According to Bloomberg, the Moroccan-born Israeli billionaire is dealing with the rapidly increasing cost on a debt load that now exceeds $50 billion. 

In late January, the news service noted, Drahi was able extend maturity on nearly $5.8 billion of debut held through his Altice France S.A. operation. But that resulted in additional annual interest costs of more than $100 million before tax credits. 

Meanwhile, a significant portion of Altice’s bonds and loans are trading at or near distressed levels, Bloomberg said.

Drahi took advantage of historically low borrowing costs as he engaged in a series of aggressive telecom acquisitions, including his $17.7 billion purchase of Cablevision in 2015, as well as his simultaneous $9.1 acquisition of another U.S. cable company, Suddenlink. 

More recently, the 59-year-old Drahi spent approximately $4.2 billion to purchase an 18% stake in British telecom giant BT Group.

But borrowing costs have risen as the value of these assets have declined. 

Share prices for Altice USA (aka the former Cablevision Systems) have decreased nearly 67% over the last year, with the New York-focused operator facing heaving competition from myriad sources for its core business of ISP provision.

Notably, Drahi recently rejected lower-than-expected bids for Suddenlink that could have generated around $20 billion to help pay off debt, sources told Bloomberg. 

But there is a growing consensus among telecom industry watchers that Drahi soon won't be in a position to be as selective, and that asset divestments will come soon.

Francois Godard, an analyst at Enders Analysis Ltd., described Drahi's situation as “complex,” adding, “We’ll see if he was swimming naked.” ■

Net income fell to $85 million or 19 cents a share, from $266.9 million or 58 cents a share, a year ago.

Revenue fell 7% to $2.39 billion.

Altice finished the quarter with 4.51 million residential relationships, down from 4.56 million in the second quarter and 4.65 million a year ago. Residential broadband customers were down 43,000 in the quarter and the company lost 82,000 video customers.

Residential revenue fell 4.4%.

Business services revenue was down 16.8% (or up 0.1% excluding air strand). News and advertising revenue was down 16.1%.

The company reiterated that it would be spending between $1.7 billion and $1.8 billion in capital expenses during the 2022 fiscal year.

“In the third quarter, we made significant progress in delivering against our Optimum Fiber broadband strategy. We saw a further acceleration in our fiber network deployment, achieving our highest ever level of incremental fiber passings and now reaching 1.9 million total fiber passings,” executive chairman Dexter Goei said. “While we are operating in a very competitive environment and are starting to see some macroeconomic pressures across our business, we are confident that we have the right strategy to return to sustainable growth. We are very pleased to welcome Dennis Mathew as our new CEO and have the utmost confidence in him to build on our current momentum and deliver on our growth plan.” ■

The dispute over retransmission and cable carriage fees could affect local stations including WNYW-TV in New York and cable channels FS1, FS2, Fox News, Fox Business Network and the Big Ten Network, and comes at a time when Fox has a heavy sports lineup, including NFL games, college football and Major League Baseball playoffs.

Also: Verizon, Nexstar Warn of Potential Blackout Friday

As usual each side blames the other for the potential blackout.

"Optimum is committed to keeping our customers connected to the TV content they love, and we are currently in active negotiations with Fox Networks to continue carrying its suite of channels at a reasonable rate that reflects the best interest of our customers," Altice said in a statement. "Unfortunately, Fox Networks is demanding unprecedented and excessive fee increases that would raise TV bills. We are working hard to reach a fair deal for our customers and to avoid any disruption."

In a statement, Fox said it remains committed to reaching a "fair agreement" with Altice for continued carriage to Optimum customers.

"Despite our best efforts for months, we regret that Altice continues to demand special treatment and reject marketplace terms, compelling us to alert our loyal viewers of a potential blackout of all Fox channels by Optimum," Fox said. "This means Optimum subscribers could lose access to the MLB playoffs on Fox and FS1, The World Series, NFL on Fox, College Football on Fox Sports, Fox News, hit shows like The Masked Singer and 9-1-1, local news, and more.  While Fox continues to seek an agreement benefiting all parties, our priority is ensuring viewers' ability to access all Fox News, Fox Sports, Fox Entertainment and local Fox station programming. We encourage subscribers to visit www.KEEPFOX.com for more information."

In 2018, when Fox and Altice last negotiated, the Fox channels went dark for few hours on a Monday morning before an agreement was reached. ■

Cable One reported Q2 results on Thursday, missing analysts’ consensus targets for broadband subscriber growth, as one influential analyst believes its problems may only be beginning.

Cable One added 1,300 residential broadband customers in Q2, soundly missing analysts’ consensus estimates of 5,200 additions. While some analysts wrote off the miss as part of the overall decline in broadband growth the rest of the industry is experiencing -- the top three publicly traded cable operators either reported flat or negative broadband customer growth in Q2 -- MoffettNathanson senior analyst Craig Moffett feared it could be a sign of stiffer competition from fixed wireless access providers. 

Cable One, like the rest of the cable industry, has seen its stock price slip this year. As of Thursday (August 4), Cable One shares were down about 18% for the year to $1,441.80 each. On Friday (August 5), the stock slipped another 5% to $1,368.19 per share in early trading.  

Also: Analyst Says Telcos Better Positioned to Chip Away at Cable's Broadband Lead 

But even through that difficulty, Cable One has enjoyed one of the strongest trading multiples in the cable business. Cable One stock was trading at a 37% premium to Charter Communications on August 4 -- mainly because its largely rural footprint was free from serious fiber broadband competition and its relatively low market penetrations meant it had a long runway for growth. In a research note on August 4, Moffett noted that those days may be over as fixed wireless offerings take hold. 

“Fixed wireless has found its greatest success in rural markets, where the market is underserved and price sensitive, and when carriers tend to have excess capacity,” Moffett wrote. “Cable One’s broadband growth has slowed along with everyone else’s, and they may now arguably face more competition than peers, at least from FWA.”

Fixed wireless growth has been strong in Q2, with T-Mobile adding 560,000 FWA customers in the period, well above analysts expectations, and Verizon adding about 256,000 FWA subscribers. T-Mobile overlaps between 40% and 50% of Cable One’s footprint, according to Wells Fargo Securities media analyst Steven Cahall, but the company said it hasn’t seen much of an increase in FWA competition so far. 

In a conference call with analysts Thursday, Cable One CEO Julie Laulis said that T-Mobile hasn’t had much of an impact on Cable One, adding that it appears that most of T-Mobile’s additions in Cable One’s footprint are former telco digital subscriber line customers. Verizon’s impact, she said, has been “virtually nothing.”

“Overlap does not take into account network quality/capacity, which we think accounts for the difference here,” Cahall wrote in a note to clients. “[Cable One] has also segmented its customer base with higher speed offerings, which we think further insulates the threat.”

Also: Cable's Broadband Slowdown Hasn't Hit Bottom Yet, Analyst Says

Moffett stressed that he  wasn’t criticizing Cable One management or its business, but merely pointing out that the hefty premium its stock price has enjoyed over the years may not be entirely justified. 

“What we are struggling with is stock selection within a cable sector that we believe is oversold and underappreciated,” Moffett wrote. “As much as we admire Cable One, we struggle to see why such a large premium – indeed, any premium – is warranted here. We believe there are better opportunities to be had elsewhere in the group.”

The analyst also worried that without a wireless play to fall back on, the outlook could be even bleaker. Wireless has been the biggest growth engine for Comcast and Charter as broadband growth has declined.  

“Is any premium at all justified if Cable One’s growth prospects are no better – and arguably, without wireless, worse – than Charter’s?” Moffett asked. 

Adding to the pressure is Cable One’s relatively high prices for broadband -- its $80.44 residential ARPU is 23% higher than Charter’s. Although its ARPU can be a bit misleading -- it has extremely low penetration of video, meaning that those remaining generally pay for much more expensive tiers of service, which helps boost the number -- Moffett noted that Cable One customers also tend to pay for higher speeds of broadband which are more costly. That could mean that Cable One has extracted most of the benefit from the video/broadband mix that lies ahead than its cable peers, he said.

That, Moffett wrote, could be enough to send growth metrics southward. He added that with a predominantly rural footprint with customers that have the least disposable income in MoffettNathanson’s coverage universe, Cable One is more vulnerable to price competition. While that had little effect when competitors couldn’t justify building out their networks to its markets, lower cost FWA makes it a whole new ballgame.

“As a percentage of disposable income, Cable One’s prices are the highest in the industry. This could make them more vulnerable to competitive price-based offers and to macroeconomic weakness,” Moffett wrote.  ■ 

Comcast is expected to kick off the Q2 earnings season on July 28, followed by Charter Communications on July 29. But in a research report Thursday, Venkateshwar wrote that there is little hope that the months-long slowdown in broadband growth is nearing an end.

It’s been almost a full year since analysts began bracing for cable broadband additions to slow, and it seems like every quarter there is another call that the impact could be even greater than expected. Analysts have already modified their forecasts for the bigger operators, with some expecting full-year 2022 additions to be nearly one-third of those of the peak year of 2020. Now, with the added pressure of increased fiber buildouts by telcos like AT&T and Verizon Communications, aggressive pricing, the near disappearance of digital subscriber line customers — once a top feeding ground for cable broadband — and sluggish new household formation, that impact could be even worse.

On the telco side, Venkateshwar believes that fixed wireless offerings from Verizon and T-Mobile could have greater unit growth “than the entire cable industry” during the quarter. 

Charter Communications chief financial officer Jessica Fischer pointed to another potential pitfall for cable at the Credit Suisse Communications conference in June, telling the audience that about 60,000 to 70,000 broadband subscribers that had been part of the Federal Communications Commission’s Emergency Broadband Benefit program did not make the transition to the fed’s new broadband subsidy offering, the Affordable Connectivity Program. While Fischer said she believes broadband is a growth business and still expects Charter to add subscribers in Q2, it has caused analysts some pause. 

Venkateshwar, who had earlier predicted Charter would add about 100,000 broadband customers in Q2, now believes they will add none, adding that the gap between it and No 1 cable operator Comcast could be bigger than usual. 

In his note, Venkateshwar wrote that while Q2 is generally seasonal as students leave college and residents move to summer homes, “the slowdown being seen intra quarter goes beyond seasonality impacts.” 

“Charter talked down broadband sub growth for Q2 due to the impact of the rollover from old subsidy programs into new programs in late Q1, and the company’s consumer broadband net adds may tip into negative growth in the quarter,” Venkateshwar wrote. “This is difficult to explain without assuming continued structural impacts on gross adds due to competition as well as broader market saturation.”

The Barclays analyst expects Comcast to add about 74,000 broadband customers in the quarter (down from 354,000 last year), while Altice USA should lose about 20,000 high-speed internet subscribers in the period, compared to zero additions in the same period last year.

While telcos seem to have an advantage given their increased fiber deployment, Venkateshwar wrote that their efforts have been largely tactical, adding that there isn’t much visibility as to the long-term trends. And any big dropoff in cable broadband could lead operators to focus more heavily on wireless, which wouldn’t be good news for telcos. 

“Longer-term, it is tough to see how either industry ends up benefiting from the ongoing convergence in wireless/wireline offerings,” Venkateshwar wrote. “The end state of this process is likely to be potentially more M&A; however, with capital costs rising and a tougher regulatory environment, this may not be available as a solution for a while.” ▪️

Since launching their respective wireless offerings in 2017 and 2018, both Comcast and Charter Communications have amassed a collective 7.6 million wireless customers, and growth rates keep rising. In Q4, both Comcast and Charter reported their best quarterly subscriber growth ever. As expansion continues into more rural areas through edge-outs, fiber extensions and federal programs, that pace isn’t expected to slow anytime soon. This should come as good news for investors, who have seen the companies’ respective stock prices slip amid fears of slowing broadband growth.

In a research report, MoffettNathanson senior analyst Craig Moffett wrote that wireless is quickly becoming a profitable business for cable operators and before long the business will be a meaningful profit center. 

According to Charter, the mobile business had negative earnings before interest, taxes, depreciation and amortization (EBITDA) of $92 million in Q4. For the year, EBITDA was negative $311 million. The deficits are getting better, though — EBITDA was negative $401 million in 2020 and negative $520 million in 2019. According to Moffett, Charter could reach EBITDA break-even this year. 

That would be on a profitability path akin to its mobile virtual network operator (MVNO) partner and the largest cable operator in the country, Comcast, which already has reported four straight quarters of positive wireless EBITDA growth.

Moffett doesn’t expect wireless to replace broadband in investors’ hearts: high-speed internet remains a better business. But he does believe that investors have to stop thinking of cable as “only” a broadband provider.

A Second Stream

“Cable isn’t a broadband-only business,” Moffett wrote. “It is, as we have repeated so often over the past two decades, an infrastructure business with multiple revenue streams — residential and commercial, wired and, yes, wireless — riding on that infrastructure.”

All this is happening as the Big Three wireless companies — AT&T, Verizon Communications and T-Mobile — aggressively price their offerings to drive subscriber growth. Cable, which has avoided pricing wars in the past, has been equally aggressive, with $30 per month, per line promotions from both Comcast and Charter (for a minimum of four lines and two lines, respectively) plus device discounts. 

But as cable is looking toward growth, AT&T and Verizon are anticipating a slowdown in what has been a strong past two years. AT&T said in January that it expects wireless revenue to grow about 3% in 2022, down from 5% last year. Wireless EBITDA is expected to be in the low single digits in 2022, compared to 3.2% in 2021. 

For Verizon, the forecast is for postpaid phone additions to slow to 1.585 million in 2022 (down 25% from 2021 additions of 2.115 million) and 1.46 million in 2023, according to Evercore ISI Group media and telecom analyst Vijay Jayant.

“While the company continues to execute well, pressure from 5G leader T-Mobile, combined with increasingly aggressive cable wireless pricing, keep us on the sidelines,” Jayant wrote.

T-Mobile postpaid phone net additions will be down about 6% in 2022 at 2.75 million, Jayant estimated, rising by 4% to 2.85 million in 2023.  

While Comcast and Charter have experienced explosive growth on the wireless front, one major publicly traded operator, Altice USA, has had worse luck with mobile. But that could change soon.

Altice USA added just 5,000 wireless customers in Q4, and ended the year with about 186,000 mobile subscribers.

Altice introduced its wireless product — now branded Optimum Mobile — in 2019 at a very low price point ($20 per month) and it has lagged well behind its peers in terms of subscriber growth, revenue and profitability. After several attempts to right the ship, which stumbled in part because of its original mobile virtual network operator (MVNO) agreement with Sprint (now T-Mobile), Altice says it is back on track with wireless. 

On a February 16 conference call with analysts to discuss Q4 results, Altice USA CEO Dexter Goei said churn rates have leveled off to the 30% range from previous highs of 60% to 70% and are declining monthly. And the company is close to forging a new MVNO agreement with T-Mobile, which should also help the service. 

“I think we’ve been clear that wireless is very important to our strategy,” Goei said.

Altice is currently concentrating on building out its fiber network: It expects to pass about 6.5 million homes, or 60% of its footprint, with its fiber-to-the-home platform by 2025. Though broadband expansion is inherently a catalyst for mobile growth — mobile customers need to subscribe to broadband in order to get wireless service — the fiber buildout could mean Altice continues to lag behind its peers for the foreseeable future. 

In a February 18 research note, Moffett reversed his outlook on Altice, downgrading the stock to “neutral” and slashing his 12-month price target on shares by more than half to $15 from $33. The primary reason for the downgrade was Moffett’s belief that Altice’s broadband turnaround is going to take at least three years. He predicted Altice would add just 9,000 subscribers in 2022 and 34,000 in 2023 and wouldn’t approach 2019 levels until 2025.  

While Altice moves to turn around its broadband business, other cable operators are focusing on expanding the service into more rural areas. 

Rural Opportunities 

At Comcast, which has about 4 million mobile customers and nearly 32 million broadband subscribers, rural expansion is ongoing. During its fourth-quarter earnings call with analysts, Comcast Cable CEO Dave Watson said mobile and broadband growth go hand in hand.

“Our mobile is key for us, and in and of itself is a great growth opportunity, but it’s also very important to broadband,” Watson said. “We talked a lot about broadband churn benefits. That continues, but we want to bring mobile value to every segment in every offer.”

As Comcast builds out more homes to broadband, there are more opportunities to sell mobile service. “The way we look at it, every single broadband home is an opportunity,” Watson said. “And every single broadband home should have at least a couple of lines.”

Charter was one of the big winners in the federal Rural Digital Opportunity Fund (RDOF) auction, snagging about $1.2 billion in funding to help bring broadband to underserved and unserved markets. That funding will be part of the $5 billion commitment the company has made to bring broadband service to more than 1 million customer locations in unserved areas of the country over the next five years. Charter has already earmarked some early markets for the expansion. In the past two months it has launched service to nearly 3,000 unserved homes and businesses in areas of rural Kentucky, South Carolina, Michigan, Missouri and Texas. And more are to come. 

Broadband expansion can only help mobile growth as customers need high-speed data service to be mobile customers. At least for now, as the pandemic has caused more and more consumers to stay put and stick with existing providers, much of Charter’s mobile growth is coming from existing broadband customers upgrading to mobile service and existing mobile customers adding lines. 

Offloading Key to Growth

Charter chairman and CEO Tom Rutledge said the MSO is also making inroads at offloading mobile traffic from the MVNO to its own WiFi network, making the operation more cost-efficient. Charter also has a large block of CBRS spectrum which Rutledge said could be used to transfer as much as 30% of its mobile traffic. 

“We also are already offloading enormous amounts of traffic on WiFi,” Rutledge said. “And I think that we have the ability to take that up significantly, too.”

That could be key. According to Moffett, the biggest goal for both Comcast and Charter in cable wireless is to offload as much traffic as they can onto their own networks to become both a mobile network operator (MNO) and an MVNO.  

“A hybrid MNO/MVNO combines the best of all outcomes,” Moffett wrote. “They will be facilities-based where the returns are high and an MVNO in the places where the returns on building would be low. Margins will likely grow over time, but the real appeal of the strategy isn’t EBITDA margin but instead return on invested capital.” ■

Altice USA stock fell more than 20% and hit a new 52-week low on Thursday — $11.12 per share — before closing at $11.83 down 17.8%. With Wednesday’s falloff, the shares are down nearly 27% since the beginning of the year. 

The company lost about 2,000 broadband subscribers in Q4 — and shed 3,000 for the year — slightly better than analysts’ consensus expectations and spurring some optimism that it could have been worse. Altice CEO Dexter Goei also outlined a plan to accelerate its fiber buildout and reverse the downward trend.  Many analysts took the bait, and Moffett wrote Wednesday that Altice USA could probably be fixed, but it wouldn’t be easy and it would take some time. By Friday morning, after the stock cratered, his attitude changed.

Moffett isn’t the only analyst to downgrade the stock, but his mea culpa comes at a time when the cable sector itself is under pressure from slowing growth in broadband and rising competition from streaming video and telco companies.  

Also: Altice USA Streaming-Obsessed, Broadband-Only Customers Are Averaging More Than Half  a Terabyte of Usage Each Month 

“Wrong. Wrong story. Wrong time. Wrong call (on our part) to have stuck around too long,” Moffett wrote Friday. “Just … wrong. There’s a time for highly levered fix-it stories. This isn’t that time.”

Altice shares were down about 2% in pre-market trading Friday to $11.59 each. 

In his Thursday note, Moffett wrote that Altice has been in a similar situation in a previous life as Cablevision Systems, in 2013. At that time, the company was faced with industry-leading customer penetration rates for its service, which made growth difficult. While the rest of the market thought Cablevision was on its last legs, -- including Moffett — Altice swooped in and paid top dollar for the asset, claiming it could right the ship with a more stringent cost structure. That worked for a while, but now, the company is faced with a familiar dilemma. 

“Altice is now entering what is likely to be a multiyear ‘fix-it’ phase,” Moffett wrote. “At a time of rising interest rates and falling risk appetites, a company with badly battered near-term growth prospects, and with a higher warranted WACC [Weighted Average Cost of Capital], Altice USA looks far less compelling than it had. We grossly overestimated the market’s willingness to underwrite their turnaround.”

Also: Broadband Slowdown Forces Analyst to Go Negative on Cable Sector 

Moffett still believes that Altice USA can be fixed -- he was especially hopeful about Suddenlink’s prospects -- but he noted it’s probably going to take longer than most thought. Where he was most wrong, he added, is in expecting the market to ignore the near-term challenges and look toward longer-term growth.

“Without a catalyst — such as a take-private that we once viewed as a reason to own the stock (that didn’t work out so well) — we have much lower expectations for a near term rebound to what we still believe is a materially higher warranted value,” Moffett wrote. 

He’s now forecasting that Altice will have no real broadband growth in 2022 (about 9,000 new customers), and will add 34,000 high-speed data customers in 2023.He doesn’t expect growth to approach 219 levels (75,000 additions) until 2025 (72,000). 

“Their steps to expand their footprint through edge-outs and, where available, government deployment subsidies, are welcome,” Moffett wrote. “But they will take time. We project no real broadband unit growth for 2022, and only modest growth in 2023.”  ■ 

That slowdown will have to wait for another day, though, as Comcast reported its strongest second quarter ever in terms of broadband growth, adding 354,000 high-speed internet customers in the period and soundly beating analysts’ consensus estimates of 270,000 additions. 

Charter, which reported its Q2 results on July 30, one day after Comcast, said it added about 400,000 total broadband customers (365,000 residential and 35,000 business) in the period, outpacing consensus estimates of 275,000 total additions by 46%.    

Most analysts had expected the pace of broadband additions to slow down after the industry reported its best growth ever in 2020, fueled by the pandemic and stay-at-home orders for work and school for most Americans. The cable industry added 5.6 million broadband customers in 2020, according to Wells Fargo Securities media analyst Steven Cahall, and most analysts expected that growth to slow to about 2.5 million additions in 2021. 

But while the pace of the slowdown was expected to accelerate after the huge gains in 2020 and many Americans beginning to return to offices and schools, that will have to wait at least a little while longer. Most analysts still expect broadband additions will be lower in 2021 than 2020, but the gap will be narrower. Expectations that 2021 growth will be behind 2019 results are no longer being considered, at least for Comcast, according to MoffettNathanson principal and senior analyst Craig Moffett.  

Keeping Up the Pace

“Growth remains torrid,” Moffett said of Comcast. “Broadband is doing better than even we had expected — full-year 2021 is now expected to be much better than full-year 2019, something that seemed aspirational, at best, at the start of the year — and wireless is gaining some serious momentum. With rising margins and still-low capital intensity, the cash generation of the business is nothing short of incredible.”

Comcast’s broadband growth helped drive even better increases in revenue and cash flow for its cable unit. Revenue at Comcast Cable rose 11% to $16 billion (ahead of analysts’ consensus estimates of $15.7 billion) and cash flow rose 14.5% to $7.1 billion, beating consensus predictions of $6.8 billion. Even video customer losses, at 399,000 in the quarter, beat expectations of a 430,000 customer loss. Comcast also added about 280,000 wireless customers, ending the period with about 3.4 million Xfinity Mobile subscribers.

Moffett wondered aloud how the results, and the huge amount of cash Comcast is expected to generate, will be used. In the past, the analyst said Comcast could spend as much as $20 billion on buybacks by 2023. Comcast has $9.5 billion remaining on its repurchase authorization, but didn’t say how much of that it intends to spend this year. Moffett opined that they could use the money to acquire scale. 

“What they do about that issue is anyone’s guess,” Moffett wrote. While the cable segment is doing well and buybacks would probably be the best use of cash, he added, “the debate is about Peacock and whether Comcast needs to (or will) buy ViacomCBS (God forbid) or a not-yet formed Discovery-WarnerMedia.”

Comcast chairman and CEO Brian Roberts tried to squash the M&A speculation on a conference call with analysts, but left the door open to international partnerships. Reports have said Roberts met informally with ViacomCBS chair Shari Redstone and CEO Bob Bakish to discuss streaming partnerships outside of the U.S. 

“We have a majority broadband-centric company and we like the mix,” Roberts said, adding that a partnership that could enhance its international streaming position would be “something you might talk to others and consider.” 

But as far as making another big acquisition to gain scale, he added, “We have all the parts.”  

Charter’s performance in the period comes after Bernstein analyst Peter Supino downgraded the stock to “market perform” in July, partly because of an expected slowdown in broadband growth. While most analysts see broadband customer gains waning in the next few years, the intensity of that deceleration may not be as dramatic as first expected. 

Supino ticked up his estimates slightly for Comcast. He now thinks Comcast will add 375,000 broadband customers in Q3 (from previous estimates of 350,000 additions) and hit 1.6 million additions for the full year, up from his previous mark of 1.4 million adds. That’s in line with Comcast raising its year-end estimate for mid-teens percentage broadband additions, from the previous prediction of a mid-single digit increase. 

Charter did not change its full-year guidance, expecting broadband additions to be at or above the pace they were in 2019.

The additional growth spurred increased optimism from some analysts.

“A solid beat by Charter, and after Comcast’s bullish internet outlook yesterday (July 29) we expect optimism around lower churn and stronger net additions in broadband,” Cahall wrote in a note to clients.

Ample Runway for Charter

Charter chairman and CEO Tom Rutledge said on a conference call to discuss Q2 results that he sees ample runway ahead for high-speed data services, adding that as the population rises and housing demand increases, so will adoption of broadband services. 

“The big issue in general adoption is more of a digital literacy issue than it is a cost issue,” Rutledge said. “And it’s continuing to improve in terms of market adoption because of the way people can use the tools on the internet today, at any level and at any age. And so I think you have a continuous march of broadband adoption right up to occupied housing over the next five years.”

About 100,000 of Charter’s broadband additions came as a result of federal and state Emergency Broadband Benefit (EBB) subsidiary programs, and could churn off in the future. Lower-than-expected non-pay churn also added to the growth.   

Barclays Research media analyst Kannan Venkateshwar saw some potential hidden meaning in Charter’s decision to keep guidance as is, adding it could be normal conservatism, or driven by the company’s assessment of the quality of the pool of available subscribers and management’s view that churn could return to normal levels. “However, visibility around these trends seems to be limited based on call commentary, which means that the unwind of some of these tailwinds could be a surprise, not just for Charter but for the industry as a whole,” he said. 

For Altice, a Less Rosy Picture 

Whatever the reason, Charter and Comcast’s results were in sharp contrast to Altice USA, which kicked off the earnings season July 28 by showing a decline (12,000 customers) in broadband subscribers. 

Altice USA has the highest broadband penetration in the industry at 48.4% and faces the stiffest competition from telcos (Verizon Fios) in its footprint. Thus it could serve as a canary in the coal mine for the rest of the industry.

Altice USA’s recent acquisition of a regional fiber-optic broadband service provider helped offset organic customer losses in the second quarter, as revenue rose 1.7% to $2.52 billion and cash flow growth was flat at $1.1 billion in Q2. 

Altice said unique customer relationships were down by 12,000 in the period, but showed a gain of 23,000 unique customers with 35,000 subscribers  from its most recent acquisition, Morris Broadband, included. Altice USA purchased Morris in April in a deal that valued the North Carolina company at $310 million. 

Organic broadband subscriber growth was flat in the period, but increased to a gain of 30,000 customers with Morris Broadband data included. That compares to a gain of 70,000 broadband subscribers in the prior year. 

The same holds true for video customer losses, down 48,000 organically in Q2, or 36,000 when Morris Broadband’s 12,000 video customers are considered. Altice USA lost 35,000 video subscribers in Q2 2020.

Residential revenue growth of 1.5% was spurred by a 7.8% rise in broadband sales and a 36.4% spike in news & advertising revenue, supported by a strong recovery in local, regional and national advertising plus additional political advertising revenue from the New York mayoral and New Jersey gubernatorial races.

Altice USA CEO Dexter Goei said he expects broadband subscriber growth to improve next year — a departure from Q1 guidance that edge-outs would help spur growth in the second half of 2021. On the call, he said that most of the edge-out build activity occurs in the summer months, which would push out the impact of those extensions into 2022. “[W]e’ve signaled going into this year that [in] 2022 and onward we expect to see much more elevated levels of broadband net adds,” he said.

Supino, along with other analysts, reduced his 2021 broadband growth expectations for Altice USA as a result.

“Investors need some volume growth to be comfortable with the narrative,” Supino wrote. “Zero broadband net adds does nothing to help their case.” 

In the four years since Comcast pulled the trigger on what was to be the fourth attempt by a cable company to crack the wireless nut, Xfinity Mobile has been a growth engine, accumulating 3.9 million customers since April 2017. In the first quarter of this year, Xfinity Mobile achieved cash flow break-even, setting the wireless business on a course well beyond the early notion that it would be a backup to plans from more established carriers. Analysts and executives alike are taking notice, predicting that wireless could be a strong competitor in the market, especially if paired with broadband.

“Cable wireless is ready for its star turn,” MoffettNathanson principal and senior analyst Craig Moffett wrote in a research note. Moffett, whose earlier take was that cable wireless is more of a retention tool for other services, now sees the product as a potential profit center. 

Comcast is currently the cable industry’s largest wireless provider and Moffett expects its lead to grow over the next four years. Moffett expects Xfinity Mobile to be close to breakeven in 2021, generating about $12 million in negative cash flow, and to turn profitable in 2022.

Aggressive Pricing a Plus

Moffett’s enthusiasm comes primarily from Comcast’s decision earlier this year to aggressively price wireless service. Comcast now substantially undercuts Verizon Communications and AT&T for unlimited mobile data across all plan sizes, according to Moffett, making the product competitive for a vastly larger portion of the market. 

Charter Communications followed Comcast, launching Spectrum Mobile wireless service in June 2018. That offering also is flirting with profitability, but chief financial officer Christopher Winfrey said Charter is more concerned with adding subscribers.

“Our goal isn’t to drive short-term EBITDA profitability,” Winfrey said on Charter’s Q1 earnings call. “Our goal is to drive as much growth as we can, because we know what the underlying profitability is and what it does for the overall business.”  

Spectrum added about 300,000 wireless lines in Q1, raising the total to about 2.7 million subscribers. 

Moffett estimated Charter’s mobile service would be profitable by 2024 as capital expenses decline. 

Charter said its wireless business is finally hitting stride, fueled by competitive pricing, reliable service and the ability to bundle mobile with broadband.  

According to researcher Parks Associates, about 19% of U.S. broadband households bundled high-speed data with wireless in Q1 2021. That’s up from about 15% in Q1 2020. With the number of broadband-only homes on the rise — Parks said 41% of households now take unbundled, standalone broadband service, up from 33% in 2018 -— the opportunity to sell mobile service to those households is increasing.   

At the JP Morgan Media & Communications conference in late May, Winfrey suggested wireless customers could eventually number about half the level of broadband subscribers, currently at 29.2 million. 

“I don’t think people took us seriously when we came into the voice market,” Winfrey said, adding that today, Comcast and Charter are the largest wireline phone service providers in the country. “And the way we did it is, because we weren’t the incumbent, we had the ability to save customers money, we had the ability to bundle it, and as a result we took down phone pricing dramatically across the entire industry and the entire U.S. 

“Over 20 years, we became the largest operators,” Winfrey continued. “At its peak, you could almost count as clockwork that voice subscribers would be about half of broadband and if it hadn’t been for mobile substitution, those numbers were continuing to increase. I think our opportunity is at least that.” 

Charter has been growing broadband at a 7% annual rate over the past three years and its wireless customers have doubled over the past two years. Continuing that pace, the wireless segment would reach about 15 million customers by mid-2023. 

That might be a bit optimistic, as Moffett predicted Charter would reach 7.2 million wireless customers by 2025. But many analysts anticipate Charter will add about 1.1 million mobile customers annually over the next few years. That pace would lead to nearly 15 million wireless customers by 2030.

At the JP Morgan conference, Winfrey said Charter does not view wireless as a standalone product but rather as an extension of broadband service. He said all Spectrum sales channels are required to sell wireless with other products.

While Charter won’t commit to a date when the wireless business will be profitable, Altice USA, which launched Altice Mobile service in September 2019 under a very aggressive pricing structure ($20 per, line per month for unlimited service for life), has since revamped that pricing. At the Credit Suisse conference, Altice USA chief financial officer Michael Grau said after a brief hiccup mainly around onboarding issues, the mobile product was beginning to hit stride in 2020 when the pandemic halted growth because retail stores shut down. The hiatus also forced Altice USA to take a hard look at the wireless business’s gross profit and churn metrics.

Altice Rethinks Pricing

“In the latter half of 2020, we offered 1 [Gigabyte] and 3 [GB] plans to supplement our unlimited plans, and we did right-size some of our pricing,” Grau said. “We’re starting to solve the gross profit problem; we’re no longer taking on customers that are generating negative gross profits.”

Altice USA now offers 1 GB data plans for $14 per month, 3GB data plans for $22 per month and unlimited data plans for $45 per month.   

Grau said take rates on the 1 GB and 3 GB products are between 60% and 70%, an encouraging sign. The new pricing also has helped dramatically reduce churn, he said. 

According to MoffettNathanson, Altice Mobile improved churn by 20% to 30% as it moved traffic to T-Mobile’s network in Q4. 

“At the same time a lot of our stores are reopening,” Grau said. “I think we’re very close to getting to the point where we’re saying, ‘I’m comfortable with the gross profit, I think we’ve solved for that; I’m comfortable with churn, I think we’ve solved for that.’ And that’s when we’ll turn up the sales and marketing machine again. I think you’ll see that somewhere in the back half of 2021.”

Because of a late start, Grau said the mobile unit probably won’t see break-even this year.

“We’d like to see it break-even on a run-rate basis as we exit 2022,” Grau said. “I think that’s more realistic.”

While cable wireless continues to hum along, one potential competitor — Dish Network’s Dish Wireless — lurks in the wings. With plans to launch the first market, Las Vegas, in the third quarter, Dish appears to be moving forward with plans for the state-of-the-art 5G wireless network, despite Wall Street skepticism. 

Dish appears to be branding the wireless offering under the “Project Gene5is” name, launching a website under that moniker in June that appears mostly to be a vehicle to gauge interest beyond Las Vegas. The website, which Dish confirmed as its own, promises to notify those who leave an email address and ZIP code when service will be available in their area. A Dish spokesperson confirmed Project Gene5is is from the company but declined further comment. 

“We’ll be communicating to customers as options are available in their area, with Vegas being our first market,” a Dish spokesperson said.

Dish has until June 2023 to make the service available to about 70% of its footprint under a federal mandate. Over the years, pundits have criticized the offering, which Dish has said  it can build for about $10 billion, on everything from time to market (too late) to expected cost (too little). 

Dish Plans Draw Skeptics

JP Morgan media analyst Philip Cusick was the latest analyst to cast aspersions on Dish wireless plans, downgrading the stock to “underweight” from “neutral” while raising his 12 month price target to $45 per share from $38. 

“We can’t find a way but to be skeptical on the Dish story,” Cusick wrote. He said while he has the highest respect for Dish chairman Charlie Ergen and the company, he remains stymied by three major issues: the inherent difficulty in launching a brand new wireless service, Dish’s spectrum disadvantage and the perception the company is too late to the 5G game.

Cusick noted the history of service and quality issues that have plagued wireless newcomers including Sprint, Leap Wireless and MetroPCS.

“Many times these were not issues of money to spend or desire, but simply that getting on the right cell sites can be very hard in areas and take years, if they are even possible,” Cusick wrote. While he noted that Dish has a leg up on previous new carriers by owning low-band spectrum and having a MVNO deal with T-Mobile, those aspects only reduce the challenge. 

Dish, according to Cusick, has about 114 Megahertz of spectrum, far less than its competition. While Dish could buy more licenses in future federal spectrum auctions, Cusick doesn’t believe the company has the money now. Finally, Cusick stated that he worries that Dish missed the boat on 5G, adding that other larger carriers that have already rolled out the technology will accelerate those plans and erase any differentiation Dish would have had by coming to market sooner. λ

Comcast stock was on a tear as the second quarter neared a close, up 7% between March 31 and June 22, nearly double its 3.7% rise in Q1. But after news reports on June 23 hinted that Comcast chairman and CEO Brian Roberts may be considering deals to boost its position in the streaming video business, including a “tie-up” with ViacomCBS or an outright purchase of Roku, the stock sank nearly 5%. The fear that Comcast would spend heavily on a big purchase -- some analysts estimated that it would have to spend at least $75 billion on any potential Roku bid -- cast a pall on an industry that had been riding high on substantial gains in its broadband business.

Also Read: Brian Roberts Speaks, Sort Of 

On the flip side of the coin, WideOpenWest stock has been on fire over the past six months -- rising 27.4% in Q1 and another 52.4% in Q2. At its close of $20.71 per share on June 30, the stock was up 94.1% from Dec. 31, when it closed at $10.67 per share.

Another stock that has performed strongly in the first half of the year was Dish Network, which despite pressure to build out its planned 5G wireless network by June 2023, was up 15.5% in Q2, building on a 12% gain in the first quarter. Dish is scheduled to launch its first market in Las Vegas in Q3. The satellite company launched a website -- Project Gene5is -- in June to let interested consumers know when the service will be coming to their town. 

In the meantime, Comcast has slowly crawled back, especially since a handful of analysts came out with reports putting a damper on the likelihood of a big Comcast M&A deal.  In the five trading days between June 23 and June 30, Comcast shares were up 2.3% to $56.78, not exactly their June 22 level of $57.63, but closer. The rest of the distribution sector, however, gained nearly 4% in that week of trading.  

While WOW is too small to make a big dent in the overall prices in the sector -- distribution stocks were up 7.8% in Q2 without WOW -- they may have a bigger impact going forward, as investors start to look harder at the gap between public stock values and private trading multiples. 

Nowhere is that more apparent than in the deal market. In the past year, two major cable systems deals have closed -- Stonepeak Infrastructure Partners $8.1 billion purchase of Astound Broadband and Cable One’s $2.2 billion purchase of Hargray Communications. Each of those deals were valued at 12.5 times forward-looking cash flow. Even WOW’s sale of systems in five markets to Astound and Atlantic Broadband in two separate transactions was valued at 11 times cash flow. In contrast, WOW’s stock has been trading at about 8 times cash flow, while bigger publicly traded operators like Comcast (10 times) aren’t faring much better.

In a research note Wednesday, B Riley Securities media analyst Daniel Day estimated WOW’s stock price would be between $33 and $34 per share if an 11 times multiple were applied. 

“[W]e expect that this morning's announced transactions will be a positive catalyst by highlighting the share price discount to the private market value of the assets,” Day said of the stock price. .    

In mid-June, distribution stocks had already erased the declines in Q1, as investors were still trying to figure out the impact of the pandemic on the overall business. Continued broadband growth in Q1 --- the numbers weren’t announced until late April and early May -- helped drive the stocks in Q2 -- Comcast stock, up 3.7% in Q1 gained another 6.3% by June 22, while Charter erased a 6.7% Q1 decine with a 12.7% gain in the same time frame. The same held true for Altice USA, which was down 14.4% in Q1 but managed to eke out a 4.4% rise by mid-June. Only Cable One, long the strongest performer in the sector, saw signs of levelling off, rising 1.6% in Q2 after a 17.8% decline in Q1. 

Despite the Q2 rise, distribution stocks are still behind 2020, when pandemic-fueled broadband gains helped drive the stocks -- falling a collective 7.6% in the first six months of the year. Comcast and Charter are still ahead of their Dec. 31, 2020 levels -- Comcast is up 10% so far this year and Charter is up 9.1% -- but it was not enough to erase losses at Altice (down 9.3% for the year) and CableOne (down 13.9% since Dec. 31).

FBN Securities media analyst Robert Routh said while investors may fear Comcast spending too much for a programming or tech asset, it could boost multiples by taking a page from an earlier playbook -- swapping systems with other operators to create bigger and more efficient clusters.

It’s a take on former Tele-Communications Inc. president Leo J. Hindery Jr. 's “Summer of Love” in the late 1990s, when TCI swapped and bought systems all around the country in a flurry of deals to better focus the cable company’s operations. 

Routh said a cursory look at a cable systems map could show potential swap candidates for Comcast, Charter and practically every other cable company. Regulatory fears would be virtually eliminated because in a swap, neither party gets bigger (or that much bigger), just more efficient. 

“If Brian [Roberts] doesn’t want to do a deal on the content side, which I can understand at the moment, maybe it would make sense first to do some other deals with Charter and some other cable systems and get more contiguous clusters,” Routh said. “That would be a win-win, and should result in multiple expansion as we saw when it was done in the late 1990s.”  

Still, even without a system swap spree, Routh believes cable stocks should rise in the second half of the year. And he sees trading multiples getting beefier as investors realize the value in systems. 

“People are starting to realize that whether they like [cable broadband service] or not, I don’t know anybody who claims they don't need it,” Routh said. “...I do think we’re going to see multiple expansion as people realize that they [cable operators] are kind of unregulated utilities. They are necessary and even the wireless folks need them for the back hauling of the signal. That’s not going to go away. The question is, where do multiples go?”

For programming stocks, gains in the first quarter that were fueled by a combination of strong positive sentiment over streaming video offerings, and a bit of confusion, began to disappear in Q2. The overall sector rose 15.7% in Q1, goosed by a short-squeeze frenzy in February that swept up stocks like AMC Networks (up 48.6% in that period), Discovery (up 44.4% in Q1) and Fox (up 24.7% in Q1). 

ViacomCBS was the other big Q1 gainer in the sector (up 21.4%) but that was more due to the launch of its much-anticipated Paramount Plus streaming service. By Q2, that confusion had waned, sending the sector into negative territory, fueled by declines at one company in particular -- Discovery Inc. -- that just happens to be involved in a mega-deal.

Discovery shares were up about 44% in Q1, in part riding the short-selling wave but also fueled by sentiment around the successful launch of its streaming direct-to-consumer offering, Discovery Plus. On May 17, Discovery and AT&T announced a $43 billion deal where AT&T would merge its WarnerMedia content business into a separate entity with Discovery. Almost immediately the stock began losing ground. 

Discovery shares fell about 5% on May 17 and at its June 30 close, Discovery shares were priced at $30.68 each, down 14% from May 14. The stock was down about 29% for Q2. For the year, Discovery shares are up about 2% from their close of $30.09 on Dec. 31.

WarnerMedia parent AT&T’s shares were up 7.1% in Q1, but dipped about 3.3% in the second quarter. For the year, the stock is up about 3.6%. 

Routh sees a rebound for programmers going forward, especially in the wake of Amazon’s agreement to purchase MGM studios for $8.5 billion. 

“They’re all looking at what Amazon is doing,” Routh said. "I do think the tech giants are going to look at the content guys. I wouldn’t be surprised if you see bids made by some or all of them. The only downside is time.”

FANG stocks (Facebook, Apple, Netflix and Google) were up about 14% in Q2, led by Google parent Alphabet (up 22% in the period), Facebook (up 18.1%), Apple (up 12.3%) and Amazon (up 11.2%). Netflix was relatively flat (up 1.2%) as some investors continued to be worried about future growth opportunities and competition from rival streaming services. MoffettNathanson media analyst Michael Nathanson issued a report June 29 wondering whether Netflix may have to consider an ad-supported version or buying sports content to drive growth. 

Facebook got a reprieve from some of the intense government scrutiny it has been under this year after a U.S. District Court Judge dismissed suits by the Federal Trade Commission and 46 states concerning the social media giant’s alleged monopolistic practices. While the FTC and the states can file an amended complaint -- and they are expected to -- Facebook stock, up 27.3% in the first half of the year, second only to Alphabet (up 43.1%), like the rest of the sector has been relatively unscathed. 

While cash-flow margins were once in the 40%-plus range for video service when that was the only product in the cable arsenal, that measure of profitability has slipped to around 30% over the years, while broadband service has margins that hover near 90%.

Video subscribers have wildly different levels of profitability based on their level of service. Though cable operators don’t break out cash flow and margins for video, it is evident that overall cash-flow margins have grown as more and more operators have switched emphasis from video to broadband. 

Cable One, the first publicly traded operator to make that shift way back in 2013, today has by far the biggest cash-
flow margins in the business: 52.9% in Q1. That’s nearly 10 percentage points higher than Comcast, which reported a profit margin of 43.2% in Q1 and has more than 75 times the number of video customers (19.4 million, compared to 252,000 for Cable One) and 35 times the broadband subscribers (31 million, compared to 880,000 for Cable One). According to its financial statements, in Q1, 74% of Cable One’s total residential customers didn’t take a video product.  

Proof that de-emphasizing video has a margin impact is evident across the board. Comcast has grown its overall margins from 40.3% in Q1 2017 to 43.2% in Q1 2021; Charter Communications grew margins from 35.9% in Q1 2017 to 39.5% in Q1 2021; and Altice USA boosted cash-flow margins from 41% in Q1 2017 to 43.4% in Q1 2021. 

Video’s Tough Economics

Cable operators have complained for years that they don’t make enough from video to put up with the hassle from programmers. And though no one has done a truly deep dive into the margin differences between super-premium and bare-bones basic video tiers, it seems pretty logical that the more video a customer buys and the longer they stay, the more profitable they become.

“The reality is that margins are what they are, programming has always been the biggest expense for distributors, impacting the margins,” FBN Securities analyst Robert Routh said. “Obviously, the people that sign up for the minimum, the margin is going to be different than those that sign up for every single channel and every single tier.”

Core pay TV subscribers are continuing to shrink across the board. According to  MoffettNathanson, the traditional pay TV industry (cable, satellite and telco TV providers) lost about 1.71 million subscribers in Q1, slightly better than the 1.75 million lost in Q1 2020.  

At the J.P. Morgan virtual Technology, Media & Communications conference on May 25, Altice USA CEO Dexter Goei articulated what a lot of operators have been thinking for a long time: If consumers are moving to streaming anyway, embrace the shift and focus on delivering better broadband and participate in the streaming relationship, either via  partnerships that allow easier access to streaming apps or helping content providers  market, sell or bundle their streaming apps with other products.

“Larger players with a full package of offerings on the direct-to-consumer side are good for our business because it focuses our customers on instead of six, seven or eight different choices, on something a lot smaller that in many respects replaces a video consumer that is less and less valuable to us,” Goei said. “And it allows us to focus primarily on our broadband product, allows us to be a partner for content on a direct-to-consumer basis as opposed to a partner on a linear basis, and I think will dramatically improve the economic trends of our business from a cash-flow standpoint.” 

In the meantime, Goei said, operators should focus on profitable video customers — those who buy top-tier  premium packages — and place less emphasis on video subscribers who change providers every few years based on price.   

“Those are the ones that are shifting toward the direct-to-consumer offerings and that’s good for us,” Goei said. “It’s beneficial to our economics, it makes our priorities very clear in terms of where we focus our capital allocation and our efforts. 

“People getting larger on the consolidation front in the media space is good because it will allow our consumers to focus on those [types] of offerings and allows them the alternative outside the fat bundle model for cable, because that business model historically is unsustainable,” he said. “We are continuing to get skinnier and skinnier economics on the video, which also takes a large part of our capital allocation and efforts internally to focus on, and that’s something we’re seeing a shift in, which is good for our business.” 

Video profit margins have eroded in the past decade as consumers have increasingly cut the cord and prices for programming have risen steadily. At the same time, operators are increasingly embracing direct-to-consumer packages as a means to provide broadband customers with access to programming without having to deal with the hassles of actual carriage.

Goei pointed out the irony inherent in the streaming video revolution’s potential to boost traditional linear TV profitability. But the idea that direct-to-consumer offerings could play into the prevailing wisdom that distributors should place less emphasis on middle-of-the-road video customers has been around for a while. 

More Nets, More Fees

Most analysts agree that the initial impact of the WarnerMedia-Discovery union will be on the traditional linear business. With more networks — the combined company will control about 30 channels, including TNT, TBS, CNN, Food Network, Discovery Channel and HGTV — the new Warner Bros. Discovery could push for much higher-affiliate fees as carriage renewal time approaches. MoffettNathanson media analyst Michael Nathanson has estimated that Discovery accounts for 16% of viewership but just 6% of affiliate revenue. WarnerMedia has fared better, at 12% of viewership and 14% of total fees, according to Nathanson, but together they could attract 29% of viewership and 20% of affiliate fees.

But the analyst also pointed out that Warner Bros. Discovery has a unique set of assets and the largest chunk of national viewing share in the industry. Other programmers aren’t that lucky. 

Overall, MoffettNathanson has estimated that increases in cable-network affiliate fees will slow from 18% growth in 2020 to 10% in 2021, 9% in 2022 and 2023 and 8% in 2024 and 2025. 

“There are pressures that are building up and down the value chain,” Moffett wrote in a May 27 report on cord-cutting. “Media companies are being forced to respond to shortfalls in their legacy businesses and celebratory valuations of their new ones by shifting content to DTC platforms ever faster. Distributors face renewal negotiations with increasingly weaker networks.”

That changing dynamic was not lost on Goei, who said streaming offerings will play a big role in every linear network carriage negotiation. He added that access to DTC offerings is part of every discussion, and particularly smaller programmers want relationships where distributors will help push the streaming product.

“That becomes one of the front and center discussions in every single one of our renewals,” Goei said. “Either because it’s something we want to do or something they want to do or it’s collectively something we both want to do. I think that’s going to become the norm. It’s part of the package, to the extent that the linear packages are less of a focus, then the direct-to-consumer package becomes more of a focus, and vice versa depending on what side of the aisle you’re on.”

Carriage Changes Coming

Goei added that he expects a big change in the next two to three years in the way distributors and content providers negotiate.

“It’s not sustainable to continue to see price increases every year with viewership falling,” Goei said. “Not only do subscriber counts fall on the video side, but overall viewership and ratings of the content providers fall as well, at least from a linear standpoint. They may be seeing and catching those types of viewerships on the direct-to-consumer offerings they have, but in terms of linear TV watching, that continues to be effective. You can’t fight the trend. You have to accept it and figure out how to adapt from a business model standpoint.” 

Since Comcast launched its Xfinity Mobile service in 2017, via a mobile virtual network operator (MVNO) agreement with Verizon Communications, cable wireless amassed nearly 6 million subscribers, making it the industry’s fastest growth product in terms of percentages. Cable’s biggest wireless rise was in 2020, when top cable operators Comcast, Charter and Altice USA, fueled in part by pandemic-
driven increases in broadband, grew their wireless customers at a 68% clip. That momentum continued into Q1 2021, with those three operators growing their total wireless lines to 5.9 million, a 9% increase. 

Comcast broke records in the wireless business in Q1, adding 278,000 lines — its most ever in a quarter — while the Xfinity Mobile unit reached cash flow breakeven (it didn’t lose money) for the first time since its launch. Wireless revenue rose nearly 50% in the quarter to $513 million, further solidifying the company’s wireless commitment.  

The news was just as good for Charter, which added 300,000 wireless customers in Q1. Altice USA added about 5,000 wireless customers in Q1.

Comcast still leads the pack with 3.1 million mobile subscribers, followed by Charter — which also has a MVNO agreement with Verizon — with 2.6 million and Altice USA with 174,000. Altice USA was the last to launch a mobile service (Altice Mobile) through an MVNO pact with T-Mobile, in September 2019. 

Those cable companies are still a long way from being an immediate threat to wireless’ Big Three: AT&T leads with 164 million postpaid wireless customers, followed by Verizon with 117 million and T-Mobile, which completed its $26 billion purchase of Sprint in 2019, has 67 million. But as pricing continues to be one of the biggest deciding factors in selecting a mobile service, and many cable wireless customers are also hardwire broadband subscribers, the gap is poised to close rapidly. Add in the potential of 5G mobile service — which depends greatly on fiber interconnections between towers, a cable strong suit — and the notion that cable wireless could become a major player isn’t that much of a stretch. 

Skeptics need look no further than the dominant position cable has carved out in broadband service. In the beginning, telcos ruled the day with copper wire digital subscriber line service, offering 1.5 Mbps speeds that in the 1990s were a major upgrade from dial-up. But as cable continued to deploy fiber deep into its network, and speed requirements vaulted into the hundreds of megabits per second, cable broadband quickly overtook its DSL competition. Today, cable accounts for about 70% of the U.S. broadband market, a number expected to grow as operators push fiber out to the edges of their footprints. 

Broadband Sets Precedent 

Cable operators have been edging out their footprints at an accelerated pace over the past few years. In 2020, Comcast added about 1 million homes passed to its footprint, with Charter adding about 1.1 million homes. Even at 30% penetration rates, that could translate into about 300,000 more broadband customers. And increasingly, cable operators seem anxious to add wireless to that bundle, which could drive those numbers as well.  

As many as 90% of cable wireless customers are also cable broadband customers, said Evercore ISI media analyst Vijay Jayant. Extending that broadband reach can only help the cause for wireless.

In its Q4 conference call with analysts, Comcast chief financial officer Mike Cavanagh said mobile is a “strategic priority” for the company and has been “fully integrated” into the core business. Xfinity Mobile added 774,000 wireless customers in 2020, slightly behind the 816,000 added in 2019, all during a period where most of its retail stores were closed because of the pandemic. Those outlets were fully open this year and as a result expected to have a positive impact on sales.  

Did they ever. Xfinity Mobile reported its best quarterly subscriber additions yet in Q1: 278,000 versus 216,000 adds in Q1 2020.

Many analysts are beginning to see wireless as a replacement for video in the overall cable bundle. As video subscribers continue to cut the cord for streaming services but keep their cable broadband connection, adding wireless service could keep the price of broadband more manageable. According to Bernstein, penetration for the video/broadband double-play has fallen from about 63% in 2018 to 51% in 2020.  

On its Q1 earnings conference call April 28, Comcast Cable president and CEO Dave Watson said that bundling broadband and wireless is something the company has done in the past and will continue to do. 

 “We think it’s good for broadband, it’s helping broadband, we’ve seen the results in terms of churn, and it’s just a growth engine for us, period,” Watson said of the wireless product. “We’re focusing on every sales channel. We’re going to be consistent with our approach.  You’ll probably see a bit more packaging with broadband and mobile, but that’s not really different than anything that we’ve been doing.”

Lose Some, Win More

In a research note, Bernstein media analyst Peter Supino called the practice of shedding low-margin video service for higher-margin broadband the industry’s “losing to win” strategy.

“The downside is the potential loss of ‘stickiness’ as a result of moving to a single offering,” he wrote. “Mobile is the potential cure.”  

Supino added in other client notes that wireless is “far stickier” than video because the decision to switch internet/video providers is about a single item. It’s much harder to try to persuade every household member to change cellphone providers at the same time. 

Wells Fargo Securities media analyst Steven Cahall estimated Comcast would add about 225,000 wireless customers in Q1 and 935,000 for the full year. That compares to his estimates of an increase of about 400,000 broadband subscribers in Q1 and 1.3 million for the full year.  

Earlier this year, Comcast revised its Verizon MVNO agreement. It said in April it would drastically reduce pricing for its Xfinity Mobile service, offering four lines with unlimited data for $120 per month. That price lines up with T-Mobile’s flagship Magenta service ($140 per month with Netflix and taxes included) and severely undercuts comparable offerings from Verizon and AT&T that are priced above $160 per month. Charter, which has an identical MVNO arrangement with Verizon, is expected to follow suit.

While the price reductions are likely to attract some additional customer interest, Bernstein’s Supino wrote, they don’t include phone discounts so they’re unlikely to have a huge impact on subscribers. But once Comcast achieves scale in phone equipment — which Supino predicted will occur in 2023 — and achieves even greater economies by shifting the bulk of traffic onto its CBRS spectrum, all bets are off. 

“We expect Comcast (and Charter) to continue to reinvest wireless economies of scale in subscribers in order to drive total cable customer lifetime value,” Supino wrote. “By 2023, when we forecast that Comcast and Charter will have deployed enough phones and small cells to make use of their recently acquired CBRS spectrum, we expect operating cost savings to fund more competitive phone promotions. ”

Betting on CBRS

The cable companies have invested heavily in CBRS spectrum: Charter spent about $465 million for 210 CBRS priority access licenses in the recent federal auction, while Comcast spent about $459 million for 830 licenses, Supino said. 

“CBRS spectrum and low-cost, strand-mounted small cells allow cable operators to build out their own facilities in dense areas,” Moffett wrote. “As much as 70% of all wireless traffic is handled by just 10% of cell sites. Cable will attempt to build out these dense areas (high ROI) with CBRS, leaving the less dense areas to the Verizon MVNO agreement, effectively arbitraging the wireless industry.

“Everything hinges on how much traffic can be offloaded onto CBRS,” Moffett said.

During the Q1 conference call, Comcast chairman and CEO Brian Roberts acknowledged the spectrum will be used to offload some traffic from the MVNO, adding that the ability to do so requires a strong wireless partner.

“Yes, we bought some spectrum and we’ll be doing some trials to see how we can offload, and that really will prove to be a cost savings if we get it right in dense areas,” Roberts said on the call. “That whole relationship requires a healthy partnership with a wireless [mobile network operator]. And in the case of Verizon, we were really pleased with the partnership.” 

For 5G, Moffett wrote as networks get more dense, key to their success will be the fiber connections between towers, which are spaced much closer together in 5G architectures. 

“As wireless networks densify, underlying wires will become the single most important part of the cost structure,” Moffett added. “As wires begin to dominate the cost structure, he who has the densest wired network will win. Cable has the densest network. Therefore, cable infrastructure will ultimately win in wireless. Just as it has already won in broadband.” 

Dish Network is poised to become the fourth-largest U.S. wireless carrier, based on the asset it has agreed to buy from T-Mobile-Sprint as a condition of federal regulatory approval of the latter’s merger. Shortly after T-Mobile-Sprint closes its deal, Dish will buy 9.3 million former Boost Mobile and Virgin Mobile prepaid wireless subscribers. Dish will also gain access to the new T-Mobile network via a seven-year mobile virtual network operator (MVNO) deal, and will spend another $3.4 billion to purchase spectrum from the new entity over three years.

On the sidelines sits cable, which after three failed attempts to break into the wireless business over the past two decades seems to have found the right elements within the past two years. Comcast’s Xfinity Mobile, launched in 2017, crossed 2.05 million subscribers in 2019 and, according to some analysts, is on a path to more than double that base in the next four years. Typically conservative Comcast said it expects wireless to become cash-flow positive by the end of 2021.

Charter Communications, which launched Spectrum Mobile in September 2018, added more than 1 million customers in the past 18 months and expects to be cash-flow positive in 2021.

Those new and stronger players will all have to compete with wireless industry behemoths AT&T (166 million wireless subscribers) and Verizon Communications (120 million wireless customers). Here’s a closer look at how they are expected to stack up.

New T-Mobile

T-Mobile proposed its merger with Sprint in April 2018, a deal it said would allow it to better compete with AT&T and Verizon and introduce new products and services to underserved markets. Along the way, the companies had to clear hurdles set up by a group of state attorneys general, which claimed the merger would result in higher prices for consumers. T-Mobile-Sprint was cleared for takeoff in February, after a federal judge ruled the combination was in the public interest. While other states have said they won’t appeal, including New York state, California Attorney General Xavier Becerra has said he would keep his options open. Most observers believe T-Mobile-Sprint can go through with the closing no matter what Becerra decides.

Just what the new T-Mobile will do after the close is anyone’s guess. But the company has made at least one thing clear: It’s going after cable.

“We’ve said it all along: the New T-Mobile will be a supercharged Un-carrier that is great for consumers and great for competition,” T-Mobile CEO John Legere said in a press release shortly after the federal court decision was announced. “The broad and deep 5G network that only our combined companies will be able to bring to life is going to change wireless … and beyond. Look out Dumb and Dumber [AT&T and Verizon] and Big Cable — we are coming for you … and you haven’t seen anything yet!”

Whatever T-Mobile does in the video space will likely involve its 2018 purchase of Layer3 TV. T-Mobile spent about $325 million for over-the-top multichannel video programming distributor (MVPD) Layer3 TV and launched TVision Home in eight markets in April of 2019. Layer3 has high programming costs (20% to 30% higher than its peers, T-Mobile has said in federal filings) which has made launching the video service difficult.

Legere has said he will step down as CEO in May, after the deal closes, replaced by T-Mobile chief operating officer Mike Sievert. With the merger behind it, Sievert said the new T-Mobile will be able to focus on providing stronger service and expanding its 5G footprint.

T-Mobile-Sprint has pledged to spend about $40 billion over three years on 5G deployment and to expand its rural wireless service to reach 59.4 million homes. It has also promised to deploy a new in-home broadband option to more than 52% of U.S. ZIP codes, with a plan to obtain 9.5 million U.S. households by 2024, with 20% of those homes in underserved areas. The new T-Mobile also expects to build 600 additional retail outlets.

Dish Network

Dish has agreed to purchase T-Mobile-Sprint’s prepaid wireless businesses (Boost Mobile and Virgin Mobile) for $1.4 billion, adding about 9.3 million subscribers shortly after the larger merger closes. Dish will also spend another $3.6 billion on T-Mobile-owned 800 MHz wireless spectrum over the next three years, and will have its own MVNO agreement with the combined company for seven years.

Dish has been relatively quiet about its plans for the wireless service — it needs to build a 5G-capable network available to 20% of the country by 2022, expanding to 70% of the U.S. by June 2023, as per federal mandate. In the past, Dish has spoken of using its wireless capability to accelerate the Internet of Things, but lately the focus has been more on 5G, especially the ability to bring that technology to rural America. Dish has said it expects to spend about $10 billion to build out the 5G network, a figure some analysts have said is too low.

The biggest short-term benefit of the deal for Dish is that it gives it more time to build out its wireless network with its existing spectrum. It had been facing a March 2020 deadline for its network to reach 20% of the country. Now, it has two more years to reach that milestone. The addition of the Boost Mobile and Virgin Mobile subscribers also provides a pool of potential customers for its postpaid business. While prepaid customers churn at a 5% rate, Dish has said migrating those customers over to a more reliable Dish-operated network — both via the T-Mobile MVNO and whatever it builds out — should reduce that churn substantially.

On Dish’s Q4 earnings conference call, founder and chairman Charlie Ergen was reluctant to reveal too much of the company’s wireless strategy, but said the build for 5G service will be on a city-by-city basis.

“There’s obviously going to be some cities that are more interested in getting 5G quickly,” Ergen said. “And those cities that want to work with us will probably get first priority. And then, obviously, when we build out a city, we can have owner economics there. So we don’t have to build — we’re probably not going to build two towers in every city. We’ll build that city by city, and complete a city before we move to the next city.”

Xfinity Mobile

Comcast launched Xfinity Mobile in 2017. Two years later, the mobile service has 2.05 million customers and is evolving from its initial purpose as a retention tool for broadband to becoming a profit center. Comcast chief financial officer Michael Cavanagh has said wireless is expected to be profitable by 2021.

The success of the wireless product can be traced to one tenet: Keep it simple, Comcast senior VP of innovation and customer value proposition Rui Costa said.

“The starting point has always been our connectivity business,” Costa said. “The success attributed to wireless is how well we position it as an additional benefit of our connectivity value proposition. The way we’ve introduced this, as the missing piece of our broadband, has been paramount to the success of this.”

The way Comcast has introduced wireless this time around also is different, Costa said, in that the focus is on the overall customer experience.

“Our product is the experience and the experience is our product,” he said, adding that Comcast has purposefully kept the mobile product as simple as possible, whether it be flexible pricing plans, different data options and even a pay-as-you-go option. The idea is to offer consumers choice without bombarding them with options that are difficult to understand.

Wireless has also proven to be an incentive for customers to keep their broadband service. Like its cable peer Charter Communications, Comcast wireless customers are required to subscribe to broadband.

In 2019, Comcast Cable added 1.4 million broadband customers, its best performance in 12 years. While there are other factors associated with that growth, including the speedy demise of telco digital subscriber line service, at least some of it can be traced to wireless stickiness.

Costa didn’t want to take credit for the rise of broadband, saying there are a lot of factors that could be attributed to its success. But wireless is becoming an increasingly important component of the overall connectivity value proposition, he said.

“The success has been the proof of how well we’re telling the story to consumers and how valuable that has become to them,” Costa said.

Those subscriber increases have helped substantially reduce the mobile unit’s EBITDA, or cash flow, losses. Comcast cut its wireless EBITDA losses by nearly half in 2019, to $402 million from $746 million in the prior year. In Q4 alone, the unit’s EBITDA losses improved by 40%, prompting Cavanagh to predict wireless would be cash-flow positive for the full year of 2021.

Analysts see strong growth ahead for the wireless product: Moffett has estimated that Xfinity Mobile will more than double its subscribers to 5.7 million by 2024.

“The strategy has been, and is and will be, how can we use mobile as a benefit back to our broadband and connectivity business?” Costa said. “It is working because we see a benefit translated in many ways — churn, and attachment of other products. The other is the halo that has been created on the back of this new way of doing business with us.”

Spectrum Mobile

Charter launched Spectrum Mobile in September 2018 and in a little more than a year grew its wireless customer base from virtually nothing to 1.1 million. According to chief mobile officer Danny Bowman, Charter’s recipe for wireless success can be summed up in two words: simplicity and speed.

“We’ve integrated mobile into our core business,” Bowman said. “We introduce mobile into every possible transaction, whether that’s inbound sales or someone walking into our stores. The channels themselves have built a lot of mobile muscle memory and it’s just become part of what we do.”

Charter was also expected on March 6 to launch 5G in 14 cities via its Verizon MVNO. (Comcast also has said it would begin offering 5G handsets on March 6.) Speeds of the service will range from 700 Megabits per second to 1 Gigabit per second. According to Bowman, 5G will be included at no extra charge to Spectrum Mobile’s $45 per month unlimited data customers.

“We already provide the fastest mobile experience from coast to coast,” Bowman said. “This is just another proof point that we’re always going to have the fastest mobile experience for our customers. We’re keeping it super simple. We’re not creating some high premium rate plan that you have to buy. I think it’ll be easy for our channels to sell. You pick a 5G device, you get a $45 rate plan; you pick a 4G device, you get a $45 rate plan.”

Also helping with sales of the 5G product, as well Charter’s other offerings, are the more than 350 Spectrum retail stores with mobile service across the country. More are planned, Bowman said, adding the stores have played a key role in mobile’s success.

The stores are just another choice on a long list of options customers have for buying mobile service, including online, or by making a phone call and having a device or a SIM card shipped to their home.

“We’ve made it really easy for a customer to do business with us,” Bowman said. “Whether you want to say, call, click or visit, we’ve made it very simple and we can be very disruptive because of how we support our customers and what channel they want to use.”

Altice Mobile

Altice USA, the newest cable player on the wireless block, launched its mobile service in September 2019 and finished the year with about 69,000 customers, an initial pace the company claimed was twice that of its peers. The smallest of the three cable players, Altice — with about 4.2 million broadband customers, compared to 28.6 million for Comcast and 25 million for Charter — also has the most aggressive offering. Altice Mobile launched at a price point of $20 per line for life, less than half the $45 per line Comcast and Charter were charging. Altice Mobile has since said it ended that $20 promotion in March, increasing the price to $30 per line for new customers (legacy customers will still pay $20 for as long as they have the service). Still, even at the higher price point, Altice Mobile is cable’s best wireless bargain.

Altice’s ability to keep its prices so low is tied in part to its MVNO deal with Sprint (now T-Mobile). Altice USA CEO Dexter Goei has said its original MVNO deal will remain intact after the merger.

Analysts have pointed to Altice USA’s MVNO as the gold standard for such deals among cable operators. Based on the structure of that agreement, Altice pays less as more and more traffic moves off the MVNO to Altice’s network. Given the architecture of the Altice network, that won’t be as hard as it seems.

Under Altice’s deal, Sprint is allowed to build small cells on Altice’s network. Sprint pays nothing to Altice aside from construction costs. In turn, the cable company gets to ride on those small cells for free. The more cells there are, the lower the cost of the MVNO.

After the T-Mobile-Sprint close, Altice will have access to what Moffett called “a best-in-class network at a disruptively low price. It seems a foregone conclusion that they will attract subscribers. They already believe they can offload enough traffic from the network that they will be profitable even at super-low prices.”

Altice USA added about 69,000 mobile customers in Q4 — about twice the quarterly pace of its peers’ initial offerings — and is expected to end 2024 with 876,000 customers, according to MoffettNathanson, or about 17% of its total broadband base, inline with its larger peers.

At the Morgan Stanley Technology, Media and Telecom conference on March 3, Goei said Altice counts about 100,000 wireless customers, a signup pace about 2.5 times faster than its peers at launch.

Altice USA also will have access to 5G tech through its T-Mobile-Sprint MVNO, Goei added. While 5G could be perceived as a threat to Altice’s own wireless business, Goei said he views it more as an opportunity, especially since the technology is expected to be deployed over time.

“There’s obviously different strategies amongst different operators, but by and large, it’s an opportunity for MVPDs to work with wireless operators, particularly those who want a small cell,” Goei said. “And for those who want to go deep into the residential neighborhoods with fiber, good luck, have fun.”

But more quietly, since it first debuted in January 2018, Altice USA’s Altice One platform has carved out a similar success story, downsizing the cable operator’s video churn for the last six quarters while simultaneously spurring broadband growth.

During Altice USA’s second-quarter earnings call, CEO Dexter Goei called the launch of Altice One, which incorporates set-top, cable modem and WiFi router functions, to be “a very, very strong success.”

Indeed, video attrition during the period was 21,000 subscribers, down from 24,000 in the second quarter of 2018, despite cord-cutting levels reaching a record high for the broader pay TV industry. Broadband net additions were 13,000 vs. 10,000 in the second quarter of 2018.

Average revenue per user is also substantially higher in homes with Altice One, the company said, while not citing specific data.

The metrics are impressive, considering only about 400,000 Altice USA customers have the Altice One system. That’s 13% of the company’s base, up from 4% infiltration in the second quarter of last year.

Three Le Boxes in One

Blending hardware from Sagemcom, silicon from Broadcom, content security from NAGRA and transcoding services from Cisco Systems, Altice One combines advanced TV search and discovery, as well as cloud DVR and voice control, along with integration of key digital services, notably Netflix and YouTube, with more OTT services on the way. There are WiFi optimization and control features. New offshoots have been added, such as an Alexa-powered smart speaker.

RELATED STORY: Altice's Model Behavior

When European telecom conglomerate Altice suddenly swooped in and acquired U.S. cable companies Suddenlink Communications and Cablevision Systems in 2015, there hadn’t been a lot of recent investment in terms of advanced user interfaces and various other modern pay TV features across the two companies, Altice USA co-president and chief operating officer Hakim Boubazine said.

Indeed, Cablevision lost around 5% of its video customers from Q2 2014 to the second quarter of 2015, a time when cord-cutting was a thing, but not nearly as robust as it is today. The attrition wasn’t much better at Suddenlink. The technology and user experience were being overwhelmed by the many new ways to consume video in the marketplace.

“The [Altice One] platform has helped us transform the user experience,” Boubazine said, noting that the mere modern look of the CPE, which contains no ’90s-era “bulky remote control,” has been a key selling point that allowing Altice USA to tap into younger consumer segments.

Currently, Altice One — now on version 3.0 of its operating system — is available across Altice’s Optimum footprint, as well as the portion of the Suddenlink footprint that offers 1 Gigabit-per-second broadband services.

Despite its success, Altice One isn’t hoisting heavy promotion of the platform. It is offered to new customers, those who are moving their service and, notably, those who are seeking to ditch their pay TV service because they want something better. “We use it a lot as a retention play,” Boubazine noted.

Boubazine didn’t disclose how much Altice USA is paying per truck roll to install Altice One. The platform requires technicians to wire up only one device instead of a video set-top, modem and WiFi router.

“The installation process is actually super simple and that allows our technicians to spend more time explaining the features and functions,” he said.

Despite that simplicity, installing new CPE into homes isn’t cheap, and Altice USA has a lot of other places to focus its cash flow — most notably on building out its fiber network and wireless infrastructure.

Expect deployment of Altice One to keep crawling along rather than getting up to sprint anytime soon.

White-Label Opportunities?

Boubazine was also asked if Altice USA has considered a white label licensing strategy for Altice One, similar to how Comcast licenses X1. Notably, Cox Communications repackages X1 as Contour. Canada’s Rogers Communications, Shaw Communications and Vidéotron do largely the same thing.

“We have looked into it, but cable operators use so many different [back-end systems] and those have to be aligned [with Altice One],” Boubazine said. “We decided it was better to focus on our own company.”

Boubazine also said that Altice One is decidedly a child of the Cablevision and Suddenlink mergers.

During its gestation, Altice One was called “Le Box,” and was reported as a technological offshoot of Altice CPE systems already deployed in Europe. But Altice One resembles Le Box only in form factor. The “guts” of the system, Boubazine said, were almost entirely developed by Altice engineers stateside.

“As we acquired Cablevision and Suddenlink, we realized that we inherited some of the finest engineers in the industry,” he said, noting the core contribution of these technologists to the platform.

As it surveyed its U.S. cable assets way back in 2015, four years before its launch of Altice Mobile, Altice was focused, Boubazine said, on the concept of cable wireline and wireless convergence. For Altice USA, that means seamlessly blending WiFi and cellular access for customers. Altice is now in the process of building out that cellular piece. But the deployment of Altice One has been a key step in improving the WiFi aspect.

“And Altice One was the most urgent piece,” he explained, noting the platform’s ability to extend WiFi range in homes up to 40%.

Finally, Boubazine noted that Altice One is able to work across multiple encryption access systems, saving the need for the company to build three different pieces of CPE for three different types of backends.

“It’s the finest piece of engineering I think we have,” Boubazine said.

But more quietly, since it first debuted in January 2018, Altice USA’s Altice One platform has carved out a similar success story, downsizing the cable operator’s video churn for the last six quarters while simultaneously spurring broadband growth.

During Altice USA’s second-quarter earnings call, CEO Dexter Goei called the launch of Altice One, which incorporates set-top, cable modem and WiFi router functions, to be “a very, very strong success.”

Indeed, video attrition during the period was 21,000 subscribers, down from 24,000 in the second quarter of 2018, despite cord-cutting levels reaching a record high for the broader pay TV industry. Broadband net additions were 13,000 vs. 10,000 in the second quarter of 2018.

Average revenue per user is also substantially higher in homes with Altice One, the company said, while not citing specific data.

The metrics are impressive, considering only about 400,000 Altice USA customers have the Altice One system. That’s 13% of the company’s base, up from 4% infiltration in the second quarter of last year.

Three Le Boxes in One

Blending hardware from Sagemcom, silicon from Broadcom, content security from NAGRA and transcoding services from Cisco Systems, Altice One combines advanced TV search and discovery, as well as cloud DVR and voice control, along with integration of key digital services, notably Netflix and YouTube, with more OTT services on the way. There are WiFi optimization and control features. New offshoots have been added, such as an Alexa-powered smart speaker.

RELATED STORY: Altice's Model Behavior

When European telecom conglomerate Altice suddenly swooped in and acquired U.S. cable companies Suddenlink Communications and Cablevision Systems in 2015, there hadn’t been a lot of recent investment in terms of advanced user interfaces and various other modern pay TV features across the two companies, Altice USA co-president and chief operating officer Hakim Boubazine said.

Indeed, Cablevision lost around 5% of its video customers from Q2 2014 to the second quarter of 2015, a time when cord-cutting was a thing, but not nearly as robust as it is today. The attrition wasn’t much better at Suddenlink. The technology and user experience were being overwhelmed by the many new ways to consume video in the marketplace.

“The [Altice One] platform has helped us transform the user experience,” Boubazine said, noting that the mere modern look of the CPE, which contains no ’90s-era “bulky remote control,” has been a key selling point that allowing Altice USA to tap into younger consumer segments.

Currently, Altice One — now on version 3.0 of its operating system — is available across Altice’s Optimum footprint, as well as the portion of the Suddenlink footprint that offers 1 Gigabit-per-second broadband services.

Despite its success, Altice One isn’t hoisting heavy promotion of the platform. It is offered to new customers, those who are moving their service and, notably, those who are seeking to ditch their pay TV service because they want something better. “We use it a lot as a retention play,” Boubazine noted.

Boubazine didn’t disclose how much Altice USA is paying per truck roll to install Altice One. The platform requires technicians to wire up only one device instead of a video set-top, modem and WiFi router.

“The installation process is actually super simple and that allows our technicians to spend more time explaining the features and functions,” he said.

Despite that simplicity, installing new CPE into homes isn’t cheap, and Altice USA has a lot of other places to focus its cash flow — most notably on building out its fiber network and wireless infrastructure.

Expect deployment of Altice One to keep crawling along rather than getting up to sprint anytime soon.

White-Label Opportunities?

Boubazine was also asked if Altice USA has considered a white label licensing strategy for Altice One, similar to how Comcast licenses X1. Notably, Cox Communications repackages X1 as Contour. Canada’s Rogers Communications, Shaw Communications and Vidéotron do largely the same thing.

“We have looked into it, but cable operators use so many different [back-end systems] and those have to be aligned [with Altice One],” Boubazine said. “We decided it was better to focus on our own company.”

Boubazine also said that Altice One is decidedly a child of the Cablevision and Suddenlink mergers.

During its gestation, Altice One was called “Le Box,” and was reported as a technological offshoot of Altice CPE systems already deployed in Europe. But Altice One resembles Le Box only in form factor. The “guts” of the system, Boubazine said, were almost entirely developed by Altice engineers stateside.

“As we acquired Cablevision and Suddenlink, we realized that we inherited some of the finest engineers in the industry,” he said, noting the core contribution of these technologists to the platform.

As it surveyed its U.S. cable assets way back in 2015, four years before its launch of Altice Mobile, Altice was focused, Boubazine said, on the concept of cable wireline and wireless convergence. For Altice USA, that means seamlessly blending WiFi and cellular access for customers. Altice is now in the process of building out that cellular piece. But the deployment of Altice One has been a key step in improving the WiFi aspect.

“And Altice One was the most urgent piece,” he explained, noting the platform’s ability to extend WiFi range in homes up to 40%.

Finally, Boubazine noted that Altice One is able to work across multiple encryption access systems, saving the need for the company to build three different pieces of CPE for three different types of backends.

“It’s the finest piece of engineering I think we have,” Boubazine said.

T-Mobile and Sprint have been telling the FCC and Justice and anyone else within earshot, that allowing them to merge is the fastest way to 5G, but the cable company begs to differ, saying its existing deal to use Sprint infrastructure to provide wireless service later this year is a better option, and one that could be thwarted by the deal.

Altice plans to enter the wireless market by the end of the year through an MVNO (mobile virtual network operator) agreement with Sprint. Altice argues that the iMVNO (infrastructure MVNO) model, "when properly enabled and supported, functions as an on-ramp to greater facilities-based wireless competition over the long-term" and that merging T-Mobile and sprint would decrease the comptition in the pre-merger wholesale market that is vital to that MVNO model, which relies on access to existing infrastructure.Analyst.

"The merger will reduce nationwide wireless competition at the retail level from four to three, while simultaneously precluding new retail competition from three or more new iMVNO competitors," it told the FCC. "able operators using iMVNOs to enter the wireless market are best positioned to provide true retail competition to the nationwide wireless carriers.

Consequently, at a time when retail wireless competition is on the precipice of increasing from four nationwide providers to, for instance, seven [via deals with new iMVNOs], the merger will instead consolidate the market into just three providers."

If the FCC does approve the merger, says Altice, it should be conditions requiring the merged company to continue to support a competitive retail market.

Analyst Craig Moffett says the Altice-Sprint MVNO is indeed an example to the rest of the industry of how that model can work, he said in a blog post earlier this month.

“Sprint gets a huge cost and time-to-market advantage versus Verizon, AT&T, and, if the deal is rejected, T-Mobile," said Moffett. "Altice USA gets an MVNO agreement which gets cheaper and cheaper over time as more and more traffic is carried by their joint small cells.”

As Multichannel News' Mike Farrell reported, which was cited in the Altice filing to the FCC, Moffett says an Altice/Sprint-like deal that encourages the buildout of small cells would be a more cost-effective path toward 5G than other cable-telco MVNO models, notably the Charter/Comcast/Verizon MVNO, "and that cost advantage would grow over time," he said.

Altice says it would also be a better path to 5G than T-Mobile-Sprint.

The FCC is currently vetting a further request for information from T-Mobile and Sprint on their plans for integrating the two networks. The FCC is currently in day 141 of its informal 180-day shot clock on merger reviews. 

Verizon Communications has about 4.5 million Fios TV and 6 million internet subscribers across the country. Altice has the greatest exposure to Verizon of any cable operator. Verizon offers a fiber-based voice, video and data product to at least half of Altice’s Optimum footprint in the New York metro area.

While Verizon, like other pay TV service providers, has lost video customers over the years — it shed 62,000 Fios TV customers in the third quarter — its broadband growth has been stronger, adding 54,000 Fios high-speed internet customers in Q3.

Over the past year, though, Verizon has shifted gears to place most of its focus on new 5G wireless technology, seemingly reducing its emphasis on wireline offerings like Fios. That, some observers have noted, could be a major opportunity for Altice to take back share.

“We don’t see them dropping their hands from a competitive standpoint in the 4G products, nor in their Fios product out there,” Goei said. “I do think they are sinking a lot of effort into 5G, and they will continue to. But I’m not so sure that will [cause] them take their eye off the ball, relative to their existing operations.”

Heavy Lifting Required

Rolling out 5G will require a massive effort, though, including deploying fiber deeply into neighborhoods and nodes where the telco wants to offer service. Verizon already said it plans to launch 5G in five markets: Panama City, Fla.; Sacramento, Calif.; Los Angeles; Indianapolis; and Houston. More markets will come, but there has been no timetable released for when the product will makes its way to the New York metro area, Altice’s largest market.

“When they start really deploying the fiber they need to have a national product on 5G, there will be a complete reset in terms of expectations and the time it will take for them to deliver a truly large customer base product,” Goei said.

Goei compared the 5G rollout with Altice USA’s own fiber-to-the-home buildout, adding that it takes time to push through the red tape and other obstacles to deliver a product.

“Verizon has to drive fiber very deep into neighborhoods in order to provide a 5G potential substitution,” Goei said. “In areas where they don’t have a current Fios footprint or they [don’t] have pole-attachment rights, etc., it’s going to take them a very, very, very long time and a lotta, lotta, lotta capital and patience. The discourse and the rhetoric around this is going to change as they start running into the challenges of deploying this on a large-scale basis.”

Despite the focus on 5G, Verizon continues to market its Fios services “pretty hard,” Pivotal Research Group CEO and senior media & communications analyst Jeff Wlodarczak said.

“Maybe if Verizon were to sell off Fios to someone (say an RLEC like Frontier) opportunities could emerge for Altice,” Wlodarczak said in an email message. “But I agree with Dexter, I don’t expect Verizon to drop the ball (especially if they are looking to sell the asset they need to keep appearances up).”

Verizon has said it has no intention of selling its Fios unit.

Wlodarczak was more skeptical of the telco’s plan to focus on 5G, saying Verizon’s plan to slow down FTTH deployment in favor of 5G is a “big mistake.”

“I question whether fixed 5G will ever make that much of a difference, especially as logically people’s bandwidth needs are only headed in one direction,” Wlodarczak noted in his email. “The real buildout costs for fixed 5G are similar to FTTH and the significant lack of ubiquity is a big problem. I actually think Verizon is making a big mistake slowing down FTTH and moving to a fixed 5G approach.”

Altice has its own fiber build to worry about. The cable operator is in the second year of a five-year, multibillion-dollar buildout to bring fiber to the home to its 4.6 million customers by 2022. Goei, on a conference call with analysts, said Altice has already soft-launched a 1 Gigabit per second fiber service in Long Island and expects a “significant” acceleration of the rollout across the Optimum footprint in 2019.

It couldn’t come at a better time.

Well-Penetrated Terrain

Altice USA’s Optimum market, the former Cablevision Systems, has some of the highest video and data service penetrations in the country — as much as 80% in some areas, MoffettNathanson principal and senior analyst Craig Moffett wrote in a recent note to clients. It could face challenges over the next few years as a victim of its own success.

The Optimum unit only added 2,000 broadband customers in Q3, indicating that at least in that region the company is getting close to the end of its growth runway.

While it’s unclear if Fios’s wireline service will suffer as a result of the 5G rollout — Verizon said it won’t — Moffett added that for Altice USA, the good news is that the bad news probably can’t get any worse.

“There are arguments to be made that Altice will be fine in its legacy Optimum footprint,” Moffett wrote. “They already face about as much competition as they ever will, for example, while competitive overlaps with fiber (and fixed wireless) are still rising everywhere else.”

Notably, the company said it is building out so much wireless network infrastructure, it will operate more as a mobile network operator than a mobile virtual network operator that leases wireless network services. 

“We will be operating our own core network with its own [Home Location Register], which is the brain of the mobile network,” said Altice USA CEO Dexter Goei, speaking during the operator’s third-quarter earnings conference call.

“This means we will manage our own customer base and mobile services, as well as provide our own SIM cards, so we can negotiate costs with our SOM suppliers directly and mange the configuration where we have scale and benefit from a lot of legacy experience in countries outside the U.S.,” Goei added.

Related: Altice Says ‘Facilities-Based MVNO’ Approach Limits Partnership Potential with Comcast, Charter

Altice USA is launching its mobile service based on an MVNO deal carved out with Sprint last year. The cable operator agreed to help densify the wireless company’s network to enhance coverage and capacity in its own footprint. Goei said Altice still has a lower wholesale network lease price than “light MVNO” users like Comcast and Charter, which have partnered up with Verizon.

“In other words, we are getting ready to operate almost like an MNO and will provide a great value proposition to our customers and the market,” he said.

“We basically own and control everything apart from spectrum and base stations, although we are currently testing CBRS spectrum, and will see if any spectrum locally becomes available,” Goei added.

Related: Charter Reports 21,000 Mobile Sub Lines, Mulls CBRS Network Plans

Altice, Goei explained, has a “path” to a spectrum strategy, whereas light MVNO users need to switch strategyes and build out their own mobile infrastructure to capitalize on the benefits of the Citizens Broadband Radio Service.

Goei also touted the Altice’s ability to deliver better data offloading, noting that the operator’s dense WiFi coverage will enable better handoff between networks.

And he added that a “light MVNO restricts the services you can offer and how you can market to customers … You might have to sell in bundles and might not be able to sell a standalone product.”

Xandr encompasses all aspects of the existing AT&T advertising & analytics businesses and will be run by Brian Lesser, the former GroupM North America chief who was recruited over to AT&T last year.

Related: AT&T Hires GroupM's Lesser to Run New Ad Business

“Xandr is a name that draws inspiration from AT&T’s rich history, including its founder Alexander Graham Bell, while imagining how to innovate and solve new challenges for the future of advertising,” Lesser said, in a statement.

Under the agreements with Altice USA and Frontier, Xandr will aggregate and sell the telecom companies’ national addressable advertising inventory. Xandr will also collaborate with Altice’s advanced advertising division, a4, in an effort to help it expand its addressable advertising capabilities.

The announcement was made from the Relevance Conference in Santa Barbara, Calif., an industry event produced by Xandr.

Touting around “170 million direct-to-consumer” relationships across wireless, video and broadband, AT&T CEO Randall Stephens used September’s Goldman Sachs Communacopia Conference to outline a strategy in which AT&T will try to take a piece of the sizable advanced advertising market share controlled by Silicon Valley giants Google and Facebook.

“Advertising models will be very, very important," Stephens said. “We think we have the elements that are gonna be required to stand up a very impressive advertising business.” 

Michel Combes, an exec who is late of Altice N.V. and Alcatel-Lucent, has been named president and chief financial officer of Sprint.

Combes starts in that role on January 6, reporting to Sprint CEO Marcelo Claure. Combes, is relocating to the Kansas City area, will also be appointed to the Sprint board at a later date. Current Sprint CFO Terek Robbiati will remain with the company through January 31 to help with the transition.

Combes most recently was CEO of Altice N.V. He resigned that post in November amid a broader management shakeup at the company. Combes, 55, was also the former CEO of Alcatel-Lucent, leading the company to its merger with Nokia in 2015. He is also late of France Telecom, Vodafone Europe and TDF, and served as an advisor to Brightstar, a company founded by Claure.

RELATED: Altice N.V. Shakes Up Management Ranks

Altice USA, comprised of Altice’s acquisitions of Cablevision Systems and Suddenlink, and Sprint announced a “full” MVNO deal in November 2017.

Combes, who joins Sprint a couple of months after Sprint and T-Mobile scuttled their merger talks, will head up financial operations, strategy and “continued cost transformation” at Sprint, the company said.

"Michel is an extremely capable and accomplished global telecom and cable industry leader and I know bringing him on board will help to accelerate our progress as Sprint begins the next chapter of our transformation," Claure said in a statement. "He is a visionary executive with a proven track record of successfully transforming leading telecom and media companies and will help us to execute our strategic plan and strengthen our team."

"I have known Marcelo for many years and am delighted to join the Sprint team and build upon the great progress achieved to date," Combes said. "This is an exciting challenge and unique opportunity to help lead a distinguished company through an historic turnaround and its most exciting period yet."

Altice USA and Starz appear to be ready to battle it out over carriage of the premium channel, with both sides apparently far apart in reaching a deal as their Jan. 1 deadline approaches.

Starz placed ads in The New York Times and New York Post on Saturday (Dec. 30) warning that customers could lose access to the premium channel if a deal wasn’t reached by New Year’s Day.

In a statement, Starz says it has been working in good faith to reach an agreement with Altice USA, which has about 4.6 million video customers in the New York metro area and in several Midwestern states. Starz has about 17 separate channels – including the Encore and MoviePlex premium services – and offers original programming like American Gods, Ash vs. The Evil Dead, Outlander and Power. It was purchased by movie and television studio Lionsgate in 2016. 

“But rather than negotiating in a meaningful way, Altice is demanding a totally unreasonable agreement unlike anything that has previously existed in our longstanding partnership,” Starz said in a statement. “We urge them to join with us in working to reach an agreement that is fair, reasonable and operates in the best interests of our customers, many of whom cannot otherwise find programming that speaks directly to them.”

Altice USA said its beef with the channel revolves mainly around pricing. The operator claims that Starz, which launched a standalone over-the-top service since its last carriage deal, is demanding an increase that would price the linear service above its OTT sibling.

People familiar with the premium service counter that it is merely asking for market rates, while they claim Altice is demanding drastic price reductions.

In a statement Altice USA spokeswoman Lisa Anselmo said the OTT service “drastically changes the value proposition their network provides us and our customers.”

“Yet Starz is asking for outrageous increases in programming costs and, given the limited viewership of Starz amongst our customer base and the different ways consumers can directly access Starz content, we are working to reach an agreement that is reasonable and reflects the best interests of all our customers,” she continued, adding that at the Starz-proposed rate, Altice would be forced to charge customers more than the cost for the OTT service.

“…this would be a bad deal for consumers who can get the service for less directly from Starz,” Anselmo said. “Bottom line, we are focused on a deal that reflects the best interests of all our customers and keeping their costs down.” 

She added that Altice USA continues to negotiate and has made “several meaningful offers” including one earlier today [Saturday].

While Altice USA claims that Starz viewership has fallen in the past three years in its footprint, the network has scored some ratings success in the past several years. Starz has the No. 2 and No. 4 top drama in premium television and its programming has resonated with African Americans and the LGTBQ communities. Power is the No. 1 show among African Americans on premium television and also ranks high (No. 2) in African American households in Altice’s footprint. And Outlander continues to attract high ratings among female viewers – it was 2017’s No. 2 scripted series behind HBO’s Game of Thrones.

The Walt Disney Co. officially announced its carriage deal with Altice USA in the New York area Thursday, a multi-year pact that will preserve the cable operator’s carriage of top Disney networks while allowing it to participate in the programmer’s upcoming direct-to-consumer initiatives.

As part of the new multi-year agreement, Altice USA’s Optimum unit  will continue to provide its customers access to broadcast station WABC, Disney Channel, Disney Junior, Disney XD, ESPN, ESPN2, ESPNU, ESPNEWS, ESPN Deportes, ESPN Goal Line, ESPN Bases Loaded, ESPN3 and Freeform, as well as make available additional multiplatform, digital and expanded on-demand content from Disney. Optimum will add ESPN’s SEC Network in late 2018 and launch ACC Network (in place of another ESPN network) in August 2019. The companies also expect to collaborate on ESPN’s direct-to-consumer product, which is slated to launch in early 2018, and have agreed to leverage Altice USA’s data analytics platform.

“Altice USA is focused on providing the highest quality video and service experience to our customers at a great value, and our successful arrangement with The Walt Disney Company ensures that our Optimum customers will continue to receive the programming they want at a reasonable cost,” Altice USA EVP and chief content officer Michael Schreiber said in a statement. “We are pleased with the value and terms agreed to and we thank our customers for their support while we worked on their behalf to reach a fair agreement.” 

The official news comes days after Altice USA and Disney jointly announced on Oct. 1 that they had a deal in principle, avoiding a blackout of its ABC broadcast station, ESPN, and Freeform to Altice USA’s 2.6 million customers in New York, New Jersey and Connecticut.

“This agreement with Altice demonstrates the tremendous value and importance of ESPN, Disney and ABC content to any distributor,” Disney and ESPN Media Networks EVP Justin Connolly said in a statement. “Together we are committed to delivering the best in sports, news and entertainment programming to Optimum customers, regardless of platform, including new networks from ESPN; ESPN’s upcoming multisport, direct-to-consumer offering; and New York’s most-watched station, WABC.”

According to sources familiar with the deal, Altice USA will drop the lightly watched ESPN Classic. Those sources also added the operator also agreed to affiliate fee increases for ABC’s New York broadcast affiliate WABC – at what some reports estimated was twice the previous rate – and more moderate increases for ESPN and Freeform.

For Disney, it received reasonable fee increases, greater carriage for two regional networks and according to sources, increased the mandatory minimum carriage requirements for its ESPN networks. That, according to some analysts, was a key point of the deal. Disney had previously required ESPN to be available to as many as 90% of a distributor’s video subscribers, but in the past few years allowed those mandatory minimums to fall to about 80%, according to an earlier research report by MoffettNathanson media analyst Michael Nathanson. According to sources familiar with the deal, ESPN got closer to the 90% level with this agreement.

The deal is widely expected to serve as a template for future carriage pacts for Disney. The programmer has said that renewals involving more than half of its subscriber base will come due by 2019.

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Altice USA said it has reached an agreement in principle with The Walt Disney Co. regarding carrage of its networks in the New York metro market, and have extended their existing carriage contract as they work to hammer out the terms of the new deal.

In a brief joint statement the two companies said simply they had "reached an agreement in principle and have extended the deadline accordingly to try and finalize the terms."

Altice's Optimum customers in New York, New Jersey and Connecticut were expected to go dark at 5 p.m. Sunday if a deal wasn't reached. The fact the parties avoided a black out and managed to reach at least a tentative deal comes as a surprise as most analysts had expected at least a brief impasse. The deal means New York Yankees fans in the area won't miss the American League Wild Card game scheduled for Oct. 3 on ESPN.

Terms of the new agreement were not disclosed. Altice did not say how long the deal would be extended as it worked on terms.

Disney and Altice had been at loggerheads for weeks over negotiations, the first big test of Disney's clout with distributors after steep subscriber losses at its ESPN sports network over the past several years.

RELATED: Altice USA Turns Up Heat as Disney Deadline Looms

Disney had reportedly been asking for large carriage fee increases for ESPN as well as increases in mandatory carriage minimums for the network, which some say would prevent Altice from offering skinny bundles of programming without the sports network. It also was reportedly requiring that Altice carry two regional sports channels -- SEC Network and the ACC Network as part of the deal.

No word on what, if any, additional Disney channels Altice USA will carry in the New York market. The cable operator has repeatedly said it was willing to pay a reasonable fee for the networks.

Arris last week said it had inked an expanded deal with Altice that calls for the service provider to deploy new boxes with 4K and High Dynamic Range capabilities across its footprint in Europe and the U.S. starting next year.

Financial terms weren’t announced, but the deal paves the way for Altice USA to roll those boxes out in the Suddenlink and Optimum (former Cablevision System) properties.

They noted that Portugal Telecom, part of Altice, will use Arris boxes to power its MEO 4K TV service across Portugal.

Altice and Arris also said that the operator is rolling out Arris’s flagship access network platform, the E6000 Converged Edge Router, in France, the U.S., and the Dominican Republic to deliver new 1-Gig services.

RELATED: Altice USA Eyes FTTP Milestone

“The 4K HDR set-tops we're developing with Altice showcase the evolution of the video and will offer exciting entertainment services to millions of Altice subscribers across the US and Europe," Larry Robinson, president of Arris’s CPE division, said in a statement.

"We expanded our strategic partnership with ARRIS to match the scale of our vision for tomorrow's entertainment," added Bruno Zebib, Altice Group CTO. "As Altice continues to grow and to usher in next-generation services for our subscribers around the world, we're leveraging ARRIS's expertise in the set-top evolution to meet demand for higher-definition viewing experiences. Our collaboration with ARRIS will reinforce our position as a pioneer in the global TV and services market."

Altice USA has been the subject of intense speculation around a possible bid for Charter Communications. While Charter has declined comment, and some of its biggest investors have dismissed any play for the company, Altice has reportedly been lining up banks for a possible bid.

Altice USA shares were up about 1% (30 cents per share) to $30.98 in early trading Monday.

Altice N.V. said Monday that it plans to begin buying back its Class A and B shares on the Euronext Amsterdam exchange today (Aug. 28), with the buyback ending no later than Aug. 31, 2018. It plans to either retire the shares or place them in treasury.

Altice N.V. said in a statement the repurchase is part of its overall strategy to create superior shareholder returns, as well as continued confidence in its operations and in meeting its near and medium-term operational and financial targets.

“Going forward, Altice will continue to assess the use of excess cash for either significantly accretive M&A opportunities or further shareholder returns,” the company said in a statement.

So much for taking a breather.

European telecom giant Altice N.V., just two months after spinning off its U.S. cable operations into a separate publicly traded company, is apparently weighing the possibility of going after the second biggest fish in the domestic pond – Charter Communications.

According to CNBC, Altice N.V. chairman and founder Patrick Drahi is lining up bankers to launch a possible takeover of Charter, the second largest cable company in the country, with 17 million video customers. While there is no guarantee Altice would actually make a formal bid, the company has long coveted Charter assets. It was an early bidder for Time Warner Cable in 2015, a prize that Charter eventually won with a bid of more than $80 billion.

Analysts have estimated that any bid for Charter would have to be north of $500 per share to get the company’s attention. That would value the MSO at more than $200 billion.

Charter stock was priced at $401 per share in early trading Wednesday (Aug. 9), up 3% or $11.25 each. The stock settled down later in the day, up 1.4% ($5.41 each) to $395.06 per share. Altice USA stock, which was down 2.3% (71 cents each) to $30.35 per share early Wednesday, was about even at $30.88 each (down 18 cents) later in the day.

Charter has been the subject of merger talk for weeks, with speculation heavy around possible offers being weighed by SoftBank (parent of No. 4 U.S. wireless company Sprint) and Verizon Communications. Charter has declined comment on all of the merger rumors.

Altice USA spun off as a separate public company on June 22, almost exactly one year after closing its purchase of Cablevision Systems on June 21, 2016. Altice USA stock has performed well – it rose 14% in its first two days of trading to $34.30 per share. The stock has settled down since then, but was still above its $30 per share offering price on Wednesday.

Altice USA and its parent are expected to be aggressive buyers of cable properties in the U.S., but Altice N.V. has said it will concentrate on organic growth for the time being.

However, at its rebranding launch in May, Drahi acknowledged past comments where he said being any lower than third in a market wasn’t worth the trouble. With about 4.9 million residential and business customers, Altice USA is the fourth largest cable operator in the country and the eighth largest telecom provider.

“I said, ‘If we are not No. 1, or No. 2, or No. 3, it’s not very exciting,’” Drahi said. “How do you get there? I really don’t know. Or if I do, I can’t say.”

But he later offered a hint at his blueprint for success in other markets.

“I have always been very clear, that first is fixed [networks], then mobile, then content,” Drahi said. “We started in the U.S. with cable. We are too small in cable to go mobile at the moment. But everything is open. We will see.” 

Mediacom Communications said Thursday that it has reached a carriage agreement with global news network i24 News.

Owned by European telecom company Altice N.V., i24 News has major studio hubs in the U.S., Israel and Europe and offers local and international news with a special focus on the Middle East. The network launched in the U.S. in February with Altice USA, Altice N.V.’s domestic cable operation.   

“Mediacom has always sought to offer a diverse menu of high-quality content in the markets we serve,” said Mediacom senior vice president of field operations Ed Pardini in a statement “We are excited to be able to provide our customers with access to news and information from the global viewpoint of i24NEWS.” 

Package and channel location information for i24NEWS is being announced locally on a market-by-market basis as the network is launched.

“We are very pleased to provide Mediacom customers with a new destination for unique content that features localized news infused with the global conversation that consumers cannot watch anywhere else,” i24News CEO Frank Melloul said in a statement. “We look forward to our partnership with Mediacom and to becoming the go-to source for news and current events analysis for its viewers.” 

Mediacom is the fifth largest cable operator in the country with about 1.4 million customer relationships mainly in the Midwest and Southeast.  

Altice USA priced its initial public offering at $30 per share on Wednesday night, at the higher end of the expected range of $27 to $31 each.

Altice USA first announced its IPO intentions in April. The company, which has about 4.9 million residential and business customers in 21 states, had said earlier this month that it expected to price its offering at $27 to $31 per share.

Altice USA also increased the number of shares it plans to offer to 63.9 million shares from 46.6 million. At that price and number of shares, the offering will raise about $1.9 billion.

The bulk of the offering proceeds will go to two selling shareholders – BC Partners and the Canada Pension Plan Investment Board (CPPIB) – who together have said they would sell about 51 million shares. Altice USA expects to sell 12.1 million shares.

Altice USA will begin trading on the New York Stock Exchange under the symbol “ATUS” on Thursday (June 22).

Altice is the second cable IPO this year. In May, WideOpenWest went public at $17 per share, well below its expected range of $20 to $22 per share. 

While Altice USA is larger – WOW has about 474,000 video customers and is in smaller markets – part of the allure of Altice stock is its potential use as a deal currency. While Altice USA has said it will focus on organic growth in the near term, the company has made no bones about its desire to grow through acquisition. With a solid U.S.-based deal currency, that becomes a more attractive option for potential targets.

Altice USA’s parent, European telecom company Altice N.V., will remain in control of the company after the offering is complete. According to Altice USA, Altice N.V. will own 70.3% of Altice USA's issued and outstanding common stock, which will represent 98.3% of the voting power of Altice USA's outstanding common stock.

J.P. Morgan, Morgan Stanley, Citigroup and Goldman Sachs & Co. LLC are acting as joint book-running managers for the offering and representatives of the underwriters, together with BofA Merrill Lynch, Barclays, BNP Paribas, Credit Agricole CIB, Deutsche Bank Securities and RBC Capital Markets as additional joint bookrunning managers.

Viacom and Altice were light on details of the agreement. The advanced ad portion sounds interesting – Altice is putting a lot of effort and resources into the targeted ad space, buying Audience Partners in March and using its set-top box data to help ad buyers and sellers focus their messages. Viacom has been an early proponent of advanced advertising, given that its youthful audience is what advertisers covet the most. But again, details were light. In a statement, Viacom and Altice said the two will form a partnership that marries Altice’s audience data and platforms with Viacom’s advanced ad offerings “to deliver local and national advertising across multiple screens, including TV, mobile, tablet and desktop.”

But for my money the most interesting part is the return, after almost three years, of Viacom’s cable channels to Suddenlink’s 1.1 million customers. It was in 2014 that Suddenlink followed Cable One in pushing Viacom out its respective cable door, claiming that the programmer was simply trying to force it to buy networks it didn't want. Cable One may have fired the first shot in the bundle wars, but Suddenlink, which today has more than twice the video customers of the Phoenix-based operator, fired the loudest.

Since then there has been a hue and cry for smaller, cheaper video packages and Viacom has been shut out of some deals for over-the-top providers – YouTube TV and Hulu Live TV. This month it was revealed that Charter Communications, the second largest cable operator in the country, was relegating Viacom’s six core networks to its priciest tier for new customers. Viacom has said it doesn’t believe Charter has the right to do that and is in discussions with the operator. On Monday Viacom’s new CEO Bob Bakish said the programmer was in “very advanced discussions” to create a streaming entertainment package that would retail for $10 to $20 per month. 

Before it was purchased by Altice in December 2015, Suddenlink said the loss of the Viacom networks had little effect, and beefed up its lineup with low-cost replacements like Revolt.TV, The Blaze and Comedy.TV. When Altice later purchased Cablevision Systems, which had a Viacom carriage deal, many were waiting to see how long it would be before the two operators would sync up their programming lineups.

When Altice launched its rebranding initiative on Tuesday under the concept of “One Brand, One Group,” it seemed to scream the logic behind similar channel lineups. 

But just how many Viacom channels Altice will carry is up in the air. In announcing the deal, Altice said that “a number” of the Viacom networks would return to Suddenlink. It also said that its former Cablevision systems, which operate under the Optimum name, renewed its carriage deal with the programmer’s "premier networks."

When asked to elaborate, neither side would offer details. An Altice spokesperson said the company would communicate to customers directly about changes to their programming lineups.

In a research note, Sanford Bernstein media analyst Todd Juenger wrote that the Optimum carriage deal was set to expire on Sept. 30, the end of Viacom’s fiscal year. But Juenger was intrigued by the wording of the joint company statement just like we were, and came to a similar conclusion – the Optimum deal probably is for fewer Viacom networks.

“We did expect Altice would insist on carrying fewer Viacom networks – which is exactly what has seemed to happen, based on this text from the press release,” Juenger wrote.

In February, Viacom said it would focus on six core channels – MTV, Nickelodeon, Comedy Central, BET, Nick Jr. and Paramount. That led some to believe, including Juenger, that Viacom’s 19 other networks would eventually disappear.

Whether that means anything with this deal is unknown. We don’t know which networks will be included when the new deal kicks in until it does. Right now, according to the Optimum web site, about 16 Viacom networks are carried.

While Juenger expressed concern and has been an outspoken critic of Viacom in the past (he has an "underperform" rating on the stock), other analysts appeared to be more optimistic regarding carriage of the networks, with several saying the deal involves most of the programmer’s channels at healthy price increases.

Jeffries & Co. media analyst John Janedis, who has a “buy” rating on Viacom, estimated that the carriage deal would return “the flagship 6 and many other networks,” praising the advanced ad component of the agreement. Janedis estimated that while the deal is short on details, he figured it is similar to other pacts and falls within the framework allowed by Most Favored Nation clauses.

“With that framework, we assume annual escalators in the MSD [mid-single digit percentage] range and a five-year term,” he wrote.

Guggenheim Securities media analyst Michael Morris, who also has a “buy” rating on Viacom, was equally optimistic, estimating a five-year deal with annual price escalators in the mid-single digit range. Morris also estimated that in the nearly three years since it dropped the Viacom networks, Suddenlink has lost 150,000 video customers, a 12% decline compared to 3% for the cable industry and 4% for pay TV providers over the same period.

JP Morgan media analyst Alexia Quadrani – who rates Viacom “overweight” – joined the chorus in her report. Quadrani estimated that it may take a while for the full effect of the agreement to be realized.

 “Although we believe it may take a few months for the networks to be added to the Suddenlink service, suggesting a benefit only at the very end of the fiscal year, we also expect almost all except two very small networks (such as NickMusic) to be added to the platform,” Quadrani wrote. She too estimated mid-single price escalators, citing Bakish’s comments at the JP Morgan conference Monday.

Wunderlich Securities media analyst Matt Harrigan also saw positives in the deal, even if it doesn’t include all of Viacom’s networks.

"We do not look for any effect on near-term 2017 estimates given the lateness in the fiscal year, but we are very encouraged on the incremental afforded stability and potential template for agreements with other distributors -- even if not all Viacom networks are included, " Harrigan wrote. 

Bank of America Merrill Lynch media analyst Jessica Reif Cohen released a report Friday that was extremely detailed -- she wrote that all but two small digital networks were included in the deal and that it extends Viacom's carriage rates and escalators "well into" the next decade.  

"We believe the deal marks a significant positive for Viacom’s turnaround strategy, which has been focused in part on improving the company’s relations with its key distributors, returning affiliate fee growth rates to normalized rate escalator levels and delivering value to distributors for the good of the Pay TV ecosystem," Reif Cohen wrote. 

In the announcement, Altice said Viacom’s networks include “Nickelodeon, Comedy Central, MTV, BET, Nick Jr., VH1, Spike (which will be rebranded as the Paramount Network in 2018), TV Land, and CMT, among others.” That’s more than the core six, but far short of the 25 networks in the company’s programming stable.

For his part, Juenger stands behind his past comments, adding in an e-mail message that he is simply basing his assumptions on Viacom’s own statements. And he wondered why Viacom didn’t just come out and say which networks were involved, like it has in the past.

Viacom, like other programmers has to be careful about the wording when announcing these deals so as not to violate non-disclosure agreements.

But most programmers, Viacom included, have had no problem in specifically delineating what networks are involved in carriage agreements. In the past year Viacom has announced two carriage renewals with Cox Communications and Dish Network that either specifically listed every network included or given the number of networks included in the deal. Granted, as part of the Dish renewal announcement, the satellite carrier's over-the-top service Sling TV agreed to carry Viacom networks "including Comedy Central, BET, Spike, MTV, Nick Jr. and many others." Specific packaging details were not announced for that service. But for Dish, Viacom said the deal included the 18 networks it was already carrying, "including Nickelodeon, Comedy Central, MTV, VH1, Spike, BET, CMT, TV Land, Nick Jr., and Nicktoons." And in a carriage deal with OTT service DirecTV Now reached last October, Viacom listed 11 networks -- Nickelodeon, Comedy Central, MTV, VH1, Spike, BET, CMT, TV Land, Nick at Nite, Nick Jr., and Logo -- when the deal actually included 15 channels. DirecTV Now also carries Teen Nick, MTV2, MTV Classic, Centric and Nicktoons.  

Maybe Altice USA did decide to take all of Viacom's networks at healthy price increases. It as an IPO coming up by the end of the year -- it filed documents in April -- and maybe it didn't want to rock the boat with an extended carriage fight. But Altice has been extremely aggressive when it comes to seeking out cost efficiencies -- it said it shaved half of the expected $900 million in cost savings from the former Cablevision systems last year.   

And maybe it doesn't matter. So far investors took the announcement in stride – Viacom stock closed at $34.90 per share on Wednesday, up 16 cents. And Juenger said the deal is probably a wash – the good news is carriage has returned to Suddenlink, the bad news is that maybe Optimum is carrying fewer Viacom channels.

But if the number is low, there could be future implications for Viacom in other deals with other carriers, Juenger added in his research note. And depending on what the over-the-top “entertainment package” Bakish has touted actually looks like, it could influence what MVPDs are willing and able to pay for Viacom’s core channels.

And that could have broader implications for other programmers, who are struggling with lower ratings and a traditional distribution base that is increasingly chafing at high content costs. Analysts in the past liked to call Viacom the “canary in the coal mine,” mainly because its youthful audience adopted trends well before older-skewing networks. Let’s hope this one doesn’t end up being a trend that leaves other programmers gasping for air.

Bethpage, N.Y. – Shortly after rallying the troops as part of a worldwide rebranding effort, Altice chairman Patrick Drahi told reporters that he was pleased with his company’s purchase of the former Cablevision Systems, and hinted at future moves to come.

Drahi was at Altice USA headquarters here with top executives at the firm as they announced a new logo and tagline “Together Has No Limits.” In addition to speeches by Altice USA chairman and CEO Dexter Goei and Altice CEO Michel Combes, the company beamed presentations by executives in Israel, France, Portugal and the Dominican Republic to its locations worldwide via satellite.

After the presentations, Drahi held court with several reporters representing all the company’s markets.

The U.S. is Altice’s newest market – it purchased Cablevision in June and Suddenlink Communications in December 2015 – and Drahi remembered the criticism he endured especially for the Cablevision purchase, which at $17.7 billion, many analysts believed was too costly.

“I like to prove to the outside world that I am right,” Drahi said of the Cablevision purchase. “When we announced the Cablevision purchase, Altice [stock] crashed. The results we have had and the potential we have are bigger than I thought. Everything we expected when we bought the company has been delivered. And I see more.”

Altice had originally said it would take about $900 million in costs out of the business over several years, a goal many analysts saw as overly ambitious. Recently the company said it had achieved about half of that goal in December.

Over the course of two days executives walked reporters through several of the company’s U.S. businesses, pointing to opportunities in advanced advertising through its cable systems and data analytics firms like Teads and Audience Partners, potential expansion of its hyper-local news channels News 12 Networks and its international news network i24, and its plan to build a state of the art fiber-to-the-home network via its project “Generation Gigaspeed.”

While Optimum has lost about 60,000 video customers between March 31, 2016 and March 31, 2017, it has added about 56,000 broadband subscribers.  At the same time revenue has increased about 6.8% from $1.44 billion to $1.55 billion and cash flow has increased 35% from $441.3 million to $596.8 million. And the company intends to commit “billions of dollars” to building out its fiber network over a period of years, Goei said.

While the initial public offering for its Altice USA business awaits approval, Drahi said he continues to look for intriguing assets. While he would not identify any specific targets, he said he looks everywhere.

“I have discussions with everybody because I am an open guy,” Drahi said. “I like different cultures, so I like to discuss with Israelis, Americans, The Dominican Republic, the French, everybody,” Drahi said. “But you cannot buy everything at the same time. So it depends on what is available, what is the price, what is the future, what do you think about interest rates, what do you think about economics, do you thin Europe is going to recover, do think the US  will grow like that, do you think Israel is better? This is a big part of my decision making”

Drahi mentioned that Altice USA is the fourth largest cable operator in the country and the eight largest telecom provider, ranks that fall short of his past comments that anything lower than third place in a market wasn’t worth being in.

Drahi acknowledged that is US ranking falls short, but added that could change.

“I said, ‘If we are not No. 1, or No. 2, or No. 3, it’s not very exciting,’” Drahi said. “How do you get there? I really don’t know. Or if I do I can’t say.”

But he later offered a hint at is blueprint for success in other markets.

“I have always been very clear, that first is fixed [networks], then mobile, then content,” Drahi said. “We started in the U.S. with cable. We are too small in cable to go mobile at the moment. But everything is open. We will see.” 

Altice, N.V., the European telecom company, pulled the curtain back on a new unified global branding strategy that will bring together its diverse brands under a single name and logo tied to the concept of "One Brand, One Group."

The telecom company, founded by entrepreneur Patrick Drahi in 1993, includes hundreds of diverse brands in the telecom, wireless and cable field in Europe, the U.S. and the Caribbean. Beginning Wednesday the company plans to embark on a year-long process that will culminate in its telecommunications brands to share the same Altice brand.

Related: Altice USA Files IPO Documents

The process also will include a new logo for the company, developed by a unit of advertising and branding giant Publicis Group. Called “the path,” the logo is in the shape of a lower-case “a,” without borders or background, which the company said represents “Altice’s timeless aspirations to continuously innovate and reinvent the future to meet customers’ evolving needs. It reinforces the strength of the Altice brand, and the path which Altice and its customers take together to experience the future.”

The new brand and logo will also get a new tagline, "Together Has No Limits," which the company said proclaims its vision.

Related: Altice USA Looks to Expand Content Reach

Altice CEO Michel Combes told reporters the rebranding will be complete by the end of the second quarter of 2018 and is expected to affect its commercial telecom operations worldwide. Most brands will initially share the Altice brand to give consumers a chance to get used to the name, including its U.S. properties.

While the Altice USA name will remain for its U.S. cable properties, Optimum, its operations in the New York Metropolitan area, and Suddenlink, its cable operations in the Midwest, would share the new brand as “Optimum: by Altice” or “Suddenlink: by Altice,” or something like it until the transition is complete.

“One group with one brand, Altice,” Combes said in a statement. “Altice is today entering a new era, following its transformation into a global leader in telecoms, content and advertising. Operating as one unified organization, Altice will reinvent the future of the customer experience through an enduring commitment to deliver innovative, best-in-class products and services that unlock the limitless potential of our customers and our people. This is our path, this is the Altice path.”

Some brands won’t see a change. Altice said its telecom sub-brands in certain areas -- including Red in France; Moche, Uzo and Sapo in Portugal; Next TV in Israel; the media news brands (News 12 Networks, i24NEWS, BFM, RMC); press brands of SFR Presse (Libération, L’Express, etc.), and Teads -- will not change.

“Altice has a global vision, a clear strategy and a track record of success, and Altice USA is pleased to stand together with its colleagues around the world under one common brand,” Altice USA chairman and CEO Dexter Goei said in a statement. “Today represents a new beginning on our path as we continue to deliver innovative, high- quality, customer-centric products and solutions that connect our customers to the world around them. As one global Altice brand, we believe anything is possible.”

Altice USA already has a presence in Texas – it has offices in Plano, Lubbock and Tyler. The company plans to move into the new space in the third quarter. The 400 workers at the facility will be a mixture of transfers from other locations and new hires.

Altice purchased Suddenlink Communications in 2015, which has a large presence in Texas.

According to the economic development incentive agreement with the city, Altice will add about $4 million in real property improvements and $1.2 million of business personal property at the location. The City of Plano also is planning to contribute about $210,000 in economic incentives. 

“As a long-time employer in Texas, we are pleased to continue our partnership with the City of Plano, which serves as an important centralized location to benefit the current and long-term needs of our customers,” Altice said in a statement. “We look forward to expanding our current presence into a new facility and creating a great place for our employees to work while making a meaningful impact in the surrounding local communities.”

Altice has expanded its 1 Gigabit per second broadband services in Texas to about 85 communities in the state and has announced a five-year plan to build a next generation fiber optic network capable of delivering speeds of up to 10 Gbps.   

According to people familiar with the matter, the vote was close — 60 against the union and 53 for representation. At press time, it couldn’t be determined if there were any abstentions in the vote. The IBEW had tried to organize the Newark operation once before but pulled its petition.

“This is a time of tremendous opportunity for our company, and Altice USA strongly believes that a direct relationship with our employees promotes an environment of trust, respect and collaboration, which ultimately drives a superior experience for our customers,” Altice USA said in a statement.

The news of the union defeat comes days after Altice USA issued preliminary documents for an initial public offering of stock.

While Newark was a setback for the union, organizers are beginning to have some success in cracking into the cable market, something that has been difficult to do in the past.

The IBEW successfully organized Altice USA’s Oakland, N.J., location in March by a vote of 49 for the union and 46 against. Altice USA’s Brooklyn, N.Y., location, with about 300 workers, voted in favor of representation by the Communications Workers of America in January 2012. But unions have failed in organizing efforts in The Bronx, N.Y., and Piscataway, N.J.

The IBEW represents about 1,700 Charter Communications workers in New York and New Jersey that went on strike March 28 to prevent changes to their healthcare and pension benefits. Charter denied making pension cuts but has said it has offered employees greater pay increases than the union had demanded, along with “competitive and robust healthcare and retirement benefits.”

Unions have stepped up organizing efforts at Altice USA ever since the company revealed plans to create Altice Technical Services, a separate company that would house all field service, construction & fiber, design, outside plant maintenance, inside plant and field-based employees serving commercial accounts.

While Altice USA has maintained that ATS offers greater opportunities for advancement and training, some unions have worried that it would allow the company to lay off workers at will. Altice USA had pledged in New York not to lay off any customer-facing employees for three years, part of the conditions it agreed to in winning New York Public Service Commission approval of its June 2016 purchase of Cablevision Systems.

In late March, Newsday said Altice USA announced plans to shut down a Long Island warehouse affecting about 98 workers there as it shifted those functions to USTC, which it hired to handle warehousing from a facility in Edison, N.J.

MSG Networks said it has obtained, from the National Hockey League, rights to stream NHL games live on the MSG GO app. Thus far, Altice-owned Optimum and Comcast's Xfinity have agreements to authenticate (enable views of) programming on the app and on MSGGo.com for its customers. Charter-owned Spectrum and Verizon Fios are among other big pay-TV providers in MSG Networks markets. MSG outlets air the NHL's New York Rangers and Islanders, New Jersey Devils and Buffalo Sabres contests. The app launched in 2015 with rights to stream New York Knicks' National Basketball Association games.

“As the outlet for more live local NHL games than any other RSN in the country, we are pleased to partner with the NHL and our teams to provide hockey fans with additional ways to view our games,” Andrea Greenberg, CEO of MSG Networks, said in a release. “With the addition of the NHL, MSG GO will certainly be a premiere mobile destination for hockey fans in the region.”

Added David Proper, executive vice president, media and international strategy, NHL in the release: “With this agreement, MSG Networks once again demonstrates what it means to be an excellent partner for our clubs. Together we share a vision for serving our fans, who are extremely passionate about their teams. This agreement for live streaming on MSG GO is all about fulfilling demand and providing our fans with the type of access they want in the way that is most convenient to them.”

While some analysts saw Cable One’s pending $735 million all-cash acquisition of NewWave Communications as a slight snub to its hefty stock price, investors apparently felt differently, driving shares up more than 3% on Wednesday, the day the deal was announced.

Cable One was the top performing distribution stock in 2016, topping $600 per share and rising more than 40% on what many analysts believed was sentiment that it would soon become an acquisition target of either Charter Communications, Altice USA or any number of private equity groups. But some saw the stock as overvalued – it is trading at an 11 times multiple of cash flow, or about 40% higher than the largest cable operator in the country, Comcast with about 22 million subscribers.

While the stock has slipped a bit in the New Year – Cable One shares were down 7% ($43.26 each) between Dec. 30 and Jan. 17 – news of the NewWave deal drove shares as high as $598.67 each in earlier trading Wednesday, up about 3.5%. The shares closed at $597.09 each, up 3.2%, or $18.62 per share.

News of the NewWave purchase surprised some analysts, who expected Cable One to be a seller, not a buyer. And though the operator could still sell out in the future, the NewWave deal does provide some opportunity.

RELATED: Rising Cable One Stock About to Hit a Wall [subscription required]

Cable One has embarked on a “broadband-centric” strategy over the past few years, focusing on broadband customer growth instead of video subscriber gains. That was evident in its proxy statement prior to going public in 2015, when it said it saw no future in the video business, and in past moves to drop major programming networks like Viacom in 2014.

In a blog published shortly after the deal was announced, MoffettNathanson principal and senior analyst Craig Moffett, who has been critical of Cable One’s valuation in the past,  said perhaps the most surprising aspect of the NewWave deal isn’t the price – high at about 11.7 times cash flow – but that it is all in cash. That would seem to hint that NewWave owner, Chicago-based private equity group GTCR, isn’t so confident that Cable One will be able to maintain its lofty public valuation.

But Moffett added that NewWave’s strategy doesn’t seem that far from Cable One’s. The smaller operator has similar video penetration – 24% vs. 20% for Cable One -- and broadband penetration at NewWave is lower – 26.1% vs. 30.8% – suggesting there may be room for growth.

“Much of the value here can therefore be assumed in raising penetration (and, no doubt, prices),” Moffett wrote.  

Seller’s skittishness over high stock valuations isn’t new. When Cablevision Systems agreed to sell to Altice N.V. in 2015, it insisted on taking cash instead of the European telecom company’s shares, which were priced at about $24 each at the time. That proved to be a very smart move – Altice’s stock plunged on the Amsterdam Exchange market over that year, losing about 40% of its value between the September 2015 announcement and the June 2016 closing of the Cablevision deal.

Altice had warned customers that it could lose the station, the second CBS affiliate in the state, if it did not reach a deal by 5 p.m. Jan. 13.

According to Altice, Meredith was seeking an “outrageous” increase in retrans fees. The blackout only affects a small number of customers in Litchfield and New Haven counties in the state – most of Altice’s Optimum TV customers are in Fairfield County and have access to the New York CBS-owned affiliate. But Altice said it will offer one free week of OTT service CBS All Access so interested customers can view programming, including the upcoming NFL Playoffs.  More details are available online at www.optimum.net/onyourside.  

On its website, WFSB said Altice has rejected its numerous attempts to reach a compromise. The station added it has reached deals with other distributors and will continue to try to hammer out a deal with Altice. In the meantime, the station encouraged Altice customers to either access the channel over-the-air or switch to another pay TV company.

“We have already offered to pay Meredith Corporation, the media conglomerate that owns WFSB Channel 3 CBS, a significant increase in retransmission fees for the channel. Unfortunately, Meredith Corp. has pulled WFSB from our Optimum lineups in Connecticut in an attempt to force us and our customers to pay millions more in fees, even as the number of Optimum customers who watch WFSB has consistently declined over the past three years,” Altice said in a statement.  “Skyrocketing programming costs, particularly those charged by broadcasters, are the greatest contributor to rising cable bills, and we are working hard to keep those costs as low as possible for our customers. We call on Meredith Corp. to immediately return WFSB to our Optimum lineup, stop putting customers in the middle, and work with us on an agreement that is fair to our Connecticut customers.”

Cable stocks had a strong run in 2016 — distributor shares increased almost 40% for the year — and with a more business-friendly presidential administration set to take hold later this month, the sector has ample runway ahead, according to several analysts.

That kind of optimism wasn’t quite so evident before the Nov. 8 election, when analysts had expected more scrutiny of media companies and pressure to keep pricing low and access high under another Democratic administration. But after Republican candidate Donald Trump’s surprise win, Wall Street’s attitude toward the sector has switched from “anything but” to “anything goes.”

“After yet another year of strong outperformance for cable stocks, investors might be forgiven for assuming that all the good news must at long last be fully discounted in the sector,” MoffettNathanson principal and senior analyst Craig Moffett wrote. “On the contrary, however, we think there is a good deal more room to run.”

Related:Viewer Watch 2017: Download the Complete Report [subscription required]

BARRIERS GET LOWER

Moffett’s optimism is fueled by three factors: lower taxes, less regulation and lower capital intensity.

Lower taxes, one of the promises of the new administration, should help lift all boats in the market. But cable, with high cash-flow margins (around 39% to 40%), low capital intensity (around 15%), could increase its trading multiples from about 7 times cash flow to 9.5 times cash flow if the corporate tax rate dips from 38% to 15%, according to Moffett.

On the regulatory front, the Trump administration is expected to reverse Title II regulation of the broadband business, which could open the door for usage-based broadband pricing and even material charges for interconnection or peering, two items that were off-limits under outgoing Federal Communications Commission chairman Tom Wheeler.

Related:The FCC's New Playbook

Capital intensity is expected to drop as more and more functionality is placed in the cloud and more customers get their video through apps, extending the life of set-top boxes in the field and reducing the need to buy new ones. Moffett estimated that a reduction in capital intensity from 15% to 13% would result in an increase of warranted valuations of almost a full turn of cash flow.

Telsey Advisory Group media analyst Tom Eagan was encouraged by cable’s subscriber performance for the year. While pay TV subscribers fell harder in 2016 than in the prior year, cable nearly halved its losses for the year.

That could encourage some privately held cable operators to tap the public markets. Altice USA, the domestic arm of European telecom company Altice N.V., has already said it is investigating an initial public offering of a minority interest in the U.S. cable operation. Eagan said he believes others could step up to the IPO plate in 2017, including privately owned Cox Communications and Mediacom Communications.

Moffett said increased competition from over-the-top services could erode customer growth, but that the greatest threat could come from 5G wireless services. The higher-speed data technology is expected to take years to fully deploy, but already Verizon has said it plans to conduct trials in 2017.

Related:New Normal: Digital Distribution [subscription required]

“If there is a downside risk to multiples, this is it,” Moffett said of 5G.

The analyst was less fearful of OTT services, in part because they have been here for years and also because what was supposed to be the category killer — AT&T’s DirecTV Now — has been plagued early on by spotty service and disruptions. New OTT offerings from Hulu and Google in 2017 are expected to have an impact, just not a very great one.

“In all likelihood, however, these services will pose a bigger headline risk than they will a financial one,” Moffett wrote. “Cable’s broadband moat provides a very powerful pricing counterbalance. By charging a premium for standalone broadband, and by upselling a portion of cord-cutters to faster broadband tiers, cable operators can relatively easily insulate themselves from subscriber losses to cord-cutting.”

On the programming side, 2016 was a mixed bag as cord-cutting and skinny bundles chipped away at what was once considered to be rock solid subscriber bases. The Walt Disney Co.’s ESPN took the highest-profile hit — it lost an estimated 7 million subscribers over the past two years and about 10 million since 2010 — but across the board networks averaged a loss of about 2% of their subscribers. That had a domino effect on other parts of the business, affecting affiliate fees and ad rates for even the strongest networks.

AT&T’s pending $108.7 billion purchase of Time Warner Inc., expected to close by the end of 2017, gave a lift to programmers and refueled interest in vertical integration. If that deal passes regulatory muster — and many analysts believe it will — it could start a chain reaction in M&A. A more laissez-faire regulatory attitude also could strengthen existing vertically integrated Comcast-NBCUniversal and others by allowing exclusive content for distributors.

OUTLOOK ON MEASUREMENT

Eagan said that despite negative headlines for the advertising business overall, ad agency stocks and fundamentals performed well. On the measurement side of the business, Eagan noted that Nielsen may have won the battle but not the war, saying both Nielsen and comScore will “benefit from marketer demand for third-party digital metric verification.”

Internal stresses helped pressure Viacom into another year of poor performance as infighting between CEO Philippe Dauman and controlling shareholder Sumner Redstone resulted in the former’s resignation in August. While the stock got a lift from talks concerning a recombination with former corporate sister CBS, those discussions ended in December with no deal.

While the hope is that new CEO Bob Bakish, a longtime Viacom international executive, can turn things around, it could take time. Meanwhile, Viacom’s ad revenue continues to slide, executives continue to leave, and its once-strong Paramount film studio limps along.

“For Viacom, if anything could go wrong for them, it did,” MoffettNathanson senior research analyst Michael Nathanson wrote in a note to clients.

AMC Networks, parent of AMC, IFC, WE tv, Sundance and BBC America, saw its stock drop more than 50% in 2016 as investors worried that it was too dependent on one program, albeit a big one: The Walking Dead. While that series remains the No. 1 scripted show on television, AMC is facing increasing pressure to come up with hits, as are other programmers like Scripps Networks Interactive (parent of Food Network and HGTV) and Discovery Communications.

Altice USA is placing a bet on fiber that’s so large that it will become grossly inaccurate to refer to the company as a “cable” provider in the years to come.

Altice USA, the service provider comprised of Altice N.V.’s acquisitions of Cablevision Systems and Suddenlink Communications, has embarked on an ambitious investment initiative that will skip DOCSIS 3.1 and instead focus on a fiber-to-the-premises (FTTP) upgrade that will encompass the bulk of its footprint over the next five years.

RELATED: As Altice Closes on Cablevision, Goei Says Company Will Take Its Time

The five-year deployment schedule, referred to by Altice USA as “Generation Gigaspeed,” is slated to start in 2017 and bring FTTP to its entire Optimum (former Cablevision) footprint and to most of its Suddenlink footprint. The company plans to announce its initial rollout markets in the coming months.

It’s a big and bold move, as the combined footprint of Optimum and Suddenlink pass about 8.3 million fiber/cable homes. Altice USA’s plan also bucks the industry trend.

Though some U.S. cable operators are deploying FTTP in greenfields and in a relatively targeted fashion, few are looking to pivot away from hybrid fiber/coax (HFC) completely and go with an all-fiber upgrade, at least at the scale and scope that Altice USA is proposing.

Because across-the-board FTTP upgrades are generally considered by the vast majority of MSOs as too expensive to deploy for the payback given, most cable operators are instead looking to drive toward gigabit-class speeds on their widely deployed HFC networks through a more iterative process – by splitting nodes, deploying fiber closer (but not all the way) to the home, and rolling out DOCSIS 3.1, a CableLabs-specified platform that delivers multi-gigabit capabilities to HFC. Last August, Liberty Global CEO Mike Fries estimated that the MSO would be able to deploy DOCSIS 3.1 and deliver 1-gig speeds for about €20 (US $21.23) per home, a cost that excludes the consumer premises equipment/modem.

RELATED: Comcast Sets DOCSIS 3.1 Expansion, Launches 1-Gig in Detroit

Citing the FTTP playbook Altice N.V. is already using in France (22 million fiber  homes by the end of 2022) and Portugal (5.3 million fiber homes passed by the end of 2020) and its access to “proprietary” technologies developed by Altice Labs, the company’s U.S. division is confident that its FTTP rollout plan is sound from a technology and economic perspective.

Going with a DOCSIS 3.1 game plan “felt to us as one step forward but not a step forward enough relative to what we see as the future of continued connectivity and higher bandwidth usage,” Dexter Goei, Altice USA’s chairman and CEO, said in an interview, noting that the operator has reached an “inflection point” as it sees a disproportionate number of gross broadband subscriber additions taking higher and higher Internet speed tiers.  

“We’re big believers in this trend continuing, and we really are moving toward a 10-gig world,” Goei said. “And to sit around and do this in multiple steps doesn’t make any sense [so we decided] to skip over DOCSIS 3.1 and get straight to the point.”

The Economic Angle

Altice USA did not outline the specific economics that will underpin Generation Gigaspeed, but Goei said the company is comfortable that it can execute on it effectively from both a labor and equipment standpoint “without materially changing the capital outlay that we do today.”

“For us, it’s a real game-changer,” Goei said, noting that Altice USA will also apply the knowhow and the experience with FTTP in Europe to the new project and leverage the advancements made by Altice Labs, which is based in Portugal.

RELATED: Altice Group Launches R&D Lab in Portugal

Altice, Goei added, has also been able to implement price points with equipment suppliers that generate material capital budget savings, and has also been able to generate savings by dropping projects that the company didn’t find useful for its Suddenlink and Optimum properties.

RELATED: Altice Halts Freewheel Sales

"All of that money is getting plowed back into this fiber project,”  Goei said. “We think we're being very efficient about using our savings and redeploying it into foolproofing our network for the long term.”

He said Altice USA’s plan rides on some critical economic tailwinds because it will be extending its HFC network, which already has fiber built to the node, rather than having to build an end-to-end network such as Verizon did with FiOS and Google Fiber has been struggling to pull off.

RELATED: Google Fiber Pauses Expansion Plans, Laying Off Some Staff

Update: Jeff Heynen, analyst with SNL Kagan, weighed in on Altice's plan on Twitter Wednesday, noting that the operator will benefit from the concentrated nature of the Optimum footprint, while also believing that other MSOs might follow suit: 

Altice won't be the only one. Easier to do FTTP in Cablevision footprint. https://t.co/hp8jEDigiI

— Jeff Heynen (@jeffheynen) November 30, 2016

Goei, who believes Altice USA’s preponderance of aerial plant will also help with the speed and cost of deploying FTTP, also expressed confidence that the newly proposed all-glass architecture will provide an economic boost in other ways, hopeful that the resulting network will require less maintenance and truck rolls and deliver services that improve customer satisfaction.

One major challenge Altice USA will seemingly face is how to deploy its FTTP network without causing service disruptions. “We’re very focused on making sure that the client transition is seamless,” Goei said.

Ahead of its coming FTTP upgrade, Altice has been leaning on DOCSIS-based technologies to deliver faster speeds on HFC. Suddenlink’s legacy, 1-Gig focused Project Gigaspeed rollout has reached nearly half of Suddenlink’s service area. More recently, Altice USA launched a 300 Mbps residential broadband service in its Optimum new York metro area footprint, where the MSO tangles with Verizon FiOS.

RELATED: Suddenlink Expands 1-Gig Reach

Altice USA Eyes ‘Full-IP’ Video Future

The FTTP rollout might also have an impact on Altice USA’s video service. RF-over-Glass (RFoG), now an SCTE standard, enables MSOs to deliver legacy QAM-based video services over FTTP networks, but it’s not clear if Altice intends to use it.

RELATED: Arris Touts Progress On DOCSIS 3.1, RFoG

Goei wouldn’t outline Altice USA’s video service roadmap, but allowed that the operator will likely move to a hybrid approach. “Fundamentally the idea is to go full-IP,” he said.

In France, Altice has already introduced a next-gen set-top/gateway initially targeted for FTTP networks that supports 4K, bakes in eight tuners and is outfitted with a new UI, a 500 GB hard drive and integrated NFC, Bluetooth and 802.11ac WiFi,  but has not announced if it would extend that part of its video game plan to the U.S.

It’s also unknown if Altice’s reported investment in Layer3 TV, the Denver-based next-gen cable operator that runs video on IP, will factor into the MSO’s future video plans.

RELATED: Layer3 TV: A Different Kind of Animal

Altice USA shed about 40,000 pay TV customers in the third quarter, an improvement over the 42,000 it lost in the prior year. The biggest improvement was at its Optimum unit – the former Cablevision Systems – which lost 28,000 pay TV customers compared to 33,000 in 2015. At its Suddenlink unit, pay TV losses reached 10,000, slightly ahead of the 9,000 it shed in the prior year.

Broadband additions for the period were flat at Optimum and 17,000 for Suddenlink.   

Overall revenue at the U.S operation was up 2.7% at Optimum, its best Q3 since 2014, and rose 6.7% at Suddenlink. Cash flow increased 33% at the Optimum unit and 20% at Suddenlink in the period.

Altice N.V. purchased Suddenlink in December 2015 and Cablevision in June 2016.  The company said its integration plans are going as expected, with the focus at Suddenlink on customer retention and reducing churn. At the Optimum systems, the percentage of customers taking high-speed data service over 100 Megabits per second increased to 40% in the period from 13% in the second quarter, following its network upgrade to offer speeds up to 300 Mbps across the footprint. 

“We are extremely pleased to see our focus on execution is paying off, delivering substantially better revenue and financial performance across all our major markets including US, France and Portugal,” Altice N.V. CEO Michel Combes said in a statement. “The efficiency savings we are achieving are fueling higher investment in infrastructure and content, and improving customer experience, which is now driving the growth of our business. Altice has fully transformed into a leading transatlantic, converged telecoms and media company and quarter after quarter we find ourselves in a stronger position.”

Cable operators appear poised for a strong third quarter on the heels of Comcast’s stronger-than-expected results, with satellite TV continuing to slide.

Comcast outpaced most analysts’ expectations by adding 32,000 basic video subscribers in the third quarter — its best Q3 showing in a decade and well above consensus estimates of about 1,000 customer additions.

The performance helped to solidify what many analysts who follow the sector have been saying for a while: Cable is king, for now.

Comcast’s performance in light of a declining overall pay TV customer base shows cable is taking back market share. According to MoffettNathanson principal and senior analyst Craig Moffett, that performance was largely driven by the success of its X1 platform — now available in 45% of its footprint — and continued strength in broadband. Comcast added 330,000 broadband customers in the third quarter, its best Q3 performance in eight years.

CHARTER, ALTICE ON DECK

While other operators aren’t expected to fare quite as well, they are expected to show improvement on both the video and broadband front.

Charter Communications and Altice USA, parent of the former Cablevision Systems and Suddenlink Communications, are expected to release their Q3 results on Nov. 3 and Nov. 10, respectively, the latter as part of Altice N.V.

Analysts generally expect marginal video-subscriber losses for Charter — ranging from about 20,000 to 30,000 customers — but with momentum building later in the year.

The same holds true for Altice USA. Pivotal Research Group CEO and senior media & communications analyst Jeff Wlodarczak expects strong cash-flow growth from the U.S. cable unit, fueled by cost efficiencies, a $5-per-month price hike for data service at Suddenlink and continued cost-cutting by the Optimum (formerly Cablevision) operations.

Wlodarczak estimated that revenue-generating units, a combination of voice, data and video customers, will decline by 25,000 for Suddenlink and by about 30,000 for Optimum.

At Charter, Morgan Stanley media analyst Ben Swinburne expects more churn as customers roll off of legacy TWC promotional pricing, leading to a loss of about 34,000 video customers in Q3.

Charter will add about 390,000 broadband customers in the quarter, well above the prior period gain of 236,000 subscribers.

Charter continues to integrate Time Warner Cable and Bright House Networks operations — the deal closed in May — and Swinburne believes that after a slight early hiccup, a strong growth trajectory should continue. “We continue to believe Charter shares offer investors a rare levered equity growth story, particularly given the visibility into that growth and capital allocation for a company of its size,” he wrote.

Swinburne said recent results — in the second quarter, video losses improved to 152,000 from 170,000 in the year-earlier period, and revenue and cash flow grew by 6.6% and 9%, respectively — reaffirms his view that Charter “can successfully implement the strategy it has proven out over the last four years on its now-larger footprint.”

Overall, cable should have a good quarter on the subscriber front. Swinburne estimated that MSOs should collectively lose about 20,000 video subscribers, amended from the 52,000 he predicted earlier when he believed Comcast would lose 8,000 customers in Q3.

If cable is to be the king for the period, though, Telsey Advisory Group media analyst Tom Eagan pegs Dish Network as a pauper.

DOWN ON DISH NETWORK

Dish is coming off a string of subscriber losses — it shed 28,000 in the first quarter and 281,000 in Q2 — and the third quarter is expected to be no different. Eagan expects Dish to shed about 125,000 customers in the third quarter, ending the period with 13.3 million subscribers.

“Dish’s business model is proving increasingly unsustainable,” Eagan wrote in a research note. While cash flow will likely increase 20% for the year, that is due more to easy comparisons with 2015. Even Sling TV, which is expected to end the year with about 700,000 customers, according to Eagan and has been the main focus of the company, could be impacted by AT&T’s over-the-top offering, DirecTV Now. AT&T said it plans to launch DirecTV Now in November at $35 per month for more than 100 channels. Sling TV sells at $20 per month for more than 25 channels.

Swinburne was equally down on Dish’s prospects — he predicted it would lose about 155,000 subscribers in Q3 and estimated it would shed between 650,000 and 660,000 subscribers per year through 2019, partially offset by average annual gains of 240,000 to 245,000 customers for Sling TV.

“We expect these trends to continue over the medium-term, particularly given cable’s investment in its product and the likely launch of new offerings in 4Q16 (DirecTV Now) and 1H17 (Hulu),” Swinburne wrote.  

New York – Altice NV CEO Michel Combes told an industry audience Wednesday that the acquisitive Dutch telecom company won’t be flexing its M&A muscles in the U.S. for the near term, instead focusing its energies on executing the business plans of its existing assets.

Altice made a splash last year with the $9.1 billion purchase of mid-sized cable operator Suddenlink Communications, and further extended its U.S. aspirations with the June purchase of Cablevision Systems for $17.7 billion.

At the Goldman Sachs Communacopia conference here, Combes said that significant U.S. M&A activity is “a bit over” for the time being as Altice focuses on execution and integrating its U.S operations.

Altice USA CEO Dexter Goei said that the transition is already happening. At the former Cablevision, investments made in customer service, the Optimum brand and quality products are already paying off in improved subscriber metrics. The New York area systems lost about 2,000 video customers in the second quarter – its best performance in four years – and Goei said that in 2017 the unit should continue to recapture market share. At the former Suddenlink, its Operation GigaSpeed high-speed data initiative has helped drive broadband growth, although tough competition from satellite TV service providers has eaten into video growth. Providing a better video experience could help reverse that trend, as other larger operators have shown, Goei added.

“We’d like to do that as well,” he said.

Altice USA is focusing on increasing broadband speeds in all of its markets – Goei mentioned that prior to the purchase, half of Optimum customers wanted 25 Megabits per second and the other half wanted 50 Mbps. Now, he said, Optimum is phasing out 25Mbps – it has a 5 Mbps low tier service and a 60 Mbps service – and about 40% of new customers want 100 Mbps speeds.

At Suddenlink, which has a 50 Mbps flagship service and 100 Mbps and greater tiers, Goei said that 40% to 45% of gross additions are in the higher tiers.

Altice USA CEO Dexter Goei said the fourth largest cable operator in the country will take a hard look at programming costs, including replacing more expensive networks with cheaper channels if customers value them less.

Goei pointed to Suddenlink Communications, which Altice purchased in December for $9.1 billion. Suddenlink dropped the Viacom suite of channels almost two years ago, with “relatively minimal” subscriber impact on the company.

Suddenlink replaced many of the Viacom channels with less expensive fare like Comedy.TV and others.

Goei said what Altice USA is trying to do is “make sure we’re allocating capital appropriately relative to the customer experience and viewership of the channel.”

That includes evaluating and considering lower priced alternatives to some channels and paying high prices for those that are popular with viewers.

“Given that it’s such a large part of our cost structure and it continues to grow at a very rapid pace, where we think that there are alternatives for our customers, we will look at them or where we think there is great programming to be had and a price to be paid, we will do that for our customers.”

RELATED:Goei, after Altice closes on Cablevision, says cost-saving changes 'will take time.'

According to Altice, the U.S. cable businesses contributed about 31% of Altice’s total Q2 revenue and 41% of its total free cash flow. On an individual basis, the former Cablevision operations, now called Optimum, reported a revenue increase of 2% while improving basic video customer losses to 2,000 in the period. It was Optimum’s best video subscriber performance in four years.

On a conference call with analysts, Goei said that the seven-week long Verizon strike (Cablevision has the highest exposure to Verizon than any other operator) played a role, even without the work stoppage “it would have been a terrific quarter.”

At Suddenlink, revenue was up 5.7% and video losses improved to 23,000 in the period.

While it keeps its eye on programming costs, Altice said it is also saving money on salaries.

Goei said that about 120 former Cablevision workers submitted their resignations after its deal to purchase the company closed in June, including between 40 and 50 people in senior positions and the 10 most highly compensated executives. Losing those executives – which include members of the once-ruling Dolan family – will save the company about $50 million to $100 million on an annualized basis, Goei said.

That could help Altice’s plans to shed $900 million in costs from the company in the next four to five years. Altice founder Patrick Drahi has said in the past that he believed U.S. media executive were paid too much, while Goei noted that about 300 Cablevision executives were paid in excess of $300,000 per year. 

Altice said it has added Paul Haddad to its management team as global chief data officer, where he will head up the creation of an analytics practice across the company’s telecom and media subsidiaries.

Additionally, he will head up the launch of the company’s local and global advertising solutions and “drive the development of innovative products and pricing strategies in each of our territories,” the company said.

Haddad, who reports to Altice Group CEO Michel Combes and Altice chairman and CEO Dexter Goei, will also continue to expand Altice USA’s advanced data analytics business.

Haddad had been serving as SVP and GM, advanced data analytics at Cablevision Media Sales. Altice closed its acquisition of Cablevision Systems in June.

“Paul has a deep expertise in how data analytics and advanced advertising can maximize media opportunities for clients across all platforms, and he is the ideal executive to bring these solutions to our businesses across the globe,” Combes said, in a statement.

“As a proven leader in the evolving advertising and data insights landscape, we are enthusiastic that Paul will continue to drive the ongoing development of the U.S. data analytics business,” Goei added.

Haddad, Altice said, brings it 20 years of entrepreneurial and multi-national experiences in the fields of big data analytics, advanced advertising, programmatic, optical networking, wireless backhaul, and network management. Haddad is also late of Concurrent Computer Corp.,  Solusia Technologies and Nortel Networks.

He holds an electrical engineering degree from Concordia University (Montreal, Canada), speaks five languages, and holds multiple patents in the advanced data & information management systems, as well as bandwidth trading domains. 

Altice and Paulson Co. are among the unannounced investors in Layer3 TV, the Denver-based, next-gen cable operator that has already raised about $100 million, according to Variety.

Layer3 TV declined to comment on its financing activities, but Variety noted that Altice’s investment comes way of its acquisition of Suddenlink Communications, though the publication said Altice and Layer3 TV  have “been quite cozy with each other for some time.” Altice, which closed its $17.7  billion purchase of Cablevision Systems last month, also declined to comment on its relationship with Layer3 TV.

Industry sources said there’s been some external interest in joining the investment mix at Layer3 TV, and that there could be some interest from those that bring strategic value to the emerging MVPD. Layer3 TV’s announced investors include Evolution Media Partners and North Bridge Venture Partners.

Layer3 TV has been tight-lipped about its specific go-to-market strategies, though it appears to have teamed up with Suddenlink for the trial of a service under the “Umio” brand in the MSO’s territories of Midland and Kingwood, Texas.

In addition to looking at deployments in which Layer3 TV could ride the distribution rights of another operator (such as it apparently did for the  Suddenlink trial), the emerging MVPD has also been developing its own pay TV service by locking in its own distribution deals with programmers and other content providers, per industry sources. Those multiple approaches would expand Layer3 TV’s deployment options.

Layer3 TV confirmed that it will “soon” launch service in the Chicago market, home to incumbent MVPDs Comcast, RCN and AT&T.

In addition to Chicago, Layer3 TV has been seeking “installation supervisor” positions in Houston, Denver and Alexandria, Va., which fuels speculation on other markets that Layer3 TV might be targeting for future service launches.

According to Variety, Layer3 TV intends to launch a service in Chicago under its own brand.

A lingering question is how Layer3 TV will get service into the home via the so-called “last mile.”

According to one industry source, one way Layer3 TV intends to do this is by securing capacity on the cable operator’s IP network paired with a revenue sharing agreement with that MSO. However, Layer3 TV, which has been marketing itself under “The New Cable” tagline, would in essence provide the market with a fresh, alternative pay TV provider to consider because Layer3 TV would be the one installing, operating and providing customer care for the service. Layer3 TV will use electric-powered BMW i3 vehicles in its service fleet.

Though Layer3 TV hasn’t said much about how it will price and market its services, its web site does shed some light on some of the features it will provide in its including no annual contracts, 4K-ready wireless set-tops, a lineup of more than 150 HD channels, personalized profiles for each viewer in the home, and a DVR that can record up to eight shows at once, with storage ranging from 1 terabyte to 3 TB. An image of the Layer3 TV remote also shows a button for a microphone, which suggests it will support voice navigation.

Layer3 TV CEO Jeffrey Binder told Wired earlier this year that Layer3 TV would be launching in Chicago and a “couple of other major cities on the East and West coasts.” The company also told the pub that it would forge deals with “large infrastructure companies” for the last mile links into customer homes.

Charter Communications said it has hired David Ellen as senior executive vice president. The former Cablevision Systems executive will be in charge of corporate functions, including programming, news and sports networks, strategic policy development, regulatory compliance, human resources, communications and security.  He will also oversee the legal support for those units.

Ellen will be based at Charter's Stamford, Conn., headquarters and report to chairman and CEO Tom Rutledge. 

"David brings a wealth of industry experience and expertise to Charter and a history of innovative thinking and successful execution," Rutledge said in a statement.  "His grasp of the component pieces of our business – including how our business strategy around programming and content must be developed in the context of a complex and changing environment – and his proven senior leadership skills will make him an invaluable asset to Charter as we continue to grow," he added.  "We couldn't be more excited about David's arrival."

At Cablevision, Ellen had served as general counsel at Cablevision until its sale to Altice N.V. in June. At Cablevision he was responsible for helping the CEO guide all aspects of Cablevision's business and worked closely with engineers and product developers on several initiatives, including leading the company's successful legal defense of its cloud-based DVR product as well as the legal strategy supporting the rollout of in-home streaming of the company's entire cable service to IP-enabled devices.

Prior to Cablevision, Ellen served in executive roles as deputy general counsel at IAC and general counsel of Eureka Broadband, a private New York-based telecommunications company.

Ellen also was a special counsel at the Federal Communications Commission working on the implementation of the Telecommunications Act of 1996 as well as a law clerk for Judges Stephen Breyer and Judge Ruth Bader Ginsberg when they were on the U.S. Court of Appeals and Justice Sandra Day O'Connor during her time on the U.S. Supreme Court.

Altice “has given Cablevision the blessing to close Freewheel,” The Wall Street Journal reported in a story about cost-cutting efforts that are underway at the operator, which has also swallowed up Suddenlink.

Altice USA has been asked for further comment and if and when Freewheel might be shut down. However, the Freewheel site shows that it’s still open for business, with service limited to the Android-powered Motorola (now part of Lenovo) Moto G smartphone. The number to order service (866-580-1619) was also active as of Tuesday evening. 

But the Twitter handle that’s been used for Freewheel (@freewheelwifi) is no longer active. The same is true of  what used to be Freewheel's Google+ page, YouTube channel and Instagram account.

If Freewheel goes away, it’s hard to say how many consumers will be torn up about it, since Cablevision has never said how many people bought in. Cablevision has been selling the Moto G alongside a service that runs $9.95 per month for consumers who take its MSO’s high-speed Internet service, and $29.95 per month for all others. 

But Cablevision was bullish on its prospects when it launched. Though Freewheel’s Instagram account appears to be shut down, photos taken at the service’s launch party still live on.

And Altice USA has posted a corporate video. Take a look:

“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,” Altice USA chairman and CEO Dexter Goei told Multichannel News.

Altice USA chairman and CEO Dexter Goei isn’t looking to make any immediate major changes as its $17.7 billion purchase of Cablevision Systems comes to a conclusion.

Instead, the head of the fourth largest cable operator in the country with about 4.6 million subscribers in 20 states is going to take his time in whittling two medium-sized operators – Altice purchased 1.5-million subscriber Suddenlink Communications in December – into the lean, efficient machine that Altice N.V. founder Patrick Drahi envisioned when he first agreed to buy the cable company back in September.

Goei, who gave up the CEO spot at Altice N.V., the European cable, telecom and wireless magnate, to take the top spot at the U.S. cable operations, said Job 1 will be to continue to intertwine the various Suddenlink and Cablevision management teams 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 are using the same suppliers and equipment. That, he said, should take the next six months.

Altice USA has named some of its top officers already. 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 as head of government affairs; Media Sales president Ed Renicker, chief accounting officer Victoria Mink; and News 12 Networks president Patrick Dolan. Altice USA named former Comcast/NBCUniversal exec Michael Schreiber chief content officer last week.

On the operations side, former Cablevision SVP of infrastructure engineering Pragash Pillai will head up the Optimum operations, while David Gilles, former Suddenlink SVP 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 CTO for the entire company.

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

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 said.

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 time line, 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 its 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 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 that 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 NYS PSC 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. Despite the potentially onerous regulatory environment, Goei said he wasn’t concerned. As a European telecom service provider, Altice is all too familiar with sometime overzealous regulatory agencies.

“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.

Goei himself has a an interesting background – the son of a Beverly Hills obstetrician, he received a degree in Foreign Service from the Edmund A. Walsh School of Foreign Service at Georgetown University in 1993. He joined Altice in 2009 after 15 years as an investment banker with J.P. Morgan and Morgan Stanley.

Drahi also is replacing another legendary entrepreneur, Cablevision founder and chairman Charles Dolan. As one of the founding members of the modern cable industry, Dolan had his hand in practically every major development in the cable business in the past 50 years, from the formation of Home Box Office to the advent of broadband. But as acquisitions and consolidation has taken hold, that 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. 2016 was a year of integration and operation. Thereafter we’ll see. It would be an outright misdirection to tell you we won’t acquire something again. But we are not focused on that today.”

The New York State Public Service Commission has approved, with conditions, Altice, N.V.’s $17.7 billion purchase of Cablevision Systems, the final hurdle in a deal that was announced in September.

The PSC unanimously approved the deal with conditions, including providing low cost broadband to lower income families, and customer service and job protections.

Altice, which purchased Suddenlink Communications for $9.1 billion in December, had announced the Cablevision purchase in September. With the addition of Cablevision’s 3.1 million customers in New York, New Jersey and Connecticut, Altice has about 4.6 million customers in the United States.

The New York PSC was the final hurdle for the deal to clear – the Federal Communications Commission quietly approved the deal in May, the New Jersey Board of Public Utilities approved it later that month.

According to the PSC, the conditions on the deal represent about $243 million in benefits to New Yorkers, including promises to upgrade the broadband infrastructure, creating a new low-income broadband program, building out its network in unserved areas and providing about $40 million in additional benefits by participating in a new federal broadband affordability program.

Altice has pledged to triple the speed of its network to 300 Mbps by the end of 2017, increase high-speed broadband access in rural and urban communities in its service territory, provide new low-income broadband offerings and deliver free broadband Internet access to 40 anchor institutions in unserved or underserved areas. The company also will provide a robust storm-resiliency initiative for Long Island and the rest of its service territory. The company also has pledged not to lay off any custoimer-facing employees for four years.

“As a result of Governor Andrew M. Cuomo’s strengthening of our oversight of the sale of cable companies, we were able to put in place rigorous conditions on the transaction to ensure it was in the best interest of customers and the State as a whole,” said Commission Chair Audrey Zibelman in a statement. “With our decision today, we will see a significant investment in New York’s communication landscape that improves quality, reliability, speed and affordability for Cablevision’s customers.”   

With New York regulators’ approval in hand, Altice said it is on track to close the deal by the end of June.

“Altice is pleased to have obtained approval from the New York State Public Service Commission for the acquisition of Cablevision,” Altice said in a statement. “This follows approvals received from the Federal Communications Commission, the Department of Justice, the New Jersey Board of Public Utilities and 67 local municipalities. We remain on track to closing the transaction as expected.”

Altice USA named former Comcast executive Michael Schreiber as its chief content officer, effective immediately.

Altice USA is the U.S. arm of European telco Altice N.V. The company completed its $9.1 billion purchase of Suddenlink Communications in December and is on track to close its $17.7 billion purchase of Cablevision Systems by the end of the second quarter.

In his new role, Schreiber will be responsible for Altice USA’s programming-related developments, negotiations, and agreements covering all content platforms and will report to co-president and chief financial officer Charles Stewart. After the Cablevision deal closes, Altice USA will be the fourth largest cable operator in the country.

“Michael is an industry leader with a proven record of success who shares Altice’s commitment to providing customers with the best content and superior service,” said Altice CEO and Altice USA executive chairman Dexter Goei in a statement. "We are thrilled to have Michael head our U.S. programming and content team, and we are confident that his forward-thinking approach will ensure that we deliver compelling content to our customers across the devices of their choice.”

Schreiber served as senior vice president, content acquisition for Comcast, where he led the execution of new media and digital content deals. Prior to his role at Comcast, Schreiber worked at NBCUniversal, most recently as vice president, business development, digital distribution, where he assisted in the founding, development and launch of Hulu.