Europe's largest entertainment group Vivendi posted better-than-expected sales and operating profit for 2009, boosted by a buoyant performance at its games and telecoms divisions.

But the owner of Universal Music Group, the world's biggest record company that competes with EMI and Sony, said net profit was hit by a surprise provision for possible damages in a U.S. class-action lawsuit.

Vivendi CEO Jean-Bernard Levy said that the group would post slight growth on an adjusted operating profit basis in 2010, a change from the strong growth it achieved last year.

Shares in Vivendi, which has telecom units in France, Morocco and Brazil, rose 3.7 percent to 19.18 euros by 0831 GMT, outperforming a 1.4 percent rise by the broader index.

Expectations were low going into results, and we therefore expect some bounce in the shares today, wrote UBS analyst Polo Tang in a research note. All divisions look broadly in line to be better.

Vivendi posted revenues up 6.9 percent to 27.13 billion euros for 2009.

Its earnings, before interest, tax, and amortization increased 8.8 percent to 5.39 billion euros. Twelve analysts polled by Reuters had expected 26.97 billion in revenues and 5.25 billion euros in EBITA.

Yet the shadow of the U.S. class-action lawsuit, in which shareholders won a case alleging Vivendi misled them about the state of the group's finances from 2000-2002 under previous CEO Jean-Marie Messier, caused fourth quarter net results to swing to a loss of 839 million euros..

To the extent that Vivendi was found guilty by a jury -- whatever we think of that verdict -- we must be prudent from an accounting point of view so we have made the provision, Levy said on a conference call with reporters

But the legal case will be long and complex and we have the strong hope that at the end of it all we will have nothing to pay out at all, he said.

Uncertainty about the case, and its eventual cost for Vivendi have weighed on the shares.

We won't know an estimate of the damages for many months and perhaps not until 2011, said Levy.

SFR'S MOBILE EBITA SEEN LOWER

Vivendi's telecom businesses -- it controls Morocco's dominant telecom operator Maroc Telecom and SFR, France's second-largest mobile operator -- performed well, with higher revenues than a year earlier and steady profits.

Revenues at SFR , which competes with France Telecom, were up 7.6 percent to 12.43 billion, while EBITA was roughly flat at 2.53 billion euros.

Levy predicted that SFR's EBITDA in mobile would decrease slightly this year while its fixed and broadband business would increase slightly.

Video games were also a bright spot, as in past years, as sales were up almost 50 percent to 3 billion euros at Vivendi's video game company Activision Blizzard. It owns 57 percent of Activision, which runs the blockbuster multi-player on-line game World of Warcraft.

In contrast, Universal Music had a tough year, with sales down 6 percent to 4.36 billion euros and EBITA down about 16 percent to 580 million euros. Levy predicted that Universal Music would achieve double-digit EBITA margin this year, compared with last year's 13 percent EBITA margin.

Vivendi's pay-TV group Canal Plus France, which it now owns at 80 percent, posted steady sales of 4.55 billion euros in 2009, while EBITA grew 15 percent to 652 million euros.

On the conference call, Levy said that no discussions were underway with Vodafone or Lagardere about buying out the minority stakes in SFR and Canal Plus. respectively. But Levy said Vivendi remained interested in buying out both stakes if the opportunity presented itself.

(Reporting by Leila Abboud; Editing by Marcel Michelson and Louise Heavens)

Morocco Telecoms