Cablevision Systems’ new Euro-pinching French owners are looking to cut the fat at their latest American possession.
“I don’t like to pay salaries. I pay as little as I can,” said Altice founder Patrick Drahi, speaking Thursday at Goldman Sachs’ Communacopia conference in New York.
More than 300 Cablevision executives earn $300,000 or more per year, Altice CEO Dexter Goei noted, also at the Goldman confab. That, according to Drahi, will change.
Cablevision declined to comment on the Altice execs’ remarks.
Also at Communacopia, Drahi said he is looking to snap up more cable ops Stateside, and that Altice eventually hopes to acquire its way into the U.S. wireless sector.
Overall, Altice said it anticipates cutting some $900 million in operating costs annually by consolidating Cablevision and Suddenlink Communications, a smaller operator it bought for $9 billion earlier this year.
Cablevision has about $1.3 billion in annual employee expenses, according to estimates by Macquarie Securities analyst Amy Yong. Given that as of the end of 20014, the company had 13,656 full-time employees and another 800 part-timers, there’s “ample room for headcount reduction,” she wrote. A 20% cut to Cablevision’s workforce would lead to $260 million in savings, according to Yong, who added that Altice has an impressive track record of cost-cutting.
But Altice’s $900 million projected cost-synergies is an aggressive target, and may not fully appreciate the differences between the European and U.S. pay-TV biz, Morgan Stanley analyst Ben Swinburne wrote in a research note.
“There are structural reasons that U.S. cable margins are lower than European margins, including business mix, content costs and competitive intensity,” he said. Deep cuts, according to Swinburne, “could put (Cablevision’s) revenue growth at risk, which CVC already estimates at only 1%-1.5% per year.”
The future of Cablevision’s Newsday and News 12 local-news TV networks is unclear with the Altice deal. The money-losing divisions “will be difficult to move to profitability without shutting both down,” Swinburne opined.
Altice expects the Cablevision takeover to close in the first half of 2016, pending regulatory approvals.
Under the terms of the pact, Altice would pay Cablevision a $560 million breakup fee if the deal is terminated on its part, while Cablevision is on the hook to pay Altice $280 million if it calls off the deal.
As of the end of June, Cablevision had 2.64 million video customers (down 4.8% year over year) and 2.78 million broadband subs (unchanged from a year prior).