Drahi (center) surrounded by executives.

The billionaire owner of France’s largest cable operator has acquired St. Louis-based Suddenlink in a surprise $9.1 billion deal, and it is likely only the first move for the Altice Group in the U.S. cable business. But it may not be a welcome one for customers, employees, and suppliers of America’s seventh largest cable company about to be introduced to the notorious “Drahi Method” of conducting business that French newspaper La Parisien calls “brutal.”

The acquisition of Suddenlink represents a modest first step for a company that hopes to divide its business half in Europe and half in the United States. Incorporated in Luxembourg for tax-savings purposes, most of Altice’s interests in the cable business are in France and its overseas territories. Numericable is Altice’s cable brand in Luxembourg, France, and parts of Portugal and recently acquired SFR is Altice’s fiber broadband and mobile brand in French-speaking Europe.

Moroccan-born billionaire businessman Patrick Drahi sees investing in cable as a great opportunity to build needed cash flow from America’s pervasive broadband duopoly. Altice is heavily in debt, financing a whirlwind of acquisitions including Israeli cable and mobile providers, Portugal’s largest telecom company, a mobile carrier in the Dominican Republic, in addition to SFR, France’s second largest wireless company, all mostly paid for with debt and junk bonds. That’s a long way from Drahi’s early days in cable, when he sold service door to door for his small regional Internet and cable-TV company in France’s Alsace region.

Suddenlink’s national service area

His mentor is Dr. John Malone, America’s former cable magnate, who followed a similar pattern of buying up cable companies across the United States in the 1970s and 80s to create Tele-Communications, Inc. (TCI), then America’s largest cable company (it was later sold to Comcast). Drahi shares Malone’s philosophy for cash flow-generating acquisitions: “Always start with cable.” He has plenty of opportunities in the United States, which unlike Europe is largely a cable broadband duopoly in big cities and a monopoly everywhere else. While Drahi confronts revenue erosion from European telecom price wars among phone, broadband, and television companies, he has plenty of room to raise the rates on captive customers on the other side of the Atlantic.

The average Suddenlink customer lives in a small to medium-sized city in West Virginia, Texas, Arkansas, Louisiana or Arizona. Suddenlink is well-positioned to sell its 1.5 million customers broadband service, because the alternative is usually low-speed DSL from companies like Frontier, Windstream, CenturyLink or AT&T. Drahi will sell all the services Suddenlink traditionally has, but customers can expect to pay a higher price.

Drahi has decided to focus on his high-end customers and has stopped competing to win customer volume based on price. The customers that pay the most for service also get the best customer service. If lower-end customers feel ignored and decide to leave, that is increasingly an accepted fact of life by Altice management. As a result, Numericable-SFR continues to lose mobile and market share in Francophone markets because customers have found better deals elsewhere. But the company is still keeping its best customers well-pampered and they have stayed, so far.

Life will be anything but pampered for Suddenlink employees and suppliers, who will soon be targeted for Drahi’s traditional culling of the herd and vicious cost cutting. European capitalists look in awe at “the Drahi Method,” a program of ruthless cost controls, job cuts, and threats visited on every acquired company. The French press is buzzing about Drahi’s latest acquisition in the United States, and wonder if Drahi’s slash and burn management style was better suited to America’s greed era of the 1980s and not the Obama’s ‘we are better than that’ era of the 2010s. But they know the story of how Drahi takes over is always the same.

Suppliers complain Drahi’s companies don’t pay their bills.

After each acquisition is complete, Altice flies in a small team of executives who live to slash costs. It’s what Le Echos calls “helicopter management.” Many middle and upper management at the acquired companies are terminated instantly, replaced with relocated Drahi loyalists. Salary freezes are imposed on those remaining and are indefinite. Job cuts in customer service are frequently next and are sometimes severe. In fact, the company’s relationship with its employees is so bad, the French trade union CFDT has taken several actions against Altice-owned SFR-Numericable over pay freezes and terminations they call unjust for a company collecting a profit margin of more than 25%, even during a price war.

But the worst is reserved for the suppliers that provide everything from coaxial cable to paper for the office printer.

“Suppliers are fifth wheel,” complained one French company that considered itself extorted to hand over a 40% discount just to get their past due invoices paid. One told Le Monde the best a supplier can hope for from an Altice-run company is to barely survive. Many more die than live.

Sometimes, the hardball tactics against suppliers and vendors seem to backfire on the company. Les Echos shares the embarrassing story of the major SFR-owned mobile store that had a big problem. This past January, the demonstration display where customers can sample the latest tablets and smartphones was curiously empty, except for a few employees milling around a coffee machine placed there to take up some of the empty space. Where were the phones and tablets to show off to make the sale? The distributor who supplies SFR had not been paid. No payment, no phones.

Drahi’s company even stiffed Cisco, which sent this warning note suspending shipments pending payment.

Just a few months before announcing his deal to acquire Suddenlink, a large group of French suppliers went to French authorities to seek a broad-based mediation to stop Drahi’s promises of payment in return for future discounts.

Les Echos reports Drahi spared no one from the cut.

“Cleaning companies, network equipment manufacturers, call centers, manufacturers of smartphones, TV, everybody goes,” it reported. Drahi’s managers even dared to challenge the local power company, Dalkia, threatening to cancel their energy services contract unless the company was granted an immediate 80 percent discount. Le Figaro reported the company ignored the contracts it had already signed with the energy company.

An empty bag: No phones at the SFR store.

“It’s vicious,” one supplier told Les Echo. “For them, everything can be renegotiated, even contracts already signed and running.”

An IT company also accused Drahi’s company of refusing to pay for past work unless it received a 30% discount. The firm said no and threatened to sue. It is now facing bankruptcy because its business overwhelmingly depends on Numericable and SFR.

The cuts can also seem petty.

Last December, office workers in Saint-Denis found themselves without paper for the office printers. Numericable SFR management had not bothered to pay its office suppliers and they cut the company off. This year, employees report they often have to bring their own toilet paper to work as the company has stopped stocking employee restrooms, apparently part of another cost-cutting measure.

The problem of unpaid invoices has grown so bad the cable operator is increasingly responsible for suppliers clogging the only Commercial Court in Paris with cases large and small, including those from Pace – the company that provides set-top boxes for Drahi’s cable companies, M6 – a television channel not paid for its programming, STS – a major software company, Orange – a major telecom operator, and even the workers who solicit customers to buy cable service going door to door, who say they have not been paid either. In fact, Numericable-SFR has been hauled into court with stunning regularity, losing almost every case, and forced to pay costs, including court fees and interest. The company has already been convicted 12 times for unpaid bills and in several other cases, it only agreed to settle minutes before a trial began.

Altice’s willingness to put itself deeply in debt just to make more acquisitions was enough for Moody’s to throw a caution flag in February, warning investors the company was under review for a credit downgrade.

“Today’s rating action is prompted by significant uncertainties about the funding of the envisaged €1.95 billion share repurchase program and its impact on Numericable-SFR’s liquidity, leverage and operational flexibility. Moody’s views the potential transaction as aggressive given that the company closed the large acquisition of SFR only recently and is still in the early stage of integrating the acquired asset,” the ratings agency said.

One might forgive Drahi’s desire to economize, considering his recent acquisition of SFR left Altice in debt for more than $12 billion and owing $55 million in interest payments a month. But Drahi continues his acquisitions unabated by those economic realities.

Another problem is Drahi’s crackdown on who is authorized to pay suppliers and other vendors. Under SFR’s old owner, about fifty employees were authorized to sign checks over €100,000 across all of France. Today, any check over €10,000 must be signed by at least one of just three employees. Silicon reports the crackdown became even more severe last winter.

“Since December, any investment must be approved by the investment committee,” a source told Silicon. “All projects are blocked, all expenses must be justified, even 50 Euros. It is set to ‘stop and go’.“

The inherent delays and austerity measures eventually also reach customers, according to ex-employees who say getting a replacement box or new cable strung can be a major problem when suppliers stop shipping and the company stops buying. It can also annoy customers that discover calling customer service no longer means talking to an employee in France. Drahi found call centers in Tunisia and Morocco that would do the same work for a fraction of the price.

Drahi said his Suddenlink acquisition is only the start. He has reportedly also shown an interest in acquiring Time Warner Cable, and shares of Cablevision stock were also increasing this afternoon suspecting that company could also be a target.

The would-be CEO picked to head the illegitimate child of the Comcast/Time Warner Cable merger wants your sympathy and understanding over the loss of bulging signing bonuses, pay packages, and benefits with the demise of the cable company that never was: GreatLand Connections.

While about 2.5 million customers in Minnesota, Indiana, and Kentucky braced for the arrival of their new cable company — one that lacked letterhead, much less any track record or experience — executives shared a box of tissues contemplating the wasted stress of moving their children from one exclusive private school to another in the ‘barren cultural wasteland’ of the midwest.

“The people aspect of this is just breathtaking,” said GreatLand’s never CEO Michael Willner, who has now been sidelined by Time Warner Cable twice – once when the company he used to oversee, Insight Communications, was absorbed into the Time Warner hegemony and now a second time, when the rug was pulled out of the cable company he was hired to run. “For 14 months this deal was meandering through the regulatory process, for whatever reason they just decided that after all the planning and all the money and all the people commitment and people who had moved to other cities, and planning to move for other cities for new jobs – there were even a few people who were told they wouldn’t have jobs after the close – they just decided there was no way to do the deal. It was unprecedented.”

Willner can keep on smiling.

Willner told his sad tale to Multichannel News, noting (thank goodness) there wasn’t a giant warehouse in the midwest full of GreatLand truck decals looking for a new home. In fact Willner spent the last 14 months preoccupied with filling 15-20 top senior vice president and vice president management positions, dangling lucrative pay and bonus offers to convince executives to move their elite east coast families to a state like… Kentucky. Time Warner Cable treasurer Matt Siegel, his biggest catch, had already bitten and was considering his new home options.

Meanwhile, nervous employees of the systems scheduled to be thrown overboard by Comcast forced Willner to personally stop by their offices several times over the past 14 months to reassure them they did not have anything to worry about.

“All the people going to GreatLand were Comcast people,” Willner said, claiming, “These employees loved working for Comcast. I had to convince them that life would be OK with us. It took me awhile.”

Willner did not bother reassuring affected customers.

In the end, it was all for naught.

“When they said ‘We’re done,’ we were done too,” Willner cried after the Comcast-TWC deal swirled in the bowl.

Despite the “unprecedented” disruption, Willner and his would-be executives all landed on their feet. Siegel went back to Time Warner Cable, most of the other executives stayed with Comcast and Willner himself did not have to skip a beat, instantly resuming his old job as CEO of video software company Penthera Partners.

The community of Hampton Falls, N.H., was first settled in the year 1638 but many of the 2,200 residents of the New England town are settling for Comcast no more.

Selectmen of Hampton Falls called on Comcast to send a representative to their meeting after scores of locals complained about the awfulness of the local cable company.

“Comcast’s service is absolutely miserable,” said Hampton Falls vice-chairman Larry Smith. “On a scale of 1-10, I’d say it’s a zero.”

Smith shared a personal experience about his wife’s attempt to shift her business email to her residential account. Comcast repeatedly sent her to the wrong department.

“This is designed to be the worst system possible,” Smith said. “It’s a virtual monopoly. Comcast doesn’t reward or honor loyalty. If you don’t have an hour or two to devote to it, you don’t even bother picking up the phone.”

Comcast made another local resident drive back and forth to Portsmouth three times to pick up a new router because the equipment proved defective each time.

“Everyone who knows me knows that I don’t get irate, but this ticked me off,” the customer said.

Comcast representative Jay Somers took heat throughout the meeting for missed service calls, poor equipment, poor Internet service, and lousy customer service.

His responses did not seem to satisfy residents:

• On missed service calls, Somers said Comcast did not provide enough technicians to handle service calls in the area. He added the company tries to have someone responding within 24 hours, but that obviously was not consistently happening in Hampton Falls;
• On Internet outages, Somers blamed customers using their own purchased modems instead of relying on Comcast’s own Internet Gateway, which costs an extra $10 per month;
• Television and other outages were the fault of home wiring or animals allowed to chew on Comcast’s cables.

Somers promised Comcast treated every customer the same, regardless of whether they were a budget minded customer or one taking every service they have.

While in no rush to deal with customer complaints, Comcast sent a letter signed by Nick Leuci, vice president of franchising, pressuring the town to hurry renewal of Comcast’s local franchise, despite having over a year remaining on the current agreement.

Based on the number of complaints from local residents, the board decided to take that matter up at a later date.

If you are a long time Optimum customer, the CEO, management, and shareholders of Cablevision would like to thank you for driving average monthly cable revenue per customer 4.8% higher from a year ago to $155.34 a month.

A few years ago, Cablevision developed a Stalinist approach to repeat customer promotions and retentions: nyet.

Despite mounting competition from Verizon FiOS, AT&T U-verse, Comcast and Time Warner Cable, Cablevision has held the line on repeatedly discounting its service for customers who complain their rates are too high.

“Our disciplined approach to pricing, promotional eligibility and customer credit policies has not wavered,” Kristin Dolan, chief operating officer, told investors on a morning conference call.

As a result, the average customer staying with Cablevision paid almost five percent more for service than they did a year earlier — more than $155 a month.

“The main drivers of our increased revenue per customer came from a combination of rate increases, but also lower proportion of subscribers on promotion,” said Brian G. Sweeney, chief financial officer. “We had a number of fixed rate increases January 1 of this year related to cable box fees, an increase in our sports and broadcast TV surcharge, as well as the pass-through of PEG fees to certain customers.”

Cablevision elected to stop competing on price in 2013, telling customers they are entitled to one customer retention deal and that is all. As a result, Cablevision has been losing customers even as it gains revenue. Although it managed to pick up 7,000 net new broadband customers during the quarter, Cablevison lost 6,000 customer relationships, 28,000 video customers — double the number from a year ago, and 14,000 voice customers. That represents 11 consecutive quarters of video subscriber losses.

The customers that remain are meeting Cablevision’s earnings expectations as others leave for better deals elsewhere.

Kristin and James Dolan

Cablevision admits many of its subscriber losses come from customers willing to shop around for a better deal. They usually find one. Although Verizon has tightened customer retention deals itself in response to Cablevision’s retention policies, Frontier U-verse in Connecticut continues to compete for new business on price, at least initially as part of new customer promotions.

Kristen Dolan argues Cablevision’s quality of service keeps customers loyal and brings many ex-customers back.

“We do a significant amount of [customer] win-backs every year and we really focus on why people are coming back and it’s not just about price,” Dolan said.

But some customers believe it is more about the price than Cablevision might think.

“The only reason I left Cablevision was because they wouldn’t negotiate and match a better deal Verizon offered me,” said Rob Hastings of Syosset, N.Y., who canceled service in 2013. “When Cablevision wouldn’t cut their price I left.”

Many of the customers coming back to Cablevision this year are, in fact, their old customers dealing with a rate reset from Verizon as promotions expire.

“When my Verizon FiOS rate shot up, I went back to Cablevision as a ‘new customer’ on a promotion,” said Hastings. “When that expires, I’ll bounce back to Verizon. Whoever gives me the best price gets my business as I am sure not going to pay extra to stay a loyal customer.”

To further combat promotion-bouncing, Cablevision is embracing its broadband product line and marketing new cord-cutting packages to customers that offer reduced-size cable television packages and free over the air antennas for local stations. The cable company also recently announced it would offer cable customers Hulu subscriptions. Jim Dolan, Cablevision CEO, believes broadband is where the money is and customers are willing to pay higher prices to get Internet access even when video package pricing has its limits.

“You’re seeing the video product begin to lose margin and not just among the little operators like us, but even some of the big operators,” said Dolan. “Our philosophy is we think of video as akin to the eggs and the milk in a convenience store. You have to have it, but you don’t make a lot of money on it. Now connectivity is a whole other basket. It’s more like the soda and chips aisle, and if you provide great connectivity, because it provides great value to the consumer, you can differentiate yourself and you can charge more and the margins are good on it.”

Dolan doesn’t think much of his competitor’s slimmed down cable packages either.

“Verizon’s known to embellish [and] use misleading messaging in their marketing to get the phones to ring,” said Dolan. “I think that’s partially how we view these packages. I can tell you that the packages that we’re offering provide a lot more flexibility.”

To further differentiate it from its competitors, Cablevision continues to emphasize its Wi-Fi network of hotspots across metro New York City. The company also recently became the first major U.S. cable operator to launch a mobile phone service that uses its network of Wi-Fi hot spots. Although not willing to divulge customer numbers, Kristin Dolan did say unique weekly visits increased 16% on average to Cablevision’s website, presumably to explore the Freewheel Wi-Fi calling product.

Cablevision’s highlights for the first three months of 2015:

• Fiber to the Press Release: Cablevision was the first cable company to introduce 1-gigabyte residential service in the tri-state area. The service launched to a single new multi-tenant building in Weehawken, N.J. No further expansion is planned at this time;
• Discounted Internet for the Cord Cutter on a Budget: Cablevision expanded the availability of $34.90/mo Internet Basics (5/1Mbps) across its entire service area. It includes an over-the-air antenna.
• Third Party Set-Top Boxes: Cablevision is interested in providing a less expensive, open standard, set-top box platform in the future to customers that don’t want to pay for a large cable box.

In the last week, executives from both Charter Communications and Time Warner Cable have talked to the Newhouse Family, controlling owner of Bright House Networks, about an acquisition of the cable company.

Time Warner may hold the stronger hand. In addition to being a much-larger and wealthier cable company, Time Warner has the advantage of a long-standing partnership dating back to the early 90’s with Bright House in which Time Warner shares its volume discounts on cable programming and technology with Bright House in return for an annual fee. As part of that arrangement, Time Warner has the right of first offer if Bright House ever chose to sell. If Time Warner matches or beats a competing offer, such as that now on the table from Charter Communications, it wins Bright House for itself.

Bright House decided it had to sell to someone after the Comcast-Time Warner Cable merger threatened to end its arrangement with Time Warner. Bright House would pay substantially more for programming and equipment without the volume discounts Time Warner received. With the Comcast deal off the table, Time Warner remains an acquisition target.

Bright House is coveted by Charter as a stepping stone to a much larger acquisition of Time Warner Cable. Charter’s balance sheet is loaded with debt and its stock isn’t worth as much as that of Time Warner Cable. Combining Bright House’s two-million subscribers with Charter’s own five million customers strengthens Charter’s balance sheet and increases its borrowing capacity as it prepares to acquire Time Warner Cable for a second time.

Time Warner Cable’s interest in Bright House would make life more difficult for Charter, preventing the company from leveraging a quick deal for Time Warner. It also would make Time Warner Cable considerably more expensive (and complex) to acquire. In January 2014, Charter offered $132.50 a share to Time Warner Cable shareholders to acquire the cable company. Time Warner Cable executives immediately recommended shareholders reject the deal as undervalued. Today Time Warner stock is worth around $156 a share, meaning Charter would have to offer at least $160 a share, and probably more than that, to interest Time Warner executives.

The Newhouse family is sitting in a lucrative position as it is courted by the two larger cable operators. One of those familiar with the talks suggested Time Warner was offering the Newhouse family influence in a combined Bright House-Time Warner Cable, because its offer would leave the Newhouse family as the largest individual shareholder of the combined company. Charter’s offer would hand power to John Malone’s Liberty Broadband, and leave the Newhouse family with little, if any voice.

Based on that, the Newhouse family may gravitate towards Time Warner Cable unless Charter significantly sweetens its deal and Time Warner drops out. With the Comcast-Time Warner Cable merger in tatters, both sides have a 30-day “good faith” period to renegotiate and tweak their respective offers.

Despite all that, Bright House may decide not to sell after all, at least until after the bigger players settle their own deals and acquisitions. In that case, Charter may have other targets in mind. At the top of the list are Mediacom and Suddenlink.