Shares in Altice soared by more than 12% during early-morning trading in Amsterdam after the cable company reported an earnings increase for the April-to-June quarter thanks to gains in the US.
The performance came despite ongoing customer losses in France, Altice's biggest market, where competition remains rampant.
Owned by French-Israeli billionaire Patrick Drahi, Altice has grown its telecom empire through the recent acquisitions of Suddenlink Communications and Cablevision Systems Corp. (NYSE: CVC) in the US, but its Numericable-SFR French subsidiary has continued to struggle amid challenging conditions.
Altice's EBITDA rose by 2.7%, to around €2.27 billion (US$2.52 billion), compared with the year-earlier period, while revenues fell by 2.6%, to €5.83 billion ($6.46 billion).
Critics say the company's relentless focus on cost cutting has seen it fall behind rivals in the sales and marketing sphere, hitting customer growth in recent quarters. Revenues in France, which account for nearly one half of total sales, fell 4.3% in the quarter, to €2.78 billion ($3.08 billion), compared with the year-earlier period.
Altice claims to have recently stepped up promotional activity, however, and did reduce customer losses at its mobile postpaid business to 199,000, from 314,000 in the second quarter of 2015, leaving it with around 12.4 million postpaid customers overall.
Drahi has agreed not to cut jobs in France before mid-2017 but is planning to reduce staff numbers by 5,000 between 2017 and 2019, according to a late-July report from Reuters, which cited French trade union representatives as its source.
That move is likely to prompt further concern about Numericable-SFR's growth prospects as rivals continue to scoop up subscribers. Market leader Orange (NYSE: FTE), for example, claimed to have increased its contract customer base by 3.1% in the 12 months to June, to about 20.5 million subscribers.
Altice insisted the earnings performance at Numericable-SFR would get better. "We are confident the revenue and adjusted EBITDA trends will continue to improve with our fiber expansion and accelerated 4G/4G+ network investment program," said Michel Combes, Altice's CEO, in a statement.
Capital expenditure in France rose to €571.6 million ($633.7 million) in the quarter, from €406.3 million ($450.4 million) a year earlier, with Group capex increasing by 16%, to approximately €1.1 billion ($1.2 billion) over the same period.
Despite the concerns, investors appeared encouraged by the latest set of Group figures, with Altice's share price trading up around 11% in Amsterdam at the time of publication.
Having recently completed the takeover of Cablevision, Altice is now the fourth-largest cable operator in the US. In euro terms, revenues at the Cablevision business fell by 1%, to €1.43 billion ($1.59 billion), while EBITDA soared by 8.7%, to €433.1 million ($480.1 million). (See Combes Lands Altice CEO Job as Cablevision Deal Looms, Altice Passes Final Cablevision Test and Coming Soon: The New Cable Trinity.)
Suddenlink, a US cable operator Altice bought last year, also performed well, growing revenues by 2.9%, to €566.1 million ($627.6 million), and EBITDA by nearly 16%, to €258.4 million ($286.5 million).
But Altice has borrowed heavily to support its international expansion: Group net debts stood at more than €49 billion ($54 billion) at the end of June, or about 5.8 times Altice's annual EBITDA. Most of Europe's biggest operators have net-debt-to-EBITDA ratios of between 2 and 3.
The scale of Altice's borrowings has fueled concern about its long-term outlook. Martyn Roetter, a consultant writing for Seeking Alpha, reckons Altice's aggressive pursuit of cost cuts "is not ultimately sustainable."
"It increases cash flow to pay down debt in the shorter term but results in a loss of competitiveness and hence a declining customer base and falling revenues as well as demotivated employees and contractors who feel they have been cheated," wrote Roetter in an article on Seeking Alpha's website earlier this month.
— Iain Morris, , News Editor, Light Reading