Despite the usual seasonal headwinds of the spring quarter, Altice posted surprisingly upbeat operating numbers for its two new US cable properties in Q2, prompting company executives to promise stronger than expected results over the next few quarters.
Altice , which has become the fourth-largest MSO in the US through its recent acquisitions of Cablevision Systems Corp. (NYSE: CVC) and Suddenlink Communications , reported smaller subscriber losses at its Suddenlink cable systems and decent subscriber gains at its Cablevision systems in the second quarter. These numbers are meaningful because the spring period is typically the worst quarter of the year for cable operators and other pay-TV and broadband providers due to spring and summer moves by college students and relocating families.
The improved operating numbers at its US cable properties played a large part in Altice's higher earnings overall in the second quarter. Shares in Altice soared by more than 12% during early-morning trading in Amsterdam after it reported the results. (See Altice Stock Soars After Profits Grow.)
Specifically, Altice reported that Suddenlink lost 8,000 "unique" customers in the quarter, significantly less than the 13,000 overall customers it lost a year earlier. Breaking down the numbers further, Suddenlink shed 2,000 broadband subscribers, as opposed to 3,000 a year ago, and 23,000 video customers, as opposed to 29,000 in the previous second quarter.
Cablevision, which saw a mass exodus of senior executives after Altice took over in the early spring, fared even better in the quarter. The New York operator actually gained 19,000 overall customers as it posted its best Q2 operational performance in four years. Breaking down its numbers further, Cablevision (which Altice now calls by its consumer-facing brand name, "Optimum") picked up 26,000 broadband subscribers and lost just 2,000 video subs in the quarter.
Largely as a result of the improved subscriber numbers, Suddenlink's revenue rose 5.2% year-over-year (as measured in US dollars) to $627.6 million, or up 5.7% when the receipts from a major pay-per-view (PPV) event last spring are excluded. Optimum's revenue climbed 1.1% on a year-over-year basis (as measured in US dollars again) to $1.59 billion, or up 2% when that same PPV event from last year is thrown out.
"We're really pleased but we think we can do even better," said Altice USA Chairman & CEO Dexter Goei, speaking on the company's earnings call Tuesday morning. "We feel very good about our perspective on the businesses when we acquired them and we think that the opportunities could be even greater now."
Goei said Altice plans to build on those encouraging results by adding more fiber to the network, boosting broadband speeds, rolling out next-gen video products, investing more in business services and improving the customer experience in both the Suddenlink and Optimum markets. It's also looking to integrate the two properties more tightly together and cut operating costs further, even though Suddenlink mainly operates in Texas, the Southwest and the Southeast while Cablevision operates solely in the greater New York metro area.
Starting with broadband, Goei said Altice is accelerating Suddenlink's deployment of Operation GigaSpeed, a three-year capital upgrade project designed to enable the operator to roll out 1 Gig download speeds throughout its footprint. As for Optimum, Altice's plans call for rolling out max download speeds of 300 Mbit/s by the end of next year, introducing a new broadband package for low-income consumers and investing even more heavily in the operator's already extensive WiFi network. In addition, Altice intends to introduce a new "home hub" for both properties soon.
Goei said Altice is also focused on reducing customer churn, particularly in the Suddenlink areas, by offering better product bundles and better customer service. In particular, he's looking to leverage Optimum's expertise in this area, noting that it now averages just 18% to 19% annualized customer churn, among the lowest rates in the cable industry, while Suddenlink averages close to 30% annualized churn, which is more in line with the industry average.
Finally, Goei sees more possibilities for cutting costs at both Suddenlink and Optimum by buying equipment at lower bulk prices, streamlining work processes and keeping programming cost increases in check. In the case of Optimum, Altice has also trimmed its payroll costs by $50 million to $100 million a year, thanks to mass resignations by 40 to 50 of its senior executives, including its top 10 or 11 execs, when the operation changed hands in the spring.
— Alan Breznick, Cable/Video Practice Leader, Light Reading