Altice USA CEO Talks Election, AT&T-Time Warner as Former Cablevision Markets Lose Fewer TV Subs
Dexter Goei also discusses upcoming new streaming services from DirecTV and Hulu and says rising programming costs mean pay TV operators are "under siege."
Altice, the European cable and telecom giant that recently acquired Cablevision Systems in a $17.7 billion deal, reported on Thursday that Cablevision lost fewer pay TV subscribers in the third quarter than in the year-ago period.
Altice USA CEO Dexter Goei on the earnings conference call was asked about AT&T's proposed $85.4 billion takeover of Time Warner, saying it follows the trend of full convergence. When big deals like that happen, the industry tends to “start focusing on figuring out where all the different pieces end up," he added. “We obviously are going to pay attention. We are very focused on the operational side still here in the U.S., but we will pay attention to if there is any opportunity for us to do anything in the next couple of years.”
Altice management previously said it expects to mostly keep its head down this year after buying Cablevision and Suddenlink, with Goei calling it "a year of integration and operation." But analysts have suggested 2017 could see Altice USA look for more acquisitions in the cable sector.
Asked what the presidential election outcome would mean for the industry, Goei said it was "too early," because there has been no indication of President-elect Donald Trump's policies. But he said that the stock market seems to have reacted “nicely, particularly in our sector.”
Citing the future Republican-dominated Congress, Goei argued that "on balance … for cable operators, it is probably flat to positive.”
Asked about upcoming new streaming services from DirecTV, namely DirecTV Now, and Hulu, Goei said: "This is one of the reasons why we are so focused on delivering our [new] Home Hub Center" as quickly as possible. A great user interface and an overall better service experience is key, he explained. "If we continue to focus on ... a superior customer experience," the company will continue to do "fine," he said.
Goei also discussed continuing increases in programming costs for pay TV operators in the U.S., saying they were "under siege by content providers" that are asking for increasing carriage fees. He said "we do not pass on that entire amount ... on average 10 percent," but has passed on 3.4 percent, while "we continue to bear the burden of the remainder of that."
Asked about possible further acquisitions and their benefit, he said that, yes, “you typically do benefit from increased scale,” but added that “some of it is just dumb luck.” He also said that the company had no acquisitions on its radar right now.
Cablevision, now called Optimum, ended September with around 2.55 million pay TV subscribers after losing 28,000 in the third quarter, down from a year-ago drop of 33,000. Quarterly revenue grew 2.2 percent, or 2.7 percent on a constant currency basis. Adjusted quarterly earnings before interest, taxes, depreciation and amortization rose 33.1 percent on that basis.
Small U.S. cable operator Suddenlink, in which Altice acquired a 70 percent stake in a $9.1 billion deal late last year, lost 12,000 video subscribers in the latest quarter, compared with a loss of 9,000 subs in the year-ago period, to end September with 1.05 million.
Suddenlink revenue grew 6.2 percent, or 6.7 percent on a constant currency basis, while earnings before interest, taxes, depreciation and amortization jumped 20.8 percent on that basis.
Altice, founded by billionaire Patrick Drahi, lauded the performance of its U.S. business as "better-than-expected" and said it was building a "best-in-class U.S. cable system to sustain growth."
The company on Thursday also reported an 8.3 percent gain in its quarterly adjusting earnings before interest, taxes, depreciation and amortization to 2.33 billion euros ($2.54 billion) helped by the U.S. assets. Third-quarter revenue stayed unchanged at 5.89 billion euros ($6.41 billion), with U.S. revenue up, while French revenue declined 2.4 percent.
Said Altice CEO Michel Combes: "Altice USA with Optimum and Suddenlink has seen a further acceleration in revenue growth while simultaneously improving margins materially, driven by accelerated investments in upgrading our networks and services."