SFR Altice France - comment

SFR Altice France was downgraded by one notch by S&P yesterday, at both levels, to B- and CCC respectively. As shown in our model, we expect intense competition in the French market to result in a muted top-line growth. SFR Altice France remains FCF negative after CAPEX due to the rollout of XpFibre and the inflationary cost pressures not met by top-line growth. Despite this, free cash flow should improve in FY23 with lower expenditure at Altice TV and lower CAPEX spending, especially from FY24 onwards. Similar to its sister company, Altice International, SFR Altice France partially amended and extended its debts in January. However, there remains a maturity wall in 2025 and 2026.

The upside at SFR Altice France is from the monetising of some of its non-core assets, specifically data centres, and reducing its debt burden. Leverage remains above its internal target of 4.5x and any asset sales would be desirable before the refinancing in FY25.