Cost-Cutting Versus Cord-Cutting at Cablevision-Owner Altice

The cost-cutting continues at Altice. But the acquisitive trans-Atlantic cable operator needs to be careful it doesn’t cut customers in the process.

Don’t get too excited by the 13% jump in Altice’s share price Tuesday. The company’s enterprise value is roughly €52 billion ($57.8 billion), but 70% of that is debt. Investors only need to think Altice is worth about 4% more to justify that 13% jump in its equity value, which follows a rocky 18 months.

Second-quarter results unveiled Tuesday showed early progress with the company’s U.S. acquisitions. The key profit margin at Suddenlink Communications—a cable business based in St. Louis it bought last year—jumped to 45.6% in the second quarter, from 40.5% the previous year. Management implied this was just the start.

Cablevision Systems, Altice’s latest U.S. deal, made a paltry 32.9% margin by comparison. The conspicuous—and widening—gap between the two operations makes the group’s ambition to cut Cablevision’s operating costs by $900m, or roughly a sixth, look achievable, even if management declined to give further details of its plan Tuesday.

However, the key question for Altice isn’t whether it can cut costs, but whether it can do so while keeping customers.

At the French business, SFR, revenues fell 4.6% year over year in the second quarter as it lost both broadband and cellphone customers. This was better than the 6.1% decline in the first quarter, when ultimately unsuccessful merger talks between French telecom operators Orange and Bouygues encouraged a spike in competition. SFR’s management forecast further improvements in the second half. This and further cost savings explain why SFR shares, which are separately listed and also highly debt-geared, rose 10% Tuesday.

But with SFR’s turnaround incomplete, Altice’s buy-cut-grow business model remains only two-thirds proven. Cost savings may give the shares a shot in the arm. Only top-line growth can fuel a lasting recovery.

Write to Stephen Wilmot at stephen.wilmot[a]wsj.com