EUR 850.00 For Business Accounts Only

Morningstar | Altice Announces Agreement for FTTP Network That Raises EUR 1.8 Billion, Reducing Bankruptcy Risk

On Nov. 30, Altice announced it agreed to enter a fibre-to-the-home, or FTTP, partnership with Allianz Capital Partners, AXA Investment Managers, and OMERS Infrastructure. Altice will own 50.01% and receive EUR 1.8 billion in cash. The partnership plans to build an FTTP network past 5 million homes by 2022, including 1 million this year. Importantly to us, this doesn’t include the 9 million premises passed by its hybrid fiber coax cable TV network or its 2.5 million homes in dense areas of France. This existing network is a key reason for our giving Altice a narrow moat rating. Instead, the partnership will cover premises in the medium and low dense areas of France, where incumbent operator Orange has built less fiber infrastructure. For a mostly new FTTP startup, we think Altice received a generous valuation when compared with similar startups in the U.K., such as CityFibre and Gigaclear. That said, we don’t plan to change our EUR 2.40 per share fair value estimate and believe the shares are fairly valued.

This deal and other asset sales, primarily towers, should provide Altice with about EUR 4 billion in cash to pay down debt. This reduction along with our expected EBITDA growth starting next year is a good start toward reducing Altice’s net debt/EBITDA to 4 times from 5.6 times, as Altice measures it, at the end of the third quarter. The company’s continued focus on debt reduction reduces the firm’s risk of bankruptcy, but Altice remains highly leveraged, which makes the stock very volatile.