Altice resets to draw wary investors
Dutch group’s operations stretch from Israel to Dominican Republic
PARIS/NEW YORK (Reuters) – Altice founder Patrick Drahi is reshaping his telecoms and cable group for the second time in as many months by splitting its US and European operations, hoping to end a drastic downward share price spiral.
Heavily indebted Altice said it would spin off its US arm, which owns the country’s fourth-biggest cable operator, to existing investors, and would prioritize efforts to turn around its European operations including French telecoms operator SFR.
Altice USA will pay a parting dividend of $1.5 billion to the European arm, to be named Altice Europe. Divestments of non-core assets, some of which are already under way, should also help to pay down debt, Altice said on Tuesday.
The two companies will be led by separate management teams with Franco-Israeli billionaire Drahi retaining control of both and garnering a large share of the dividend as well as of a $2b. share buyback planned by Altice USA.
“The separation will enable each business to focus more on the distinct opportunities for value creation in their respective markets and ensure greater transparency for investors,” Altice said Tuesday.
Dennis Okhuijsen, Altice’s current chief financial officer, will become CEO of Altice Europe and Dexter Goei will continue to serve as chief executive of Altice USA.
No new executive recruitment was announced, however, with Altice remaining managed by the same close team that has seen it transform from a small Francebased company into a global group.
Several analysts said that this light and centralized top management may hamper Altice’s capacity to define an efficient and clear marketing strategy in each of its markets.
Altice, whose operations stretch from Israel to the Dominican Republic, saw its shares plummet after a financial report signaled it would fail to grow in France in 2017, despite large investments in mobile and fixed networks.
Some of the telecom’s financial woes may stem from the generational change in how viewers sit down and watch television.
Younger consumers are increasingly “cutting the cord,” no longer subscribing to cable and broadband and instead, paying for television channels separately or for video streaming services like Netflix.
Altice’s Israeli paid-subscriber subsidiary HOT is facing much greater competition from two mobile phone companies entering the market, Cellcom and Partner, which are getting into the fixed-line, broadband and TV industry.
They are also competing with long-time competitor Bezeq, according to analyst Ilanit Sherf from Psagot Investment House. That leaves four Israeli companies vying for consumers.
“Now, you and me, and all Israelis can get very similar services for less than half the price from HOT in less than two years,” Sherf told The Jerusalem Post, adding that Altice’s Israeli branch has had to cut costs in order to stay competitive.
The dooming financial report led to the ousting of Altice’s chief executive, a rare apology by Drahi to investors at a conference last year and the promise that Altice, whose debt equals more than twice its yearly revenues, would shift focus from large acquisitions to sales growth and debt management.
Max Schindler contributed to this report.