Finance

Altice Makes Cablevision Case to the States

Defends Track Record on Operational Investment in Other Markets 3/21/2016 8:00 AM Eastern
Altice CEO Dexter Goei
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Altice told New York State regulators it is open to concessions to get its deal to buy Cablevision approved, but won’t budge on returning half of its expected savings to customers or committing not to cut jobs.

Dutch telecom operator Altice has told state regulators that it was willing to make some concessions in its quest for approval of its $17.7 billion purchase of Cablevision Systems, but drew the line at conditions that would return half of the expected cost savings to customers and limit its ability to make changes in its workforce.

 

The New York Public Service Commission has been critical of the Altice deal. Commission staffers have said in filings that hitting aggressive cost-savings targets could force Altice to drastically reduce customer service and implement massive job cuts. The staff has recommended the deal be rejected unless Altice adheres to a laundry list of conditions.

 

Altice is confident it will receive the necessary approvals. And with the Federal Communications Commission winding down its review of Charter Communications’s $78.7 billion acquisition of Time Warner Cable, the agency will now likely be able to focus more on this smaller deal for the New York City area-centric Cablevision.

 

EYES Q2 CLOSE

Altice CEO Dexter Goei — who is also slated to head up the U.S. cable operations — said he was confident the deal for Bethpage, N.Y.-based Cablevision would close by the end of the second quarter. Goei, during a financial-results call, said Altice expects decisions from the New Jersey Board of Public Utilities by the beginning of April, the New York PSC by the end of April and from the FCC in May.

 

In a March 8 filing with the New York PSC, Altice agreed to offer 30 Megabit-per-second high-speed Internet service to low-income families in the New York area for as low as $14.99 per month.

 

In a statement, Altice said the filing shows the Cablevision merger “will provide concrete benefits to consumers in the nation’s most competitive market. Altice will make substantial investments to further enhance competition and improve the customer experience, as outlined in the filing. The regulatory approval process is proceeding and we look forward to it continuing in a fair and open manner.

 

Altice has said it expects to extract at least $900 million in cost savings from Cablevision over the first few years after the deal closes, largely through removing redundancies and operating the network more efficiently.

 

At an industry conference shortly after the deal was announced in September, Altice chairman Patrick Drahi said better deals with vendors and removing amplifiers from the network would go a long way toward achieving that goal.

 

In the most recent PSC filing, Altice didn’t offer many specifics about efficiency plans, but did reveal it has earmarked several network improvements — including introducing an all-in-one home center allowing subscribers to integrate pay TV video, over-the-top video, online storage, home media and WiFi- and Ethernet-connected devices into a single hub.

 

Altice also plans to introduce a new customer interface, similar to one it has developed and deployed in other markets, to offer better navigation and recommendation tools.

 

PLANS TO INVEST

Because of those investments, Altice recommended passing along about 15% of its overall costs savings to customers — reinvesting the rest in operational improvements — and not the 50% recommended by New York regulators.

 

Altice balked at the N.Y. PSC staff suggestion to hold off on reducing “customer-facing” jobs for five years after the deal closes, saying improvements in technology and efficiency have already reduced the need for some of those positions.

 

“[I]mproved service quality will organically reduce the need for customer-facing jobs by reducing key measures of customer dissatisfaction: unnecessary or repeat truck rolls and home visits, repeat calls for technical and service support, and overall support demands to call centers and field service technicians,” Altice told the agency.

 

Altice said it currently invests a larger percentage of total revenue into operations than Cablevision does. It also said it would not cut back on spending on customer-facing improvements because that would potentially degrade its $17.7-billion investment.

 

Most analysts believe the deal will win approval with conditions, and point to Cablevision’s stock price since the deal was announced — at $33.10 per share on March 16, the stock is just 5% below Altice’s offering price of $34.90 per share.

 

“My guess is they make some agreement around investment, maintain the Bethpage headquarters and low cost broadband and they get this done,” Pivotal Research Group CEO and senior media & communications analyst Jeff Wlodarczak said.

 

SIDEBAR: Altice in the Family

Altice mapped out a list of the benefits of its pending merger with Cablevision Systems:

• Offer a 30 Mbps broadband service to qualifying low-income homes in footprint for $14.99 per month, and upgrade the overall network to deliver speeds of up to 300 Mbps;

• Work in partnership with community groups and public authorities to expand broadband into low-income and underserved areas;

• Agree to base its U.S. headquarters in New York City;

• Introduce an all-in-one home center, enabling customers to integrate video, OTT video, online storage, home media and WiFi and Ethernet connected devices in a single hub

• Launch an improved customer interface with better navigation and recommendation tools.

SOURCE: Altice

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