Altice USA open to role of buyer or seller in next wave of consolidation

Altice USA CEO Dexter Goei is a fan of more industry consolidation, but isn't all that particular about which side of any resulting deals – as a buyer or a seller – his company might land... so long as it creates value in the end.

"We have never shied away from consolidation, whether we're on the front foot or a receiver of a phone call," Goei said today at the JP Morgan Technology, Media and Communications Conference. "We realize that we're not one of the larger players out there. We believe it makes sense for consolidation to occur. Whether we make a phone call or someone calls us, I would suspect that we would be receptive to either of those types of alternatives at the right time."

He said it's likely that Altice USA would play some kind of role if another "active wave of consolation" were to rise up within the next five years.

Altice USA was formed via he acquisitions of Suddenlink Communications in 2015 and Cablevision Systems in 2016. Since then, Altice USA has acquired a couple of smaller cable operators (Morris Broadband and Service Electric Cable T.V. of New Jersey), but came up short in a bid for Cogeco that envisioned Altice USA holding onto Cogeco's US assets (Atlantic Broadband) but transfering Cogeco's Canadian assets to Toronto-based Rogers Communications.

As for any big moves Altice USA might attempt next, Goei suggested that he's open to a wide range of possibilities, including a sale that would allow the company to redeploy money toward another US asset or participate in a deal that would further consolidate the industry.

"There's a strategic long-term story in the US for us to follow," he said. "What's clear from our standpoint, historically, is that we're open to any type of solution, as long as we believe there seems to be value creation to occur going forward."

Goei stressed that Altice USA is not under pressure to make any big M&A moves as it pursues organic growth. However, he did note that the company is seeing openings to acquire smaller, adjacent operators perk up as Altice USA and other operators explore "edge-outs" that involve overbuilding a neighboring cable operator.

"Smaller operators are now proactively reaching out and saying: 'Listen, before you overbuild us, what do you think about buying us out and saving yourself a lot of time?,' " Goei explained. "I'm hopeful that we can do a lot more of these, because they are very accreditive for us."

Fat-bundle pay-TV model is 'unsustainable'

On the video front, Goei said the ongoing consolidation of the media business and consumers' embrace of direct-to-consumer (DTC) streaming products is impacting the pay-TV industry, but not always in a bad way.

The emergence of DTC options is giving consumers the option to seek out alternatives outside of the "fat-bundle package from cable," Goei said. "That business model, as I've said historically, is unsustainable."

Having less profitable video customers shift to DTC streaming services but retain Altice USA's broadband service is "beneficial to our economics," he said. "We are continuing to get skinner and skinnier economics on the video, which also takes up a large part of our capital allocation and efforts internally to focus on."

Goei expects a "big transformation" to take place in the multichannel video programming distributor (MVPD) market over the next two to three years.

"It's not sustainable for us to continue to see price increases every year with viewership falling – not only subscriber counts fall on the video side, but overall viewership and ratings of the content providers fall as well," he said. "You can't fight the trend. You have to accept it and then figure out how to adapt from a business model standpoint."

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— Jeff Baumgartner, Senior Editor, Light Reading