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Vivendi’s SFR Predicts Faster Services Will Slow Phone-Bill Drop

November 15, 2012

Vivendi SA (VIV)’s French phone business SFR predicts revenue per user won’t decline as much next year as in 2012 as it persuades consumers to spend on faster mobile Internet services as a strategy to exit a price war.

The new packages will help limit the fall in 2013 and average revenue per user is set to rebound in 2014, SFR Chief Executive Officer Stephane Roussel said. French phone companies have battled with discounted phone packages since Iliad SA (ILD)’s Free brand came into the market in January with prices starting at 2 euros ($2.55) per month.

“We’ll continue to feel the effect of Free’s offensive in 2013, but we think average revenue per user will fall less than this year,” Roussel said today in an interview at a telecommunications conference in Montpellier, France. “New high-speed offers built on 4G will bear fruit afterwards -- you’ll see an improvement starting in 2014.”

SFR, which revamped its offers in September into low, mid and high-end packages, has so far seen more consumer appetite than expected for its most expensive products, packed with faster network technology, customer service and mobile-phone subsidies, Roussel said.

While parent Vivendi weighs options to revamp its structure and sell some assets, SFR is accelerating the deployment of faster 4G network technology and is in the midst of cutting costs to save 500 million euros by the end of 2013. Vivendi investors have been attentive to SFR’s profit decline as it accounts for about 38 percent of the Paris-based group’s earnings before interest, taxes and amortization.

‘Atypical Year’

SFR’s average revenue per user dropped 8.8 percent in the first nine months of 2012, Vivendi has said.

“2012 was a totally atypical year,” Roussel said. Iliad captured 6.4 percent of the French mobile market in nine months, in a start unprecedented among other fourth entrants in Europe.

Roussel declined to comment on Vivendi’s plans for SFR or discussions about a sale of the phone unit. The parent company has informally discussed a sale to former co-owner Vodafone Group Plc (VOD), though the two companies remain widely divided on a valuation, people with knowledge of its plans said last month. Egyptian billionaire Naguib Sawiris has expressed interest in buying SFR, the Financial Times said today.

The 51 year-old executive, who began his position in June after the ouster of Vivendi’s former-chief Jean-Bernard Levy, said SFR is now done redefining its strategy and the response so far has shown the company has “made the right decisions.”

“All people have been talking about in France is segmenting the market towards low-cost offers, but the high-end market also exists,” Roussel said. “While we think about 40 percent of French consumers are very keen on price, we’re also seeing appetite from clients who are willing to pay 50 euros a month to get something extraordinary.”

Six Cities

SFR will start 4G service in six French cities by the end of the first half of 2013, including Marseille, the country’s second-most populated city after Paris. The French capital will be covered later on.

Data transfer speeds and customer service have been the main focus of SFR’s marketing revamp under Roussel. Rival France Telecom SA (FTE), France’s largest carrier, has also said the rollout of a faster network is vital to charge clients more money.

“Fighting a war only on price just isn’t our strategy,” Roussel said. “We want to plan ahead and we’re betting on innovative offers as well as our stores, call centers and online sales to grow with our clients.”

SFR’s cost cuts in part prompted Vivendi to say this week that its earnings will fall less than expected this year, as Chairman Jean-Rene Fourtou heads into a six month of weighing options for a strategy change.

Vivendi is preparing to act on its strategic review in coming quarters as it looks at ways to boost the depressed stock price, its Chief Financial Officer Philippe Capron said today. The company has spent the last six months exploring everything from share buybacks to divestments to restructuring divisions after its shares lost almost half their value in the past five years.

To contact the reporter on this story: Marie Mawad in Paris at mmawad1@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net


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