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T-Mobile Prepares for Boost Auction if Dish Network Talks Stall

(Reuters) – T-Mobile US Inc is preparing an alternative plan if a deal to sell wireless assets to Dish Network Corp falls through, according to two sources familiar with the matter.

Investment bank Goldman Sachs Group Inc., which is advising T-Mobile, the third largest U.S. wireless carrier, on selling prepaid brand Boost Mobile as part of the company’s concession to gain regulatory approval to buy Sprint Corp, is expected to send out books to prospective buyers in two weeks, one source familiar with the matter said.

While satellite television provider Dish Network remains the front-runner to acquire the Boost assets, Goldman has told prospective buyers as late as Tuesday that it is preparing for an upcoming auction of Boost.

Another source characterized the process being run by Goldman as moving slowly. Among the details holding up an auction is that Goldman is not yet clear what exactly is up for sale from the merger, one source said.

T-Mobile and Sprint did not immediately respond to requests for comment. Goldman Sachs declined to comment.

T-Mobile and Sprint have agreed to a series of deal concessions, including to sell Boost, to gain regulatory approval for the $26.5 billion merger with Sprint, but still needs the green light from the U.S. Department of Justice antitrust chief, though his staff have recommended the agency block the deal.

A source close to the discussions said T-Mobile was hopeful it would reach an agreement with the Justice Department by early next week.

The Boost assets have stirred up interest from a variety of parties, including Amazon.com and cable companies Comcast, Charter Communications, and Altice USA, according to sources.

T-Mobile and Sprint are still negotiating possible additional concessions with the Department of Justice, and Goldman Sachs is waiting for the details of the agreement before working on the terms that will be sent out to bidders, one source said.

Two potential bidders told Reuters on the condition of anonymity that they are still in the dark about critical information related to the Boost sale, such as how the Boost wireless deal with T-Mobile will be structured, or financial details about the Boost customers, which the bidders will use to determine the prepaid brand’s valuation.

Dish is also speaking with other parties on potential partnerships with Boost, sources said.

T-Mobile has agreed to negotiate a contract with Boost’s buyer that will allow the spun-off company to run on the combined T-Mobile and Sprint network, according to a regulatory filing that outlined the merger concessions. But the carriers are currently debating whether to provide the buyer an infrastructure-based mobile virtual network operator deal, which would allow the buyer more control over the wireless plans, including control of the user’s SIM card, one source said.

That could help convince the Department of Justice to approve the merger, which has held discussions on how to preserve competition in the wireless industry.

Cable provider Altice is one of the few so-called MVNO partners to have this type of wireless agreement, which it currently has with Sprint. An infrastructure-based MVNO is generally seen as more favorable than a standard deal that allows wireless providers that do not own and operate their own network to piggyback off of one of the four major wireless carriers for wholesale prices.

Other concessions being discussed include whether T-Mobile and Sprint will divest wireless spectrum, or the airwaves that carry data, and the possibility of giving up more retail customers or retail shops from either T-Mobile or Sprint’s prepaid brands, according to one source familiar with the matter.

Reporting by Sheila Dang and Angela Moon in New York and Diane Bartz in Washington; Editing by Kenneth Li and Lisa Shumaker

Altice Struggles With Video Programming Costs That Eat 67% of Video Revenue

The reason why many cable companies are no longer willing to cut deals on cable television with customers looking for a better one is that the profit margin enjoyed by cable operators on television service is shrinking fast.

Researcher Cowen found that smaller cable operators are particularly vulnerable to the high costs of cable programming because they do not get the volume discounts larger operators like Comcast, Charter, DirecTV, and Dish are getting.

Researcher Cowen found that programming costs are increasing fast at smaller cable companies. (Image: Cowen/Multichannel News)

Altice USA, which divides about 3.3 million cable TV subscribers between Optimum/Cablevision and Suddenlink, says it paid $682.4 million for cable TV programming during the first quarter of 2019. That amounts to 67% of the company’s total video revenue. If Altice offered complaining customers a 40-50% break on cable television, it would lose money. Cable operators already temporarily give up a significant chunk of video revenue from new customer promotions, which discount offerings for the first year or two of service. Many operators consider any video promotion to be a loss leader these days, because programming costs are exploding, particularly for some local, over-the-air network affiliated stations that are now commanding as much as $3-5 a month per subscriber for each station.

Comcast, the nation’s largest cable operator, unsurprisingly also gets the best programming prices. With volume discounts, Comcast reports its programming costs consume about 60% of revenue. Charter Spectrum and Dish report about 65% of their video revenue is eaten by programming costs. Both are seeing dramatic declines in video subscribers as cord-cutting continues. The more customers a company loses, the less of a discount they will command going forward.

According to Cowen, just three years ago Comcast gave up 53% of video revenue to cover programming costs. With programming rate inflation increasing, many smaller cable companies are considering exiting the cable TV business altogether to focus on more profitable broadband service instead.

Suddenlink Putting Its Lines Anywhere It Wants, Drooping in Yards and Roadways

Phillip Dampier June 17, 2019 Altice USA, Consumer News, Public Policy & Gov't No Comments

Suddenlink is taking full advantage of a lax approach to regulatory oversight in Texas by laying its cables just about anywhere it pleases, and without talking to local officials about exactly what the cable system is doing.

Huntington residents have been complaining to city officials about Suddenlink’s ongoing expansion of its cable system in the city, reporting the cable company is putting cables just about anywhere it wants, often leaving them drooping in yards and roadways. The Altice-owned cable company’s ultimate plans are a complete mystery to the city, because the cable company has said nothing specific about its expansion plans or where exactly the company’s crews are working.

The Lufkin Daily News reports Huntington City Manager Bill Stewart has been hearing second hand about Suddenlink’s expansion since March 2016, but the company has never approached the city formally to share details.

“For the most part, when they finally decided to do it they just started laying lines,” Stewart told the newspaper.

The quality of the construction work is what bothers residents, who complain Suddenlink’s lines are hanging low across yards and even across city streets, with no sign of repair crews willing to fix the problem.

“If they’re going to come in and do something, we expect it will be done right and will be taken care of correctly,” Stewart said. “We want to have a positive relationship with them. But things just need to be done differently if you’re going to come and do something like that. You need to fulfill what you say, and at this point a lot of people are upset because that’s not been done.”

Suddenlink’s response was a general statement:

“Since launching our Suddenlink by Altice broadband, TV, and phone services in Huntington earlier this year, we have seen great demand from residents and have been bringing additional resources to the area to ensure a positive experience for all of our new customers,” Suddenlink media representative Lindsey Angioletti said. “We thank our customers for their support and look forward to serving them with advanced products and services for many years to come.”

Stray Bullet Causes Large Service Outage for Suddenlink in North Carolina

A stray bullet that hit a fiber optic line in late May eventually disrupted Altice/Suddenlink service in eastern North Carolina and caused a minor outage for the Beaufort County 911 Communication Center.

The bullet, recovered by the Washington, N.C. Police Department, damaged the overhead fiber optic line it struck, eventually bringing service down for nearly a day.

Suddenlink first detected the problem on a Saturday in late May, but did not identify the fiber line as “shot” until a day later, at which point WPD officers responded to the scene. The cable company evidently did not start repairs until after a widespread service outage began.

Most of the information about the outage was provided by the local police department, because Suddenlink has not responded to requests for details about the outage’s extent or duration. A police report about the incident shows that there were no calls to 911 to report the shooting, and a suspect has not been identified. The WPD classified the incident as “damage to property.”

The Washington Daily News reports that there was some disruption to the city’s public safety operations.

“911 operations are impacted by any interruption in internet service, but we can operate without it for a short period of time,” Beaufort County Sheriff’s Office Chief Deputy Charlie Rose told the newspaper. “We may receive notice if there is a planned outage for maintenance. Our service has been slow today, but hasn’t been out completely.”

Altice Preparing to Offer $20-30/Mo Unlimited Data Mobile Plan

Altice USA could be your next cell phone provider, if you subscribe to Cablevision’s broadband service in the metro New York City area.

The Wall Street Journal reports Altice is preparing to launch an unlimited calling/texting/data plan that will cost between $20-30 per month, powered by Cablevision’s in-home Wi-Fi, its network of public Wi-Fi hotspots, and Sprint’s 4G LTE network.

The service, likely to be called Altice Mobile, is the latest entry from cable operators pitching low cost mobile service as an incentive to keep customers from switching providers. Altice will charge dramatically less for its unlimited plan than Xfinity Mobile and Spectrum Mobile ($45) — both reselling Verizon Wireless service — (with speeds reduced to 1 Mbps download and 512 kbps upload after 20 GB of data usage in a month.)

Customers using AT&T and Verizon pay even more. Unlimited monthly plans for a single phone start at $80 at Verizon and $70 at AT&T, depending on bundling certain other AT&T-owned services. For less than half the price, Altice Mobile would deliver all the same services larger providers offer, although Altice intends to offload as much usage as possible to its network of Wi-Fi hotspots, to keep costs low. Before Altice acquired the cable company, Cablevision built a major Wi-Fi presence in the New York City metro areas where it provides cable service. Altice announced it intends to strengthen that network to support its mobile initiative, including the possibility of deploying its own small cell network.

Where Altice cannot supply its own wireless connection, it will rely on Sprint to take over, paying the cell phone company for its customers’ traffic. In return, Sprint will be able to bolster its network in Altice’s service area, perhaps even using Altice’s fiber-to-the-home network, now under construction. That could help Sprint launch 5G service relatively soon in the region, regardless of whether its pending merger with T-Mobile USA is approved. To protect the venture, Altice has secured an agreement with both T-Mobile and Sprint not to terminate its contractual agreement with Sprint should a merger be approved. But the service will still be dependent on network owners like Sprint willing to sell connectivity. Should Altice Mobile take a significant share of the market, network owners may be reluctant to renew such contracts, or price them much higher at renewal time, raising prices.

The cable industry’s incentive for getting into the wireless business, even if it proves unprofitable, is plain to see. All entrants require their mobile customers to maintain a broadband account in good standing to qualify for mobile service. Comcast, Charter, and Altice are aware their video packages are increasingly untenable in a cord-cutter’s marketplace, but maintaining internet service remains essential. In most areas where the cable operators provide service, Verizon or AT&T also sells both broadband and wireless service. Customers may be reluctant to bounce between providers looking for a better deal if they also have to switch mobile providers at the same time.

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