Altice USA makes mobile, gigabit, M&A waves

Fourth-largest US cable op enjoys first big wireless quarter and swings deal for smaller New Jersey cableco while rolling out 1-Gig service and reports otherwise mixed Q4 results.

Alan Breznick, Cable/Video Practice Leader, Light Reading

February 13, 2020

5 Min Read
Altice USA makes mobile, gigabit, M&A waves

Despite notching higher video subscriber losses and lower broadband sub adds, Altice USA closed out 2019 on a high note by generating strong gains for its new mobile service and accelerating its rollout of both FTTH and DOCSIS 3.1.

In a packed Q4 earnings call Thursday evening, Altice USA also revealed that it has returned to the M&A warpath, scooping up Pennsylvania-based Service Electric Cable TV of New Jersey for $150 million in cash. The deal, which will expand Altice's New Jersey reach even further in and beyond the New York City metro area, is expected to close in the third quarter.

Mobile movement
Altice USA, which now has a footprint of more than 8.8 million homes passed, picked up 54,000 customers for its new Altice Mobile service, which the company launched in September 2019. That addition boosted its total to 69,000 subs after the first four months.

On the earnings call, Altice USA executives boasted that they have gotten off to a faster start with mobile service than either Comcast or Charter Communications did. "We're growing 2x faster than the other MVNO offers" out of the starting gate, said Altice USA CEO Dexter Goei. He noted that the MSO has already signed up nearly 2% of its broadband customer base for mobile service.

Altice USA, which is offering the mobile service based on a "full" MVNO deal with Sprint and an additional roaming deal with AT&T, has been charging a super-low promotional price of $20 a month-for-life to new mobile subscribers. Although that introductory promotional offer will end next week and the monthly rate will jump to $30, company executives still believe subscribers will come pouring in. "We don't expect any material changes," Goei said.

But what Goei's team does expect to see are benefits from the forthcoming T-Mobile/Sprint merger, which will give their customers access to a vastly improved wireless network. "We feel very good about the opportunity to work with the new T-Mo," Goei said. "We're very cautiously optimistic."

Video and broadband mishmash
The mobile subscriber gains overshadowed Altice USA's at-best mixed results on the video and broadband fronts. Turning first to video, the company shed 44,200 pay-TV customers in the fall quarter, more than triple the number (14,200) it shed in the year-ago period. For the full year, the cableco lost nearly 107,000 video subs, worse than the previous year's loss of 97,000 subs, to lower its total to less than 3.2 million.

Thanks to a strong December, Altice USA did eke out a gain of 7,000 broadband subscribers in the fourth quarter, boosting its customer base to nearly 4.2 million. Although those gains amounted to less than one-third of the 22,000 subs it added a year earlier, the company's December surge of 17,000 broadband subs more than made up for its sub losses in October and November.

Altice USA executives blamed the higher video sub losses and sluggish broadband sub gains mostly on the expiration of various promotional offers. They stressed that the December resurgence has continued through the first two months of the new year so far.

In a research note issued late yesterday, MoffettNathanson principal and senior analyst Craig Moffett noted that Altice USA's sluggish broadband performance was actually better than expected since the consensus Wall Street estimate called for a loss of 6,000 customers. But he expressed skepticism about the company's ability to boost revenues and subscribers at the same time.

"We have argued in the past that as long as Altice's broadband unit growth is positive, the market is likely to view their results as 'good enough,' " Moffett wrote. "Well, growth was positive in the quarter. But, not by much."

Help on the way
Seeking to boost its broadband numbers further, Altice USA is now rolling out both FTTH lines and, more quietly, DOCSIS 3.1 technology over its HFC plant in the New York metro area, to deliver gigabit speeds to its data customers. On the earnings call, Goei said the MSO upgraded about 500,000 homes to FTTH in 2019, ending the year with about 600,000. At the same time, it is now deploying DOCSIS 3.1 in the New York area, starting in the Bronx last month. As a result, Altice USA now offers 1-Gig service to nearly 30% of its data subscribers.

We'll have more on Altice USA's broadband results in a story on our sister site, Broadband World News, later today.

On the video side of the ledger, Altice USA is counting on help from Altice One, its all-services gateway platform for its HFC network. The company closed 2019 with 543,000 unique Altice One customers, representing 17% of its total video customers, up from 9% at the end of 2018. The MSO is also prepping a similar uber-box for its all-fiber customers, with plans to start rolling that out in the spring.

Back to M&A
Goei was most effusive when discussing his company's move to buy Service Electric Cable TV, which has a place in cable industry lore as arguably the firs-ever cable TV system in the US. The privately owned cable operation, founded in 1948 by the Walson family and now based in Bethlehem, Pennsylvania, will extend Altice USA's reach further into western and southern New Jersey and boost its revenue by about $50 million annually.

"If we had a hundred of these deals, we'd love to have them because they are very, very profitable and accretive to us," Goei said, noting that there are very few like it available. In particular, he sees great potential to drive broadband penetration and revenues higher in the Service Electric footprint.

In morning trading today, Altice USA's shares were down more than 2%, to $28.87.

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

About the Author(s)

Alan Breznick

Cable/Video Practice Leader, Light Reading

Alan Breznick is a business editor and research analyst who has tracked the cable, broadband and video markets like an over-bred bloodhound for more than 20 years.

As a senior analyst at Light Reading's research arm, Heavy Reading, for six years, Alan authored numerous reports, columns, white papers and case studies, moderated dozens of webinars, and organized and hosted more than 15 -- count 'em --regional conferences on cable, broadband and IPTV technology topics. And all this while maintaining a summer job as an ostrich wrangler.

Before that, he was the founding editor of Light Reading Cable, transforming a monthly newsletter into a daily website. Prior to joining Light Reading, Alan was a broadband analyst for Kinetic Strategies and a contributing analyst for One Touch Intelligence.

He is based in the Toronto area, though is New York born and bred. Just ask, and he will take you on a power-walking tour of Manhattan, pointing out the tourist hotspots and the places that make up his personal timeline: The bench where he smoked his first pipe; the alley where he won his first fist fight. That kind of thing.

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