Altice Eyes Cablevision Deal Close in Second Quarter, Plans No Further U.S. Purchases in 2016

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Altice CEO Dexter Goei

Management lauds U.S. cable firm Suddenlink, says it won't hurt this year from having dropped Viacom networks and says the broader market is seeing more cord shaving than cord cutting.

European cable and telecom giant Altice expects to close the acquisition of Cablevision Systems in the second quarter and likes the momentum it has seen early on at fellow U.S. cable operator Suddenlink, in which it bought a 70 percent stake in a $9.1 billion deal late last year, management said Tuesday.

CEO Dexter Goei said about Cablevision that "we’re hoping to close by the end of the second quarter.” The deal, valued at $17.7 billion and which would create the fourth-largest U.S. cable firm, still needs approval from New Jersey, which is expected in April, New York at the end of April and the FCC, which is expected to rule around the beginning of May, he said.

Asked if Altice, founded by billionaire Patrick Drahi, may have to reduce its targets for financial synergies to win approval as it offers some concessions to regulators, Goei said the company was "in the middle of our regulatory process" and would only discuss further details once it was completed.

Asked about potential added M&A in 2016, management said beyond some possible deal opportunity in France, it expects to mostly keep its head down this year. The current year is “a year of integration and operation,” Goei said, adding, “we don’t anticipate doing anything else” outside possible small deals or a French deal this year.

Goei on Tuesday also lauded Suddenlink, which became part of Altice at the end of December, saying it “continues to do extremely well." He acknowledged that “year-over-year growth in 2015 slowed due to the decision to drop Viacom content at the end of 2014," but added, "As Suddenlink puts more quarters under its belt since the Viacom decision, the business is returning closer to its historical growth rate.”

COO Michel Combes similarly said "we are really pleased with this acquisition." And he said that the impact of dropping Viacom content "will not play a role anymore in 2016." The company had lost about 34,800 video subscribers in the fourth quarter of 2014, but things have since improved. The exec said that "attrition on the video side has come down significantly," arguing that "interestingly, Suddenlink didn’t see significant impact on its video subscriber levels when it decided to drop Viacom content."

Looking ahead, Combes said the company would look to gain user market share and grow its average revenue per user.

Asked about broader U.S. pay TV trends and recent momentum at cable operators, Goei said "it’s a little early to tell," but in the broader picture, "we are seeing a lot more cord shaving than we are seeing cord cutting," although performance depends on specific companies, products and regions. Cablevision, with its New York-area focus and high triple-play service penetration, for example, is "a bit different" from the rest of the market, he said.

But overall, "we are seeing continued improvements in video [subscribers] in terms of the stemming of losses of them and a continued increase in the broadcast product" in the U.S., said Goei.

Altice has used debt to grow via acquisitions in the past couple of years with operations in France, Portugal, Israel and the U.S.

The company said it expects to grow its overall revenue in 2016 after a flat 2015. Adjusted earnings before interest, taxes, depreciation and amortization rose 18 percent. Analysts have said they look for revenue growth and continued cost cuts.

Said Goei: "During 2016, we will continue to be very focused on further improving operational and financial performance, integrating the businesses we have acquired and pursuing the efficiency target we have set out."

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