Vivendi, a major European entertainment group, which in July called off talks to buy a majority stake in Kuwaiti telecoms firm Zain's African telecoms assets, said on Tuesday the issue was now 'over'.

Chief executive Jean-Bernard Levy also said the company was was sticking to a cautious acquisition policy, which would sharply reduce its debt in 2009.

Vivendi also delivered a forecast-beating second quarter underlying profit, despite the global economic crisis, and stood by its 2009 goal for a strong rise in adjusted operating income.

The said it still expected a strong rise in adjusted operating income for 2009 and confirmed a dividend payout ratio of at least 50 per cent of net adjusted income.

Vivendi shares were up 3.2 percent at 20.5 euros ($29.44) shortly after the market opened, outperforming the DJ Stoxx European media index.

'Our priority remains to maximise value for our shareholders and continue to distribute a high dividend,' Levy said.

Levy told a conference call with journalists that the group remained 'very cautious on external growth' and that net debt could decline to slightly over 7 billion euros ($10 billion) at the end of the year, from 8.5 billion euros at the end of June 2009.

'At this stage we do not have any acquisition project to disclose,' Levy said.

Vivendi, a majority stake holder in Maroc Telecom and which recently bought a stake in a telecoms operator in Mali, remains keen on expanding in emerging countries.

But when asked about Zain, Levy said: 'The Zain dossier is over ... We do not intend to pay more than what it was worth.'

When asked if Vivendi could again look at the Zain issue if it was offered a more attractive price, he said: 'This issue in not on the agenda.”

Zain, whose shareholders voted to scrap individual ownership limits on Monday, is in negotiations to sell a stake in its African business.

Crisis-resilient earnings

With 70 per cent of revenue coming from phone, Internet, pay-TV and online video games subscriptions, Vivendi is viewed as one of the most defensive stocks in the media sector, with low exposure to bleak advertising markets.

'Vivendi achieved a very solid first half 2009 in a difficult environment,' Levy said, adding the impact of the crisis on the company was 'real but limited'.

The owner of Activision Blizzard, the world's top video games company, and of France's second-biggest mobile operator SFR said second-quarter earnings before interest, taxes, and amortisation (EBITA) rose 10.4 per cent to 1.51 billion euros.

'EBITA is above expectations thanks to SFR and Canal  Plus,' CMC-CIC Securities said in a note.

Levy said SFR had increased market share in the fixed/Internet and mobile segments.

Revenue grew 11 per cent to 6.65 billion euros, driven by past acquisitions, notably in video games.

The average forecasts in a Reuters poll of 10 analysts were 1.42 billion euros for EBITA and 6.69 billion euros for revenue. – Reuters