Altice's results raise more questions than answersAltice's results raise more questions than answers
Altice lost more broadband customers during its second quarter. It did manage to gain mobile customers, but mostly thanks to an offer of free service. And then there's that sale of Suddenlink...
August 4, 2022
Cable company Altice said it lost more broadband customers during the second quarter, results that dovetail with similar results from its cable peers Charter Communications and Comcast. And though Altice reported progress with its ongoing fiber network buildout, that effort hasn't yet helped to stem the company's slow slide in the market.
Altice also reported a significant gain in the number of its mobile customers – but that growth appeared to be driven primarily by the company's offer of a free 1GB of service.
And, finally, Altice CEO Dexter Goei confirmed that a sales process is "going on" for its Suddenlink systems – Bloomberg reported on the situation nearly two weeks ago – but he declined to offer more details.
Taken together, the results raise a number of concerns about Altice without providing any clear directions.
Figure 1: (Source: Richard Levine/Alamy Stock Photo)
"Altice's second quarter 2022 results showed a business that continues to be under pressure, and we didn't see any material signs of an inflection one way or the other," summarized the financial analysts at Evercore in a note to investors following the release of the cable company's quarterly results. "As such, we expect investor focus to remain on the prospects for a sale of all or part of the Suddenlink asset, which could unlock significant value, although we remain cautious about the probability that a transaction can be worked out."
Ongoing customer losses
Altice said it lost around 40,000 broadband customers in its most recent quarter, capping four quarters of such losses. The figure is also roughly double what most financial analysts had expected.
"Altice is seeing dramatically different patterns in its two footprints," wrote the financial analysts at MoffettNathanson in their assessment of the company's second quarter performance. "In the more rural Suddenlink, they are seeing high gross additions, but also higher churn, and they are feeling the impact of fixed wireless. In the urban Cablevision footprint, they are seeing low churn but also low move activity and therefore low gross additions."
Indeed, those factors have also affected the likes of Comcast and Charter in the second quarter. The number of customers moving to new homes directly affects the number of new cable customer signups, and that figure has been lower than normal recently. Further, cable companies are seeing more competition from the likes of fiber providers and fixed wireless access (FWA) operators like Verizon and T-Mobile.
Altice, for its part, has been working to upgrade its network to fiber in order to offer customers faster speeds. The company said it remains on track to reach 6.5 million fiber passings by the end of 2025, having added 270,000 new fiber-to-the-home (FTTH) passings in the second quarter. The company said it now counts 104,000 fiber customers.
Altice inked a new MVNO agreement with T-Mobile in January, allowing the company to offer "more attractive mobile promotions, including extremely competitive multiline discounts," according to Goei.
Altice is among a number of T-Mobile MVNOs – including Dish Network and Google – that have recently scored new terms.
Altice's new Optimum Mobile pricing helped drive the addition of 33,000 new mobile customers. However, nearly 28,000 of those subscribed to the company's "1GB for free" offer, which the company discontinued at the beginning of July.
"Still, wireless accounts for just 1% of revenues at Altice, even as wireless revenues are now growing at 28% year over year," wrote the MoffettNathanson analysts. "For comparison, Charter now sources almost 6% of its revenues from wireless... and their growth rate is 40%. There is clearly room to grow here, in our view."
The Suddenlink sale
Altice is reportedly working to sell its Suddenlink business – in the midst of a rebrand to Optimum – for around $20 billion. Cable One, Cox Communications, Charter, Comcast and Mediacom have been floated as possible buyers.
"I don't think we're in a position to talk about the assets in detail," Goei said during his company's quarterly conference call, according to a Seeking Alpha transcript of the event. "I think we can confirm that we've received a lot of reverse inquiry for all or parts of the Suddenlink assets. I don't think we want to get into a debate as to financial and operational KPIs [key performance indicators] in a public forum."
In general, analysts appeared doubtful that Altice could generate $20 billion for Suddenlink, as reported by Bloomberg.
"That would imply a better than 15x multiple," argued the MoffettNathanson analysts. "That might have been attainable a year, or even six months, ago, but it's not now."
The analysts speculated that a 6-7x multiple might be more realistic. But they warned that "the window to 'fix' Altice by selling Suddenlink may already be closed, in our view."
Similarly, the Evercore analysts argued a 20x multiple for Suddenlink would be "unrealistic." But they suggested a 7x multiple "would be accretive to Altice equity."
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