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Altice USA: 'Wait Till Next Year!'

Alan Breznick
8/3/2018
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Like a baseball contender doomed to fall short this season but committed to winning next season, Altice USA's rallying cry appears to be: "Wait till next year!"

An independent entity since fully spinning free of its European parent two months ago, Altice USA reported slightly higher than expected losses on slightly lower than expected revenues for the second quarter Thursday despite incremental increases in revenue and cash flow on a year-over-year basis.

But investors mostly shrugged off these lower numbers. As a result, Altice USA's share price, which has tumbled more than 20% since the beginning of the year, began recovering in late trading yesterday and early trading today, climbing to $17.22 each as of 11 a.m. ET, up nearly 4% on the day.

What might be turning investors' heads is that Altice USA, the fourth-largest cable provider in the US with 4.9 million total customers, trimmed its video customer losses and boosted its broadband subscriber gains on a year-over-year basis. The cableco also racked up healthy increases in commercial services and a surge in advertising revenues. (See Altice USA Q1 Revenues Rise 1.8% to $2.36B.)

But what seems likely to make a longer-term difference for investors is that Altice USA executives clearly have their eyes on 2019 as they carry out various initiatives designed to spur a fresh wave of subscriber and revenue growth for next year and beyond. They spent much of their earnings report and corresponding call with financial analysts yesterday evening focusing on the benefits that these initiatives are expected to bring.

Take the video side of the business. Altice is clearly counting on big things from its new home entertainment hub, known as Altice One. Introduced with much fanfare in the New York City area over the past eight months, the Altice One all-in-one boxes -- designed to offer seamless navigation across traditional video content, over-the-top video apps, whole-home WiFi and other services -- have now been deployed across the MSO's legacy Cablevision Systems footprint in the New York City area and introduced in its legacy Suddenlink Communications service areas. The company plans to complete the Suddenlink rollout by the end of September and upgrade the uber box's operating system with new features over the rest of the summer and fall. (See Altice USA Rolls Out Uber Set-Tops.)

Or consider the broadband part of the business. With the company now providing symmetrical 1-Gig service in 73% of the old Suddenlink territories and starting to offer the same in the former Cablevision areas, Altice USA is boosting data speeds faster than most of its rivals. It is also building a new FTTH network in the New York area after doing the same in much of the Suddenlink territories. (We'll have more on Altice USA's broadband progress and plans in an upcoming story on our sister site, Broadband World News.)

Or look at Altice USA's mobile ambitions. Under a multi-year MVNO agreement with Sprint Corp. (NYSE: S) announced last November, the MSO intends to launch mobile service over its network and Sprint's network early next year. In its earnings report, Altice USA said its "connection to Sprint microsites to support Sprint’s network densification … is currently running well ahead of schedule." (See Altice & Sprint Ink MVNO Deal.)

In addition to these initiatives, Altice USA is preparing to install a new BSS/OSS system across its entire 8.7 million-home footprint this fall. Further, it's deploying advanced WiFi routers and mini-repeaters in broadband customer homes and planning to launch a new Smart WiFi service by the end of the year.

And, beyond all that, Altice USA is looking to start doing more in-franchise network extensions next year after several years of laying low.

On the earnings call yesterday, Altice USA Chairman & CEO Dexter Goei said the company has been averaging just 40,000 new home passings a year over the last couple of years, split pretty evenly between the Cablevision and Suddenlink territories, as it focused on integrating the two units into its operations. But now, with most of that integration work completed, "we expect to be higher than that" this year and "significantly higher" in 2019, he said.

So all signs point to 2019 as the year that Altice USA starts making its mark. At least that's what the company executives are shooting for.


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Turning to the second-quarter numbers, Altice USA shed about 24,000 video customers, an improvement over its loss of 37,000 video subs a year earlier. At the same time, it added 10,000 broadband customers, up from just 2,000 a year ago, thanks largely to gains at its Suddenlink unit.

Altice USA's revenue rose 1.8% to $2.4 billion in the quarter, while cash flow edged up 1.5% to $1 billion. The Suddenlink unit accounted for much of that growth, with its revenue up 3%. The Cablevision (Optimum) unit, which lost about 13,000 video customers in the spring because of a carriage dispute with Starz and severe weather, eked out a 1.6% revenue increase.

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

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