Drahi’s SFR Jumps After Labor Unions Agree to Job-Cut Plan

  • Deal allows French phone carrer to cut a third of workforce
  • Cost of voluntary plan said to range $334 million-$1.1 billion

SFR Group SA gained the most in more than three months after reaching an accord with labor unions on a job-cut plan which will allow Patrick Drahi’s French phone business to cut a third of its workforce by 2019.

The plan to reduce 5,000 jobs, about one-third of its work force, by June 30, 2019, is set to help improve efficiency and lower costs at the Paris-based company facing intense price competition.

The cost of the voluntary plan could range from 300 million euros to 1 billion euros ($334 million-$1.1 billion), depending on the seniority and wage levels of those who sign on, according to people familiar with the situation, who asked not to be identified discussing details that aren’t public. SFR is offering workers 2.5 months of compensation per year worked on average, one of the people said. The French newspaper Les Echos, which reported on the plan earlier, said it will reduce costs by 400 million euros a year starting 2017.

SFR advanced 5.5 percent to 21.35 euros at 1:27 p.m. in Paris after rising as much as 6 percent, on track for its biggest gain since March 11. Altice, Drahi’s telecommunications holding company, gained 2.2 percent to 13.13 euros in Amsterdam.

Drahi’s team has been focused on cutting costs at SFR after merging it with cable provider Numericable about two years ago. SFR had 15,816 workers at the end of 2015, according to data compiled by Bloomberg. In June, SFR parent Altice NA completed the $9.7 billion acquisition of Cablevision Systems Corp. in the U.S.

SFR management met with French labor minister Myriam El Khomri on Tuesday, after unions pointed out a promise made by Altice to maintain jobs for 3 years after it bought SFR in 2014 from Vivendi SA. SFR will respect the commitment, a company spokesman said.

Both SFR and Altice report quarterly earnings next Tuesday, and the costs savings could support their results and outlook.

“Despite a weak start in 2016 (mainly in France), we expect Altice to reiterate its guidance as we expect earnings in France to recover in second half, mainly driven by costs savings and pricing initiatives," Emmanuel Carlier, an analyst at ING, said in a research note.

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