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.

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.

French competition regulators have fined Altice for a second time this year for abusing European regulatory policies designed to protect competition in the marketplace.

The French Competition Authority imposed an $88.5 million fine for pursuing mergers and acquisitions without first getting permission from the regulator.

In 2014, Altice rushed into an effort to buy SFR, one of France’s major cellular and broadband providers. Although ultimately successful, the French regulator produced a lengthy dossier with evidence Altice executives allegedly engaged in illegal back door negotiations to complete a takeover of both SFR and Virgin Mobile with or without clearance from the agency that ensures French consumers benefit from competitive markets.

“The Group chose not to refute these practices and to accept the French Competition Authority’s settlement offer,” Altice said in a statement. “The Group chose to settle the matter in order to limit its financial exposure, given the level of penalties imposed for the type of procedural violation under the French Commercial Code.”

SFR customers apparently wished Altice never acquired the telecom provider, because the mass exodus from customer cancellations continued for yet another quarter, despite extremely low-priced customer retention promotions.

SFR’s cable and fiber broadband division lost 75,000 customers in the last three months, 193,000 over the year. Among DSL customers, 120,000 said goodbye to SFR during the last quarter, 432,000 for the year. SFR’s mobile service did even worse, down 88,000 customers in the last three months, 593,000 for the year.

To offset losses on that scale, Altice is relying on American cable customers to make up the difference. At least 41% of Altice’s global operating free cash flow now emanates from Cablevision and Suddenlink customers in the United States. Thanks to rate increases and other revenue enhancers, Cablevision customers kicked in 2.2% more revenue while Suddenlink customers provided 6.2% more to Altice’s revenue numbers. Suddenlink customers are already paying unprecedented cable bills, with a reported 46.4% profit margin, which ranks among the highest in the U.S. cable industry.

Seeing the enormous sums of money to be made running cable companies in the much-less competitive United States, Altice has been drawing up plans for a potential initial public offering to build a war chest to expand the Altice USA empire starting in 2017.

Among the most likely targets to be consolidated under the Altice umbrella: Cox Communications, Cable One, Mediacom and Midco. Some of those companies are privately held, so Altice founder Patrick Drahi would likely have to pay a substantial premium to snap up some of these mid-sized companies.

If the incoming Trump Administration opens the floodgates for a merger and acquisition free-for-all, Drahi might aim higher, looking at Charter Communications. An acquisition attempt of Comcast would be his most audacious move yet.

Those customers consolidated into the Altice family can look forward to higher bills and significant cutbacks in some customer support functions.

Altice plans to continue centralizing call center operations and demanding better performance from workers employed there. By minimizing customer contacts with call centers, costs are reduced. Making sure customer problems are addressed quickly is supposed to reduce customer losses from churn.

Rate increases and additional fine print also guarantee more revenue for Altice operations. In France, SFR has not shied away from imposing multiple rate increases throughout the year, even when customers are “locked in” with a promotional rate. SFR has been playing with how it charges France’s value-added tax (VAT), reducing it for some while adding new passed-thru charges for others. Many customers saw their bills increase by around 10% over the summer and are waiting to pay even more this fall.

Cablevision and Suddenlink customers are getting similar treatment as they discover new and unusual service charges and fees, including general rate hikes of about 3.4% that take effect in December.

The most significant change is that Cablevision no longer provides credits for disconnecting customers. Regardless of when you drop Cablevision service, Altice will not give you any service credits for disconnecting before the end of your billing cycle.

Manasquan, N.J. resident Bonnie McGee discovered Cablevision’s quietly imposed change that took effect in October.

“No matter what now, I am paying for 25 days when I am not getting any service from them,” McGee told New Jersey’s Press on Your Side. Her final bill was $183.

Under the previous owners, billing stopped the day a customer disconnected service and turned in their equipment. Under Altice, customers will continue to be billed for service, even if they cannot access it because they turned in their set-top boxes and cable modem, under the end of the billing cycle.

Cablevision officials call this change a benefit to their customers.

“Optimum services remain available to you for the full billing period and there are no partial credits or refunds of monthly charges already billed,” according to the fine print on Optimum bills.

“Like many entertainment and telecommunications providers, our services are available on a monthly basis, and customers have access to all of our high-quality products and services until the end of their monthly service period,” a spokesperson told the newspaper.

While that may sound good to the bean counters at Altice, it has infuriated customers, and the change may be permanently harming Cablevision’s name, leaving many departing customers even more unhappy with the service they canceled.

“Why would I even think about going back to Optimum for anything?” one asked. “I will never go back,” said another.

Look what’s in the box. MergeMaster Patrick Drahi. (Illustration: Michel Kichka)

Cable conglomerate baron Patrick Drahi promised American, French and Portuguese consumers he would bring them value for money by taking control of large established telecom companies in both countries and revamp their products and services to bring improved service. Consumer advocates in all three countries continue to argue customers are still waiting for Drahi’s debt-laden Altice empire to deliver on its promises.

A flurry of mid-summer articles in the French media continue to acknowledge Drahi’s formula has brought results — for him and his top executive minions, but has caused headaches for employees, customers, and even the government.

The biggest firestorm involves Altice-owned SFR’s newly-announced plan to slash at least 5,000 more jobs at France’s fourth-largest mobile operator, which also provides wired cable-TV and broadband services in parts of the country. That represents at least one-third of SFR’s total workforce. The planned cuts run so deep, some in the French press call them “violent.” These new cuts are on top of the 1,200 jobs Drahi cut when he took control of SFR two years ago. An Altice executive warned that if they still perceive to be “fat on the bone,” there will be further cuts after that, presumably starting in 2019.

The job cuts have raised the ire of some in the French press because one of the conditions of Altice’s takeover of SFR was a commitment not to cut jobs. But some reporters may have missed the fine print negotiated with regulators  — the job protection agreement expires in July 2017, after which Drahi can slash at will. And he will.

Investment banks love it. American and European banks have loaned €50 billion ($55 billion) — a record amount — to Drahi to buy up telecom companies on a virtual credit card and deliver short-term results by slashing expenses, which at least temporarily boosts profits. When customers find out the implications of the draconian cuts, they complain and tend to leave. But savvy investors learn how to cash out before that happens, often walking away with huge returns. Such methods have been business-as-usual in the United States for a long time. But Drahi has improved on the old formula of relying on OPM – Other People’s Money – to build his empire.

Some of the money flowing through Altice’s coffers comes from the French taxpayer, currently footing the bill for unpopular French President François Hollande’s key measure to boost the competitiveness of French companies — the Tax Credit for Competitiveness and Employment (CICE), which significantly cuts employer’s labor expenses. Altice has been a grateful recipient of this gift from French taxpayers, who pay for it through new ecological taxes and an increase in Value Added Tax (VAT) rates, which like our sales tax, applies to goods and services one buys. The standard VAT rate in France is now 20%, with 10% charged on restaurant meals, transport, renovation/improvement works and certain medical drugs, and 5.5% on food, water and non alcoholic beverages, books, special equipment for the disabled and school meals. The other half of the money spent implementing the CICE came from decreased public spending on infrastructure and social service programs. Take from the poor and middle class and give to the corporations, Hollande’s critics claim. The program was supposed to protect employment, but critics say it has had little or no effect beyond enriching large corporate conglomerates who hire and fire for their own reasons, and are not particularly concerned about what that could do to future government payouts.

French newspaper l’Humanité is calling on the government and Mr. Drahi to account for his use of taxpayer-funded CICE aid. The paper demands the Hollande government to disclose exactly how much Altice’s SFR has received from the program.

Unemployment office in Connecticut

Altice continues to claim the job cuts will be voluntary — a suggestion scoffed at by employee unions in both France and Portugal, where Altice operates telecommunications companies. In addition to asking Altice-owned Suddenlink and Cablevision employees whether the recent sudden separation from their paychecks was voluntary, unions claim they have the benefit of past experience.

“When they say ‘no job cuts’ and 1,200 have already been cut over the past 18 months, how can we trust them?” asked Frederic Retourney, a spokesman for the CGT-FAPT employee union. “We know that voluntary redundancies are made under duress in most cases. When SFR announces 5,000 job cuts when there are 14,400 employees at the company now, we do not see how one can speak of voluntary departures.”

The job cuts at Altice’s U.S. operations — Suddenlink and Cablevision — have just begun. In a filing with the Connecticut Department of Labor, Altice disclosed it is issuing a total of 587 termination notices in that state — 482 call center workers in Shelton who will lose their jobs Nov. 1 and another 105 in Stratford leaving in two waves Oct. 14 and Dec. 15. Cablevision’s chief Connecticut competitor Frontier Communications is turning Altice’s lemons into Frontier’s lemonade by capitalizing on the job cuts with a quickly organized media push for a job fair on Aug. 31 in New Haven targeting the soon-to-be-former Cablevision workers.

Frontier will hold interviews for the former Altice call-center workers and field technicians. The alternative, if those former Cablevision workers still want to work for Altice, is to move to New York or New Jersey and hope their jobs don’t get cut again. With Frontier, they can stay in Connecticut.

Altice-owned SFR Francophone call center workers face even bigger challenges from relentless demands for cost cuts. In 2015, Altice announced it was open to relocating its Moroccan-based customer care call center to Madagascar, a large and severely economically depressed island nation off the eastern coast of southern Africa. Drahi, who told Wall Street he likes to pay as little as he can in salaries, is evidently upset labor costs in Morocco now force Altice to pay salaries up to €500 a month ($560). The company said it was open to seeking solace hiring French-fluent replacement workers in Antananarivo, Madagascar’s capital city, where the average annual salary is $260. In contrast, Connecticut call center workers make an average of $14.80/hour, according to Indeed.

Connecticut State Rep. Laura Hoydick (R-Stratford) acknowledges employee life with Altice in charge of Cablevision may be a tough ride.

“Having gone through unemployment with family members — and now me — emphasizes how the Cablevision employees are nervous for their livelihood and existence,” Hoydick told The Hour. “I thought it was great that the Frontier folks saw that there was an already-trained workforce here in Connecticut.”

Other state Republicans are attempting to blame Democratic Gov. Dannel P. Malloy for Cablevision’s job cuts, characterizing them as evidence employers are fleeing the high taxes and expenses associated with running a business in Connecticut.

“People are making a choice: ‘Do I stay in Connecticut and weather the storm, or do I move out of the state?’” said state Rep. Jason Perillo (R-Shelton).

For now, those decisions are mostly made by Altice’s cable company call center workers and some members of middle management. But Patrick Drahi’s long-term plan to conquer the media business depends on implementing his “convergence” strategy, which means owning and controlling not only the means of distribution, but also the product being distributed. l’Humanité compared Drahi’s business to a multibillion cephalopod, with octopus-like tentacles extending his control and influence well beyond the cable business.

In France, he is accomplishing his mission by buying up cable networks, newspapers, and other media outlets which he packages together. Now a customer doesn’t just buy cable TV — he buys TV, internet, phone, the daily newspaper, and magazines for one flat price. For about $22 a month, SFR customers get unlimited digital access to 17 newspapers and magazines including Libération, l’Express, and l’Expansion. Then you can watch Drahi’s new sports channels and local news channel — all owned by Altice. Drahi told the French Senate his new bundled media model could “save the press.” But dig a little deeper and you discover Drahi’s altruism is considerably more limited.

By bundling everything together, the Altice-owned businesses each enjoy the enormous benefit of having their products taxed at the special press VAT rate of 2.1%, down from the usual 20% that would be otherwise owed. Altice pockets the savings for itself — a considerable boost in gross revenue.

More conservative investors worry about how Altice is managing to pay for all of its acquisitions and still manage to cover its existing massive debt, especially as Drahi plots to bring his model to the United States. His goal in America: to create the largest or second-largest telecom company in the country. Worried shareholders have been placated by the news massive layoffs are in SFR’s future, with the cost-savings they bring. Those still not satisfied were quieted after Numericable, another Altice concern, borrowed almost two billion dollars and raided Altice’s treasury for another billion to finance a dividend payout to shareholders worth more than $2.5 billion. Of course, Mr. Drahi himself is among the top recipients.

Patrick Drahi’s vision of unwanted employees he’d like to lay off.

Patrick Drahi, who oversees a global telecom empire that now includes Suddenlink and Cablevision in the United States, is quietly seething over the regulators who forced him to accept commitments not to kill jobs at the companies he’s acquired. To him, an unwanted Altice employee is nothing more than a washing machine ready to be tossed out after outliving its usefulness.

Drahi points to his French wireless company SFR as a prime example of how job protection agreements are bad news for his business plans. In Drahi’s view, SFR, like many of the companies he has acquired, is overstaffed. But he cannot slash jobs for three years because of regulator conditions imposed when acquiring the company.

“We have one year left on our guarantee of employment for three years,” Drahi told investors in New York. “Today we’re in a situation where people know that the guarantee stops in one year. It’s like buying a washing machine from [home good retailer] Darty with a three-year warranty. After three years the washing machine breaks down. What should we do, [pay for it to be repaired]? They know we’re overstaffed.”

In Drahi’s view, the unnecessary employees are just a drain on company’s resources, something their competitors are fully aware of and are ready to exploit. Drahi said the protected employees also create tension in the company. Their union representatives claim the opposite, arguing Drahi’s draconian cost-cutting makes for a hostile workplace where employees often have to take pay cuts and in some cases pay for their own toilet paper, office supplies, and break room equipment out-of-pocket. As a result, as many as 1,200 employees have already voluntarily left SFR for other jobs. In many cases, those vacant positions were never filled again, helping Drahi achieve desired job cuts through other means.

Drahi’s cost cutting even extends to the top. He admitted he was able to convince the current managers of Cablevision and Suddenlink to cut their salaries while suggesting they could share in the long-term profits of the companies sometime in the future.