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Altice Abandons Fiber to the Home Network Upgrade in France as Major Cost Cuts Loom

In a sign that could spell trouble for Altice’s ambitious plans to scrap Cablevision’s coaxial cable network in favor of fiber to the home service, Altice has announced it is ending its plan to build its own fiber to the home network by 2025 across France.

Instead of building its own network, Alain Weill, head of Altice’s SFR Group said the company would lease space on the government’s own public fiber network now under construction instead.

“With Patrick Drahi… we’ve recently decided to go for a more traditional model… and a collaboration with local authorities,” Weill told surprised French officials.

France considers its forthcoming national fiber network a national priority to help the country achieve the ability to fully compete in the 21st century digital economy. France is treating fiber broadband like roads and bridges — a public infrastructure project necessary to maintain the country’s standing in the global economy. France had relied on private providers like Altice to construct telecommunications networks and as a result fell to the bottom of EU rankings for superfast broadband.

President Emmanuel Macron said relying on the private free market to stimulate France’s digital economy was inadequate because the companies answered to shareholders, not the country. The European Union is on track to bump North America to third place behind Asia and Europe in fiber speed broadband.

Altice’s World Comes Crashing Down; No More Acquisitions Until Massive Debt Reduced

Drahi’s World

Shareholders have shaken Patrick Drahi’s dreams of being the next king of telecom in the United States by plunging Altice’s share price by more than a third in a single week, forcing Drahi to announce he won’t be making any additional acquisitions until the company’s staggering $59 billion debt is repaid.

Investors were also given a sacrificial lamb from the very sudden departure of Michel Combes, the ruthless cost-cutter that also served as titular operations leader of Altice’s European operations. Combes paid the ultimate price for the continued mediocre financial results at SFR-Numericable, which provides wireless and cable service in France and is Altice’s largest holding. That departure comes only two months after Michel Paulin, Drahi’s right-hand man at SFR, was also shown the door.

Drahi made it clear that he is formally taking back control of Altice, although observers have claimed he has always been in charge. European business analysts have uniformly described Altice as a company mired in crisis management, as European investors lose trust in Drahi’s business philosophy, which depends heavily on acquiring companies with other people’s money.

Drahi’s prominence in France came with his acquisition of SFR-Numericable just three years ago. SFR is France’s fourth largest wireless carrier and the company also has a prominent place in the wired telecom market, providing cable television, phone and internet service. Drahi has attracted investors with promises to wring every possible concession out of the companies he acquires. For financial markets, Drahi’s best trait is his ruthless cost-cutting and employee reductions. In France, employees have reported providing their own copy paper and toner cartridges for empty office printers, occasionally supply their own toiletries, and take turns mopping floors and vacuuming offices.

Employees of Altice-owned Suddenlink have been forced to take requests for replacement coffee machines for break rooms to skeptical company committees that review virtually every transaction. More recently, Cablevision technicians are complaining Altice eliminated their winter apparel budget, leaving workers without coats, bibs, overalls, or rain gear for the upcoming winter. Technicians will have to pay for their unsupplied winter gear out-of-pocket.

While shareholders and financial analysts bid up Altice stock on the premise that cost cutting would deliver better results, the fact France has a highly competitive telecom market brought unintended consequences for Altice and its shareholders: customers fled as cost cuts took their toll on service quality and support.

Competition Matters

Between the end of 2014 and mid-2017, SFR lost 514,000 subscribers in wired internet and 1.7 million mobile customers, delighting Altice’s competitors Orange, Free, and Bouygues Telecom. SFR’s internet problems are well-known across France. Altice’s attempt to offer a “one-box” solution for internet and television service has been of dubious value. Its equipment is notorious for failures, has compatibility problems with online games, and has high support costs. Altice is starting to bring similar equipment to the United States to supply its Cablevision customers, and technicians report many of the same problems are occurring in the U.S., adding they are skeptical Altice’s Le Box, known here as Altice One, will perform well for customers.

The biggest enemy of Altice in Europe is robust competition, which has allowed dissatisfied customers to switch providers in droves. SFR-Numericable, despite promises of fiber-fast speeds, has endured complaints about slow and uneven speeds and persistent service outages. Drahi’s original business plan was to upgrade broadband speeds and performance to win over France’s remaining DSL customers. That worked for a time, according to the French newspaper Libération, but not for long.

Paulin, who used to run the division responsible for Altice’s wired broadband, complained bitterly competitors have “polluted” his marketing campaign by advertising their 100% fiber optic networks, educating customers that Altice isn’t selling that. That ruined Drahi’s plans to slowly upgrade services with the belief customers are more captive to their broadband provider and wouldn’t switch providers if Altice took its time.

A competitor put it this way: “SFR’s remaining DSL customers have indeed migrated at the encouragement of SFR-Numericable… to Orange or Free’s 100% fiber optic network offerings.”

Accusations about service problems and slow upgrades were readily believed by customers because Altice drew headlines for its ruthless efforts to save money.

“First, the restructuring – cuts in spending and pressure on suppliers – has shaped its image as a bad payer,” notes the newspaper. “At the end of 2015, SFR was fined $400,000 for its late payments. Second, package price increases, imposed discreetly and justified by the addition of exclusive video content, annoyed customers when they found extra charges on their bills. Finally, recurring network problems have undermined user trust. The new satisfaction survey of UFC-Que declared SFR was in last place among operators.”

Altice’s one-box solution for TV and internet has proven troublesome for customers in Europe.

Altice blamed most of SFR’s problems on its previous owner, Vivendi, who it claimed underinvested in its network for years. But customers were in no mood to stick around waiting for upgrades. Throughout 2015 and 2016, customers fled, finally forcing Drahi to embark on costly upgrades of SFR’s wireless and broadband networks. Drahi’s investments in SFR amounted to only $2 billion in 2014 and $2.12 billion in 2015, but dramatically increased to $2.71 billion in 2016. By the beginning of 2017, the upgrades stemmed some of the customer losses as independent tests showed SFR’s 4G LTE service finally became competitive with France’s top two providers. SFR commissioned 5,221 new 4G cell sites over the last 12 months, beating 4,333 for Bouygues Telecom, 3,543 for Orange and a distant 2,010 for low-cost carrier Free.

Drahi also made headlines last summer by announcing SFR-Numericable was completely scrapping its coaxial cable networks in France (as well as in Cablevision territory in the United States) to move entirely to optical fiber technology, even in the most rural service areas. But the fiber upgrades are not being financed with cash on hand at Altice. Libération reports the $1.78 billion Altice will need to spend on fiber upgrades for France alone will be financed by more bank loans. Drahi hopes to eventually offer bonds to investors to internally finance fiber upgrades.

The Suddenlink/Cablevision Cash Machine

Drahi was banking on his ability to manage Altice’s debt and boost revenue by milking U.S. cable customers. Unlike in France, where competition and regulation have kept cable television and broadband prices much lower than in North America, Drahi saw enormous potential from the U.S. telecom market, where Americans routinely pay double or even triple the price many Europeans pay for television and internet access. Drahi sold investors on the prospects of slashing costs, initiating employee cutbacks, and raising prices for acquired U.S. cable companies. Suddenlink customers are particularly captive to cable broadband because the only alternative in many Suddenlink markets is slow speed DSL. Cablevision faces fierce competition from Verizon FiOS, but Verizon has sought to ease revenue-eating promotions that the company has offered in prior years. Both U.S. cable operators have raised prices since Altice acquired them.

Altice’s investors demand short-term results more than long-term prospects, and Altice’s heavy reliance on bank loans at a time when interest rates are gradually rising could spell peril in the future. Drahi used to promote a 38% profit margin to his investors with predictions of 45% in the future. Altice recently removed all predictions of its margins going forward, a sign Altice is being forced to spend more money than it planned on network upgrades and expensive exclusive content deals for French cable television customers that might otherwise switch providers to secure a better deal.

Increasing costs and decreasing customers pushed Altice’s net profit in the red in 2016. The company also faces a lump sum loan payment of $4.72 billion in 2022. For now, Drahi will continue to refinance his portfolio of loans to secure lower interest rates and better repayment terms, but investors no longer believe Altice can continue to carry, much less increase its debt load.

That has forced Drahi to declare he is suspending further acquisitions at Altice and will instead spend resources on paying down its current debts. If he doesn’t, any recession could spell doom for Altice if his bankers are no longer willing to offer favorable credit terms.

The Great Telecom Merger Carousel: Altice <-> Sprint <-> T-Mobile <-> Charter

A last-ditch effort last weekend by executives of SoftBank and Deutsche Telekom to overcome their differences in merging Sprint with T-Mobile USA ended in failure, killing Wall Street’s hopes combining the two scrappiest wireless carriers would end a bruising price war that had heated up competition and hurt profits at all four of America’s leading wireless companies.

Now Wall Street, hungry for a consolidation deal, is strategizing what will come next.

Sprint/T-Mobile Merger

In the end, SoftBank’s chairman, Masayoshi Son, simply did not want to give up control of Sprint to Deutsche Telekom, especially considering Sprint’s vast wireless spectrum holdings suitable for future 5G wireless services.

The failure caused Sprint Corp. shares and bonds to plummet, and spooked investors are worried Sprint’s decade-long inability to earn a profit won’t end anytime soon. Sprint’s 2010 Network Vision Plan, which promised better coverage and network performance, also helped to load the company with debt, nearly half of which Sprint has to pay back over the next four years before it becomes due. Sprint’s perpetual upgrades have not tremendously improved its network coverage or performance, and its poor performance ratings have caused many customers to look elsewhere for wireless service.

Investors are also concerned Sprint will struggle to pay its current debts at the same time it faces new ones from investments in next generation 5G wireless technology. Scared shareholders have been comforted this morning by both Son and Sprint CEO Marcelo Claure in an all-out damage control campaign.

Son has promised the now-orphaned Sprint will benefit from an increased stake in the company by SoftBank — a signal to investors SoftBank is tying itself closer to Sprint. Son has also promised additional investments to launch yet another wave of network upgrades for Sprint’s fourth place network. But nothing is expected to change very quickly for customers, who may be in for a rough ride for the immediate future. Son has already said his commitment to raise Sprint’s capital expenditures from the current $3.5-4 billion to $5-6 billion annually will not begin this year. Analysts claim Sprint needs at least $5-6 billion annually to invest in network improvements if it ever hopes to catch up to T-Mobile, AT&T, and Verizon Wireless.

Masayoshi Son, chairman of SoftBank Group

“Even if the next three-four years will be a tough battle, five to 10 years later it will be clear that this is a strategically invaluable business,’’ Son said, lamenting losing control of that business in a deal with T-Mobile was simply impossible. “There was just a line we couldn’t cross, and that’s how we arrived at the conclusion.”

During a call with analysts on Monday, Sprint’s chief financial officer Tarek Robbiati acknowledged investors’ disappointment.

Investors were hoping for an end to deep discounting and perks given to attract new business. T-Mobile’s giveaways and discounting have reduced the company’s profitability. Sprint’s latest promotions, including giving away service for up to a year, were seen by analysts as desperate.

Son’s own vision plan doesn’t dwell on the short-term, mapping out SoftBank’s progress over the next 300 years. But for now, Son is concerned with supporting the investments already made in the $100 billion Vision Fund Son has built with Saudi Arabia’s oil wealth-fueled Public Investment Fund. Its goal is to lead in the field of next generation wireless communications networks. Sprint is expected to be a springboard for those investments in the United States, supported by the wireless company’s huge 2.5GHz spectrum holdings, which may be perfect for 5G wireless networks.

But Son’s own failures are also responsible for Sprint’s current plight. Son attempted to cover his losses in Sprint by pursuing a merger with T-Mobile in 2014, but the merger fell apart when it became clear the Obama Administration’s regulators were unlikely to approve the deal. After that deal fell apart, Son has allowed T-Mobile to overtake Sprint’s third place position in the wireless market. While T-Mobile grew from 53 million customers to 70.7 million today, Sprint lost one million customers, dropping to fourth place with around 54 million current customers.

Son’s answer to the new competition was to change top management. Incoming Sprint CEO Marcelo Claure promptly launched a massive cost-cutting program and layoffs, and upgrade-oriented investments in Sprint’s network stagnated, causing speeds and performance to decline.

Claure tweetstormed damage control messages about the merger’s collapse, switching from promoting the merger’s benefits to claims of relief the merger collapsed:

  • “Jointly stopping merger talks was right move.”
  • Sprint is a vital part of a larger SoftBank strategy involving the Vision Fund, Arm, OneWeb and other strategic investments.”
  • “Excited about Sprint’s future as a standalone. I’m confident this is right decision for our shareholders, customers & employees.”
  • “Sprint added over 1 million customers last year – we have gone from losing to winning.”
  • “Last quarter we delivered an estimated 22% of industry postpaid phone gross additions, our highest share ever.”
  • “Sprint network performance is at best ever levels – 33% improvement in nationwide data speeds year over year.”
  • “We are planning significant investments to the Sprint network this year and the years to come.”
  • “In the last 3 years we’ve reduced our costs by over $5 billion.”
  • “Sprint’s results are the best we’ve achieved in a decade and we will continue getting better every day.”

In Saturday’s joint announcement, Claure said that “while we couldn’t reach an agreement to combine our companies, we certainly recognize the benefits of scale through a potential combination. However, we have agreed that it is best to move forward on our own. We know we have significant assets, including our rich spectrum holdings, and are accelerating significant investments in our network to ensure our continued growth.”

“They need to spend (more) money on the network,” said William Ho, an analyst at 556 Ventures LLC.

CNBC reports Sprint’s end of its T-Mobile merger deal has hammered the company’s stock. What does Sprint do now? (1:30)

Sprint/Altice Partnership

Sprint executives hurried out word on ‘Damage Control’ Monday that Altice USA would partner with Sprint to resell wireless service under the Altice brand. In return for the partnership, Sprint will be able to use Altice’s fiber network in Cablevision’s service area in New York, New Jersey, and Connecticut for its cell towers and future 5G small cells. The deal closely aligns to Comcast and Charter’s deal with Verizon allowing those cable operators to create their own cellular brands powered by Verizon Wireless’ network.

An analyst at Cowen & Co., suspected the Altice deal may be a trial to test the waters with Sprint before Altice commits to a future merger between the two companies. Altice is hungry for expansion, currently owning Cablevision and Suddenlink cable operators in the U.S. But Altice has a very small footprint in the U.S., leading some analysts to believe a more lucrative merger might be possible elsewhere.

Sprint/Charter Merger

Charter Communications Logo. (PRNewsFoto/Charter Communications, Inc.)

Charter Communications stock was up more than 7% in early Monday morning trading as a result of speculation SoftBank and Charter Communications were restarting merger talks after a deal with T-Mobile collapsed.

CNBC reported that Mr. Son was willing to resume talks with Charter executives about a merger between the cable operator and Sprint. Charter executives have shown little interest in the deal, still distracted trying to merge their acquisitions Time Warner Cable and Bright House Networks into Charter’s current operation. Charter’s entry into wireless has been more tentative, following Comcast with a partnership with Verizon Wireless to resell that considerably stronger network under the Charter brand beginning sometime in 2018.

According to CNBC, John Malone’s Liberty Media, which owns a 27% stake in Charter, is now in favor of a deal, while Charter’s top executives are still opposed.

CNBC reports Charter and Sprint may soon be talking again about a merger between the two. (6:33)

Dish Networks <-> T-Mobile USA

Wall Street’s merger-focused analysts are hungry for a deal now that the Sprint/T-Mobile merger has collapsed. Pivotal Research Group is predicting good things are possible for shareholders of Dish Network, and upgraded the stock to a “buy” recommendation this morning.

Jeff Wlodarczak, Pivotal’s CEO and senior media analyst, theorizes that Sprint’s merger collapse could be good news for Dish, sitting on a large amount of unused wireless spectrum suitable for 5G wireless networks. Those licenses, estimated to be worth $10 billion, are likely to rise in value as wireless companies look for suitable spectrum to deploy next generation 5G networks.

Multichannel News quotes Wlodarczak’s note to investors:

“In our opinion, post the T-Mobile-Sprint deal failure there is a reasonable chance that T-Mobile could make a play for Dish or Dish spectrum as it would immediately vault the most disruptive U.S. wireless player into the leading U.S. spectrum position (w/ substantially more spectrum than underpins Verizon’s “best in class” network),” Wlodarczak wrote. “This possible move could force Verizon to counter-bid for Dish spectrum (or possibly the entire company) as Dish spectrum is ideally suited for Verizon and to keep it out of T-Mobile’s hands.”

AT&T/DirecTV Buyout of Dish Network

Wlodarczak has also advised clients he believes the deregulation-friendly Trump Administration would not block the creation of a satellite TV monopoly, meaning AT&T should consider pairing its DirecTV service with an acquisition of Dish Networks’ satellite TV business, even if it forgoes Dish’s valuable wireless spectrum.

“AT&T, post their Time Warner deal, could (and frankly should) be interested in purchasing Dish’s core DBS business taking advantage of a potentially more laissez faire regulatory climate/emergence of V-MVPD’s, to significantly bolster their DirecTV business (and help to justify the original questionable DirecTV deal) by creating a SatTV monopoly in ~10-15M US households, increased programming scale and massive synergies at a likely very attractive price.”

Such a transaction would likely resemble the regulatory approval granted to merge XM Satellite Radio and Sirius Satellite Radio into SiriusXM Satellite Radio in 2008. Despite the merger, just months after its approval, the combined company neared bankruptcy until it was bailed out with a $530 million loan from John Malone’s Liberty Media in February 2009. Liberty Media maintains an active interest in the satellite radio company to this day.

Despite Net Neutrality, Providers Launch Fiber Spending Spree

Despite claims from some industry-backed researchers and former members of Congress that Net Neutrality has reduced investment in telecommunications, a new research note from Deutsche Bank shows America’s top telephone and cable companies are spending billions on fiber upgrades to power wireless, business, and consumer broadband.

“Telecoms have become much more public signaling their intent to increase fiber investment, with AT&T and Verizon leading the spending ramp,” reports Deutsche Bank Markets Research.

Verizon has been on a fiber spending spree in the northeastern United States, signing contracts with Corning and Prysmian worth $1.3 billion to guarantee a steady supply of 2.5 million miles of fiber optic cable Verizon plans to buy over the next three years. Much of that spending allows Verizon to lay a foundation for its future 5G wireless services, which will require fiber to the neighborhood networks. But in cities like Boston, Verizon is also once again expanding its FiOS fiber to the home service to consumers.

AT&T is committed to connecting 12.5 million homes to gigabit-ready fiber broadband by 2019 — part of a deal it made with the FCC to win approval of its acquisition of DirecTV. AT&T claims it has already connected 5.5 million homes to its gigabit AT&T Fiber network, expected to reach 7 million by the end of this year.

Deutsche Bank thinks providers’ future drive towards 5G service will also simultaneously benefit fiber to the home expansion, because the same fiber network can power both services.

“To support the upcoming innovations such as autonomous driving, IoT, smart cities, the US needs to densify its fiber network,” Deutsche Bank said. “The U.S. fiber penetration rate is 20% vs. 75% for leading OECD countries, which suggests a large gap needs to be closed.”

Altice founder Patrick Drahi (second from left) and Altice USA CEO Dexter Goei (center) visit a Cablevision fiber deployment on Long Island, N.Y.

The bank predicts companies will spend around $175 billion over the next 10 years building out their fiber networks, with most of the spending coming from the phone companies, who may see fiber buildouts as their best attempt to level the playing field with cable operators’ hybrid fiber-coaxial cable networks. As cable operators expand their networks to reach more business parks, they have been gradually stealing market share for phone and data services from phone companies. Consumer broadband is also increasingly dominated by cable operators in areas where phone companies still rely on selling DSL services.

FierceCable notes Comcast and Altice have stepped up aggressive spending on fiber networks for their consumer and business customers. Altice is planning to decommission Cablevision’s existing coaxial cable network and move customers to fiber-to-the-home service. Comcast is deploying fiber services while still selling traditional cable broadband upgraded to DOCSIS 3.1, which supports substantially faster broadband speeds. The two networks co-exist side-by-side. Customer need dictates which network Comcast will use to supply service.

Customers benefit differently in each state, depending on what type of service is available. Comcast’s large footprint in Pennsylvania, outside of Philadelphia, is usually served by traditional coaxial cable. Verizon still sells DSL in much of the state. In Massachusetts, Verizon is building out its FiOS network to serve metro Boston while Comcast will depend on DOCSIS 3.1 upgrades to speed up its internet service. In New Jersey, long a battleground for Verizon’s FiOS service the company stopped aggressively expanding several years ago, Comcast has announced DOCSIS 3.1 upgrades for the entire state.

Independent phone companies are also seeing a bleak future without fiber upgrades. Both CenturyLink and Windstream are planning moderately aggressive fiber expansion, particularly in urban service areas and where they face fierce cable competition. Frontier continues its more modest approach to fiber expansion, usually placing fiber in new housing developments and in places where its copper facilities have been severely damaged or have to be relocated because of infrastructure projects.

None of the companies have cited Net Neutrality as a factor in their future broadband expansion plans. In fact, fiber networks have opened the door to new business opportunities to the companies installing them, and the high-capacity networks are likely to further reduce traffic/transit costs, while boosting speeds. That undercuts the business model of selling digital slow and fast lanes.

Who Will Buy Charter? Altice, Comcast, SoftBank, or None of the Above?

The French press did not take kindly to comments from MoffettNathanson analyst Craig Moffett, who suggested Altice’s ability to swallow up Charter Communications in a deal worth at least $185 billion dollars was “not credible.”

Panelists appearing on French language business news channel BFM TV chuckled at Mr. Moffett’s ability to predict Altice chairman Patrick Drahi’s next move.

“Mr. Moffett does not know Mr. Drahi like we’ve come to know Mr. Drahi,” noted one analyst. “We’ve learned not to underestimate his ability to put together business deals that some would call bold, others financially reckless, yet he does it again and again. If Mr. Drahi wants [Charter], he shall have it.”

French business reporters have scoffed at Altice for years, well before the company arrived in the United States to acquire Cablevision and Suddenlink and rebrand them as Altice.

“When you don’t take him seriously, that is when he strikes,” reported BFM.

Drahi is a master of using other people’s money to finance massive telecommunications deals. For him, bigger is essential, and that means he’d either have to acquire Comcast or Charter or hope to build a cable empire out of smaller cable companies he’d acquire and combine.

Drahi (center)

Multiple independent media outlets are tracking Drahi’s movements. Le Figaro reports Drahi has spent months laying the groundwork for his next big takeover in the United States and the newspaper knew all along it would be a major deal, because Drahi is banking on the prospects of emptying the pockets of millions of American cable subscribers to fund his operations. Americans pay vastly more for cable television and broadband service than consumers in Europe because of a lack of regulation and competition.

The newspaper adds that Drahi routinely tells investors and reporters he wants to be “number one or two” in all countries where he does business. Right now Altice is the fourth largest cable operator in the United States, an absolutely intolerable situation for Mr. Drahi.

Drahi is well aware of the enormous cost of a Charter acquisition, and Bloomberg News reports he is considering asking the Canada Pension Plan Investment Board and BC Partners to help fund the potential merger. Both groups are already familiar with Mr. Drahi and Altice and were instrumental in his acquisition of Cablevision and Suddenlink. Despite the potential help, Moffett still believes Charter is well outside of Altice’s reach.

“None of the proposed suitors—Verizon, SoftBank, Altice—have the balance sheet to acquire Charter,” Moffett wrote his investor clients in a research note. He notes Greg Maffei, chairman of Liberty Broadband, is unconvinced of the wisdom of allowing a buyer to use its other highly leveraged companies as compensation in a merger deal.

Moffett believes the deal has to make sense to two people to proceed – John Malone, Charter’s largest shareholder and ironically Drahi’s mentor and Charter CEO Thomas Rutledge, who was America’s highest paid executive in 2016. He stands to get considerably richer if he can fend off a deal until he achieves tens of millions in stock option awards, first when Charter’s average share price tops $455.66 a share and stays there for at least 60 days and then again when the share price exceeds $564 a share and stays there for 60 days. This morning, Charter Communications was selling at just over $399 a share. All of the merger and acquisition talk is helping boost Charter’s stock price, but Rutledge doesn’t want the company sold until after he can walk out with his compensation package fully funded or finds a buyer willing to make him whole.

As for Malone, he’s always been willing to cash out, but only when the deal makes financial sense to him and avoids taxes.

“Let’s put a finer point on it,” Moffett added. “The ONLY reason [Liberty Media chief] John Malone would be willing to swap his equity in Charter for equity in Altice would be if he believed, with real conviction, that Altice could simply manage the asset better than Charter’s current management.  It is not a knock on Altice to suggest that there is simply no way that Liberty would believe that. Next.”

But then, Time Warner Cable’s management didn’t take an acquisition offer from Charter Communications seriously either when it was first proposed. Time Warner Cable believed selling to Comcast made better sense to shareholders and executives. Like Altice, Charter was a much smaller cable operator proposing to buy a much larger one. In the end, regulators rejected the deal with Comcast and with Wall Street beating the drum for someone to acquire Time Warner Cable, Charter’s sweetened second offer was readily accepted.

Charter’s biggest downside to a potential acquirer is the $60 billion in debt it took on buying Time Warner Cable and Bright House Networks. Debt at SoftBank also makes Moffett skeptical of a deal between Sprint and Charter.

“They [SoftBank] already sit on $135 billion of debt,” Moffett wrote. “Add Charter’s $63 billion and you’re within a rounding error of $200 billion. Add any cash at all for Charter’s equity and you’re flirting with a quarter trillion (trillion!) dollars of debt. Were SoftBank to buy Charter, they would become not only the most heavily indebted non-financial company the world has ever seen, they would in fact be more indebted than most countries.”

To avoid crushing debt scuttling a deal, Citigroup speculated in a report to their investors that Comcast and Altice could partner up to divvy up Charter Communications themselves. The Wall Street bank speculates Comcast would help finance a deal if it meant it would take control of Charter’s customers formerly served by Time Warner Cable. Legacy Charter customers and those formerly served by Bright House would become part of the Altice family.

Such a transaction would likely overcome Malone’s objections over an Altice-only offer leaving him with a large pile of Altice USA stock.

Just as with Time Warner Cable, once a company is seen willing to deal, fervor on Wall Street to make a deal — any deal — can drive companies into transactions they might not otherwise have considered earlier. If Charter is seen as a seller, there will be growing pressure to find a buyer, if only to satiate investors and executives hoping for a windfall and Wall Street banks seeking tens of millions in deal advisory fees.

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