Mr Fourtou has pledged to reduce debt

Early gains in its share price, however, were soon reversed as analysts focused on the state of planned asset sales essential to reduce the company's huge debt.

The French-American group said it was in talks with six potential buyers for its Vivendi Universal Entertainment (VUE) division but that it had not ruled out an intial public offering, or stock market listing, for the business.

Vivendi, which reported a record French loss of 23.3bn euros in 2002, its net losses in the three months to 31 March fell from 815m euros (�573m, �964m) to 319m euros (�224m, $377m).

An improved performance at its telecoms and pay-TV divisions helped boost earnings, pushing its income figures much higher than analysts had expected.

Telecom gains

The group's entertainment business, which includes theme parks and Universal Studios, continued to struggle in the first three months of 2003, with operating profits down 23%.

Its music division Universal Music also suffered from an estimated decline in world music sales of 12%.

By contrast, the Canal Plus television subsidiary jumped back into profit with a gain of 158m euros against a loss of 68m euros in the same period last year.

Its telecom business Cegetel also outshone other subsidiaries with a 30% jump in earnings.

But analysts said the key concern was the planned sale of VUE.

"There was a certain amount of relief that this morning's results didn't bring any unpleasant surprises," said one trader.

"But these were immediately sidelined. Until we get some firm information, rather than speculation and rumour, we'll see the shares ebb and flow."

Debt pile

Vivendi still had net debt of 15.3bn euros at the end of March, which it has since reduced to 14bn euros as of 31 May 2003.

This is hopes to reduce by selling assets worth 7bn euros by the end of the year.

Chief executive Jean-Rene Fourtou, who took over last July, has said he plans to 're-centre' Vivendi on telecoms after its rapid expansion under his predecessor Jean-Marie Messier.

Mr Messier spent heavily on turning Vivendi from a water company into a huge media empire, but built up a vast debt pile in the process.