Published: Wed, January 10, 2018
Global News | By Stacy Ballard

Drahi U-turn makes Altice's problems easier to see

Drahi U-turn makes Altice's problems easier to see

The planned restructuring "squarely addresses" many issues that made MoffettNathanson analysts skeptical when Altice USA first debuted on the Nasdaq previous year, including the connection to its European parent, analyst Craig Moffett said Tuesday in a note to investors.

That stake will be distributed to the Amsterdam-listed company's shareholders, including founder Patrick Drahi, who will retain control of both companies through a holding company.

The move is created to simplify what had become a bit of a sprawling operation after the acquisitions of Suddenlink and Cablevision made for Altice USA - and to shield the US operation from woes in Europe. Dexter Goei will continue in his role of Altice USA CEO and his current management team will remain unchanged, while Dennis Okhuijsen will head up Altice Europe.

Altice said it was still looking to sell off its tower portfolio and its operations in the Dominican Republic.

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Altice NV said in November that Chief Executive Michel Combes had resigned in a management reshuffle, with Drahi returning as president, as the telecoms group seeks to reassure investors following poor results in Europe.

Altice has grown rapidly through acquisitions in the United States and Europe, helped by cheap debt that has risen to around $60 billion - more than five times its annual core operating profit.

The spinoff represents a reversal of Drahi's original vision for a single broadband operator spanning portions of North America and Europe, after Altice spent $17.7 billion in 2016 to acquire Cablevision, whose Optimum unit provides cable TV and broadband service in much of southwestern CT and the metropolitan New York City region.

Netherlands-listed telecom group Altice's leveraged loans rebounded strongly in Europe's secondary loan market on Tuesday, on the back of the firm's announced reorganisation on Monday that will see the USA business spun off to existing shareholders.

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Following the spinoff of Altice USA Inc from Altic NV, Altice NV will reorganize to Alitce Europe.

The listed USA business, no longer owned by Altice NV, will then be shielded from concerns about the European operations, while its liquidity will quadruple to 42 percent of total shares outstanding. "That should solve their "guilt by association" problem", Moffett said.

Drahi has recently shifted gears, saying there was a path to further strengthen the European balance sheet over the long term through non-core asset disposals, such as telecom towers. Altice USA also approved a US$2 billion repurchase program of US shares, once the separation is complete.

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