SFR shares rally as CEO says French price war easing

August 9, 2016 1:12 AM EDT

People walk under the logo of French telecoms operator SFR in Paris, France, August 8, 2016. REUTERS/Philippe Wojazer


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By Mathieu Rosemain

PARIS (Reuters) - French telecoms operator SFR said on Tuesday a fierce price war in the domestic mobile market showed signs of easing, sending its shares up sharply despite lower quarterly profit.

"We are seeing right now a more normalized competitive environment," Chief Executive Michel Combes said in a call with reporters. "There's still promotional activity mainly at the low end of the market, while we are more focused on the high end."

France's second-biggest telecoms operator, which posted a 6.8 percent decline in second-quarter core operating profit, is betting on big high-speed broadband and mobile investments to lure customers ready to pay more for improved networks.

The domestic industry has been struggling to revive mobile business margins since the 2012 arrival of Iliad's low-cost Free Mobile services.

SFR shares were up 12.6 percent at 0839 GMT, on course for their biggest one-day gain since January, after Combes said he expected the pricing environment to improve in coming months.

Parent company Altice was up 14.5 percent in Amsterdam after it separately reported a 2.7 percent increase in quarterly operating profit to 2.27 billion euros, beating analysts' expectations thanks to a resilient performance in the United States and Portugal.

Altice, which is controlled by Franco-Israeli tycoon Patrick Drahi, also confirmed its full-year guidance.

SFR's operating profit decline to 999 million euros ($1.11 billion) in April-June reflected the cut-throat competition and a loss of mobile customers, with revenue down 4.3 percent at 2.78 billion euros.

Orange had already signaled last month that pricing pressure remained intense in the quarter.

Combes declined to comment on the costs or savings expected from a redundancy plan signed last week with SFR's two biggest unions to cut 5,000 jobs by mid-2019.

French newspaper Les Echos has reported that SFR planned to set aside between 600 million and 800 millions euros over two years to finance restructuring that could save 400 million euros annually starting next year.

(This story corrects reporting period to April-June from March-June in 8th paragraph)

(Reporting by Mathieu Rosemain; Editing by Alan Crosby and Laurence Frost)



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