Hallelujah! Billionaire Patrick Drahi has stopped losing mobile customers at SFR Group SA for the first time since he bought France's second-biggest telecoms carrier. Revenue even inched higher in the last quarter of 2016 for the first time in six years.
But hold on a minute. SFR is still losing broadband and television customers to its rivals, despite buying expensive soccer content as an enticement. The sales boost was actually down to a one-time wholesale payment.
And any fragile improvement could well be derailed later this year when Drahi starts slashing 5,000 jobs at SFR, roughly one-third of its workforce. He knows the risks: hence the decision for SFR not to give a profit forecast this year, instead only promising that revenue will "stabilize". French rivals Orange SA, Iliad SA and Bouygues SA could pounce with more aggressive promotions while SFR is distracted by lay-offs. As I've said before, Drahi still has plenty to do before declaring his takeover of SFR a success.
So, not quite time to cue the singing angels. That said, Drahi's U.S. telecoms empire, which accounts for 44 percent of operating free cash flow, is doing very nicely. His holding company Altice NV bought two regional cable companies there in 2015 to become the fourth-largest provider by subscribers. Unlike the French unit, they're growing on all measures.
Altice is thinking about listing the U.S. units later this year. The growth potential and options for more deals are certainly more enticing than the shrinking French business.
The Atlantic divide has never looked wider. Investors have indicated their preference. Altice shares have risen nearly 50 percent in the past year, putting the parent group roughly at par with the sector on an enterprise value to forward Ebitda basis, according to Bloomberg data. Meanwhile, SFR shares are down 20 percent and trade at a 20 percent discount to peers.
As we've said before, the question hanging over Drahi is whether his operational skills can match his cost-cutting and deal-making prowess. In the U.S., there's plenty of fat to cut and transactions to chase. In France, genuine organic growth is the thing since repeated consolidation attempts have failed. It's yet to be seen whether the Franco-Israeli billionaire can really straddle this gap.
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