News Articles

Altice Preaches Patience as Cablevision Closes

U.S. unit chairman says cost savings could take ‘four to five years’ 6/27/2016 8:00 AM Eastern
TakeAway

With Cablevision in the fold, Altice USA says it’ll focus on integration and put further deals on the back burner for now.

Altice’s ambitious move into the U.S. market took a big leap forward last Tuesday (June 21), when the multinational operator sealed up its $17.7 billion purchase of Cablevision Systems, which followed its purchase of Suddenlink Communications late last year.

 

Ahead of that, Altice had been preaching that it will bring to bear a lean-running machine alongside significant cost savings as it becomes the fourth-largest U.S. MSO, with about 4.6 million subscribers. But one of Altice’s top executives stressed that hitting those marks will take time.

 

Dexter Goei, now chairman and CEO of a new unit called Altice USA, said job one will be to continue to intertwine the various Suddenlink and Cablevision management teams to adapt to Altice’s way of thinking and the things the company wants to achieve. After that, the focus will be on operations, combining the various back-office units and making sure both companies use the same suppliers and equipment. That, he said, should take the next six months.

 

Goei also went out of his way to downplay comments about cost-cutting made last fall at a Goldman Sachs conference by Altice founder and controlling shareholder Patrick Drahi.

 

“I don’t like to pay salaries,” Drahi said at the time. “I pay as little as I can … No one in our company is making more than a couple hundred thousand [dollars] a year.”

 

INTEGRATION FOCUS

 

In an interview with CNBC’s David Faber last week, Goei said Drahi’s comments have been a “little misinterpreted.”

 

“Wholesale changes and employees is a complete misnomer for us right now, and we’re very focused on integration and delivering and focusing on our customer-centric approach,” Goei said.

 

But Altice will have some major work ahead if the plan to boost operational efficiencies includes a unification of its U.S. video strategy. The historic approaches of Cablevision and Suddenlink in this area could not be further apart. While Suddenlink’s current video platform is centered on boxes powered by TiVo’s technology, Cablevision has pushed ahead with a platform that relies on a downloadable security system and features a network DVR that can record up to 15 programs simultaneously.

 

Across the pond, Altice has put a focus on a 4K-capable gateway equipped with a 1 Gigabit-per-second modem, eight tuners and a new user interface that is initially targeted to fiber-to-the-premises networks. It has also developed Zive, a multiscreen subscription VOD service, launched its own labs unit and established a procurement company for the entire group to negotiate with suppliers.

 

While product unification plans will likely factor in further down the road, Altice USA has already identified its top officers.

 

Joining Goei at Altice USA are co-president and chief financial officer Charles Stewart and co-president and chief operating officer Hakim Boubazine. Former Cablevision employees making the transition included Lisa Rosenblum, general counsel; Lee Schroeder, head of government affairs; Ed Reniker, Media Sales president; Victoria Mink, chief accounting officer; and Patrick Dolan, News 12 Networks president. Altice USA has also tapped former Comcast/NBCUniversal executive Michael Schreiber as chief content officer.

 

On the operations side, former Cablevision senior vice president of infrastructure engineering Pragash Pillai will head up the Optimum operations, while David Gilles, former Suddenlink senior vice president of operations, Southwest region, will head up the Suddenlink unit.

 

Former Suddenlink president of commercial and advertising operations Kevin Stephens is president of business services, and former Suddenlink chief technology officer Terry Cordova becomes chief technology officer for the entire company.

 

Rounding out the top executives, Suddenlink senior VP of sales Gregg Graff will become head of residential sales; former Cablevision senior VP of branding Matthew Lake will be chief marketing officer; Cablevision CIO Keith Sherwell becomes CIO of Altice USA; and former Cablevision senior VP of human resources Colleen Schmidt will be head of human resources and talent development.

 

BRANDS TO STAND PAT

 

For the time being, the Optimum and Suddenlink brands will remain the same.

 

“We’ve got a lot of work ahead of us for the next six months, really getting ready for 2017, where hopefully we’ll show our colors even more than we do today,” Goei told Multichannel News.

 

One of the biggest questions ever since the deal was first announced was how Altice was going to extract $900 million in costs from Cablevision’s business. Goei said those cost savings will come over a span of four to five years and will involve some easy wins like reducing corporate overhead and more efficiently managing the business. Others will have a longer timeline, like upgrading the networks and the customer experience with new home equipment and determining which vendors to use.

 

“Those things take time,” Goei said, adding that the financial goal is to double Cablevision’s cash-flow margins from its current 20% to more than 40% over the next five years.

 

Some critics have said that the only way to achieve the cost-cutting goal is to decimate customer service. Goei said that couldn’t be further from the truth: “Why would we ever do that? Why would we ever make our customers so unhappy that they would want to churn and go somewhere else? That’s not what we’re talking about. This is not about doing large cuts in the workforce.”

 

As part of the approval process, Altice promised the New York State Public Service Commission it would not cut any customer-facing jobs for four years after the deal closes. That should keep the customer service force intact for at least that time.

 

While the NYSPSC took its time in finally approving the deal, Altice moved relatively smoothly through the regulatory process, winning Federal Communications Commission approval in May with few conditions and getting the nod from the New Jersey Board of Public Utilities later that month.

 

But at the same time, the federal government appears to be cracking down on cable service, particularly on the broadband side, reaffirming net-neutrality rules last week and going forward with an “unlock the box” set-top proposal that has had heavy pushback from the industry. But Goei said he wasn’t concerned.

 

“Nothing really surprises us from a regulatory standpoint, given how aggressive the European regulators are,” he said.

 

And though a newcomer to the U.S. cable business, Goei added that Altice has its roots in entrepreneurship — Drahi grew up on the streets of Morocco and built a global telecom empire before he was 52 years old, modeling his business in part after John Malone’s Liberty Media.

 

“I would line him [Drahi] up with any other entrepreneur out there,” Goei said.

 

DEALS ON BACK BURNER

 

Drahi also is replacing another legendary entrepreneur, Cablevision founder and chairman Charles Dolan. As acquisitions and consolidation have taken hold, that entrepreneurial club has dwindled in size.

 

Altice USA could help whittle down that list even further — it has said it would be interested in acquiring other cable operations, especially Cox Communications — but not in the short term, Goei said.

 

“Absolutely not today,” Goei said of other acquisitions. “We’re very focused on integrating our business.”

Want to read more stories like this?
Get our Free Newsletter Here!