Broadband services

Altice Raises $1.9B in US IPO

Cable company Altice has raised $1.9 billion in what appears to mark the second-largest initial public offering in the US market this year after that of social media player Snap. (See Altice's US Arm Files for IPO and Snap, Crackle & Pop: $28B IPO Stokes 'Bubble' Fears.)

Along with some of its shareholders, the US arm of the Altice empire managed to sell about 63.9 million shares at a price of $30 per share, having previously marketed a price range of $27 to $31 per share, according to Bloomberg.

Altice is said to be keen on using the money it has raised to support further takeover activity in the US market following the acquisitions of Cablevision Systems Corp. (NYSE: CVC) and Suddenlink Communications in the last two years.

Headquartered in the Netherlands, the cable group has been one of the sector's most acquisitive players in the last few years and today controls Numericable-SFR, France's second-biggest telecom operator, as well as Portugal Telecom SGPS SA (NYSE: PT) and various smaller businesses in other markets.

The takeover of Suddenlink in 2015 took it into the US market for the first time and was soon followed by an even bigger move for Cablevision, which was subsequently rebranded Altice USA. (See Altice Passes Final Cablevision Test.)

It is currently the fourth-biggest cable operator in the US market with about 4.9 million residential and business customers, although it trails market leaders Comcast Corp. (Nasdaq: CMCSA, CMCSK) and Charter Communications Inc. by some distance. (See Coming Soon: The New Cable Trinity.)

Altice's strategy of spending heavily on takeovers, coupled with its reputation for ruthless cost-cutting at the businesses it acquires, is a concern for some analysts.

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Group debts stood at roughly €50.7 billion ($56.6 billion) in the first quarter -- around 5.5 times the company's annual earnings (before interest, tax, depreciation and amortization).

The ratio has been falling but is still about twice the level reported by most of Europe's telecom incumbents.

Altice's net loss narrowed to €181 million ($202 million) in the first quarter, from €333 million ($372 million) in the year-earlier period, while revenues grew by about 40%, to €5.95 billion ($6.65 billion), over the same period.

Another concern is whether the US division's broadband network ambitions are achievable.

In November last year, Altice announced plans to go "all-fiber" across its entire US footprint, expressing confidence that it could do so without having to significantly increase the US budget for capital expenditure. (See Altice Plans FTTH for Entire US Footprint.)

In March, Dexter Goei, the chairman and CEO of Altice USA, said the fiber plan was economical because Altice was mainly upgrading last-mile connections on its aerial plant. (See Altice USA Sticks to High-Fiber Diet.)

Outside the US, investments look set to fall sharply in 2017, with Altice indicating that it will slash overall capital expenditure to just €4 billion ($4.5 billion) from about €4.7 billion ($5.3 billion) last year. (See Altice to Slash 2017 Capex Despite US FTTH Plan, French Rivalry.)

— Iain Morris, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, News Editor, Light Reading

Phil_Britt 6/23/2017 | 7:46:36 PM
Re: Financial leverage Growth through merger and acquisition will continue as long as there are successes like Comcast/Universal that continue to show sharp growth post-merger.
James_B_Crawshaw 6/22/2017 | 5:20:44 PM
Financial leverage It is a well-known law of Wall Street that cable companies like Altice are allowed to have net debt to EBITDA ratios that are double those of telecom operators because they have highly recurring revenues from all those TV services and then they can sell broadband on top of the same pipes at 100% margin. There are no risks that consumers will ever stop watching those TV channels. Furthermore, the cable infrastructure is provided for free by a charitable association of vendors so free cash flow is very strong. Please email me if you would like to buy my heavily geared cable company. 
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