SFR results hurt by domestic price war; Vivendi ducks break-up question

Tough domestic competition has seen France's second-largest mobile operator, SFR, report lower first-half sales, but the company noted that customer losses slowed to 53,000 in its second quarter.

The Vivendi-owned company said that sales for the six-month period were down 5.9 per cent at €5.76 billion, while EBITDA fell 5 per cent to €1.85 billion, according to Reuters.

Vivendi also announced a plan that would see SFR cut its operating expenses by €500 million a year by the end of 2014, with the saving being generated from a voluntary redundancy plan as well as "variable" cost savings across all of the business including procurement costs and information technology, Vivendi CFO Philippe Capron told Reuters.

"We are suffering from the price reset in the French mobile market," he said. "We have to adapt to the new reality."

These comments came as Vivendi announced a 17 per cent fall in first-half net income to €1.5 billion compared with the same period last year, with SFR's poor performance being largely blamed for the downturn.

However, despite ongoing speculation, Capron said that a "straight break-up" between its telecoms and media businesses was "not something that we can contemplate for the time being."

"Despite the imagination of investment bankers, I do not see how we could reconcile it with the need to preserve value for our bondholders," he told the Financial Times. "A break-up would create very real difficulties with splitting the debt between the two different entities."

The Vivendi executive added that the company is not ready to provide an update on possible asset sales, or any other restructuring of the business short of a full break-up, only noting that the previously announced restructuring review would "take time."

Commenting on the Vivendi announcements, a UBS analyst issued a note carried by Reuters stating: "We think the main focus for investors was on divestments and SFR costs savings--a 'sizeable number' that could lead to roughly 10 per cent improvement relative to consensus for 2014 earnings per share."

This positive viewpoint was supported by CM-CIC Securities analyst Jean-Michel Köster. SFR has been more resilient than expected, he told L'Expansion, "particularly in terms of profitability, despite the offensive from Free Mobile."

For more:
- see this Reuters article
- see this Financial Times article (sub. req.)
- see this L'Expansion article (translated via Google Translate)

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