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Rebranded: Goodbye Suddenlink and Cablevision/Optimum, Hello Altice

Phillip Dampier May 25, 2017 Altice NV, Cablevision, Consumer News, Suddenlink No Comments

Patrick Drahi’s acquired cable properties in the United States will join a global rebranding under his company’s own brand: Altice.

Suddenlink, Cablevision/Optimum, SFR-Numericable (France), HOT (Israel), Portugal Telecom-MEO-Sapo (Portugal), and Orange-Tricom (Dominican Republic) will all be called simply “Altice” by the second quarter of 2018.

Cablevision’s Lightpath commercial service will be rebranded “Altice Business” as well.

The global rebranding has begun before Altice USA launches its IPO, expected to attract $1 billion or more that will likely be used to help finance the acquisition of other American cable companies.

Along with a new logo, Altice also introduced its new tagline: “Together Has No Limits” — ironic for a company that continues data capping its Suddenlink broadband customers. Drahi delivered lofty remarks about his aspirations for the new logo and tagline during a closed circuit presentation seen by employees in all the countries where he owns cable companies.

“Our innovations must not make our individual realities smaller, but our collective ambitions greater,” Drahi said. “Not to make individuals more dependent on technology, but more reliant on each other. ‘Together Has No Limits’ is an invitation from the Altice family to come together and build a dream engine that unlocks all of human potential. Together has no limits means ‘let’s learn together, let’s be safe together, let’s be knowledgeable together, and please let’s enjoy!'”

It’s all a part of Drahi’s master plan to dominate the cable and telecom marketplace in the United States. He has freely admitted Altice has started small, but is in no way done making acquisitions and forcing future mergers. In Drahi’s own words, he’s not interested unless he runs the #1 or #2 largest telecom company in a country.

Drahi’s recipe for acquisition success is paying handsomely for acquisitions and then gutting expenses and much of the workforce Drahi considers unnecessary or redundant. After paying $17.7 billion for Cablevision — an amount his critics called excessive, Drahi slashed salaries, closed call centers, and began obsessively scrutinizing expenses. Employees complain morale is low and even the most mundane tasks like keeping the employee break room up and running now requires justifying almost every purchase in management committee meetings that employees fear. Drahi jettisoned much of Cablevision’s senior management, if only because he deemed them overpaid.

Drahi

Extravagance was never a word used to describe Suddenlink. The smaller operator Drahi also acquired in 2015 is known for serving smaller, more rural and economically distressed markets. But Drahi remains obsessed about cost-cutting there as well.

Wall Street analysts scoffed at Drahi’s claim he would cut nearly $900 million in costs at the two American cable companies. But thanks to his “cut to the bone” strategy, Drahi has touted about $400 million in savings to investors so far, with more to come. While Drahi claims he likes to pay employees “as little as possible,” he has no problem splurging on new acquisitions and upgrading the ones he already owns. To allow his Cablevision property to stay competitive against Verizon FiOS, Drahi has authorized ripping out existing coaxial cable and moving to an all-fiber network instead. Speed upgrades are also underway at Suddenlink that now deliver faster speeds than the much-larger Charter Communications now offers its customers.

In March, Drahi acquired Teads, the number one video advertising marketplace in the world. He intends to precision-target audiences with relevant advertising, which could enhance revenue at his cable TV and online properties. Altice has also been beefing up its content operations, particularly in Europe where Drahi has decided to launch his own cable networks instead of overpaying for other companies’ networks. Domestically, Drahi sees value in expanding Cablevision’s News 12 Networks operation and will import i24, his Tel Aviv, Israel based international 24-hour news and current affairs network to the United States.

Just as he has done in Europe, Drahi has telegraphed how he intends to do business in the U.S.

“I have always been very clear, that first is fixed [cable], then mobile, then content,” Drahi said. “We started in the U.S. with cable. We are too small in cable to go mobile at the moment. But everything is open. We will see.”

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.

Suddenlink Hiking Rates: Internet Up $3.50, Surcharges Now Exceed $13/Month

Suddenlink customers around the country are finding accessing the internet has suddenly gotten more expensive. For many service areas, the cable operator raised its rates in December for television and broadband service, with some of the biggest hikes coming from sneaky surcharges.

In many states, the most popular basic bundle already costs $90 a month. The biggest increases have come from “surcharges” which are never a part of Suddenlink’s advertised promotions, surprising many customers on their first bill.

In Arizona, the Broadcast TV surcharge has gone up another $1.61 a month, making customers pay $8.39 a month for a handful of local channels. A separate sports programming surcharge of $5.15 also applies. Suddenlink is also part of the club of cable operators charging customers $10 a month to rent a cable modem. For good measure, the cable operator also wants another dollar a month for its DVR and $3.50 more for broadband. Assorted other fees and surcharges tack on another $4.50 a month.

Suddenlink has already notified some regulators more price hikes are coming in the next several months.

But a Suddenlink spokesperson said there is more good news than bad.

“We provide Suddenlink customers with superior products and services at a great value, continually introducing faster internet speeds and with plans to roll out an enhanced video experience in the coming months,” Janet Meahan, spokeswoman for Suddenlink, told the Daily Miner in Kingman, Ariz. “Our pricing remains extremely competitive in the face of rapidly rising programming costs.”

Mehan also told the newspaper that Suddenlink introduced 1 gigabit internet service in Kingman in October, and provided “complimentary” speed upgrades for residential customers at no extra charge.

“They also had their artificial internet rate hike when they implemented data ‘allowances’ (caps),” retorted Ryan, a Suddenlink customer. “Their upgrades are anything but complimentary.”

Readers report they’ve had success calling Suddenlink and threatening to cancel service over the rate increases. Some report they’ve successfully negotiated their rates down to a level just a dollar or two higher than what they paid two years ago. Customers can also buy their way out of Suddenlink’s data caps by upgrading their service.

New subscribers and existing customers who elect to get an upgrade will automatically be enrolled in an unlimited plan at no extra charge the first year, pay an added $5 a month after 12 months, and an added $10 a month after 24 months. Customers currently subscribing to Suddenlink’s fastest local services may choose to retain their existing usage-based plans or upgrade to an unlimited plan.

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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