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Altice Europe's profit slips after heavy promotions win subscribers

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Altice Europe's profit slips after heavy promotions win subscribers
FILE PHOTO: An advertising board is seen during a demonstration 5G technology in Lisbon, Portugal June 4, 2018. REUTERS/Rafael Marchante/File Photo   -   Copyright  Rafael Marchante(Reuters)
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By Mathieu Rosemain and Gwénaëlle Barzic

PARIS (Reuters) – Telecoms and cable group Altice Europe <ATCA.AS> reported a sharp increase in customers in France in the third quarter, thanks to heavy promotions, and said it expects to return to growth next year.

In the past year Amsterdam-listed Altice Europe has shifted focus from cost-cutting towards gaining clients and selling infrastructure assets to reassure investors, after heavy investments in broadcasting rights, including the Champions League in France.

The group, owned by billionaire Patrick Drahi, said its third-quarter core operating profit fell by 6.8 percent from a year ago to 1.3 billion euros ($1.48 billion), as it spent money on promotions to attract subscribers.

The profit excluded the negative impact of the phasing out of a lower value-added tax (VAT) rate applied in France.

The group is striving to regain market confidence after a steep fall of its shares a year ago heightened concerns about its capacity to repay its 30 billion euro (26.6 billion pounds) debt pile.

Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) fell 10.4 percent in the third quarter, including this VAT-related impact. Revenues dropped by 6.1 percent, including the loss the VAT benefit, to 3.44 billion euros.

In France, which represents more than two thirds of Altice Europe’s sales, the group said it added 166,000 broadband customers in the third quarter, as well as 378,000 post-paid mobile contracts.

“Since the beginning of 2018, Altice Europe has continuously overdelivered on its operational turnaround plan,” Drahi said in a statement.

“We already see a tangible inflection in Portugal, paving the way for a recovery in France, underpinned by our strategy in infrastructure and content,” he added, saying that the group would return to growth in 2019.

Still, the addition of subscribers in France was made at a hefty price, as shown by the evolution of its average revenue per user (ARPU), a key performance indicator in the telecoms industry.

It went down to 31.7 euros in the third-quarter from 35.9 a year ago in the French broadband business. The ARPU of Altice Europe’s mobile business fell to 22.4 euros from 25.8 euros over the same period.

(Reporting by Mathieu Rosemain and Gwenaelle Barzic; Editing by Luke Baker and Susan Fenton)

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