Cablevision Acquirer Altice Stock Drops 5% After Announcing 2015 Results

Market still worries about cost-cutter Altice’s debt, commitment to marketing, strategy, customer experience

PARIS – Patrick Drahi’s Altice Group, which bought Cablevision last September – in a deal pending regulatory approval – reported 2015 results which gave markets much of what they wanted – such as the first uptick in mobile customers at French cell-phone operator SFR – but not enough of it to stop a 4.8% plunge in morning trading on corporate stock.

Revenues at the whole Altice Group plateau-ed at €17.495 billion (), 0.1% down year-on-year. For France’s cable-mobile phone operator Numericable-SFR, Altice’s biggest unit, whose full year results were announced separately, sales were down 3.5% to €11.039 billion ($12.2 billion), vs. 2014. Altice Group operating profit stood at €6.671 billion ($7.4 billion), up 7.7% year-on-year.

Final quarter financials also pinpoint potential weaknesses of Drahi’s managerial philosophy – buy lavishly, run up debt, slash costs – as the Cablevision deal pends regulatory approval.

To its credit, over Oct-Dec. 2015, for the first time since Drahi made waves, acquiring SFR from Vivendi, Altice has managed to stem the loss of mobile customers, which saw it lose 1 million clients over the first half of 2015, goosing its residential mobile customer base by 140,000 customers to 12.6 million. Like other telcos in Europe, Altice has flagged it will invest in building both its 4G and fiber optic networks.

Market concerns look to lie elsewhere, however. Last year, Altice bought 70% of St. Louis-based cable operator Suddenlink in May, paying $9.1 billion, then $17.7 billion for New York’s Cablevision. Company net debt mountain is nearly €50 billion ($56 billion).

“My main worry is that Altice is pilling up new debts again and, needing increasingly more cash to pay back debt, may push Numericable into a direction were it shouldn’t be,” said François Godard, an analyst at Enders Analysis.

But the weak side of Altice, if Numericable, which Drahi has owned for a decade, is anything to go by, is “marketing, content and customer experience,” he added. A large question is whether Drahi will transfer this faults to Cablevision. SFR has indeed become a byword in France for underwhelming customer experience. In November, Altice bid aggressively, paying reportedly over €300 million ($333 million) to snag rights to English Premier League soccer rights in France.  It will need to step up that content drive to really stand apart from its competitors in content. As many observers have commented, Drahi’s heart may be more in cutting than building.

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