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Altice USA is making moves, including an internal investigation into its procurement activities and a review of its vendor relationships, amid a corruption probe targeting Altice Europe's ops in Portugal.
Altice USA is making several moves, including the launch of an internal investigation into its procurement activities, a change in procurement-related leadership and the suspension of some capital spending, amid a corruption probe targeted at Altice Europe's operations in Portugal.
Those moves are in the wake of a corruption probe in Portugal that has already resulted in Altice Europe cutting ties with several suppliers operating in France tied to the allegations, Bloomberg reported. Bloomberg also reported that Tatiana Agova-Bregou, an exec in charge of content, acquisitions and partnerships at the European unit, has been placed on leave, effective August 1.
Update: Legal representatives for Agova-Bregou issued a statement that she denies any wrongdoing. Agova-Bregou, they added, will make herself available for any judicial hearing. But, "as of today, she has not been contacted by the judicial authorities for any hearing," the added.
That chain of events followed the recent house arrest of Altice co-founder Armando Pereira while the police investigate alleged corruption at Altice's Portuguese subsidiary related to procurement processes at the company. Pereira is also regarded as the right-hand man to Altice owner Patrick Drahi.
"In response to these circumstances in Portugal, we have made the immediate and prudent decision to launch our own internal investigation at Altice USA," Altice USA CEO Dennis Mathew said Wednesday on the company's Q2 2023 earnings call. Mathew, a former Comcast exec who was tapped as CEO nearly a year ago, was recently appointed chairman of the board at Altice USA.
Mathew also announced that Altice USA's prior head of procurement, Yossi Benchetrit, was put on leave and has since been separated from the company. Altice USA followed with the hiring of Jennifer Yohe, an industry vet late of companies such as Comcast, DZS and MediaKind, as chief procurement officer.
Altice USA also is reviewing its supplier and vendor relationships and "proactively pausing some capital spend until we have completed our investigation, which will impact our fiber construction targets in the short-term," Mathew said. As Altice USA reviews its fiber passings and capex targets, the company will use this time to ramp up sales and marketing efforts aimed at driving penetration onto the already-built network, he added.
'Uncomfortable connections'
Altice USA, a sister company to Altice Europe, has not been directly dragged into the scandal, nor has Drahi. "But there are already some uncomfortable connections," MoffettNathanson analyst Craig Moffett wrote in a research note, citing the situation with Benchetrit, Pereira's son-in-law. Altice USA's former chairman, Alexandre Fonseca, resigned in mid-July and was replaced by Mathew.
Moffett also stressed that "it is too early to know whether the European procurement scandal will infect the US business." But Altice USA is making the aforementioned string of moves in the wake of the emerging scandal in Europe.
Broadband subscriber losses extend into Q2
This is occurring as Altice USA's absorbs more subscriber losses and reductions in revenues and while the company moves to improve its overall operations and plows ahead with an ambitious fiber network upgrade that's largely concentrated in New York, New Jersey and Connecticut.
Altice USA lost 37,000 total broadband subs in the period, a tick below a loss of 39,000 in the year-ago quarter, as the company continues to face off with fiber and fixed wireless access (FWA) competition. But that was paired with the addition of 40,000 fiber broadband subs, Altice USA's best quarter in that category, expanding that total to 250,000.
Altice USA built another 287,000 fiber-to-the-premises (FTTP) passings in the quarter, raising its to total to 2.66 million. The company recently introduced a new symmetrical 8-gigabit service that was available to 1.7 million passings at the end of the second quarter. Altice USA also added 66,000 network passings from network "edge-outs" during the quarter.
Based on construction in process and other commitments outside its decision to suspend some capital spending as the company conducts its own internal investigation, Altice USA now expects to complete at least 600,000 fiber passings for fiscal 2023. That implies a potential reduction of $100 to $200 million in capital intensity compared to what's been previously disclosed, CFO Marc Sirota said.
The company also shed 68,300 video subs in Q2, from a year-ago loss of -84,500. Altice USA is deploying a new Android TV-powered streaming device that now serves as the company's "marquee video product" and is the "primary video solution" for Altice USA's fiber customers, Mathew said.
Altice USA added 16,000 mobile lines (via its MVNO partnership with T-Mobile), raising its total to 264,000. Mathew said mobile attachment rates for new broadband customers has more than doubled since the recent launch of the company's new Optimum Complete convergence package.
On the financial front, total revenues dropped 5.6%, to $2.32 billion. Residential revenue declined 5.7% year-over-year, while business services declined 1.9% and advertising revenues declined 14.8%.
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— Jeff Baumgartner, Senior Editor, Light Reading
Editor's Note: An earlier version of this story reported Altice USA shed 58,600 video subs in Q2 22, which was incorrect.
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