Altice USA shares surge on report Charter is sizing up a takeover

Altice USA shares shot up more than 35% in Monday afternoon trading after a report that Charter Communications is exploring a takeover bid of the New York-based broadband operator.

According to Bloomberg, Charter is engaging with financing advisors to explore the potential merits of an acquisition of Altice USA, a company that was spun-out from Europe-based Altice in 2018. Altice USA is comprised of acquisitions including Cablevision Systems, an operator focused on New York, Connecticut and New Jersey; and Suddenlink Communications, an operator that largely serves rural parts of the US.

Bloomberg noted that it's still unclear whether Charter ultimately will decide to pursue a takeover of Altice USA. There's still no telling what Charter would put up for Altice USA, but MoffettNathanson analyst Craig Moffett recently estimated Altice USA's enterprise value at $2,668 per home passed.

Altice USA explored a potential sale of its Suddenlink systems in 2022 but ultimately decided to stand pat.

Charter has not outwardly shown an appetite for any sizable acquisitions. Charter execs have likened the returns it's getting via rural network buildouts to cable M&A.

Charter and Altice USA declined to comment on the report.

Tale of the tape

Altice USA's networks passed about 9.62 million locations at the end of 2023, and the company finished the year with 4.74 million customers (4.36 million residential subs and 380,300 business customers). Charter, the larger of the two, finished 2023 with 56.98 million passings and 32.12 million customers (29.90 million residential customers and 2.22 million small and midsized business customers).

Both companies have growing mobile businesses but are taking different approaches. Charter offers Spectrum Mobile via its mobile virtual network operator (MVNO) deal with Verizon, its Wi-Fi network and a budding CBRS network deployment. Altice USA's Optimum Mobile service leans on an MVNO agreement with T-Mobile and its Wi-Fi footprint.

Charter and Altice USA are also using different network strategies. Charter is in the midst of an upgrade of its hybrid fiber/coax (HFC) network, including a move to DOCSIS 4.0 in a portion of its footprint, and is using passive optical networking (PON) for its new builds. Altice USA is upgrading its HFC networks to fiber-to-the-premises (FTTP) on the East Coast and relying on DOCSIS 3.1 upgrades in the Suddenlink areas.

A successful play for Altice USA would expand Charter's presence on the East Coast and complement some of its rural operations.

Both sides seeking growth

A potential deal would enter the picture as Charter and Altice USA seek out ways to grow their respective broadband businesses. Charter shed 61,000 broadband customers in Q4 2023 but is expanding its footprint and customer base with a rural-focused network buildout. Altice USA, which is in the midst of a turnaround under new CEO Dennis Mathew (a former Comcast exec), lost 27,000 residential broadband subs in Q4.

Bloomberg said Altice USA shares were up as much as 63% Monday, a surge that caused a brief halt in trading. Altice USA shares later settled down to close Monday up 65 cents (+35.79%) to $2.48 each in late afternoon trading.

Charter shares closed Monday down $6.78 (-2.26%) to $292.64 each.