Report: SFR faces cost cuts of €450M

French mobile operator SFR, still reeling from the impact of Free Mobile's launch onto the market, now looks set to face some serious cost cutting as parent company Vivendi continues its efforts to develop a new strategy for the company. A report by Bloomberg, citing two unnamed sources with knowledge of the matter, said top executives at Vivendi plan to reduce operating expenses at SFR by €450 million this year through job cuts, a reduction in marketing spending and renegotiating contracts with call centres.


The measures are aimed at offsetting a projected earnings decline of 12 per cent in 2012, Bloomberg cited its sources as saying. The report follows Vivendi's decision earlier this month to hire Vodafone Europe CEO Michel Combes as its new CEO to lead the turnaround of the group. It was also reported in late March that Vivendi CEO Jean-Bernard Lévy, then serving as acting CEO of SFR, had halted 100 projects that were underway within the mobile operator.

Some of the challenges facing France's largest three mobile operators were made clear on Thursday when French regulator Arcep revealed that the number of mobile subscriptions transferred from one carrier to another reached a record high of 2.6 million in the first quarter of 2012. This covers the period following the launch of an aggressive new price plan from Iliad-owned discount operator Free Mobile.

The number of mobile users in France increased by 900,000 to 69.5 million by the end of March, "far more than in previous years," said Arcep. "First-quarter growth over the past five years averaged 300,000 SIM cards."

SFR, France Telecom's Orange and Bouygues Telecom have all been forced to assess their pricing strategies in order to respond to the Free Mobile challenge.

"The numbers show Free probably won more from competitors than we thought," Stephane Beyazian, an analyst at Raymond James, wrote in a research note, Bloomberg reported. Beyazian estimates Free gained about 2.5 million of the 2.6 million ported customers in the first quarter.

SFR could have a net subscriber loss between 350,000 and 400,000, or as much as 2 per cent of its client base, Bloomberg quoted Conor O'Shea, an analyst at Kepler Capital Markets, as saying.

For more:
- see this Bloomberg report

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