PARIS: Altice NV, the telecoms group buying Cablevision Systems Corp. for $10 billion, said Tuesday it expects an improving trend in revenue in 2016 after its French unit swung to subscriber growth in the final three months of last year.
The company, founded by billionaire entrepreneur Patrick Drahi, reported flat revenue year-over-year at €17.5 billion. Its French mobile phone and cable business SFR, accounting for more than half of Altice’s sales, said revenue fell 3.5% to €11.04 billion, while revenue at Portugal Telecom dropped 7.3% to €2.34 billion as Altice worked to restructure the two units.
Overall, Altice reported an 18% year-over-year rise in adjusted earnings before interest, taxes, depreciation and amortization—something analysts say is an important measure of the firm’s performance—to €6.67 billion.
Mr. Drahi faces a challenge to prove he can grow the top line of his businesses while keeping costs low. Altice, the holding company for its operational units, roughly tripled the size of staff in recent months as it moves from an intense period of acquisitions to a new phase of investing in its units’ networks and on marketing efforts. Altice also named new executive committees to many of its major businesses in 2015.
“We have strengthened our management team and during 2016 we will continue to be very focused on further improving operational and financial performance, integrating the businesses we have acquired and pursuing the efficiency target we have set out,” said Chief Executive Dexter Goei.
The French unit—which was created when Mr. Drahi merged his cable company, Numericable, with mobile phone firm SFR in 2014—is closely watched by analysts as a bellwether of Mr. Drahi’s ability to execute on his game plan of quickly slashing costs in his companies to then reinvest in growing them.
In the first nine months of last year, SFR lost more than 1 million mobile clients, in part because Mr. Drahi’s team focused on cutting costs and improving core profit rather than keeping its customers.
In September, SFR fought back by launching an advertising blitz and introducing special offers to lure cost-conscious clients. In the fourth quarter it added 141,000 mobile clients. Average revenue per user was flat on last year at €22.5.
“Although commercial performance was restored in the fourth quarter in France, we still have concerns over the French revenues outlook for 2016,” said analysts at Bryan Garnier, citing difficulties in growing both the number of clients and its average revenue per user.
Still, the benefits of Mr. Drahi’s methods were evident as SFR reduced expenses by €755 million last year, pushing its operating margin up to 35% from 27% in 2014. SFR swung to a net profit of €682 million in 2015 from a loss of €288 million a year earlier.
SFR also said it was “on track to outperform synergy and efficiency targets announced” when it was acquired by Altice.
Altice has used debt over the past two years to form a vast telecommunications empire ranging from France to Portugal and the U.S. In September it agreed to buy New York-based Cablevision Systems Corp. for $10 billion.
The company’s share price has dropped 45% since its peak last year as investors questioned Altice’s ability to grow its portfolio of businesses while keeping a tight lid on costs.
Altice is seeking approval from New York state regulators to complete its acquisition of Cablevision Systems Corp, with the state’s Public Service Commission set to rule on the deal by April 29. It completed the acquisition of U.S. regional cable company Suddenlink in December.
