* Altice core profit up 9.5 pct; SFR's down 5.1 pct
* SFR margin lowest since Drahi acquisition in 2014
* Deals with NBCUniversal, Discovery weigh on SFR profits
(Adds shares reaction, analyst note, details)
By Mathieu Rosemain and Gwénaëlle Barzic
PARIS, May 11 The performance gap between
telecoms and cable group Altice NV and its listed SFR
Group division widened in the first quarter,
underscoring SFR's difficulties in attracting customers despite
heavy investments in infrastructure and content.
The holding company, founded by Franco-Israeli tycoon
Patrick Drahi, said on Thursday that its quarterly profits in
the United States grew ahead of a planned initial public
offering (IPO) while those of SFR in France dropped, along with
the number of customers in the country.
Altice's core operating profit rose by 9.5 percent over the
first three months of year to 2.24 billion euros ($2.43
billion), in line with a Reuters poll.
SFR's contribution to that amount was 820 million euros,
down by 5.1 percent from a year earlier. That figure compares
with the 896 million euro core operating profit yielded by
Altice USA over the same period, representing an increase of
Drahi is betting on the convergence of content providers and
telecommunications operators to increase margins and compete
better against newcomers such as Netflix and Amazon
. He saw the announcement of AT&T Inc's $85
billion acquisition of Time Warner Inc as an additional
proof of this trend.
In France, SFR bought the English Premier League's football
rights for the three seasons starting in 2016, paying more than
300 million euros for them.
SFR also won the TV rights for soccer's European Champions
League for the period 2018-2021 period for an annual cost of 350
million euros, a source told Reuters on Thursday.
Still, evaluating the impact of such investments on
customers' choices remains difficult and recent spending on
exclusive distribution agreements with NBCUniversal and
Discovery weigh on SFR margins.
"Yes, we believe that content has an impact on our figures,"
Altice's chief executive Michel Combes said in a call with
reporters. "It answers customers expectations, it clearly
supports our pricing strategy," he added.
SFR lost 351,000 mobile customers and 213,000 broadband
customers in the first quarter compared with the same period a
The French unit's quarterly core operating margin at 30.3
percent is the worst on record since Drahi bought SFR in
November 2014, and far from an initial target of 45 percent.
"SFR's fundamentals will likely remain difficult in 2017, as
cost savings from headcount reductions are totally reinvested in
content costs," analysts for Raymond James said in a note to
"The possible positive impact of the content strategy on
customer trends remains unclear," they added.
($1 = 0.9202 euro)
(Reporting by Mathieu Rosemain and Gwenaelle Barzic; Editing by
G Crosse and GV De Clercq)