SFR in dire straits: what is happening with the operator in the red square, who is losing subscriber after subscriber?

The operator SFR is facing a major crisis, symbolized by the loss of 385,000 mobile customers over the last year, and a weakened owner.

Formerly a leader in the French telecoms sector, SFR, now the second largest operator in France, is going through an alarming crisis, with a sharp drop in its subscriber base in one year and never-ending financial problems. Add to this a parent company, Altice, in difficulty and weighed down by a considerable debt, as well as a corruption scandal involving a senior manager of the group, which further threatens the already well-established credibility of the company in the eyes of of its creditors. Patrick Drahi no longer has a choice and must react.

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SFR is going through a major crisis

Imagine that in just one year, SFR lost 385,000 mobile customers and some 200,000 landline customers. It’s colossal. The profits of Altice France, parent company of SFR and the media BFMTV and RMC, plunged by 5.7%, as our colleagues at Capital.

Worse, free cash flow (which makes it possible to reinvest, pay dividends to shareholders or reduce debt), was negative in the second quarter of 2023. The operator in the red square is the only one, among all its competitors, to be in such a situation.

As of June 30, 2023, Altice France reported a debt of around 24 billion euros. That of the Altice group, including branches in the rest of the world, reached 60 billion euros. The debt, which has been hampering the company for several years, has become a burden for Patrick Drahi, especially as it has led to higher interest rates due to inflation.

A corruption scandal that comes at the worst time for Altice

But while he was preparing to repay the first major payment, the founder of Altice had to face a corruption scandal, which literally splashed the group this summer. This was marked by the arrest of Armando Pereira, a close collaborator of Patrick Drahi, arrested in Portugal on charges of corruption, money laundering and tax evasion. By playing with the tax authorities, but also with the local subsidiary of Altice, he seriously damaged the reputation of the company and complicated relations between the behemoth and its creditors.

SFR employees no longer hide their concerns about their future. Because Patrick Drahi now plans to sell part of the capital of Altice France, this therefore includes the operator SFR. Even if the part mentioned would only be a minority and only intended to push back the deadlines a little further, the unions are demanding total transparency on the situation, and that employees can be involved in future decisions.

Despite an ambitious vision when acquiring SFR in 2014, at the time for 13 billion euros, Patrick Drahi made a number of strategic errors, notably by betting on fiber optic lines with cable at the subscriber’s premises. , rather than on end-to-end fiber, which offers better speeds. Not to mention its media convergence project, which quickly failed in the face of rising prices, which was particularly unpopular. The time has now come for recovery for Altice and SFR, if the group has the capacity today.

Source : Capital