SFR Results Mask Broader Growth Opportunities
BMI View: The challenging operating conditions within France's mobile telephony market are reflected in SFR's latest financial results, relating to the quarter ended March 2014. The operator was recently sold to help its erstwhile parent shore up its debts while the lead shareholder in rival Bouygues Telecom is also mulling a withdrawal from a sector that now poses considerable risks to investment. Yet, France continues to enjoy the highest overall score within BMI's proprietary Industry Risk/Reward Ratings and this article explores why this is so.
SFR reported a 5.8% decrease in operating revenues, to EUR2.443bn, in Q114, while EBITDA contracted by 11.0% to EUR625mn over the same period. The operator's total mobile subscriber base rose by 3.2% y-o-y to 21.293mn, although it shrank by 0.3% during the quarter. Retail revenues fell by 8.9% y-o-y to EUR1.611mn and the postpaid retail subscriber base also contracted during Q114, both movements causing further diminution of retail ARPUs. Although SFR has ceased reporting detailed financial indicators while its sale to Altice-controlled Numericable is being processed, BMI believes that its operating and profit margins are under considerable pressure.
The company - along with peers Orange and Bouygues Telecom - is having to invest heavily in next-generation networks and services in order to stay relevant in a market that has been undermined by the aggressive pricing tactics of newcomer Free Mobile as well as over-reliance on resellers and mobile virtual network operators (MVNOs) to maintain organic subscription growth, while seeking to increase its exposure to the more valuable postpaid market.
|Ahead Of The Pack|
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