Shares in Altice USA shot up more than 22% Thursday afternoon amid a report that the operator is exploring the sale of its rural-focused Suddenlink cable properties for up to $20 billion.

Citing unnamed people familiar with the situation, Bloomberg reported that Altice USA has connected with Goldman Sachs on a deal with potential suitors. Altice USA, which originally acquired control of Suddenlink in late 2015, is looking for a deal to help the company pay down billions in debt, the report added, noting that Altice USA may ultimately still decide to retain the unit.

Figure 1: (Source: Richard Levine/Alamy Stock Photo)

Altice USA declined to comment on the report. However, CEO Dexter Goei has hinted previously that the company is open to a range of transactions, including sales or swaps of certain assets.

Altice USA is in the process of placing all its systems under the "Optimum" brand and is implementing an ambitious fiber-to-the-premises (FTTP) upgrade that largely focuses on its footprint in New York, Connecticut and New Jersey, but also includes portions of its rural Suddenlink service areas.

That Altice USA is looking into a sale of the Suddenlink assets "shouldn't come as a complete surprise," Craig Moffett, analyst with MoffettNathanson, wrote in a brief research note. Moffett recently characterized Altice USA as the "new canary" in cable's coal mine (effectively replacing Cable One, which previously held that distinction) as its broadband subscriber growth slows amid pay-TV losses, and rumors build that the operator could make a move to go private.

"Even cable bears would likely concede that Altice USA is trading below its intrinsic value," Moffett noted. "What is surprising, at least to us, is that they are considering a breakup and sale while they are still a public company."

Moffett said his fear is that the majority owner, Patrick Drahi, is more likely to take the company private first, perhaps at a modest premium, in order to capture the upside of a Suddenlink sale for himself.

"As it happens, this is precisely the scenario we described," Moffett wrote in reference to a report last fall that discussed such a scenario and the potential to divest Suddenlink.

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— Jeff Baumgartner, Senior Editor, Light Reading