Altice announces separation of US, European businesses

Patrick Drahi

Altice is to separate Altice USA from the parent company by spinning off its 67.2% stake in the company. Divestments of non-core assets, some of which are already under way, should also help to pay down debt, Altice said on Tuesday.

"The biggest overhang on Altice USA shares", he added in an email, "has been the nagging concern that US shareholders might somehow be called upon to backstop weakness in Europe". At Altice USA, Dexter Goei will continue as CEO and a director of Altice USA. "Over the medium and longer term, I'm certain this question will be asked again and maybe we'll have a different response".

Telecoms company Altice is buying control of Portugal's Media Capital, paying Spain's Prisa 440 million euros ($502 million) for its 94.7 percent stake in the Lisbon company.

The dividend to be paid to Altice Europe will add to Altice USA's net debt, which was approximately US$21.2 billion at the end of the third quarter of a year ago.

The group's leveraged loans also rebounded strongly in Europe's secondary loan market.

Shares of the Amsterdam-based holding company have fallen more than 40 percent since it reported disappointing third-quarter results on November 2, and its president Patrick Drahi has said he is shifting focus from acquisitions to reducing Altice's 50 billion euro ($59 billion) net debt. Both companies will have new management.

Several analysts said that this light and centralized top management may hamper Altice's capacity to define an efficient and clear marketing strategy in each of its markets.

Altice International: Altice International will include MEO in Portugal, HOT in Israel, Altice Dominican Republic, Teads and Altice Technical Services Europe (other than France).

A parting $1.5B dividend payment from the USA unit will help improve Altice's balance sheet, which is beset by high debt in an environment of low revenue generation.

Altice has grown rapidly through acquisitions in the United States and Europe, helped by cheap debt that has risen to around $60 billion - more than five times its annual core operating profit.

The spinoff represents a reversal of Drahi's original vision for a single broadband operator spanning portions of North America and Europe, after Altice spent $17.7 billion in 2016 to acquire Cablevision, whose Optimum unit provides cable TV and broadband service in much of southwestern CT and the metropolitan New York City region.

The company largely fulfilled its promise to cut costs aggressively at the businesses it bought but often failed to achieve the operational turnarounds and growth it targeted.

Altice USA will pay a $1.5 billion dividend to its shareholders immediately before the completion of the separation, and its board has authorised a share buyback scheme of $2 billion after the spinoff.

As part of the separation, which is expected to be completed by the end of the second quarter of 2018, Altice NV will reorganize its worldwide operations under the new name Altice Europe.

"With U.S. activities clearly split, the contagion effect will not be felt", said Thomas Coudry, an analyst at Bryan, Garnier & Co. Following the split Drahi will retain control of both companies through his Next investment vehicle. "That should solve their "guilt by association" problem", Moffett said.

This move is created to assuage investor concerns about the impact of Altice's investment in premium content on the underlying network business.

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