The French communications giant has bold ambitions to play a major role in consolidating the US cable market over the next couple of years, but will it happen?

Alan Breznick, Cable/Video Practice Leader, Light Reading

May 21, 2015

4 Min Read
Is Altice the Great US Cable Consolidator?

Move over, Brian Roberts, Rob Marcus and Tom Rutledge. There's a new cable kid in town.

Altice CEO Dexter Goei made that point abundantly clear Wednesday during the company's conference call with financial analysts about its $9.1 billion deal to purchase a 70% stake in Suddenlink Communications . Referring to Suddenlink as "our first US acquisition," Goei said the company has grand designs on the huge, and still somewhat fragmented, US cable market. (See Altice to Buy Suddenlink in $9.1B Deal and What's It All About, Altice?)

Noting that Altice executives see "significant in-market consolidation opportunities in the US," Goei said every cable operator "below Comcast effectively is in consolidation mode. So it augurs for an interesting next six months to two years. We certainly expect to be right in the middle of that consolidation."

Goei, whose company is reportedly wooing Time Warner Cable Inc. (NYSE: TWC) as well, did not spell out which other US MSOs might be in Altice's sights. But he emphasized that Altice, which has concentrated on Europe, Israel and the Caribbean up till now, intends to be a major American player from now on.

Assuming that the Suddenlink deal passes US regulatory review and goes through as planned, American properties will make up 12% of Altice's portfolio. Goei said the company's goal is to boost that portion to 50% of the company's holdings over time to balance out its investments between the US and Europe, although he cautioned that "that's not a golden rule."

The unexpected announcement of the Suddenlink deal and Goei's comments sent US cable stocks both soaring and falling yesterday. Shares of Time Warner Cable and Cablevision Systems Corp. (NYSE: CVC), seen as another key takeover candidate, rose markedly while shares of Charter Communications Inc. , which now faces a strong rival in its pursuit of TWC, dipped.

Analysts are generally mixed over whether Altice will pursue Cablevision, whose CEO James Dolan effectively put the company up for sale at the cable industry's INTX Show in Chicago two weeks ago. While Cablevision operates a large, highly valued cable system in the prime New York market, some analysts argue that its valuations are too high and its competition position is too vulnerable in a market where it fiercely competes head-to-head with Verizon Communications Inc. (NYSE: VZ)'s all-fiber FiOS platform. (See Cablevision Chief Plays the Dating Game.)

But, with Charter already pursuing Time Warner Cable and now negotiating a new deal with Bright House Networks , analysts strongly believe that more market consolidation is coming. The big question now is which company will be the Great Cable Consolidatior, Altice or Charter? (See Charter, Bright House: The Wedding's Back On.)

For all the excitement created by Altice's move earlier this week, Craig Moffett, for one, still thinks that Charter has the upper hand in the upcoming duel for TWC because it can offer more cash in its takeover bids than Altice right now. In a note to investors yesterday, Moffett, senior research analyst at MoffettNathanson LLC , also noted that Charter is less leveraged and better capitalized than Altice.

Want to learn about OTT video, multiscreen and other next-gen video technologies? They will be a few of the many topics covered at Light Reading's second Big Telecom Event on June 9-10 in Chicago, which will include a special Video Summit. Sign up today!

But, no matter what, TWC will likely go for a higher price now, assuming company executives decide that they don't want to stay independent. "The price for TWC just went up," Moffett wrote. "The value of a TWC deal to Charter therefore just went down."

Moffett, who criticized Altice for buying Suddenlink "at an unsupportably high price" and assuming improbably high cost synergies from the deal, also thinks that Charter will still emerge as the industry's grand consolidator, not the ambitious French communications giant. But he notes that Charter may end up having to pay a prohibitive sum for that privilege.

"Yes, Charter still has the inside track to being the industry's consolidator," he wrote. "But if they have to overpay to consolidate, it would be a pyrrhic victory."

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

Read more about:


About the Author(s)

Alan Breznick

Cable/Video Practice Leader, Light Reading

Alan Breznick is a business editor and research analyst who has tracked the cable, broadband and video markets like an over-bred bloodhound for more than 20 years.

As a senior analyst at Light Reading's research arm, Heavy Reading, for six years, Alan authored numerous reports, columns, white papers and case studies, moderated dozens of webinars, and organized and hosted more than 15 -- count 'em --regional conferences on cable, broadband and IPTV technology topics. And all this while maintaining a summer job as an ostrich wrangler.

Before that, he was the founding editor of Light Reading Cable, transforming a monthly newsletter into a daily website. Prior to joining Light Reading, Alan was a broadband analyst for Kinetic Strategies and a contributing analyst for One Touch Intelligence.

He is based in the Toronto area, though is New York born and bred. Just ask, and he will take you on a power-walking tour of Manhattan, pointing out the tourist hotspots and the places that make up his personal timeline: The bench where he smoked his first pipe; the alley where he won his first fist fight. That kind of thing.

Subscribe and receive the latest news from the industry.
Join 62,000+ members. Yes it's completely free.

You May Also Like