May 11, 2016 / 6:47 AM / 4 years ago

UPDATE 2-France's SFR reports profit drop as it spends to lure customers

* SFR predicts improvement in coming quarters

* Shares fall the most in five weeks

* Parent company Altice confirms full-year forecast (Adds shares reaction, analyst quote, details)

By Mathieu Rosemain and Gwénaëlle Barzic

PARIS, May 11 (Reuters) - SFR reported a first-quarter net loss on Wednesday, hit by increased spending on campaigns to lure back customers as it tries to reposition itself as a content-driven telecoms operator in a competitive French market.

Still, France’s second-biggest telecoms operator said it expected business to improve over the rest of year, helped by growing demand for broadband and high-speed internet services.

SFR posted a quarterly net loss of 41 million euros ($46.7 million), compared with a net profit of 743 million a year earlier. Core operating profit fell 9 percent to 851 million, while total revenue fell 6.1 percent to 2.57 billion.

SFR’s shares fell 6.5 percent by 0859 GMT, their steepest decline since April 4, the first trading day following the end of merger talks between rivals Orange and Bouygues Telecom that could have brought a stop to the price war started by the arrival of Iliad’s low-cost services.

The SFR group, controlled by Franco-Israeli tycoon Patrick Drahi, relies on a combination of television content and mobile telecoms to set itself apart from rivals.

It plans to offer customers its own television content, including English Premier League soccer, to win market share even though similar projects have failed in the past.

Some analysts said that SFR’s strategy needs to bear fruit quickly.

“While there are supportive factors, it strikes us that improvement needs to be pretty rapid and we expect this to be the focus of questioning on the conference call,” said Jerry Dellis, an analyst at Jefferies, in a note.

SFR’s parent company, Altice, said in a separate statement that first-quarter core operating profit grew 0.9 percent to 1.62 billion euros ($1.84 billion) as its businesses in Portugal and the United States offset the steep decline in profitability at SFR.

“It has been a challenging quarter in France but we are confident that our accelerated network investment programme, content-enriched service offering and operational improvements will deliver improving results throughout 2016 under the new management,” Altice Chief Executive Officer Dexter Goei said.

Altice confirmed its full-year forecast for mid-single digit growth in adjusted EBITDA (earnings before interest, tax, depreciation and amortisation). It also expects its $10 billion acquisition of U.S. firm Cablevision to complete in the second quarter.

$1 = 0.8780 euros Reporting by Mathieu Rosemain and Gwenaelle Barzic, additional reporting by Raphael Bloch; Editing by James Regan and Louise Heavens

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