SFR's 2009 EBITDA Down 4.5% on Competition and Regulation

SFR has announced its full-year earnings before interest, tax, depreciation and amortisation (EBITDA) for 2009, which fell 4.5% year-on-year (y/y) to 3.97 billion euro (US$5.41 billion) as the effects of increased competition and regulation in the French market offset some strong mobile growth. The French number-two operator, behind France Telecom, also announced that revenues increased by 7.6% y/y to 12.43 million euro, compared to 2008, but these figures include the consolidation of Neuf Cegetel, which was incorporated by SFR owner Vivendi into the operator's results in April 2008. The results were published as part of a report from the Vivendi Group, which saw 2009 revenues grow by 6.9% y/y to 27.13 billion euro, while EBITA grew 8.8% y/y to 5.39 billion euro.

SFR says its 2009 revenues grew by 0.3% y/y on a like-for-like basis as it saw almost 743,000 new net mobile customer additions, including strong growth in the post-paid segment where SFR grew its market share to over 36%. SFR also added 565,000 net new active broadband internet customers during the year, representing approximately one-third of the market's net additions, an increase of 14.6% y/y, and bringing its broadband total subscribers to 4.444 million.

The operator reported that mobile revenues were relatively flat at 8.98 billion euro as service revenues decreased by 0.9% due to regulatory cuts, but this was offset by a 33% jump in data revenues. Broadband internet and fixed-line revenues dropped 1.3% y/y to 3.78 billion euro as the ongoing decrease in switched voice revenues and the sale of its Club Internet network assets offset broadband growth.

Outlook and Implications

• A Fair Performance in a Tough French Market: SFR has stated that its ongoing investment strategy in mobile and broadband internet has largely offset the impact of the economic crisis in France and the effects of regulatory decisions, including the European Union's (EU) cut in roaming tariffs that came into effect in July 2009. SFR has also pointed out some significant gains in the mobile post-paid sector where it has improved its customer mix by 3.5% over the year to reach 72.6%. The launch of the iPhone was also an operational highlight, with 670,000 units sold between April and December 2009, bringing significant gains in mobile broadband and data use. SFR is now facing the entry of a fourth mobile player, which is likely to spark a price war in the mobile market, but it also now has the chance to acquire further spectrum for mobile broadband services in the forthcoming auction and is in the early stages of a network-sharing deal to boost 3G coverage (see France: 26 February 2010: French Government Sets Minimum Price for 3G Blocks at US$162 mil. and 25 February 2010: French Mobile Operators Sign 3G Network-Sharing Deal). The recent announcement of a carrier partnership deal with Microsoft for its new operating system is also likely to fuel further subscriber and data gains (see World: 16 February 2010: Microsoft, Samsung, Intel, and Nokia Reveal Operating System Strategies).

• All Systems Go for Fixed-Line Growth: While SFR has seen inevitable declines in traditional fixed-line services, it has grown its ASDL broadband market for the fifth consecutive quarter with a 38% net additions market share in the fourth quarter of 2009. Key rival France Telecom recently announced a 2-billion-euro investment in its French fibre-optic next-generation network (NGN) as it revives its fibre investment programme after many months on hold, and is seeking co-investment deals with its rivals, for which an agreement has been signed with SFR to carry out operational tests in two cities (see France: 11 February 2010: France Telecom Announces US$2.8-bil. Fibre Investment by 2015). France Telecom has ended the fibre deadlock in the country and there are now hopes that the operators will end their differences and forge ahead with the NGN roll-out.