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Altice Moves to Stem Investor Panic

Alan Breznick
11/10/2017

Seeking to halt an all-out investor revolt, Altice is betting that its old, tried-and-true management team can restore faith in the company after a harrowing week that saw its stock price plunge by about a third.

In a series of moves unveiled together late yesterday, Altice announced that founder Patrick Drahi will return to active management of the international cable/telecom giant as president of the board and that CEO Michel Combes will resign immediately, slightly more than one year into the job. Altice also announced that Altice USA CEO Dexter Goei will assume Combes's role, effectively taking his old job back, while continuing to run the US unit. And the company announced that Dennis Okhuijsen will become Altice Europe CEO in addition to serving as CFO of the parent company.

"This structure represents a return to the core organization that created the success of the Altice Group," the company said in a prepared statement. "It will provide direct, clear leadership of the European operations to deliver on its potential and continue to support Altice USA."

Altice is making all these management moves and more after it spooked investors by issuing an unexpected profit warning that raised fresh questions about the company's ability to manage its heavy debt load, which has topped $55 billion. In its third-quarter earnings report late last week, Altice said it now expects its full-year cash flow to "grow at the low end of the guidance range" in contrast to the high-single-digit percentages forecast earlier. The MSO also revealed that revenue at its international operations fell 1.8% on a year-over-year basis, dragged down by revenue declines in both France and Portugal. (See Eurobites: Drahi Retakes Control at Altice as Combes Steps Down.)

In contrast to the company's French and Portuguese units, Altice USA performed better than expected in the summer quarter, with its overall revenue rising to $2.3 billion, up 3.2% from a year earlier, while cash flow climbed 18.9% to $1.03 billion. Most notably, the company's consolidated margins, already among the highest in the cable industry, continued to move upward, reaching an impressive 44.1%. (See Altice USA Plows Ahead With Hubs & Fiber.)

Yet, despite the unit's better-than-expected results. Altice USA's stock price has also fallen over the past week. As of late this morning, the stock traded at slightly below $22 a share, down about 10% from the time just before the earnings report was released last week.

The big question now is whether Drahi and Goei, who together built Altice into one of the world's largest cable/telecom players through aggressive acquisitions and organic growth, can reassure investors that they can restore growth at the company's European units and manage their way out of the debt problem through cost-cutting, more acquisitions, fiber builds and other measures. On Altice's earnings call last Friday, Combes and his team sought to assuage those fears by predicting that revenue and cash-flow turnarounds in France and Portugal were just around the corner, but that effort clearly failed.

It will be interesting to see what Drahi and Goei have in their bag of tricks this time.

— Alan Breznick, Cable/Video Practice Leader, Light Reading

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mendyk
mendyk
11/10/2017 | 2:54:42 PM
Might as well jump
Does Mr. Combes lead the league in golden parachutes at this point?
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