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Altice Hails French Recovery as Earnings Rise

Iain Morris

Altice hailed signs of progress at its business in France following a recent group restructuring and greater focus on customer service, as it reported an earnings increase for 2017 on revenues that were about the same as in the previous year.

The service provider generated revenues of about €23.4 billion ($28.8 billion) across its various European and US operations and made around €9.39 billion ($11.57 billion) in adjusted EBITDA, up from €8.89 billion ($10.96 billion) in 2016.

Altice has struggled in France amid fierce competition from rivals Orange (NYSE: FTE), Bouygues Telecom and Iliad (Euronext: ILD). Rampant cost cutting was previously thought to have left Altice ill equipped to challenge those companies.

But Altice claimed to have added about 80,000 mobile contract customers in the final three months of 2017 -- a big improvement on net additions of 33,000 in the year-earlier period and the company's best performance in two years, it said.

Net additions in the fiber broadband market also reached their highest level in two years, rising to 69,000 in the fourth quarter of 2017 from 54,000 in the year-earlier period.

Despite those improvements, Altice's overall consumer mobile business shrank by 247,000 customers in 2017, to just under 14.4 million subscribers. There was also shrinkage at the fixed-line business, which lost 170,000 customers in the year to finish it with just over 5.9 million subscribers.

A wave of acquisitions in the last couple of years has led to mounting debts at Altice and the company has been trying to dispose of assets to improve its balance sheet position.

Group net debts stood at more than €49 billion ($60.4 billion) in December 2017, more than five times the company's adjusted EBITDA for the entire year. The figure compares with net-debt-to-EBITDA ratios of between two and three for most large European operators and has left investors feeling nervous about Altice's financial wellbeing.

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Seeking to reduce debts, Altice has already negotiated the sale of a telecom solution and data center business in Switzerland. It has also entered into talks with a company called Tofane Global about the sale of its international wholesale voice carrier business in France, Portugal and the Dominican Republic. (See Eurobites: Finnish State Takes 3.3% Stake in Nokia.)

Altice has now put its French and Portuguese towers up for sale and hopes to sign a deal in the first half of this year. The assets it is selling cover about 10,000 sites in France and 3,000 in Portugal and could attract a bid of about €3 billion ($3.7 billion), according to press reports, with American Tower and private equity firm KKR & Co identified as potential buyers.

The move comes after Altice decided to spin off its US business and restructure its European one at the start of this year. The restructuring, it is hoped, will help the respective businesses to focus more clearly on their different strategic objectives and lead to operational improvements. (See Altice Spins Off US Biz, Rejigs in Europe.)

The operational results from France, which accounts for about 46% of group sales, may offer some encouragement. Revenues continued to fall in the final quarter, dropping 4.5%, to about €2.7 billion ($3.3 billion), on a year-on-year basis. But adjusted EBITDA rose 2.2%, to nearly €1.1 billion ($1.4 billion).

Altice had previously updated on results at its large US business, where revenues in 2017 rose 3.2%, to about $9.3 billion, and adjusted EBITDA was up 19.7%, to about $4.1 billion.

Shares in Altice were trading up 1.2% in Amsterdam at the time of publication, at €8.17 ($10.1), but have fallen sharply from a level of €21 ($25.9) this time last year amid concern about the company's debt position.

— Iain Morris, News Editor, Light Reading

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