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Cable giant Altice USA has confirmed it has put its telcom Suddenlink assets up for a sale after fielding interest from several buyers.
Altice USA CEO Dexter Goei, during an analyst call Wednesday, responded to market chatter about a possible sale. “I think we can confirm there is a process going on. I don’t think we want to comment any further than that, much like we did when there was a lot of chatter on Lightpath,” he said after the company had received wide interest in the Suddenlink assets. (In 2020, Altice sold its Lightpath fiber enterprise unit to Morgan Stanley Infrastructure Partners.)
“It’s the right time to be looking at this…. We’ll update you and the rest of the market when we deem appropriate to update, but at this time there’s nothing more to really talk about,” Goei added. The Altice USA head also would not be drawn on a possible sales price for the Suddenlink assets.
“Numbers have been out there historically on the asset, so you could probably with other analysts figure out broadly speaking what the numbers look like,” Goei added.
Wall Street analysts have in the past said that Altice, which provides pay TV, broadband and telephone services to approximately 4.9 million residential and business customers in 21 U.S. states, could sell Suddenlink, which it had acquired in 2015 for $9.1 billion, followed by a $17.7 billion takeover of Cablevision.
Bloomberg reported July 21 that Altice USA was looking at selling Suddenlink, which operates in the south-central U.S. for a potential price tag of $20 billion, including debt, to reduce its debt load.
MoffettNathanson analyst Craig Moffett, in a recent note, argued that this price tag would be rich given the unit’s estimated earnings before interest, taxes, depreciation and amortization of $1.3 billion: “$20 billion would represent a 15.4 times multiple. That might have been a reasonable valuation range in 2020 or 2021, but with rising inflation, rising interest rates and falling prevailing valuations, that no longer strikes us as a reasonable multiple,” he wrote.
Moffett had also addressed the question of likely buyers. “We’re skeptical about either Charter or Comcast (CMCSA as potential suitors,” he argued. “Either could easily afford it, of course — it would be a small transaction for either company. But precisely for this reason, we believe it would be non-strategic; neither’s overall scale would be materially changed. Yes, either one could benefit from the synergies that would come from operating Suddenlink more efficiently. But Altice’s ultra- low-cost model might actually introduce negative synergies; in our view, neither Comcast nor Charter would choose to run the company so lean.”
The analyst also discussed regulatory issues. “While there is no sound argument that either company should or would be prevented from buying a company as small as Suddenlink, it is nevertheless the case that either would be forced to undergo a long (torturous?) regulatory process,” he argued.
“For Cable One, on the other hand, the acquisition of a company the size of Suddenlink would be transformational, in our view,” Moffett wrote. “They have made no secret of their desire to get bigger and, other than privately-held Mediacom, there is no other meaningfully-sized cable operator in the country that might reasonably be acquirable.” But he cautioned that “it wouldn’t be easy” for the firm to pull off an acquisition of that size.
“Other cable operators — most notably privately held Cox Communications — can’t be ruled out,” the MoffettNathanson expert concluded. “But they have expressed no particular interest in acquisitions. That leaves private equity. Fortunately for Altice, we think there does appear to be a rather robust appetite for broadband investments of all kinds.”
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