EUR 850.00 For Business Accounts Only

Morningstar | Altice Returns to Wireless Subscriber Growth in France for First Time Since Iliad Entered Market

Altice is a global holding company that has grown through acquisitions of telephone and cable operators in several countries. We believe that Altice's track record of improving its networks will allow the firm to offer a high-quality converged product and return to expanding its subscriber bases and its revenue.Altice has a history of being an aggressive cost-cutter, and of improving the margins of companies it acquires. Its largest operation is SFR, the second-largest phone company and largest cable operator in France. This business struggled as the quality of its wireless network fell behind, as cable operator Numericable, which in turn is controlled by Altice, initially focused on reducing costs at SFR after acquiring the business from Vivendi. However, in 2016 SFR began to aggressively ramp up its 4G network, which now has coverage comparable to that of Orange and Bouygues. Along with improving its wireless operation, SFR has been expanding its fiber-based broadband network, ensuring it remains the largest in the country by number of premises passed. Altice somewhat changed its stripes in May when it fully spun off its U.S. unit Altice USA to shareholders. This significantly reduced the firm’s size and created an even more leveraged company. While we expect the company to generate sufficient cash flow to service its debt, we expect the sliver of equity supporting so much debt to be very volatile. The firm has been selling assets, such as towers and a stake in part of its fibre business, to reduce debt.With the U.S. business gone, Portugal, which is now the second-largest market, becomes more important. Altice acquired Portugal Telecom, the struggling incumbent operator out of bankruptcy. As in France, Altice’s focus is on selling a converged product of fixed-line telephony, including broadband and pay TV, with wireless telephone and building out a nationwide fiber network. Also as in France, its Portuguese operation has struggled, but we think its superior network will enable it to improve revenue and margins. Altice’s other operations are much smaller and are located in French overseas territories, Israel, and the Dominican Republic.