The European telecommunication multinational Altice SA (ATCEY, Financial), has finally realised its ambitions of entering the U.S. market by successfully acquiring Suddenlink communications, the seventh-largest cable operator in America, with 1.5 million residential customers in Tyler and east Texas regions for $9.1 billion. Headed by cable investor, Patrick Drahi, the prolific telecom group announced the procurement of 70% stake in Suddenlink Cable group in a combined deal of cash and existing debt from the company owners, private equity firm BC Partners and Canada Pension Plan Investment Board on May 20. In an address in the French national assembly on May 27, Drahi spoke about the aborted attempt for the lucrative Time Warner Cable (TWC), where the Franco-Israeli businessman was outbid by his once mentor and now rival John Malone from Charter Communications (CHTR, Financial) with a $55 billion proposed merger between the No.2 and No.3 cable operators in America. Altice plans to expand its foothold in the competitive U.S. cable TV sector.
Altice’s American dream
Altice is the Luxembourg registered multinational group of telecommunication companies and cable operators with extensive businesses in Belgium, France, Portugal, Switzerland, Israel and a number of other nations. Since establishing itself in 2001, Drahi has built the group from strength to strength expanding to a telecom giant with a current turnover of 14 billion euros with serial acquisitions worth 36 billion euros since its IPO in 2014 through leveraged buys adding assets like Portugal Telecom (PTC, Financial) and France’s second largest mobile carrier SFR.
Now with sight set on earning half of its cumulative revenue from the U.S. market , the Suddenlink acquisition from which Altice aims to shed $215 million in annual cost reductions, will account for 12% of current revenue with telecom and cable properties in Israel, France, Portugal and newly acquired Dominican Republic delivering the rest.
Analysts are certain that the debacle of its TWC venture will not hinder the ambitious expansion plan and are certain that the livewire Drahi was already eyeing other cable operators like fourth largest and privately held Cox Communications, the fifth ranked and public undertaking Cablevision (CVC, Financial) and the private eighth placed Mediacom. These companies may not be as powerful as Times Warner but are definitely key players in a dynamic cable TV market making them ideal targets for Altice.
The future of the US cable TV market
With the leading cable operator in U.S., Comcast Corporation’s (CMCSA, Financial) $45 billion bid for next largest Times Warner Cable thwarted amidst allegations of monopolistic powers and the subsequent proposed venture of joining the second largest cable company in U.S. with the third in line Charter Communications is awaiting regulatory approval, the American cable TV segment is poised for a big change. Amidst growing prices of cable channels and viewers are shifting allegiance to internet providers for their telecom dose, the cable operators are struggling to consolidate their operating cost in the online Pay TV age. Owners of the independent Cox communications may not be interested in a sale but the lesser profitable Cablevision declared its willingness for a deal earlier this month as it is struggling under heavy debts and severely threatened operations in New Jersey, New York and Connecticut from the internet connectivity provided by Verizon Communications (VZ, Financial).
Analysts opine that if the Charter merger materialises, then Altice will need to buy all other players in the market in its pursuit of developing a 50-50 revenue mix from U.S. and non U.S. holdings, and are watching the drama unfolding on the U.S. cable TV stage.
