unlock this opportunity. Of course, acquisitions are also possible. Vivendi management has been quite vocal in expressing the Company’s transition into exclusively a media and content company. Any acquisitions are expected to remain within the media/content and digital entertainment field, with particular emphasis placed on emerging/growth markets. One possible investment that has been the subject of public speculation is Italian pay TV network Mediaset Premium—including forming a partnership between Canal+ and Mediaset (potentially alongside beIn Sports’ Qatari affiliate Al Jazeera) to launch a joint pan-European pay TV network. Other speculated investments include consolidation of the Brazilian telecom sector and a minority interest in YouTube competitor Dailymotion. Vivendi’s management team has stressed strict financial return criteria will be applied to any potential acquisition. The Company’s focus on scalable, subscription based businesses and Mr. Bolloré’s cash flow-driven investment philosophy provide us some additional reassurance. Under these considerations, we are cautiously optimistic that M&A could be a source of incremental value creation for Vivendi shareholders going forward.

Valuation & Conclusion: Conglomerate Discount Intact with Catalysts on Horizon In the following sections, we analyze Vivendi’s value on a business unit level to derive a sum-of-the-parts based intrinsic value estimate for the holding Company. GVT Vivendi management has vocally supported GVT as a core holding since taking it off the market in 2013. However, as a telecom business its long-term position/role in Vivendi’s reinvention as a pure media and content business is uncertain. Vivendi explored a sale of GVT in 2012-2013 and reportedly received 4 competitive bids including final offers of approximately €6 billion from DirecTV and a private equity consortium before deciding to hold onto the asset. In our view, this was a smart decision. Despite the near-term macro/currency headwinds, the Brazilian cable/telecom industry offers uniquely appealing long-term growth prospects. GVT is the fastest growing player in the Brazilian telecom market and its high speed broadband network is a crown jewel asset. There are multiple opportunities for GVT to realize incremental value in the coming years. From an operational standpoint, GVT’s extensive investments over the past 14 years are finally nearing payoff as the business transitions to positive cash flows. Operating cash flows are already ~€700 million and continued top-line growth combined with moderating capital expenditures could produce significant free cash flow within 2-3 years.

Consolidation also remains an attractive avenue for value creation at GVT. The Brazilian telecom market appears to be on the verge of a consolidation wave and we believe GVT’s value is only increasing given its unique fixed line assets. There are more eligible suitors for GVT by the day, with John Malone’s Liberty Global planning a spinoff of its Latin America business, and the pending DirecTV/AT&T merger set to increase DirecTV’s financial firepower (potentially including a spinoff of the Latin American business at some point). Both of the latter companies’ management teams have stressed the attractiveness of DirecTV’s Latin American assets, especially Sky Brasil, and DirecTV CEO Mike White recently noted that AT&T’s balance sheet capacity and unique expertise (wireless and wireline services) could make the company more inclined to undertake M&A outside its core competency of satellite TV. Clearly, GVT fits these criteria and DirecTV has already expressed its interest in GVT.

Other competitors are also better positioned to pursue GVT today. Fixed and mobile telecom provider Oi SA raised capital in April in a move to shore up its balance sheet and facilitate a merger with Portugal Telecom SGPS SA, which could provide it with M&A firepower. Mexican telecom tycoon Carlos Slim’s America Movil is also active in Brazil (via Claro) and reportedly has shown interest in GVT. Meanwhile, Brazil’s #2 mobile operator Tim Brazil, controlled by Telecom Italia, has been exploring a merger with GVT among other options. Telecom Italia’s largest stakeholder is Telefonica SA, which itself controls leading Brazilian mobile operator Vivo SA and is reportedly angling for a breakup of Tim Brazil amongst Vivo and its other mobile competitors. In either case, we believe GVT would present an attractive candidate for telecom competitors looking to expand its high speed Internet and pay TV offerings. In fact, Telefonica lost out to Vivendi in a bidding war for GVT in 2009. GVT could also present an attractive investment for financial buyers as a vehicle for broader consolidation in the Brazilian market.

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Given GVT’s relatively modest size as a stand-alone company and the potential synergies and/or alleviation of excessive price competition from a merger, we would expect the new Vivendi management team to revisit this option. With prospective bidders in more favorable financial positions today—and with Vivendi’s possible prior reputation as a weak negotiator no longer applicable—GVT would likely garner a meaningfully higher price tag over the next few years vs. the 2013 offers. Alternatively, Vivendi could revisit a carve-out IPO (and/or spinoff) for GVT. This would give GVT the currency to play the role of consolidator or repurchase shares if the market fails to ascribe a fair value, while allowing Vivendi shareholders to participate in the upside. At 8x 2016E EBITDA, we estimate GVT’s intrinsic value will approach €8 billion. We would note that this is roughly in line with recent cable industry transactions in more mature U.S. and Western Europe markets.

GVT Estimate of Intrinsic Value (€MM) GVT 2016E EBITDA € 993 assumed multiple 8.0x Implied Intrinsic Enterprise Value € 7,945

Canal+ Group: The underappreciated value of cable networks and content owners has been a recurring theme for Asset Analysis Focus in recent years. We believe this investor aversion is particularly evident in the case of Canal+ Group due to the unique challenges of the French pay TV market (unbundling; relatively low penetration; greater regulatory burdens, etc.), the French economy’s lackluster performance, and an increasingly punishing tax regime. Canal+ France has also faced aggressive new competition from beIN Sports over the past 2 years. However, Canal+ has managed to fend off these challenges and continues to post consistently strong profitability. Looking longer-term, we believe the Company’s position is secure. Canal+ Group offers a unique combination of vertically integrated assets, with assets including premium pay TV channels solidified by unreplicable content (sports rights, first run films), a content production/distribution arm and a large film library at StudioCanal, and partial ownership of distribution channels through CanalSat and SFR’s IPTV services (to be turned over to Numericable, but with enhanced scale). Both high-speed Internet and pay TV remain underpenetrated in France, offering an attractive long-term opportunity. The Company continues to roll out its CanalPlay OTT service, and its myCanal integrated Internet-delivered platform launched in December 2013 could allow Canal+ to return to subscriber growth in France.

Canal+ Group’s real hidden value may lie in its overseas pay TV assets. Canal+ Group is growing subscribership by 30%-50% or greater in Africa and Vietnam. At 1.7 million combined individual subscribers, this now represents 16% of total Canal+ subscribers. These units’ revenue contribution (est. ~11% combined in 2013) is still well below the subscriber base, and we estimate EBITDA contribution is not yet meaningful. However, these businesses could provide a meaningful source of EBITDA within 2-3 years should subscribership continue to grow anywhere near recent levels. Canal+ Group’s Poland JV, nC+, is also well- placed in a market with attractive pay TV growth potential. NC+ generated an estimated €54 million EBITDA (223 million Polish zloty) in 2013 on 10% EBITDA margins, offering large margin expansion potential should the service gain wider adoption.

In valuing Canal+ Group, we would remind investors that cable networks, including premium pay TV programmers, typically command double digit EV/EBITDA multiples. While Canal+ Group also includes a film studio (including a valuable library) and a distribution business, and the French video environment is very different than in the U.S. (margins unlikely to ever approach U.S. firms’ levels), on the other hand Canal+ Group’s competitive position in France is also uniquely strong. In order to arrive at a value for the Group, we separate Canal+ France (including French language overseas territories) from the Poland, Vietnam, and French FTA units. Placing a 10x EBITDA multiple on Canal+ France’s 2016E EBITDA and backing out a majority interest in SECP France, we estimate Canal+ France’s forward-looking intrinsic value exceeds €8 billion. Placing higher multiples on the Polish (11x) and Vietnam (12x) pay TV businesses and a discounted 8x multiple for the broadcast channels, we estimate Canal+ Group’s intrinsic value is approximately €9 billion. We conservatively assume flat to down revenue trends in Canal+ Mainland France over the next 3 years, with international revenue growth declining from 26% in 2013 to 7% in 2016. Higher revenue growth and/or margin expansion could provide upside to our estimate.

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Canal+ Group Estimate of Intrinsic Value (€MM) Canal+ France - 2016E EBITDA (inc. overseas) € 863 less 51.5% of SECP 2016E EBIT € (35) Canal+ France 2016E EBITDA, proportional € 828 assumed multiple 10x Canal+ France estimate of Intrinsic Enterprise Value € 8,278

Free TV channels 2016E EBITDA € 27 assumed multiple 8x Free TV channels estimate of Intrinsic Enterprise Value € 216

Poland nc+ 2016E EBITDA € 80 assumed multiple 11x Poland nC+ estimate of Intrinsic Enterprise Value € 881 Vivendi proportion @ 51% economic interest € 449

Vietnam K+ 2016E EBITDA € 21 assumed multiple 12x Vietnam estimate of Intrinsic Enterprise Value € 256 Vivendi proportion @ 49% economic interest € 125

Canal+ Group s.o.t.p. intrinsic enterprise value € 9,068

Universal Music Group Universal Music Group is a unique asset that holds a dominant 30% market share position in the recorded music industry. This position was further solidified by the recent EMI acquisition, which will continue to yield incremental cost savings in 2014. In our view, UMG (and the industry) is belatedly discovering how to monetize the transition from a physical to a digital-based business. Digital now contributes a majority of UMG’s recorded music revenues, and streaming revenues (26% of digital) are growing at ~40% year led by upstart subscription services. UMG’s results have stabilized over the past 4 years, and as streaming services gain adoption and physical music sales become a smaller portion of the revenue pie, the long-dormant industry could even re-enter a growth phase. Emerging markets and online music video consumption offer additional sources of growth.

In estimating UMG’s intrinsic value, we would note UMG’s purchase of EMI Recorded Music for €1.4 billion from Citigroup in September 2012. The transaction valued EMI at approximately 7x EBITDA, and UMG subsequently divested €679 million of assets at comparable multiples. Perhaps of greater relevance, Warner Music Group was acquired by private equity interest Access Industries for $3.3 billion or 7.9x TTM EBITDA/~9x forward EBITDA in 2011. In our view, UMG deserves a substantial premium to these transactions given its #1 market position. Furthermore, UMG possess a unique merchandising business and a large music publishing business which typically commands a higher multiple due to its greater visibility. We also believe the long-term prospects of the recorded music industry are clearer today than at the time of Warner Music’s acquisition in 2011. Nonetheless applying an 8x multiple to 2016E EBITDA, we estimate UMG’s intrinsic value is approximately €5.8 billion. This corresponds to an attractive ~10% unlevered free cash flow yield based on UMG’s 2013 pretax free cash flow. In deriving our estimate, we conservatively assume roughly flat revenue and EBITDA progression over the coming 3 years. A faster-than-anticipated transition in the digital business could produce earnings upside. Additionally, while we believe Vivendi views UMG as a strategic asset, we would not dismiss the possibility of a sale or strategic merger at some point. Private equity has long been active in the industry, and given the aforementioned cash flow yield as well as potential cost savings in a going-private transaction, it is not difficult to see UMG as an acquisition candidate. There also may be more strategic bidders than investors anticipate for an asset like UMG. Warner Music received industry bids as well as a reported bid from Live Nation for its recorded music business in 2011 before reaching a deal with private equity. While a merger with Warner or Sony may be untenable from an anti-trust perspective, a vertical merger with Live Nation or another artist management

- 48 - Vivendi S.A. platform like AEG could make sense. Additionally, we believe that the growth in Internet-delivered and mobile content is increasing the value of not just traditional video programming, but music content as well. Ownership of UMG’s vast music content could be a valuable strategic asset for a hardware company (e.g. Apple), a music platform (e.g. Spotify), or a telecom provider (Sprint/Softbank). Beyond its tangible financial returns, owning an exclusive music business could provide a great marketing platform for any of the aforementioned industries. In fact, Vivendi reportedly turned down an $8.5 billion offer for UMG from Softbank in 2013. As SoftBank Chairman Mayaoshi Son subsequently wrote in his 2013 annual letter to shareholders (emphasis ours), "The SoftBank Group's goal is to become the global No. 1 in mobile Internet. Our vision for the Group is to enable people around the world to lead enriched lifestyles by enjoying a diverse spectrum of services and content, such as music, video, e-commerce, and financial settlements."

Notably, our intrinsic value estimate represents a discount to Softbank’s reported bid. Putting aside an acquisition, there could still be upside from greater collaboration between UMG and the aforementioned businesses. For example (although one step removed from UMG), Sprint (controlled by SoftBank) recently signed an agreement with Spotify to bundle subscriptions into cellular billing plans at discounts, with Sprint to heavily market the plan to win users. At the least, greater integration of music services into these businesses should increase music consumption as well as the music industry’s negotiating leverage and royalty stream over time.

UMG Estimate of Intrinsic Value (€MM) UMG 2016E EBITDA € 729 assumed multiple 8.0x UMG estimate of intrinsic value € 5,833

Vivendi’s Sum-of-the-Parts Intrinsic Value The following table details our estimated intrinsic value for Vivendi on a sum-of-the-parts basis utilizing the individual business valuations already detailed.

Vivendi Sum-of-the-Parts Valuation €MM Canal+ Group enterprise value @ est. SOTP valuation € 9,068 GVT enterprise value @ 8.5x 2016E EV/EBITDA € 7,945 UMG enterprise value @8x 2016E EBITDA € 5,833 Corporate @ 6x 2013 EBITDA € (540) Implied Business Value € 22,306

Net cash (debt), Pro Forma 1Q 2014 € 6,981 SFR-Numericable Stake @ Market Value plus Earn-out € 3,979 Activision equity @ market value € 633 Minority Investments (Beats Electronic, Vevo, Spotify, N-Vision, etc.) € 972 Deferred tax assets (liabilities) @0.5x stated value € (18) Underfunded pension & retirement benefits at stated liability € (610) Securities class action liability @ 0.5x full reserve € (523) Equity Value € 33,719 Diluted Shares Outstanding, 1Q 2014 1348.7 Vivendi Estimated Intrinsic Value per Share € 25.00 Vivendi current share price € 19.24 Implied upside 29.9%

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Vivendi shares have performed reasonably well since AAF profiled the Company in January 2013, producing a 27.6% total return versus a 19.4% rally in the CAC 40. Despite the rally, in our estimation Vivendi still trades at a comparable if not wider discount to intrinsic value. In several cases, the Company’s has announced the disposal (e.g. SFR and EMI disposals) or acquisition (Canal+ France) of business units at more favorable rates than we previously anticipated. Its remaining businesses continue to perform roughly in-line with expectations, while various minority stakes (including Activision, Beats, and the pending Numericable equity) have markedly appreciated. Combining the aforementioned pieces, our sum-of-the-parts intrinsic value estimate for Vivendi is approximately €25 per share (unadjusted for June 2014 and future dividends), implying total return potential of approximately 30% from current levels.

Notably, our intrinsic value estimate does not include any incremental cash flow generation (beyond the already-announced transactions) or capital deployment (including share repurchases). While the recent restructuring transactions have yet to unlock Vivendi’s intrinsic value, its incoming cash hoard and return of capital plans could serve as catalysts. Mr. Bolloré’s transition to a leading role at Vivendi has also taken place much faster than we anticipated, much to our pleasure; we view this as a positive sign for future return of capital. In our detailed analysis of Vivendi’s sum-of-the-parts intrinsic value above, we also highlighted incremental asset sales/M&A as another possible catalyst, albeit with less certainty. Our analysis also includes Vivendi’s equity investments at quoted market values or latest reported equity values, while their intrinsic values could be much higher. We would highlight Vivendi’s estimated €3.2 billion stake in Numericable (post-SFR transaction closing), which has already increased >50% since the merger announcement and could have significantly more upside if the merger can unlock the forecasted synergies and/or French authorities allow 4-to-3 telecom sector consolidation.

Risks Risks that Vivendi may not achieve our estimate of the Company’s intrinsic value include, but are not limited to, foreign exchange translation risks; general economic weakness impacting the Company’s businesses; negative regulatory and/or tax reforms in France or abroad; lack of moderation in competitive pricing pressures at Vivendi’s pay TV or telecom businesses; failure to reverse revenue declines in the music industry; failure to complete pending divestitures; negative litigation outcomes; value-destroying capital deployment; and that shares continue to receive a discount to net asset value.

Analyst Certification Asset Analysis Focus certifies that the views expressed in this report accurately reflect the personal views of our analysts about the subject securities and issuers mentioned. We also certify that no part of our analysts’ compensation was, is, or will be, directly or indirectly, related to the specific views expressed in this report.

- 50 - Vivendi S.A.

VIVENDI S.A. CONDENSED CONSOLIDATED BALANCE SHEETS (in millions of euros) ASSETS Dec. 31, 2013 Dec. 31, 2012 Goodwill € 17,147 € 24,656 Non-current content assets 2,623 3,327 Other intangible assets 4,306 5,190 Property, plant and equipment 7,541 9,926 Investments in equity affiliates 446 388 Non-current financial assets 654 488 Deferred tax assets 733 1,445 Non-current assets 33,450 45,420 Inventories 330 738 Current tax receivables 627 819 Current content assets 1,149 1,044 Trade accounts receivable and other 4,898 6,587 Current financial assets 45 364 Cash and cash equivalents 1,041 3,894 8,090 13,446 Assets held for sale 1,078 667 Assets of discontinued businesses 6,562 - Current assets 15,730 14,113 TOTAL ASSETS € 49,180 € 59,533

EQUITY AND LIABILITIES Share capital € 7,368 € 7,282 Additional paid-in capital 8,381 8,271 Treasury shares (1) (25) Retained earnings and other 1,709 2,797 Vivendi SA shareowners' equity 17,457 18,325 Non-controlling interests 1,573 2,966 TOTAL EQUITY 19,030 21,291 Non-current provisions 2,904 3,258 Long-term borrowings and other financial liabilities 8,737 12,667 Deferred tax liabilities 680 991 Other non-current liabilities 757 1,002 Non-current liabilities 13,078 17,918 Current provisions 619 711 Short-term borrowings and other financial liabilities 3,529 5,090 Trade accounts payable and other 10,416 14,196 Current tax payables 79 321 14,643 20,318 Liabilities associated with assets held for sale - 6 Liabilities assoc. w/assets of discontinued business 2,429 - Current liabilities 17,072 20,324 TOTAL LIABILITIES 30,150 38,242 TOTAL EQUITY AND LIABILITIES € 49,180 € 59,533

- 51 - Cisco Systems, Inc.

Disclaimers

Asset Analysis Focus is not an investment advisory bulletin, recommending the purchase or sale of any security. Rather it should be used as a guide in aiding the investment community to better understand the intrinsic worth of a corporation. The service is not intended to replace fundamental research, but should be used in conjunction with it. Additional information is available on request. The statistical and other information contained in this document has been obtained from official reports, current manuals and other sources which we believe reliable. While we cannot guarantee its entire accuracy or completeness, we believe it may be accepted as substantially correct. Boyar's Intrinsic Value Research LLC, its officers, directors and employees may at times have a position in any security mentioned herein. Boyar's Intrinsic Value Research LLC Copyright 2014.

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