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French Press: U.S. Consumers Ripe for Fleecing By Cable Magnates Like Altice’s Patrick Drahi

The French press continues to report, with some bewilderment, that U.S. consumers are being fleeced by the country’s biggest telecom companies while politicians do nothing to regulate a duopoly market or force more competition to stop the pick-pocketing. The Francophone press is responding to reports that cable baron Patrick Drahi is vacuuming up profits from his American subsidiary Altice USA — which owns Cablevision and Suddenlink — and is likely to get much bigger in 2017, all thanks to the U.S. regulatory landscape.

“Americans live under a corrupt politician-sanctioned broadband monopoly in many places, and this assures telecoms operators in the United States can earn astounding profit margins impossible in European markets,” notes Giga France.

Le Figaro reported this month Altice’s directors had an easy job figuring out where much of the global conglomerate’s future profits would come from: the United States.

“Given the structure of the telecom market, [Altice’s] margin for growth in France is low, whereas in the United States it is considerable,” the newspaper reported. The reason is a persistent lack of competition, made possible by politicians that accepted the recommendations of lobbyists and corporate special interest think tanks on how to structure the broadband market.

Drahi

In the United States, providers have won near-absolute control of their networks and need not share access with competitors. Large telecom companies argued that requiring shared access to their infrastructure would threaten investment and stall broadband network deployment. Ironically, some even argued it would lead to reduced competition. But the reverse turned out to be true and the United States has fallen far behind in competition and network quality, while more traditionally regulated markets in Europe now enjoy low prices, faster internet speeds, and a larger number of competitors vying for consumers’ business.

Wall Street indirectly conspires to keep the status quo by discouraging the entry of new fixed line providers, claiming it will destroy shareholder value and consume billions of investor dollars constructing competing networks that will be unlikely to attract enough subscribers fast enough to give shareholders a timely return on their investment.

With a provider-friendly Trump Administration in power, and more importantly the installation of Ajit Pai, a notorious telecoms-friendly regulator as chairman of the FCC, Altice’s directors consider 2017 to be one of the most inviting years for expansion in the United States.

Le Figaro reports there is plenty of opportunity for Altice’s empire to become more dominant in North America. In France, its SFR unit now holds a 25% share in the fixed line market, but that number is unlikely to grow much considering ongoing price wars that come from fierce competition in France. In the U.S., Altice only holds barely 3% of the market, and Drahi has made no secret he would like to become at least the second-largest provider in the United States.

Les Echos suggested Altice is quietly preparing a full-scale ambush on the U.S. market starting with a much-anticipated IPO expected this year. Wall Street doesn’t welcome Altice entering the U.S. cable business as a market disruptor. Instead, investment banks are willing to loan huge sums to Altice for the purpose of acquiring telecom companies, maintaining the existing duopoly of one cable and one phone company for the majority of Americans.

“In the past, every time he introduced a publicly traded asset, Drahi proceeded with acquisitions: Numericable, in 2013, SFR the following year; and by 2015 Cablevision and Suddenlink in the U.S.A.,” reports Les Echos.

In France, up to four providers compete head to head for fixed line telecom customers. In other parts of Europe, telecom networks are often forced open to competitors. Neither is the case in the States, and consumers are paying very high telecom bills as a result.

Les Echos notes the U.S. cable business is so lucrative, “never before has a French company made such an important investment in the country of Uncle Sam.”

Suddenlink and Cablevision: Consistent source for fat revenue growth for Altice.

Drahi told investors more than a year ago he wanted to eventually generate 50% of Altice’s business overseas, primarily in the profitable U.S.

Altice has so far only bought up smaller cable operators, but observers expect Drahi will aim for much larger targets, including the possibility of buying out a wireless provider or even targeting Comcast, AT&T, or Charter. Les Echos quotes Vincent Maulay, an analyst at Oddo who notes that Drahi may be able to collect future assets inexpensively if Verizon decides to move on an acquisition of Charter. Regulators will likely force the combined company to shed cable assets in New York State where Verizon and Charter currently compete. That would allow Drahi’s Cablevision to pick up divested service areas, perhaps even in Manhattan.

Altice’s Cost Cutting Truth: 2.5+ Million Customers Fled for the Hills

Phillip Dampier January 24, 2017 Altice NV, Cablevision, Consumer News, Suddenlink No Comments

In 2016, just one company was responsible for more than half of all consumer complaints aimed at telecommunications companies in France. That provider was Altice-owned SFR/Numericable.

Last year alone, the number of complaints against Patrick Drahi’s telecom conglomerate jumped 120%, with consumers upset about the company’s landline, wireless, cable TV and broadband services, according to data from the French Association of Telecom Users (AFUTT) and noted by Capital.

The biggest spike in complaints targeted the company’s wired broadband services, where complaints rose 166% (in contrast, mobile complaints were up a milder 72% over the year before).

AFUTT records out of more than 5,000 complaints received last year, 73% of all contract complaints, 68% of customer service complaints and 66% of complaints about bait and switch promotions regarded Mr. Drahi’s operations in France.

Patrick Drahi’s business philosophy, backed by billions in Wall Street bank loans used to acquire companies and then slash budgets to the bone, proved to be terrible for his customers in 2016. Cablevision and Suddenlink subscribers can only hope those mistakes won’t be repeated here.

In just over two years after taking over one of France’s largest cell phone and cable operators — SFR/Numericable, more than 2.5 million customers have fled, fed up with Drahi’s initial lack of interest spending money on network upgrades and service improvements. It didn’t help that the prior owner — the conglomerate Vivendi — didn’t invest enough either, leaving the French cell phone company with headline-grabbing service outages, indifferent customer service, and a fear of employee suicides from threatened cutbacks and layoffs.

Even investors and the banks financing Drahi’s worldwide conquest of cable and telecom companies were concerned enough to apply pressure to stem customer losses that continued at a record pace for more than six months. The damage to SFR’s reputation has been so great, the wireless company has experienced two very bad years even with $2.3 billion in emergency spending to keep customers happy with service improvements while trying to win others back.

Paulin

Michel Paulin, in charge of SFR, told employees in an internal memo obtained by Les Echos things are still bad at the company.

“We have to face it: our customers are still not satisfied and far too many are still leaving for other operators,” Paulin wrote. “This year we will have to regain the confidence of our customers, but we will also have to return to growth in fixed and mobile broadband.”

That growth is still expected to come at the expense of jobs. By the summer of 2019, Drahi will have presided over the slashing of more than one-third of the SFR/Numericable workforce, amounting to at least 5,000 French workers. Many of Altice’s most recent investments are in content agreements to bolster programming for subscribers. SFR launched five sports channels, two news and information channels, and has spent heartily to acquire sports rights and programming agreements with American networks including NBCUniversal and Discovery.

Altice is also dramatically increasing spending on its news channel i24 News, which will soon be on the lineups of Cablevision and Suddenlink cable television customers. The news channel broadcasts multiple feeds in French, English, and Arabic and will supply viewers with international and Middle Eastern news, particularly focused on Arab countries where Al Jazeera delivers fierce competition.

Altice End Runs Around Connecticut TV Station’s Blackout By Sending Customers to CBS All Access

“Of course you know this means war.”

Altice USA has found a way to use CBS’ All Access online streaming service against a Connecticut CBS affiliate that blacked out its signal for some Connecticut Cablevision customers.

Meredith-owned CBS affiliate WFSB-TV in Hartford has been off the Optimum television lineup in two dozen Connecticut towns as of 5pm Friday, Jan. 13 after negotiations between Iowa-based Meredith and Altice USA broke down over the price of renewing a retransmission consent contract that Altice claims is 800% more expensive than before.

That means Optimum customers in Litchfield County no longer have access to CBS programming. Or do they? Optimum’s website is redirecting affected customers to WFSB’s network — CBS — and offering a week’s free trial of CBS’ All Access, which allows viewers online access to all CBS programming on demand.

Optimum’s previously negotiated distribution deal with CBS for the All Access platform has been in place since the summer of 2015, which means CBS cannot pull the offer down from Altice’s website. That effectively means CBS is being used to undercut its own affiliate’s most important leverage — taking away popular programming until a provider finally capitulates and signs a renewal contract.

Matt Polka, president of the American Cable Association, which represents small and independent cable companies, loves it.

“Local broadcasters cannibalized by their own network!” Polka tweeted.

Altice USA has promised investors it will hold the line on programming costs even if it means finding alternatives for customers. This seems to be an example at work.

Will CBS All Access weaken Meredith’s position on WFSB to force price concessions? The New Haven Register isn’t sure, reporting there are years of “bad blood” between Cablevision and Meredith over carriage contracts:

During the last retransmission agreement negotiations in 2014, Cablevision Systems called on the Federal Communications Commission to investigate whether Meredith Corp. was meeting public interest obligations that are an important component of all television station licenses. Cablevision also sued Meredith in Connecticut’s court system under the Unfair Trade Practices Act.

The latest dispute has attracted the attention of both of Connecticut’s U.S. senators.

“I typically don’t get involved because it’s not for me to dictate the terms of a dispute between a cable company and a network,” Sen. Chris Murphy said in a statement issued Friday night. “But I haven’t been pleased with Altice’s commitment to Connecticut since it bought Cablevision.”

FierceCable reported the area’s congressional delegation isn’t happy with either company:

Connecticut’s two Democratic U.S. Senators, Richard Blumenthal and Christopher Murphy, sent a letter addressed to both Meredith Corp. CEO Stephen Lacy and Altice USA CEO Dexter Goei.

“While we respect the private negotiations being conducted by Optimum and WFSB and make no representations as to the merits of either side’s position, we believe that the current impasse does a disservice to Connecticut families and we urge you to negotiate in good faith to bring an end to this blackout,” the Senators wrote.

Altice, meanwhile, said in its own statement, “We have been negotiating in good faith for weeks and made multiple offers to Meredith even though their initial request was for more than 800% over what we currently pay.”

Unions Fail in Effort to Represent Altice Workers

Phillip Dampier January 9, 2017 Altice NV, Cablevision, Public Policy & Gov't 1 Comment

Altice USA employees in the Bronx and New Jersey rejected efforts by the Communications Workers of America (CWA) and the International Brotherhood of Electrical Workers (IBEW) to organize part of the workforce of Altice-owned Cablevision.

The cable operator today announced both unions were rejected in a relatively close vote:

  • In Piscataway, N.J., the IBEW lost in a vote of 53-43;
  • In the Bronx, the CWA lost in a vote of 113 against unionizing and 92 for CWA representation.

Altice’s reputation for drastically cutting workers in the companies it acquires apparently failed to sway employees. Altice recently announced it was planning to gradually spin technical workers off to a new separate entity dubbed, “Altice Technical Services.”

The CWA believes the move may allow Altice to cancel its job-retention commitments to New York regulators required as a condition of approving Altice’s acquisition of Cablevision.

 

Siren Song: Altice USA CEO Asks Workers to Trust Him Despite Ruthless Cost-Cutting Reputation

Goei

The CEO of Altice USA took time away from his luxurious homes in Switzerland and New York this week to sit down with concerned middle and working-class Cablevision employees at a meeting held at an unassuming company garage in the Bronx.

Dexter Goei has worries of an organized workforce on his mind. A recording of the meeting provided to Stop the Cap!, showed Goei spent most of his time trying to convince employees they could trust him to protect their future employment at the cable operator.

Since Altice acquired Cablevision in the U.S., the French media have criticized the ‘naiveté of American regulators’ that largely accepted the promises and commitments of the rapidly growing international cable and wireless company at the same time Altice was regularly accused of reneging on the promises it made to regulators in Europe, especially in France. The company has been fined at least twice for breaking those commitments.

Altice’s entrance into the United States began with the acquisitions of Suddenlink, a relatively small cable company serving forgotten small cities in states like Texas and West Virginia and the should-have-been-acquired-by-Comcast-or-Time-Warner-Cable-years-ago oddity Cablevision, which made money for its founding family the Dolans for decades, selling cable mostly in suburban downstate New York.

In America, those acquiring a rival operator are usually asked to show how a deal is “in the public interest” while also submitting to a review to ensure the transaction does not irreparably harm competition. For Suddenlink customers, almost anything Altice could do would be an improvement for a cable company run by a guy who admitted on national television that the days of big investments by cable companies in service improvements were over. It was time to reap the profits, to paraphrase then-CEO Jerry Kent. And so they did, coming up with innovative usage caps and overlimit penalties for customers who dared to use the cable company’s internet service to circumvent a costly cable television package.

Cablevision, in contrast, was usually better regarded than the cable giants that surrounded it. Although technologically aggressive, Comcast canceled most of the goodwill earned for its service improvements by treating customers like patrons of an S&M club. Time Warner Cable was also loathed for its “last to do anything” upgrades, disengaged customer service, and reliable rate hikes, but at least they learned from earlier customer service mishaps and generally relied on a policy of being nicer to customers that threatened to leave.

Cablevision innovated on ways to keep customer loyalty after Verizon FiOS arrived to compete in large sections of its service area. The company spent millions on a major Wi-Fi network for the benefit of its commuting customers, launched broadband speed upgrades earlier than most, and after one embarrassing episode with the FCC showing their speed claims were not met by reality, they have usually overachieved ever since.

Drahi

In 2016, almost everything except Comcast changed. Time Warner Cable was successfully sold to Charter Communications and a self-styled ‘Baron of the Stock Exchange‘ — Patrick Drahi, managed to invade the United States and successfully acquire the two cable operators, despite admitting he would gut spending and wring hundreds of millions in savings out of the transactions for the benefit of his investors.

Mr. Drahi’s penchant for ruthless cost-cutting isn’t new, and he’s been dubbed “The Slasher” in Europe since decimating the budget at his French wireless and broadband company SFR-Numericable. French unions hate him, and not just those representing workers at his telecom businesses. Since the Altice Media Group took control of several major print publications in France, independent photographers have complained Altice slowed payments to a crawl, leading to an open letter to the French government from several press photography agencies demanding action. To date, Altice owes more than a half million dollars in outstanding licensing payments.

Critics contend this is nothing new for Altice, often denounced for not paying vendors (or paying them only after they agree to provide discounts) or alienating employees with radical cost cutting and cutbacks. Customers don’t like what they see either, with more than a million dropping SFR for other providers.

But that was not a story Goei was prepared to share with Cablevision workers in the Bronx.

Instead, Mr. Goei told employees he turned his back on a lucrative career on Wall Street after the great financial meltdown of 2008 and saw more potential running cable companies in Europe and the United States. Goei told the workers Altice’s business plan is to acquire cable and telecom companies and reinvest the profits in improved customer service and better technology for customers. Actual customers of Altice’s cable companies in Europe are still waiting for those improvements.

The French loathe SFR-Numericable, giving it one out of five stars in reviews.

SFR-Numericable, which Goei claimed this week won acclaim from French regulators for being the most reliable in the country, gets scathing reviews criticizing the company for its very frequent service outages, tricky marketing, and incoherent customer service. “Legalized banditry,” claimed one customer. Another described the offshore customer care center as “the Moroccan nightmare,” with more than a few call center workers demonstrating less-than-capable comprehension of French. Service outages are rampant and represent the single biggest reason customers have canceled service.

Goei complained that acquisitions and upgrades have been complicated in Europe by former managers grabbing their golden parachutes and abandoning the acquired companies (without mentioning Altice’s well-known reputation for draconian salary cuts and downsizing) and slowdowns from underperforming suppliers (despite the fact some vendors in France complained their invoices went unpaid for weeks or months, leading to complaints to government regulators).

Forthcoming upgrades are one of the reasons Goei was in the Bronx to sell employees on the merits of Altice Technical Services (ATS), a spinoff entity expected to eventually manage all of Altice’s technical infrastructure and the technicians that will care for it.

“We don’t want to contract out,” explained Goei, who aspires to manage Altice’s forthcoming upgrades effectively in-house through ATS instead of going to outside contractors. To manage this, Goei needs to convince Altice USA’s technical employees to leave Altice and join ATS.

Will ATS protect workers and customers or simply help Altice rid itself of regulator-imposed conditions for its acquisitions?

Goei’s statements seemed to suggest that most will need to make that transition if they want to remain a part of Altice for more than five years, hinting ATS will increasingly manage more and more of Altice’s technical needs, eventually making Altice USA employees potentially redundant.

Goei also hinted ATS might perform work for more than just Altice, which underlined concerns for union organizers that ATS is being established as an independent contracting entity that would not be subject to any regulatory job protection conditions that came with the approval of Altice’s acquisition of Cablevision.

Altice’s plans to rip out and replace coaxial cable with an all-fiber network will likely provide work for the next 7-10 years, notwithstanding the ambitious five-year timeline Altice gave for the fiber upgrade. But employees peppered Goei with questions about job security, benefits like vacation pay, and exactly who will be running ATS and what their opportunities for advancement are.

The transition to ATS might effectively be in name only, because Goei claimed ATS will have full access to employees’ files and work history with Altice and Cablevision, and if managers make the transition to ATS, employees could report to the same manager or supervisor they did under Altice.

“We’re not bringing in some Mexican guy” to run things Goei said to nervous laughter and raised eyebrows from the almost all-minority audience.

Goei’s question and answer session is unlikely to assuage concerns ATS could evolve into little more than Altice’s version of an independent subcontractor with enhanced loyalty to Altice USA. Despite assurances Altice is not looking for excuses to radically trim its workforce, Altice’s history shows job cuts are an integral part of what the French business press calls “The Drahi Method.”

At France’s SFR, Drahi made clear he is looking to cut at least 5,000 paid positions, reducing the workforce from 14,700 to 9,000, starting in July. Observers suspect Altice’s reliance on ATS to act as an umbrella technical department for all of Altice’s North American acquisitions guarantees workforce reductions, if only to eliminate redundancy. Altice has already shown a willingness to lay off employees at its Cablevision and Suddenlink call centers.

But there is one area where Altice is willing to spend.

Le Temps reports Drahi is opening the checkbook to beef up its Geneva executive headquarters in Switzerland, increasing the workforce tenfold and centralizing business operations for the Altice empire. The office is packed with ex-Wall Street bankers and businessmen with a reputation for ruthlessness. Goei’s office is in the building, as is the company’s director — Michel Combes. Combes was notoriously hired away from Alcatel right after demonstrating a talent for swinging the job cutting ax. They are joined by Burkhard Koep, a former Morgan Stanley investment banker in charge of mergers and acquisitions.

The top shelf executives have moved themselves and their families from London, New York, Paris, Tel Aviv and Lisbon to the posh neighborhoods around suburban Geneva, where homes are more likely to be called estates.

The Geneva office conducts business through heavy reliance on videoconferencing and racking up frequent flier miles traveling abroad. Often absent is Drahi himself, who prefers to conduct business from his Zermatt-based luxury cottages. As much as executives spend their time pondering the next acquisition, Le Temps reports they also spend their weekends trying to renegotiate the company’s enormous debt load by seeking refinancing at lower interest rates.

“They play a bank against each other by saying: we will refinance to 6% the debt you loaned us at 7%,” reported the news outlet.

But Altice’s Geneva headquarters did not come for free. Drahi recently introduced a new franchise fee obligating each cable or telecom unit to pay 2-3% of their revenue to Mr. Drahi’s Switzerland office. In the first year that is expected to raise at least $550 million dollars. While popular with Swiss tax authorities, the substantial royalty payments are expected to reduce available cash for upgrades and debt service. Nobody is sure where the money will ultimately end up.

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