European mobile service revenue remained stalled at -0.7% y/y in Q1 16, a slight improvement from Q4 15 partly due to the leap day. The industry continues to struggle to return to positive revenue growth. Data growth by volume is slowing, as the adoption of LTE matures (base effect). Tiering appears to be holding back usage growth rather than driving decent ARPU growth, with customers slow to upgrade to the next tier. Operators are therefore evolving to offering 'more for more', raising price points and bundle sizes simultaneously. We are OP on TDC, NOS, Telekom Austria whilst UP on Telenor and Swisscom.
Note attached
* NUMERICABLE-SFR (N, TP EUR35.0): Q1 16 results were weaker than we expected with MSR (B2C + B2B) falling -6.8% and B2C fixed service revenues falling -5%. Q2 will still be somewhat challenging and H2 16 should be significantly better. We cut 2016 MSR to -5% and B2C fixed to -1%, ie a downgrade of 2% for both. This is the main driver for the 3% cut to our EBITDA estimate. With continued backbook repricing pressure and a rising competitive threat from Iliad offsetting some of the gains from SFR's network upgrades we expect revenues will remain slightly negative.
* ALTICE (N, TP EUR14.0): We cut 2017 EBITDA 3% and retain our Neutral rating. We cut Cablevision and SFR revenue and EBITDA, but raise revenue and EBITDA for Suddenlink and Portugal Telecom. We expect M&A to resume in 2017. The jury is still out on the long term revenue impact of the deep-cost-cutting that ATC implements at acquired assets, though the recent top-line development at some acquired assets is encouraging. We see the US story as better than France (and prefer ATC over NUM) but with high leverage and execution uncertainty see too many risks to turn more positive.