Fueled by an accelerated fiber rollout across its footprint, Altice USA, which has endured four consecutive quarters of broadband subscriber losses, should turn the corner in Q4 and beyond, outgoing CEO Dexter Goei told an industry audience Tuesday.

But that means that Altice USA investors will likely see continued declines in Q3. At the Goldman Sachs Communacopia + Technology conference in San Francisco, Goei said while the company has made strides in deploying its fiber network -- it expects to finish 2022 with up to 2.3 million homes passed with the technology -- it is still seeing customer declines in its former Cablevision and Suddenlink footprints. 

In Altice’s former Cablevision systems in metropolitan New York City, gross additions are lower, there is less move activity and churn levels are low, but the company also is competing against a telco -- Verizon Communications -- that has been extremely aggressive on price. In its Suddenlink markets mainly in the Midwest, gross addition activity is high but churn is high, especially in markets where it is being overbuilt.

“We’re still losing subs in both markets but for different reasons,” Goei said. “We feel good about the fourth quarter turning around and looking better next year.”

Altice USA lost about 3,000 subscribers in 2021 -- the only major cable operator to do so -- and shed more than 50,000 broadband customers in the first half of this year.  

Altice began accelerating its fiber rollout last year, with a goal of passing 6.5 million homes by 2025. At the Goldman conference, Goei said the company expects to end 2022 with 2.2 million to 2.3 million homes passed with fiber (an increase of about 1 million homes), and should add another 1.6 million to 1.8 million households by the end of 2023. 

While other cable operators have seen an increase in competition from fixed wireless access providers from telcos, Goei said most of Altice USA’s telco competition is replacing slower DSL lines with fiber, hence the acceleration of its own fiber buildout plans. But he shared his peers’ disdain for fixed wireless access (FWA), agreeing with some pundit predictions that the technology will reach a performance and penetration plateau in the next two or three years.

Goei announced his intention to step down as CEO earlier this month, and will become executive chairman of Altice USA on October 3. In his place the company named Comcast executive Dennis Mathew as CEO, also effective October 3. Mathew has 17 years of experience with Comcast, most recently as senior VP of its Freedom Region (Southeast Pennsylvania, New Jersey and Northern Delaware). He earlier served as senior VP for its Western New England Region (Connecticut, Vermont, Western Massachusetts and areas of New York and New Hampshire) and has extensive experience in running cable businesses. 

Goei said at the Goldman conference that his main motivation for stepping down was a desire to return to Europe, where he spent his childhood and most of his professional career, with his family. He added that he notified the Altice USA board of his decision about a year ago, starting the search process for a replacement about six months ago. He believes he’s leaving Altice USA in capable hands. 

“I interviewed many, many people during the process; Dennis fits the bill across the board,” Goei said, adding that Mathew has a proven track record in operations, running one of Comcast’s most high-profile regions (the Freedom Region) and will fit in well with the Altice team. “He’s just a great guy, a team player, will focus on the prize and is someone who would do very well with the executive team at Altice USA.” ■

After four straight quarters of broadband subscriber losses, a 38% decline in its stock price and the possible sale of its former Suddenlink Communications systems, Altice USA said it has named a new CEO -- Comcast executive Dennis Mathew -- while its longtime chief executive Dexter Goei becomes executive chairman.

The move will become effective as of October 3. Mathew is a 17-year veteran of the telecom industry, and has served in several operational roles at Comcast over the years. According to Altice USA, Mathew was most recently senior VP of its Freedom Region (Southeast Pennsylvania, New Jersey, Northern Delaware) responsible for strategic, financial, and operational performance at those systems. He earlier served as SVP for its Western New England Region (Connecticut, Vermont, Western Massachusetts, and areas of New York and New Hampshire) and has extensive experience in running and transforming cable businesses.

“I am honored to accept the role of CEO at this important juncture for Altice USA,” Mathew said in a press release.  “As Altice USA advances its position as a converged fixed and wireless player, I see immense potential to further connect with and serve customers in new ways while elevating the company as the connectivity provider of choice.  I look forward to leading such an innovative company that has the right vision and long-term strategy centered on investments in fiber infrastructure and a superior customer experience.”

Mathew will be based in Altice USA’s Long Island City, New York headquarters.

“I am pleased to welcome someone of Dennis’ caliber and mindset to Altice USA,” Altice USA founder and chairman Patrick Drahi said in a press release.  “He has an impressive track record at Comcast, driving transformation and success in highly competitive markets and redefining the role of telecommunications services for customers through a superior service experience, all of which will serve us well.  With our fiber network deployment well underway, I am confident that Dennis is the right leader to build on the momentum we have made as we bring the most advanced fiber broadband services to our customers across the country.  Dennis’ leadership approach, along with his commitment to our people, our customers, and our communities, will have a tremendous impact on Altice USA today and into the future.”

Goei, who intends to return to Europe with his family and helped in the selection of a new CEO, was Altice USA’s first CEO, taking over the company that was formed when European telecom giant Altice N.V., burst on the U.S. cable scene after its purchases of Suddenlink  Communications and Cablevision Systems. Goei, a longtime Altice N.V., executive, was tasked with implementing its parent’s strict cost cutting strategy, steering the operations to an initial public offering in June 2017. 

For a while, the strategy worked -- in 2019 Altice USA was one of the top performers in the cable business. But a footprint that was largely saturated -- its New York systems had some of the highest broadband penetration in the industry -- stiff competition from Verizon Fios (which operated in about two-thirds of its footprint) and the pandemic took its toll on subscriber growth. Altice USA lost 13,000 broadband customers in 2021 -- the only major cable operator to do so -- and has lost more than 50,000 high-speed data customers in the first half of 2022.  

In August, Goei acknowledged that the company was seeking a buyer for its Suddenlink systems, with some reports speculating that it expected $20 billion from a sale.  While no deal appears imminent, most analysts believe that Suddenlink will attract considerably less. .   

Drahi praised Goei for his stewardship of the assets, adding that the executive “has effectuated a business and cultural transformation at Altice USA over the past seven years, building the company into what it is today with passionate employees who are committed to our customers and to each other.  Given his intention to return to Europe with his family, Dexter has been involved in our search for a new CEO and I am grateful for his partnership to ensure Altice USA has the best leader to advance the company into its next phase of growth.  I have the highest respect for Dexter as a business partner and confidant and am pleased that he has agreed to serve as Executive Chairman of the Board of Directors while also supporting Dennis in his transition to CEO and working on key strategic initiatives.”

As executive chairman, Goei will support Mathew in the transition and work on key strategic initiatives. 

“Leading Altice USA has been the most rewarding experience in my career,” Goei said in a press release. “From our fiber network deployment and launch of multi-gig fiber broadband offerings to our diversity and inclusion programs and local community engagement efforts, I could not be prouder of what we have accomplished together thanks to the leadership team and the thousands of dedicated employees across the country who enthusiastically serve our customers and communities every day.  In the months ahead, my focus will be on ensuring a smooth leadership transition and working closely with Dennis on our key strategic initiatives.  I welcome Dennis to the Altice USA family and have the utmost confidence in him as we continue to accelerate and deliver on our fiber strategy and embark on the next chapter of our story.”■

About two weeks after a Bloomberg report that said Altice USA had hired investment banker Goldman Sachs to seek a buyer for its Suddenlink systems, company CEO Dexter Goei confirmed that a sales process is “going on,” but declined to offer more details. 

Suddenlink has about 1.8 million subscribers in 17 states in the Midwest, south and western parts of the country. Altice is also in the process of rebranding the Suddenlink systems under its Optimum brand.

Goei’s confirmation came during a conference call with analysts to discuss Q2 results.

News of the sales process confirmation drove Altice USA stock -- which had been down about 2% in after-hours trading earlier -- up nearly 9% to $10.50 each in after-hours trading.  

“We can confirm there is a process going on,” Goei said on the call. “I don’t think we want to comment any further than that, much like we did when there was a lot of chatter around Lightpath. We’ll update you and the rest of the market when we deem it appropriate to update. But at this time there is nothing further to talk about.”

Altice sold a 49% interest in its Lightpath telecom unit in December 2020 to Morgan Stanley Infrastructure Partners in a deal with an implied value of $3.2 billion. 

The value of Suddenlink would depend on the buyer. While Bloomberg had said the systems could sell for as much as $20 billion, implying a deal multiple of 14 times cash flow, many believe the systems would sell for less. 

Goie said the company has “received a lot of reverse inquiries for all or parts of the Suddenlink assets” but declined to speculate on potential buyers or prices. 

“I don't think we want to get into a debate,” as far as the financials or operations of the systems, Goei said. “The numbers have been out there historically on the assets, so you can probably figure out what the numbers look like.” ■

Shares in Altice USA soared Thursday (July 21) after a report in Bloomberg News said the mid-sized cable operator was seeking a buyer for its Suddenlink Communications division that could fetch as much as $20 billion.

According to Bloomberg, Altice USA is working with Goldman Sachs on a potential deal, citing unnamed sources.

Altice officials declined to comment on what they called "rumors."  

Altice USA CEO Dexter Goei opened the door ever so slightly to a sale back in May at the MoffettNathanson Media & Communications Summit, when he didn’t rule out a potential deal. 

“Suddenlink in itself is a great asset, great growth matrices, under-penetrated markets, less competitive areas, despite that it’s very rural,” Goei said at the conference. “But strategically, it's not a footprint that makes you sit there and say ‘Wow, that’s the most strategic footprint out there.’ So are we sellers or restructurers of certain of our assets in other areas outside of Cablevision? We're always open to listening to people out there if it makes sense for us to trade, swap, sell certain assets.”

Altice USA shares rose more than 40% in afternoon trading July 21, priced as high as $13.17 each, up 43.5% or $3.99 per share. Trading was halted briefly by the NYSE because of the spike, but was resumed later in the day. The stock closed at $11.24 each on July 21, up 22.5% or $2.06 each. 

Nevertheless, the gains have basically erased year-to-date declines for the shares — they were down 43% since December 31 prior to Thursday — fueled by broadband subscriber losses and threats of more intense pricing competition from telco Verizon Communications.

Altice USA has the greatest exposure of any operator to Verizon’s Fios product: About two-thirds of its Optimum footprint in New York, New Jersey and Connecticut competes with the telco. While its Suddenlink footprint is virtually Fios-free, it faces increasing competition from fixed wireless and fiber builds from large and small providers.  

Suddenlink operates primarily across 17 states in the Midwest, southern and western parts of the country. Although Altice USA does not break out specific data for Suddenlink, in a research note Wells Fargo Securities analyst Steven Cahall wrote that he estimates the unit has about 1.8 million customers and passes about 3.9 million homes. He also estimated that 2022 cash flow could be about $1.4 billion. At a $20 billion take-out price, that implies a 14 times cash flow multiple, which would be considerably higher than recent deals. 

Cahall had previously speculated in May that Altice USA could sell Suddenlink at a 7-to-8 times cash flow multiple, which would imply a $12 billion to $13 billion price tag. But if the Bloomberg report is correct, Cahall wrote that his past enterprise value for the company “was far too low.”

In a research note in September 2021, MoffettNathanson senior analyst Craig Moffett assigned a 12 times cash flow multiple to an upgraded Suddenlink, in line with past deals like Cable One’s purchases of Fidelity Communications (11.7 times) and Hargray Communications (17.2 times); adding that any possible buyer would not have as many cost-cutting opportunities as Cable One in those prior deals.

The list of possible buyers could run the gamut of private equity and strategic players, including Cable One, Breezeline (formerly Atlantic Broadband), Stonepeak Infrastructure Partners, TPG and others.    

Whatever the price it is likely to be far in excess of the $9.1 billion Altice paid for Suddenlink back in 2015. That purchase was the international telco’s first in the U.S., and led to its $17.7 billion purchase of Cablevision Systems in 2016.

While Altice was able to cut a lot of costs out of the two companies, more recently it has had trouble gaining broadband customers, reporting a loss of 13,000 high-speed data customers in Q1, after shedding about 3,000 broadband subscribers in 2021.

In a note to clients Thursday, Moffett said while the idea that Altice would sell Suddenlink isn’t that surprising — equity values across the cable landscape are short of their intrinsic values — he was surprised they would attempt a sale while they’re still publicly traded. Altice shares have been on a steady decline over the past several months -- prior to today (July 21), the stock was down 68% since September 3, 2021. That had some speculating in the past that Altice management could take the company private.  

“A large part of our recent reticence in taking a more constructive stance on the company despite its appealing valuation has been our fear that majority owner Patrick Drahi would be much more likely to take the company private first, potentially at only a modest premium, in order to capture the upside of a Suddenlink sale for himself,” Moffett wrote Thursday. ■

Altice USA named former executive VP of operations Pragash Pillai as its new executive VP and chief technology & information officer, replacing Philippe Le May, who becomes a special advisor to the company.

In a memo to employees last week, Altice USA CEO Dexter Goei said Pillai would assume the role of chief technology & information officer immediately, as well as continuing to lead the company’s operations organization.  

Goei added that PiIlai has a strong operations and engineering background and has always worked closely with the CTIO organization.

“As we look to accelerate our fiber deployment over the next several years to millions of additional homes, having both the CTIO and Field Operations organizations under Pragash’s leadership will streamline our fiber build and enable us to meet that goal efficiently,” Goei said in the memo. 

Altice USA stepped up plans to build out its fiber network across its footprint last month, pledging to pass 6.5 million homes with fiber by 2025, after reporting disappointing Q4 broadband results. Late last year it announced a change in its strategic direction, shifting several management positions and planning to rebrand the company under the Optimum name.  

Pillai has been with Altice USA and its predecessor Cablevision Systems since 2010 in various high-level operations, customer service and technology roles. Most recently he was executive VP of operations at the company and formerly served as executive VP customer experience and regional market strategy. He can trace his cable roots back to 1999 -- when he served as VP of advanced engineering, digital video for Charter Communications -- and earlier was senior VP of engineering and technology at Bresnan Communications.

Le May joined Altice USA in 2017, shortly after it purchased Cablevision Systems.  Le May signed on with a unit of Altice USA’s former parent Altice N.V. -- Altice France -- in 2006 and prior to that was head of network communications at Lyonnaise Communications.

“During Philippe’s time at Altice USA, he has been instrumental in the execution of our network and technology strategy, including the expansion of our fiber network, enabling 1 gigabit speeds across most of our footprint, and the integration of Morris and Service Electric infrastructure into our network, among other accomplishments,” Goei said in the memo. “I am grateful for Philippe’s leadership and his work to build a resilient, reliable network that enables our customers to live life connected.” ■

 The spring conference season is upon us, a time of new beginnings, when nature and CEOs of major media companies show the world just what they have been hiding under their drab little husks for the past four months. For nature, the metamorphosis bursts forth in an explosion of color, new life and possibilities. For cable CEOs, it comes in a series of presentations and fireside chats with the investment community to prove their businesses aren’t going to die this year.

Investors have been lining up for cable’s funeral for decades. The industry’s death rattle supposedly began in the nineties with competitive threats from satellite TV and telcos. Now streaming video, direct-to-consumer offerings that bypass the traditional bundle and fixed wireless access service that is expected to steal away broadband customers are expected to deliver the fatal blow. But instead, every year cable survives. It weathered the satellite onslaught, the multiple attempts by AT&T to weasel its way into the video business, and by the looks of things, it is preparing itself to ride out the latest storms. 

I’m not saying cable, or any industry, is invulnerable. Taking even a cursory look at the industry is proof that the business is nothing like it was a decade ago. But unlike buggy whips and the Betamax, whenever the collective consciousness began to stray, cable operators have for the most part managed to figure out a way to make themselves attractive again to consumers. 

In the past century, cable pushed back video competition by introducing more channels, more choices and better pictures through digital and later HDTV offerings. Later, competitive wireline phone offerings, high-speed internet service and in the past few years, mobile service have helped the industry not only survive, but thrive. Now cable companies have twice as many broadband customers as video subscribers, and mobile service, once thought of as merely a retention tool, is becoming a real threat to traditional carriers. In the meantime, cable continues to invest in the business, build out fiber networks and reinvent itself.

Even though those moves are far from secret, operators continue to make the seasonal rounds, reminding investors that although they may not be the latest thing, they are what makes that latest thing work.

Investor Conference Rites of Spring

March is the traditional beginning of the spring conference season (I know spring doesn’t officially begin until March 20, but it was 74 degrees in New York this week, for gosh sake), with Morgan Stanley's Technology, Media & Telecom conference on March 7, and Deutsche Bank Securities hosting the next media get-together on March 14. There is expected to be a bit of a reprieve in April, followed by MoffettNathanson’s Media & Communications conference and J.P. Morgan’s Global Technology Media & Communications conference slated for May. Evercore ISI should wind down the spring season with its TMT event expected sometime in June, although others could be sprinkled in between. And then the fall season starts.   

Already, CEOs of the top three publicly held cable companies have hit the conference circuit and have had to reassure investors that: Yes, they still intend to add broadband subscribers; no, they haven’t given up on video quite yet; and yes, mobile service is on the path to becoming profitable.

Comcast chairman and CEO Brian Roberts kicked off the spring season with his March 7 appearance at the Morgan Stanley conference, He spent most of his time telling the investment community that while broadband growth is indeed slowing down, it has lots of runway ahead of it. He pointed to four areas where he sees Comcast can boost broadband growth: expanding its footprint; competing more aggressively; bundling with other products like wireless; and growing its business services reach.

Comcast has been expanding its reach to about 1 million more homes per year within its footprint through edge-out programs. This year, he expects that expansion to be even greater, given government initiatives to build out unserved and underserved rural areas. 

“Where it's been uneconomic previously, it will be economic in the future for us to extend our broadband,” Roberts said. “And we're going to compete aggressively to do that.”

Roberts also defended cable broadband against the latest competitive threat — fixed wireless access from the telcos — adding that at the moment it is an inferior product to high-speed data service from cable, reminding the audience again that cable has a history in pushing back competitive threats. 

“We don't take it for granted, but we've seen lower-price, lower-speed offerings before,” Roberts said. “And in the long run, I don't know how viable the [FWA] technology holds up.”

Altice USA CEO Dexter Goei, who has been dealing with a steep drop in his company’s stock price since it lost broadband subscribers in 2021, spent his time at the Morgan Stanley conference reiterating plans to accelerate its fiber network buildout, and hinting about faster speeds becoming available to a wider swath of customers. 

Altice‘s accelerated fiber rollout has been well-documented, and Goei said at Morgan Stanley that it is expected to make a big difference. 

Goei said Altice has been talking about fiber for three years, and the slowdown in deployment has been a combination of permitting and COVID-19 related delays and the company’s inability to “get its own ducks in a row.” But now with a restructured management and a clearer focus,  growth is expected to take hold in 2023.     

“The goal was to reinvigorate distribution, rebrand the company, address some customer service-related issues we were dealing with and make that a one-time investment,” Goei said, which “leads to a nice payback in 2023.”

Goei hinted at “multi-gig” speeds for its Optimum broadband service in the second quarter, stopping short of saying just how fast its offering would be. But the company has said publicly — back in May 2021 at the MoffettNathanson Media & Communications conference — that its goal was to offer 10 Gigabit per second broadband within 18 months.       

On the video side, Charter Communications chairman and CEO Tom Rutledge said there is “more damage to come” regarding continued customer losses, but all is not lost quite yet.

“There’s nothing about the old model that’s really changed, Rutledge said at the Morgan Stanley conference, adding that prices for traditional video service continue to rise, driven by ever-increasing sports rights fees. “There’s nothing to really constrain the cost of live sports in the linear business and that’s still the glue that holds it together. I see that business continuing to get more and more expensive for consumers.”

Eyeing a Mobile Future

Despite the shift toward streaming, Rutledge isn’t expecting the pay TV business to change that much over the next few years. But he echoed Roberts in saying that the mobile/broadband bundle will be the future. And he acknowledged that he often thinks of how cable could eventually aggregate and package streaming services for consumers. 

“The opportunity going forward is to start to reaggregate and use that aggregation to give a better, more cost-efficient consumer experience to more people,” Rutledge said. “We think about that every day and how that might happen. I don’t want to be overly Pollyannaish and say that is about to happen because the current model is still very much in force. I don’t see that disappearing in the next couple of years.”

But Rutledge said Charter is laying the groundwork for that day when it does come, making itself available on apps like Roku, where it is one of the most used applications. He added that nearly 12 million customers access Charter services (broadband-only as well as video) via an app instead of a set-top box.

“The upside is still yet to be realized,” Rutledge said. “The reaggregation is somewhat far away, but we’ve been thinking about how to build a platform that can be used by customers  in a more efficient way.” 

It’s a concept that has been well-documented in this column over the past year, and a place where, whether participants say it aloud or not, the industry is headed. But it is also an example of something that cable has been famous for, at least during the 30 years I’ve been covering it: No matter what gets thrown at it, this industry has managed to adapt. It sounds a lot easier than it is to do, and the landscape is littered with the carcasses of companies that underestimated the resilience of this business. This March and beyond, cable executives will get to remind investors of that fact once again. ■

Altice USA said it has promoted Keith Bowen, Altice News & Advertising chief revenue officer, to president of the unit, replacing Jon Steinberg who will leave the company in the spring.

Bowen will now have responsibility for Altice USA news brands Cheddar News, News 12 and i24NEWS as well as the a4 advanced advertising and data business. Before joining Altice USA in 2019, Bowen served as chief revenue officer for Spectrum Reach and earlier served in similar roles for Tribune Media and Urban One (formerly Radio One). He will report to Altice USA CEO Dexter Goei.

“Since joining Altice USA in 2019, Keith has helped our news and advertising businesses experience significant growth and success, and I am confident that the division will continue to flourish under his leadership,” Goei said in a press release. “Jon’s enthusiasm and keen business mind have helped our News & Advertising group achieve great success over the last three years and I offer my gratitude to him and look forward with excitement as Keith brings his invaluable expertise to our news and advertising groups.”

Steinberg founded Cheddar in 2016 and joined Altice USA in 2019 as part of the company’s purchase of Cheddar News. He will serve as an advisor to Bowen over the next several months in advance of his departure this spring, and, after a period of transition, will return to his entrepreneurial roots.

“Jon has been a great mentor for me over the last several years, and I’m excited to now step into his shoes to lead the amazing teams that we have in place at Cheddar News, News 12, i24NEWS and a4,” Bowen said in a press release.

Separately, Altice USA said it has named Kristin Malaspina GM of Cheddar News and senior VP of distribution for Altice News and will be responsible for Cheddar News’ content, growth and operations while continuing to lead the distribution teams across all Altice News brands. She will report directly to Bowen. Malaspina previously served as senior VP of marketing & partnerships for Altice News & Advertising, and, before that, worked for Starz and also spent several years at Time Warner Cable/Spectrum News in various executive marketing and distribution positions.

“I am thrilled to take on the opportunity to lead the Cheddar News team as we further establish the network as a leading source of news for the forward-looking viewer,” Malaspina said in a press release. “Cheddar News has become an important brand among today’s most discerning news viewer, and I’m excited to help lead the incredibly talented Cheddar News team as we look to continue to deliver the exceptional news reporting that our audiences have come to know and love.”

Malaspina joined Altice USA in 2017 as senior VP, marketing and partnerships, overseeing all marketing, branding, partnerships, event opportunities and distribution for the Altice News & Advertising brands. Prior to that, she was VP of distribution marketing, strategic partnerships for Starz as well as VP of marketing for Spectrum Networks. Earlier in her career, Malaspina served as director, product marketing and customer communications for iNDEMAND Networks and at CBS Inc. in a variety of production roles.

“In looking back on my time leading both Cheddar and the Altice News & Advertising group, I remain immensely proud of the work that our teams have done in serving our viewers with the highest quality news reporting and our clients with innovative advertising products,” Steinberg said in a press release. “As I take my next entrepreneurial step, I leave the Altice News & Advertising group, including Cheddar News, in extremely capable hands in Keith and Kristin and look forward to watching what they do next.”

 Also: Analysts Search for Meaning in Altice USA Leadership Change 

Steinberg’s stepping down is the latest in what have been several management changes over the past few months at Altice USA as it moves to consolidate its brands and beef up its connectivity offerings, beginning in September, when chief operating officer Hakim Boubazine resigned. In December, Altice hired former JP Morgan Chase exec Ben Collier as senior VP of brand, marketing and media, and executive VP of government and community affairs Lee Schroeder said she would step down in July. Earlier this month the company named former Comcast exec Shuvankar Roy senior VP of customer experience. ■

Bernstein media analyst Peter Supino lowered his price target for Altice USA to $35 per share, from $38 each on Friday, a day after the stock hit a new 52-week low and amid talk that the company would end the year with negative broadband subscriber growth.

Supino has been a proponent of Altice USA either selling or going private and other analysts have made the privatization case as well. In his Friday note, Supino wrote that Altice’s markets -- the New York metro area and the Midwest -- and its commitment to building fiber make either decision attractive.

Supino’s report comes a few days after Altice USA CEO Dexter Goei said at the UBS Global TMT Virtual Conference that it is possible the cable operator will report negative broadband customer growth in Q4 -- it lost 13,000 high-speed data subscribers in Q3 -- and could end 2021 on a negative note. 

Supino’s new price target -- he maintained his “outperform” rating on the stock --  is still more than double Altice USA’s current stock price. On Dec. 9 the stock hit a new 52-week low of $14.78 per share and was trading at $15 each in afternoon trading on Dec. 10. At that price, Altice USA stock is down about 60% from the beginning of the year, when it traded at $37.87 per share.  

While Altice’s visibility remains limited, Supino noted that in the cable business, “market structure and service quality trump everything else.” He added that supply and demand in Altice’s markets aren’t changing much, and by spending about $800 million per year over the next three years for fiber and upgrades, the company is obviously moving to improve its service. Add to that a too-low trading multiple -- Altice trades at around 7.3 times cash flow, compared to 9.9 times for Charter and Comcast trades at 8.3 times -- and Altice stock looks cheap. 

“For resilient businesses, valuation matters most when it is very high and very low, and more so when management is aligned with investors to exploit it,” Supino wrote. “If management agrees to sell the company, our $35 price target (+133%) looks very much ‘in play.’ If they don't sell it, we own a ‘trophy case’ portfolio generating a 12% equity free cash flow yield and a 24% discretionary free cash flow yield.” ■

The slowdown in cable broadband subscriber additions may be even slower than anticipated after executives at two of the top three publicly traded cable companies -- Comcast and Altice USA -- hinted that customer growth is trending at an even more decelerated pace than expected. 

Comcast Cable CEO Dave Watson touched off a mini firestorm on Dec. 7, telling the virtual audience at the UBS Global TMT Virtual Conference that he expected to end 2021 with 1.3 million additional broadband subscribers. That is lower than the 1.4 million Comcast added in 2019 and implies that Comcast would add about 185,000 high-speed data customers in Q4, its lowest growth since Q2 2017. 

Most analysts had expected Comcast to end 2021 with about 1.4 million additional broadband customers. In a recent research report, MoffettNathanson principal and senior analyst Craig Moffett predicted Comcast would add about 286,000 broadband customers in Q4. Moffett expects Charter to add 271,000 broadband customers and Altice to add 3,000 high-speed internet subscribers in the period. 

While Charter may well hit Moffett's target, chances are that Altice USA, coming off a third quarter where it lost 13,000 broadband customers, could see negative growth in Q4.

“We probably are trending -- and we still have a big month of December coming up -- slightly negative in Q4, which probably leads us to be down in a range of 5,000 to 10,000 for the year,” Goei said at the UBS conference.

He added that the declines are in markets where Altice USA competes with Verizon Communications’ Fios Internet product, which Goei described as heavily promotional. 

“These losses are in Fios zones,” Goei said. “I think Fios has been saying they have not lost momentum. We’ve slowed momentum relative to Fios and we really need to drive to the first quarter when we have a better mobile product.”

The news sent Comcast shares down 7% on Dec. 7, as well as the rest of the sector. At the end of the day, losses eased a bit -- Comcast stock closed down 5%, Charter down 3% and Altice USA fell 2%. But the fear that sluggish broadband growth could last a while longer didn’t seem quite as irrational as the day before. Between Dec. 6 and Dec. 8 the three stocks fell 6.5%, 4.6% and 6.4%.

Charter Communications chairman and CEO Tom Rutledge spoke at the UBS conference on Dec. 8, and avoided making any specific broadband predictions. Rutledge did say that as the spike in pandemic-fueled consumer acceptance of the broadband product begins to unwind, there is still plenty of runway left. 

“I do think that the opportunity to grow the business is pretty much unchanged,” Rutledge said at the UBS conference. “If you look at it on a four- or five-year growth rate trend, it’s pretty solid, pretty straightforward and pretty consistent. I think that that future will look more like the trend than it will look like the third or fourth quarter.”

Cable operators have consistently denied that stepped up telco 5G wireless and fiber broadband initiatives would cut into their businesses, and at the UBS conference tried to stress that in addition to strong opportunities ahead for broadband, their other services are even more robust. Watson said at the conference that wireless subscriber additions should break records in Q4, and added that cable EBITDA growth should be between 7% and 8% in the period, exceeding analysts expectations.  

Watson said Comcast would add a record number of mobile customers in Q4, after signing on 285,000 additional Xfinity Mobile customers in Q3, its best quarterly performance since launching the wireless product in 2017. At the UBS conference, Watson said Comcast expects cable EBITDA growth to be in the 7% to 8% range in Q4, while net cash flow growth will be in the low double-digit percentages. 

“In wireless, we’ll  beat Q3 in Q4,” Watson said. “We’ll set a record.”

Rutledge didn’t make any wireless subscriber predictions, but said mobile service will be Charter’s biggest growth engine going forward, likening the mobile opportunity to that of the wireline telephone business several years ago. Back then, traditional phone companies were offering wireline phone service for $72 per month. Today, cable companies are selling wireline service for $13 per month and dominate the industry, with Comcast and Charter the two largest wireline phone companies in the U.S. 

“We took that business,” Rutledge said. “So, what kind of upside is there [to the mobile business]? That kind of upside.” ■ 

Altice USA CEO Dexter Goei said he expects to see further consolidation in the broadband business as companies look to build out their fiber networks, telling an industry audience at the Paley Center for Media’s virtual International Summit Wednesday that fixed wireless operators could get involved in the fray. 

Goei knows of what he speaks. Altice USA’s former parent, Altice N.V., got its foothold in the U.S. market through acquisitions, first buying Suddenlink Communications for $9.1 billion in 2015 and Cablevision Systems for $17.7 billion later that same year. Lately, Altice USA has focused on smaller tuck-in deals — like its 2020 purchase of Service Electric Cable TV of New Jersey for $150 million and its $310 million deal to buy Morris Broadband earlier this year — although it did pair up with Rogers Communications in a failed $8 billion bid for Canadian telecom and cable operator Cogeco Communications in 2020. 

“It’s very clear that in the broadband space, as it is in the media space, size does matter,” Goei said at the Paley Center conference. “Having more connectivity with your clients across multiple products and multiple services as much as possible is important.”

Goei added that while there have been several recent deals focused on the cable and fiber space, he sees future M&A activity including fixed wireless operators as well.

“I do suspect there will be more consolidation in the cable space and in the fiber space as more capital keeps on getting thrown at upgrading networks across the country,” Goei said. “However, something I’ve been talking about for quite some time is fixed wireless consolidation. We’ve seen it pretty much in all developed world economies for quite some time. We are where we were probably a year or two ago — in the early innings.”

Goei said he believes the industry is in the middle innings of convergence from a product standpoint, but added that as companies like AT&T and Verizon Communications build out fixed wireless and fiber networks, and wireline broadband providers Altice USA, Comcast and Charter Communications are expanding their product lines with wireless service, something‘s got to give. At some point, the best way to rapidly deploy the necessary infrastructure may be to buy it rather than spend the time and money building it out. 

“So, size does matter, and I expect our sector to see consolidation, as it has for the last few years, continue going forward,” Goei said.

Altice USA said it lost about 13,000 residential broadband customers in Q3, better than the 15,000-to-20,000 losses its CEO said were expected more than a month ago, and vowed to reverse those losses through accelerated footprint expansion, new products, fiber upgrades and additional investment in mobile and converged offerings. 

Altice USA CEO Dexter Goei warned that broadband subscribers could go negative in Q3 to the tune of between 15,000 and 20,000 customers at the Goldman Sachs Communacopia conference on Sept. 23. That news drove the stock down by as much as 16% that day and sank the sector as fears that the anticipated broadband growth slowdown could accelerate.

Despite the broadband decline, total revenue for the company was up 5.8% in the period to $2.57 billion and adjusted EBITDA rose 3.4% to $1.16 billion. 

In a press release, Goei said that the near-term focus is to return to broadband growth and boost investment in its residential business.

“Today we are announcing strategic measures to enhance the company’s product portfolio and customer experience, including footprint expansion, fiber and network upgrades, as well as investments in simplified and converged offerings that support consumer needs, and a rapid expansion of sales distribution channels,” Goei said in a press release. “I am optimistic that by advancing these key initiatives we will drive long term sustainable growth and value for all of our stakeholders.”

The initiative seemed to cheer investors, who drove up Altice USA shares by more than 8% in after-market trading Nov. 4 to $17.75 each. 

Back in September, Goei said the expected broadband decline was due to lower than expected gross additions, the result of an “underwhelming” back-to-school period. But the CEO was hopeful that new efforts launched at the beginning of September, like increasing the speeds of its Altice Advantage Internet product to 50 Megabits per second (a 65% boost), renaming it Optimum Advantage and keeping its price point at $14.99 per month, will boost subscriber rolls. In July, Altice said it would rebrand its Altice Mobile product as Optimum Mobile, the first step in aligning all of its brands under the Optimum name. 

Altice has been deep in its fiber-to-the-home network upgrade for the past few years, but had to scale back during the pandemic to adhere to protocols. Now that those restrictions are easing, the company said it plans to step up its fiber rollout to pass 1.5 million homes with fiber-to-the-home capability by the end of the year -- up from 1.26 million passings in Q3 -- and to 2.5 million FTTH passings by the end of 2022. That includes completing the vast majority of its Connecticut territory by the end of 2022 and targeting 100,000 homes for fiber upgrades within Suddenlink’s footprint next year.  

Existing hybrid-fiber-coax (HFC) areas inside the Suddenlink footprint also will see speed increases from the old maximum of 150 Megabits per second to 400 Mbps and 1 Gigabit per second. 

“We’re on track to deliver over 300,000 upgraded homes by the end of this year, at the higher end of what we were targeting, and we’ve already commenced additional upgrades which we will complete next year,” Goei said on the call.

In a research note, MoffettNathanson principal and senior analyst Craig Moffett wrote that Altice’s new strategic direction is in part a repudiation of its old method of deep cost cuts, minimal capex spending and healthy price increases, which the company previously dubbed “The Altice Way.” 

The new direction seems to make Altice more of a conventional cable company, which the analysts saw as good news. 

“[T]hey are conceding that they have underspent on capex, and, having done so, full fiber replacement, especially in competitive areas, is the best strategy,” Moffett wrote.

The company said it also will expand investment in its sales distribution channels to pre-pandemic levels. Door-to-door salesforce headcount, which slipped to 241 in Q3 after being as high as 518 in 2018, is expected to rise to between 400 and 500 by the end of next year. Retail locations, which fell to 87 in 2020 during the height of the pandemic, are expected to rise to between 150 and 170 locations by the end of 2022.  

Altice said that most of the broadband losses came in Optimum markets where it competes against Verizon’s Fios products. Broadband customer growth was consistent with 2018 and 2019 levels within its Suddenlink footprint. 

On a conference call Thursday to discuss Q3 results, Goei said that Verizon Fios has benefited from having a “mobile strategy, product and mindshare which is significantly higher than ours across the board,” which should change now that Altice USA’s MVNO partner is T-Mobile instead of Sprint. And the CEO believes the expansion of the fiber buildout will also make a competitive difference. 

“We think that building fiber puts us in a superior network position relative to them,” Goei said of Fios. “...They need to fix their fiber-to-coax termination if they want to go to higher speeds. We’re going to be 10-Gig ready effectively by the second half of next year across our fiber footprint and have a longer runway with product advantage and mindshare. We’re repositioning ourselves to be able to duke it out on an equal, if not better, product portfolio going forward.”

As far as boosting broadband subscribers, Goei said on the call that lower churn has driven less competition for gross customer additions, which has impacted gross additions in general. And though there was some softness in the back-to-school market, he believes that segment is beginning to come back. 

“Yes, we had a peculiar 2021 back-to-school,” Goei said on the call, adding that after visiting some college campuses “it looks like [things are] back to normal.”

The theory that the recent spike in fiber builds by telcos, coupled with lower prices for 5G and broadband products will pull cable companies into an ever-descending vortex of spending and price-cutting — the so-called Convergence Apocalypse theory — could be one of the reasons for the rapid decline of both telco and cable stocks in the past few months. But in a research note Thursday, MoffettNathanson principal and senior analyst Craig Moffett said that despite the threat of telco fiber overbuilds, cable still has a clear advantage.

Cable stocks have been hit hard as investors have been thrown into a tizzy after two top companies warned of slower than expected broadband subscriber growth in the third quarter. The first tremor was  caused by Comcast chief financial officer Mike Cavanagh on Sept. 14, when he told a virtual audience at the Bank of America Media, Communications & Entertainment conference that the cable operator was seeing a “little bit” of a slowdown in broadband subscriber adds in late August. Comcast stock fell more than 7% that day and the rest of the sector — Charter Communications, Altice USA and Cable One — saw their shares dip between 3% and 4%. 

The real impact came a few weeks later, when Altice USA CEO Dexter Goei said at the virtual Goldman Sachs Communacopia conference on Sept. 23 that broadband additions would  be negative in Q3 — to the tune of 15,000 to 20,000 in subscriber losses — blamed in part on what he said was a sluggish back-to-school period. 

Also Read: How Slow Will The Broadband Slowdown Be? 

Altice USA stock fell 13% to $22.06 per share on that day, and has had a steady decline ever since, closing at $17.62 each on Oct. 13. Other stocks like Charter Comcast and Cable One also felt the pain, as analysts began to rethink their models to account for what they saw as an accelerated slowdown in growth. At the same time, some analysts were rejiggering their outlooks on telco stocks, especially those that have made commitments to expand their fiber networks like AT&T, Verizon Communications and Frontier Communications. 

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

In a research note Thursday, Moffett wrote that both the cable and telecom sectors are getting crushed in the market. Cable distribution stocks are down 16.8% since Sept. 1 and telco stocks like AT&T, T-Mobile, Verizon, Frontier and Lumen Technologies have fallen a collective 10.5%, mainly due to the belief that as telcos build out more fiber and lower prices for broadband, cable subscriber additions will suffer. Conversely, as cable companies drop prices for wireless service, as Comcast did it in August and Charter did earlier this week, that will lead to a long-term slide in telco wireless customers. 

“In this dystopian converged future, there are no winners,” Moffett wrote. “There is only mutually assured destruction.”

But like any other good conspiracy theory, there is some truth to the thesis — telcos are expanding fiber builds and cable operators are dropping wireless prices — and some not so truthful assumptions. For example, Moffett believes that “Convergence Apocalypse” adherents are forgetting a few key components of the thesis, particularly timing and coverage. 

According to Moffett, telcos have targeted an incremental 5 million homes with fiber overbuilds this year, or about 4% of the country. Next year that effort will expand to an additional seven million homes, or 5% of the U.S. By Moffett’s estimates, the percentage of cable plant overbuilt by fiber will grow from 30% currently to about 55% in the next decade. 

“The delays in passing a home, subsequently making the broadband service available for sale, and then actually connecting it, make clear that the competitive impact of this year’s tranche of homes newly passed will only begin to be felt next year, and even then only modestly (we’ve heard arguments that Comcast’s warning of “a little bit of a slowdown” in their Q3 numbers is an early sign of the new fiber overbuilds, but that is not remotely plausible),” Moffett wrote. “And recall that new homes passed in 2020 were the lowest in a decade; it will be at least a few more years before the rolling average of homes passed over the trailing four years or so is meaningfully above average.”

Moffett believes the immediate impact will be on wireless, as cable’s ability to bundle mobile and broadband service at lower prices has the potential to take significant share from the telcos. 

Cable can offer broadband throughout its footprint and wireless on a national scale. Telcos are limited in terms of bundling on which parts of the country they offer fiber broadband. For Verizon, that’s about two-thirds of its footprint or 11% of the country and for AT&T, about one-third of its footprint or 13% of the U.S. T-Mobile, Moffett wrote, has no fiber at all. 

What has been holding  cable wireless back in the past has been pricing, but that changed six months ago when Comcast dropped its family wireless plans to $30 per line per month for four lines or more of unlimited service. Charter introduced its new pricing -- $29.99 per month per line for two or more lines of unlimited service -- and it could be a game changer for the company.

Also Read: Analyst Says It’s Time to Take Cable Wireless Seriously 

According to Moffett, both the Comcast and Charter wireless plans are cheaper than those of AT&T, Verizon or T-Mobile, although the traditional telcos offer steep handset discounts the cable companies do not. But that is likely to change.

And then there is the cost.

According to Moffett, telcos are spending up-front, at-risk incremental dollars for their fiber builds, so in order to get return on that investment, they will have to achieve high penetration rates and high average revenue per customer. And while payback periods are typically between six and 10 years, if they fail to hit those targets or costs rise, the periods extend or become unattainable. In contrast, cable wireless is a variable cost business — operators only pay their mobile virtual network operator (MVNO) contract when their customers are using the service. As long as they price the service above that variable cost, they make a profit. 

Moffett pointed to a report he did years ago that argued that cable companies had the advantage in the coming convergence climate, a tenet he says holds true today. 

Why Wired Nets Hold an Advantage

“The argument was simple: it costs vastly more to put wires under a wireless network than it does to put a wireless network on top of wires,” Moffett wrote. “He who has the best (most ubiquitous) wired network will win. That cable doesn’t even have to bother building out facilities in low-value places — they can let Verizon spend that money on their behalf — only makes their advantage all the more dramatic.”

The analyst added that as the cable industry sees the mobile product as the best way to protect its broadband offerings, they will respond to increasingly aggressive telco fiber buildouts with equally aggressive wireless pricing. That strategy already appears to be working. Moffett estimated that cable is capturing as much as half of all wireless net additions within their broadband customer base even at the old pricing. 

Moffett added that the pressure on wireless could force telcos to make a decision — cut their dividend or reduce capital spending. That’s what AT&T was faced with in 2019. It cut capital spending and halted its fiber build in favor of the dividend, then reversed course in 2021, slashing its dividend and recommitting to improving the network.

But in the end, success in the wireless and broadband business is going to come down to price.

“[O]perators will have to pay customers, in the form of a discount, for the disadvantage of forced choice,” Moffett wrote. “Cable’s cost structure and infrastructure advantage allows for them to do that. Verizon’s and AT&T’s do not.”

Altice USA shares fell another 10% Friday as investors continued to rush for the exits after CEO Dexter Goei said the company would have to increase spending as Q3 broadband additions enter negative territory, causing some to call into question the company’s past aggressive cost-cutting strategy. 

Altice USA shares traded as low as $19.74 each on Friday morning (down 10.5%, or $2.32 per share), after a 12.7% decline on Thursday when Goei said at the virtual Goldman Sachs Communacopia conference that the company would lose between 15,000 and 20,000 broadband customers in the third quarter. The stock closed at $20.59 each on Sept. 24, down 6.7%, or $1.47 per share.  

“If perchance Altice USA CEO Dexter Goei MEANT to destroy his own stock yesterday, he could hardly have been more thorough,” wrote Bernstein media analyst Peter Supino in a note to clients Friday. “After stating that Altice would miss consensus broadband net additions for the third time in four quarters, Goei described a different operating and financial trajectory with less broadband ARPU growth, more operating expenses, more capital expenditure, and less share repurchase (maybe, probably, for now). This may have been the most thoroughly negative outlook we have ever heard.”

While operators have repeatedly warned that the COVID-fueled growth rates of 2020 will slow down in 2021, Goei’s comments hurt all the more because not only did they highlight that broadband performance not only could slow down but could turn negative, and that capital spending, on the decline as the focus of the cable business has shifted toward broadband, could rise. 

Also Read: Analysts Search for Meaning in Altice USA Leadership Change 

Goei didn’t say how much he expected expenditures to increase at the Goldman conference. Altice USA also is in a different situation than other operators because it is in the middle of a five-year fiber upgrade plan started in 2017. Already the company expects to pass about 1.5 million homes in its footprint with fiber by the end of the year, mostly in areas where it competes with Verizon’s Fios service. Whether it will extend that buildout to its renaming 1.5 million homes in the future remains to be seen. 

“Ultimately, we do believe that fiber is the technology, the winning technology going forward as opposed to improvements in DOCSIS technology," Goei said at the Communacopia conference, but he added that it is getting harder to find technicians that know how to build fiber networks.    

In a research note, Barclays media analyst Kannan Venkateshwar wrote that he believes Altice USA’s problems go beyond infrastructure. 

“We believe costs may have been cut too deeply in areas such as customer support and billing, which may need to be built back to match the footprint expansion,” the analyst wrote. “This is why the turnaround in operations may take a while to materialize.”

As far as its stock, Venkateshwar noted that Goei also said the company will slow its share repurchase program, a key component of its valuation. He added that Altice USA’s track record for multiple guidance cuts in the past two years and its inability to meet its short-term goals have threatened its credibility, which has also pressured the stock.

“Overall, we believe Altice USA is back to where it was at the time of its IPO with respect to gaining investor confidence,” he wrote. “It took management a couple of years of execution to gain investor attention post IPO, and in many ways, the company appears to be back in that cycle. Consequently, we do not see any good reason to recommend the stock.” 

Altice USA burst on the U.S. cable scene about six years ago, when it’s former parent Altice NV purchased Suddenlink Communications and Cablevision Systems in quick succession. Led by then chairman Patrick Drahi, an admirer of US cable legend John Malone, Altice USA believed it could squeeze profit out of what many said was a rapidly maturing industry by slashing expenses and imposing European-style cost discipline to the bloated U.S. cable business. 

While most analysts doubted that ability, Altice made good on that promise by removing $900 million in costs from its former Cablevision and Suddenlink businesses, later going public in 2017. But now, with its stock price falling sharply — it reached a new 52-week low Friday — some analysts are wondering if the company may be better off increasing its leverage to buy its remaining publicly traded shares, effectively abandoning the public markets altogether. 

At the Communacopia conference, Goei said that beefing up leverage is an option, but at least for the next three quarters, the focus will be on righting the ship. 

“We’ve got decisions whether we want to releverage the balance sheet at some point in time if we’re not getting rewarded for what we’re doing from an investments perspective, that we really believe in the medium-term results,” Goei said. “But I don't think that's a decision for us to make today.

“I think we’re focused, given the management changes, on making sure that all arrows are pointing in the right direction towards reinvesting in our business or accelerating our business, and that's what the focus is going to be over the next three quarters,” he continued. “Thereafter we can have discussions around what to do with our balance sheet, depending on how the market sees us.”

Also Read: Model Behavior

Goei said in part the Q3 loss was due to lower than expected gross adds and an “underwhelming”  back-to-school period And while some analysts noted the inherent seasonality of Q2 and Q3 in the cable business — typically that’s when customers move to summer homes and college students go off to school -- others weren’t buying it. 

“Explanations proffered by operators thus far for lower gross adds don’t really make much sense to us, especially given that telecom companies are actually seeing trends improve,” Venkateshwar wrote. “While some have blamed weaker back-to-school origination, most colleges in the U.S. are operating at close to full capacity and therefore it is not clear where this slowdown is coming from.”

Venkateshwar warned that “there are more shoes to drop,” pointing to eviction moratoriums expiring, fading unemployment insurance increases and the potential fallout from non-pay churn.

“[T]here is an unusual lack of visibility across cable industry unit growth trends, and given the fact that almost the entire residential revenue topline growth now depends on broadband relationships and the high proportion of fixed costs on the broadband side, valuation in the space could have more downside to reflect this uncertainty,” Venkateshwar wrote. 

Altice USA shares fell as much as 16% in early trading Thursday, after CEO Dexter Goei said broadband subscribers would be down by as much as 15,000 to 20,000 customers in the third quarter.

Shares in the New York-based MSO were trading as low as $21.21 early Thursday, down 16% or $4.05 per share. The stock closed at $22.06, down $3.20 or 12.7% each on Sept. 23.

Some analysts had expected Altice USA to add about 22,000 broadband customers in Q3, down from the 26,000 it added in the same period last year but higher than the 15,000 it added in Q3 2019. Other cable operators have said that they expect broadband growth to slow in Q3, as the positive customer growth effects tied to the pandemic begin to wane. 

At the Goldman Sachs Communacopia conference Thursday, Goei said that high-speed internet customer additions would be negative. 

“Our numbers are going to be negative coming into Q3 in terms of internet adds, probably to the tune of 15,000 to 20,000, which gets us to a trend of being flattish to slightly up for the year,” Goei said, adding that the operator averaged about 72,000 internet adds in 2018 and 2019 and 145,000 additions last year. “If we are flattish to slightly up this year, we’ll be breakeven over the last four years. That is disappointing.”

Also Read: Analyst Makes Case for Altice USA to Go Private 

Goei said that lower than expected gross adds, the result of “underwhelming” back-to-school performance in its markets in late August and into September, was the main culprit for the negative broadband additions. But the CEO is hopeful that new efforts launched at the beginning of September, like increasing the speeds of its Altice Advantage Internet product to 50 Megabits per second (a 65% boost), renaming it Optimum Advantage and keeping its price point at $14.99 per month, will boost subscriber rolls. In July, Altice said it would rebrand its Altice Mobile product as Optimum Mobile, the first step in aligning all of its brands under the Optimum name. 

Also Read: Analysts Search for Meaning in Altice USA Leadership Change 

“These are getting some traction,” Goei said. “We are hopeful that in Q4 we’ll see back-to- normalized trends and positive net adds and we continue to be very, very focused on increasing our investment in the network and our distribution channels.”

Goei also commented on the recent departure of chief operating officer Hakim Boubazine, adding that the executive had a long successful history with the company, but that it was time for a change. Boubazine said earlier this month that he would step down at the end of the year, and in the meantime would serve as a special adviser to the company. Goei would take on his duties in addition to those of CEO. 

Goei said despite Boubazine‘s success in the past, operating trends have been “a little underperforming” over the past few years. He added that the change will help the company execute more quickly on its goals, as well as allowing the organization to react to change in a more flexible way. 

“We thought it was a good time to make that change,” Goei said. “Me coming in really helps flatten the organization, allows people to have a lot more say in their opinions and it rises quickly to my attention and be able to react in a much more flexible way. The tenets and the foundations of what we want to do remain the same. … The buck will stop with me.” 

Altice USA chief operating officer Hakim Boubazine‘s decision to resign from the company last week had some media analysts searching for hidden meaning, with Bernstein’s Peter Supino doubting that CEO Dexter Goei, who will take over Boubazine’s duties, can right the ship while concluding the company, often seen as a takeover target, is undervalued.

Boubazine, who has run several businesses for Altice N.V. founder and chairman Patrick Drahi over the years, and joined Altice USA shortly after Drahi first entered the U.S. cable market in 2015, resigned unexpectedly on Sept. 9, agreeing to stay on in an advisory role through the end of the year. In a press release, Altice USA said Goei will assume Boubazine’s duties, in addition to his own as CEO, immediately. 

In a research note, Supino wrote that Boubazine’s departure is significant because he ran so many parts of the business. According to its website, Boubazine was in charge of product, marketing, technology, engineering, and operations functions as COO. His departure also comes at a time when Altice USA has “badly underperformed” its peers, according to Supino, adding just 8,000 organic broadband customers over the past three quarters. 

“Operational trouble seems to run deeper,” Supino wrote, adding that analysts’ consensus cash flow forecasts for Altice USA began declining in 2018, and in the second half of 2019, the company struggled with its OSS/BSS transition and the launch of its wireless service, Altice Mobile. 

Supino also saw problems with Altice USA’s marketing decisions, adding that he found it “odd” that the company focused on price maximization in 2019 through the roll out of its “Price for life’” campaign.

More recently, the company decided to rebrand Suddenlink as Optimum because ”(in our assessment) Suddenlink is loathed by too many consumers and not because Optimum is known to any of them,” Supino wrote.  

Adding to the pressure is that Altice USA stock is down about 24% year-to-date, and there are some doubts as to how effective Goei, an investment banker by training, will be in running the telecom side of the business.

“With roots in investment banking, we are not convinced that Goei has the background to solve Altice’s operational problems,” Supino wrote. But the analyst still recommended the stock, not necessarily because he sees a turnaround — although he called Goei an “energetic leader with an enormous stake in the company” — but because he expects Altice USA to be a takeover target. 

“While our most important 2H21 estimates remain below consensus, we continue to recommend ATUS because we believe the business is structurally sound, under-valued, and strategically appealing to several larger, acquisitive companies,” Supino wrote.

Altice USA has been tossed around as a potential takeover target ever since it came on the scene. With attractive assets in the New York metro area — mainly the Bronx, Staten Island and New Jersey and Connecticut systems it purchased from Cablevision Systems in 2016 — Altice USA could fit well with Charter Communications and Comcast, each of which have substantial assets in those markets. Suddenlink systems in the Midwest could be seen as attractive to operators like Cox Communications and Cable One.

In a research note earlier this month, MoffettNathanson principal and senior analyst Craig Moffett made the case for taking Altice USA private, pointing to its declining share price and undervalued assets. In that report Moffett opined that Altice USA could sell off its Suddenlink systems for around $22.7 billion and take its Optimum unit private for about $10.8 billion. 

So far Altice USA has been a buyer not a seller, doing mainly small deals like its purchase of Service Electric Cable of NJ in July 2020 for $150 million, and its April buy of North Carolina fiber company Morris Communications for $310 million. 

Also Read: Altice and Cogeco: He’s Just Not That Into You 

Last year Altice USA made its biggest M&A splash, teaming up with Rogers Communications in an $8 billion bid for Canadian operator Cogeco Communications and its U.S. cable unit Atlantic Broadband. That bid, where Altice would acquire Atlantic Broadband and Rogers would take the rest, was soundly rejected by Cogeco, and the unsolicited bid was abandoned in November 2020. 

Altice USA said chief operating officer and president of telecommunications Hakim Boubazine has resigned, and that CEO Dexter Goei will assume direct responsibilities for the company's telecom unit in addition to his other duties, effective immediately. 

Boubazine will serve as a senior adviser to the CEO until Dec. 31.  

In a press release, Altice USA said it has a seasoned telecom team already in place that will now report directly to the CEO.

“It has been a pleasure to work with Hakim, and I want to thank him for the critical role he has played over the last six years at Altice USA,” Goei said in a press release. “We appreciate the time he will serve as a senior advisor and wish him much success in his future endeavors.”

Boubazine has been with Altice USA since 2015 when it was formed via the combination of Cablevision Systems and Suddenlink Communications. He previously served as CEO of sister company Altice Dominicana, where he oversaw TV, broadband and mobile operations with more than 4 million customers in the Dominican Republic. Prior to that, he was CEO of a European telecom company that specialized in the design, construction and operation of cable and fiber networks in France, Belgium, Luxembourg, and the French West Indies. Before joining the telecom business, he spent more than a decade in the oil and gas industry. 

“Working at Altice USA has been one of the most rewarding experiences in my career, and I could not be prouder of what we accomplished together,” Boubazine said in the press release. “I am grateful for the opportunity to serve such an innovative, entrepreneurial, and inclusive organization, and I want to thank Patrick Drahi and Dexter for their trust over the years. I have the utmost confidence in the entire Altice USA management team for achieving future success.”

Cable operators should embrace the coming shift from traditional MVPD distribution to streaming for the simple reason that it could help them remove what has been a thorn in their side for years: relatively unprofitable video customers. 

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.” 

The threat of further direct-to-consumer content consolidation shouldn’t worry traditional pay TV distributors, Altice USA CEO Dexter Goei said at an industry conference Tuesday, because it will help MVPDs weed out what has been an albatross around the industry’s collective neck for years -- unprofitable video customers.  

Analysts expect that other content companies could follow Discovery and WarnerMedia’s attempt to create a streaming video behemoth, but Goei, speaking at the JP Morgan Technology, Media & Communications conference, said that could be an economic boon for traditional distributors. 

With pay TV subscriber rolls steadily eroding over the years, it is evident that consumers are already moving toward an over-the-top, direct-to-consumer model. As content providers look to get larger and gain more streaming scale, Goei said it could allow traditional MVPDs to focus more on highly profitable broadband service, and weed out low-margin video subscribers.

Also Read: Discovery/WarnerMedia Combo Could Have Biggest Initial Impact on Linear Nets 

“Larger players with a full package of offerings on the direct-to-consumer side is good for our business because it focuses our customers on --  instead of 6-7-8 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.”

Goei added that the increased focus on DTC offerings could be an advantage for distributors come carriage renewal time, as the equation shifts toward the DTC model. He added that all of Altice USA’s programming partners have some kind of DTC offering.  

“For us, you want a consumer to be a long-term video subscriber that’s a profitable subscriber, [and] you don't want a video subscriber that’s under three years,” Goei said. “Those [under three-year subs] are the ones that are shifting toward the direct-to-consumer offerings and that's good for us. It’s beneficial to our economics. It makes our priorities very clear, in terms of where we focus our capital allocation and our efforts.”

And that means that distributors are going to look hard at DTC offerings when negotiating future carriage deals. 

“We are going to revisit every equation,” Goei said. “... I think we are going to go through, I would call the next two or three years where you will probably see a big transformation in the MVPD world as to how we partner with our content providers. Because it's not sustainable to continue to see price increases every year with viewership falling.”

With its nearly $4 billion bid to acquire Atlantic Broadband all but a memory, Altice USA CEO Dexter Goei told analysts Wednesday that the company still wants to grow via acquisitions, and has its eye on a handful of potential “bite-sized” deals. 

“We definitely want to go out there and find attractive MVPDs to acquire,” Goei said on a conference call to discuss Q4 results. He added that while there are a handful of smaller operators to acquire, that field is narrowed, due to geographic and competitive reasons, is further narrowed down to “a couple.” 

Altice USA teamed up with Canadian telecom company Rogers Communications to launch an unsolicited bid for Atlantic Broadband parent Cogeco in a deal valued at about $7.8 billion. Altice USA originally said it would spend $3.6 billion for Atlantic Broadband, upping that bid to about $3.9 billion, but was continuously rebuffed by Cogeco’s controlling shareholder. After several attempts to get a deal done, Altice USA officially abandoned the effort in November.  

Also Read: Altice and Cogeco: He’s Just Not That Into You 

Goei echoed his Q3 comments concerning future M&A, in that small deals, like its July purchase of Service Electric Cable TV of NJ for $150 million, are just as appealing as the bigger transactions.

“The bite-sized, Service Electric-type acquisitions are very attractive for us,” Goei said. “Hopefully, we’ll be able to unlock one of those this year. But we’ll continue to try to unlock as many of those as possible.”

Goei said that in the absence of M&A, Altice USA would use those resources to buy back its stock. But he added he wouldn’t turn down a large deal if it came along.

“If something like an Atlantic Broadband comes up for sale, or even a larger size than that, we definitely continue to believe that M&A is the best use of our capital if anything is available,” Goei said.

More than a month after finalizing a deal to sell a 49.99% interest in the company, Lightpath has named former Stonepeak Infrastructure Partners executive Chris Morley as its new CEO. 

Morley has more than 20 years experience in the telecom industry, most recently serving as  senior operating advisor for Stonepeak. Prior to that he spent nearly a decade at Zayo Group, serving in  various roles, including chief operating officer, where he led its fiber infrastructure, data center, enterprise networks, and transport service business segments.

 Morley will be joined on the Lightpath leadership team by Doug Dalissandro, formerly the chief revenue officer for Lightower Fiber Networks, and David Mayer, formerly the general counsel and executive vice president of business development for Lightower. Dalissandro will become Lightpath’s chief revenue officer while Mayer will be chief strategy officer for the company. 

“Lightpath has a rich and successful history of providing advanced communications services in the greater New York metropolitan area, and I’m excited to partner with Altice USA and MSIP to invest in and grow the business,” Morley said in a press release. “Leveraging our shared experiences from Lightpath, Lightower and Zayo, coupled with the extensiveness of the company’s fiber infrastructure network create a unique and relevant platform to the benefit and enablement of our customers.”

Lightpath completed the sale of a 49.99% stake in the company to Morgan Stanley Infrastructure Partners in December, in a deal with an implied enterprise value of $3.2 billion.  The telecom company is controlled by Altice USA, which holds a 50.1% interest in Lightpath. 

Before selecting Morgan Stanley as its partner, Altice USA had been in talks with Stonepeak to buy the Lightpath stake, but those talks broke down. Stonepeak later purchased Astound Broadband, which includes RCN, Grande Communications and Wave Broadband, from TPG for $8.1 billion. 

“Chris is a talented leader within the commercial communications industry with a proven track record of delivering exceptional value and results, and both Altice USA and MSIP are pleased to have him onboard to lead Lightpath as we embark on this new partnership,” Altice USA CEO Dexter Goei said in a press release. “I am confident that Chris, along with Doug and David, have the experience needed to help Lightpath realize its full potential as one of the leading enterprise and wholesale connectivity providers in the nation.”

With its $3.9 billion pursuit of Atlantic Broadband nearly just a memory, Altice USA is turning its focus to smaller acquisitions, telling analysts it has a “handful” of potential targets in mind as it looks to boost growth. 

Altice USA launched a $3.6 billion offer for Atlantic Broadband — part of a larger $7.8 billion joint bid with Rogers Communications for its parent, Canadian telecom operator Cogeco — on Sept. 2. After Cogeco’s controlling shareholder rejected that deal, Altice and Rogers increased their offer to $8.4 billion ($3.9 billion for ABB) on Oct.18, which was again summarily rejected.

On its Oct. 29 conference call with analysts to discuss third-quarter results, Altice USA CEO Dexter Goei noted that there is still time for Cogeco to change its mind — it had imposed a Nov. 18 deadline for Cogeco to accept the deal — but he held out little hope. 

“We’re very cognizant that the controlling shareholder needs to be acquiesced,” Goei said on the conference call. “Based on his rhetoric and his statements to date, I think it’s fair to say that there is a low chance of us collectively with Rogers being able to move forward on this project. Formally, we’ve got until Nov. 18, so we’ll see if anything shakes loose.” 

The apparent failure of the Cogeco bid doesn’t mean Altice USA is giving up on M&A. On the conference call, Goei pointed to a handful of potential targets, adding that interest is growing among small operators to sell out. 

“We are out there looking at a handful of things,” Goei said, adding that given Altice USA’s 21-state footprint, there are several opportunities to find small systems contiguous to its operating area.

Small-Market Opportunities 

While the choices may be few and far between in Altice’s Optimum footprint — the former Cablevision Systems operations in New York, New Jersey and Connecticut — the opportunities appear greater in its Suddenlink division. Suddenlink, which Altice purchased in 2015 for $9.1 billion, operates in 14 states and has been a “sneaky” source of organic growth for the company, according to Bernstein media analyst Peter Supino. 

In a research report, Supino estimated Altice would add about 90,000 broadband customers in 2021, 85,000 in 2022 and 70,000 in both 2023 and 2024, with the bulk of those gains (66,000; 67,000; 69,000 and 71,000) coming from Suddenlink. 

“Why would a decades-old business in smaller midwestern and southeastern cities offer a growth opportunity?” Supino asked in his report. “Amidst steadily rising demand for bandwidth — a powerful trend long before COVID-19 — and with relentless cable upgrades overwhelming DSL [digital subscriber line] competition, small-town cable has become a quasi-monopoly on Internet service.” 

Altice USA already showed its appetite for smaller systems when it purchased Service Electric Cable TV of New Jersey in July for $150 million. In its Q3 conference call, Goei said Service Electric has proven to be a strong purchase, adding that Altice has been able to grow the unit with minimal eff ort. Service Electric has about 30,000 subscribers. 

“It’s not necessarily that easy to unlock all of this, but given the environment, given the interest rate environment, given that size does really matter here in terms of getting operational synergies and investing heavily in technology and customer service, it is starting to percolate that some of the smaller operators, the mom-and-pop guys, are looking to deal,” Goei said. 

He pointed to Service Electric, which needed some investment in its network and didn’t have a consistent marketing strategy when Altice first bought it, but has responded well with minimal effort. 

“We’re seeing a lot of low-hanging fruit just by adding two or three additional salespeople both on the SMB [small and medium-sized businesses] side and the B2B side, that’s been very lucrative for us just increasing penetration out there, bringing new products, and we’re upgrading the network as quickly as we can,” Goei said. “Everything that we are able to get our hands on in terms of M&A opportunities will be the best use of our capital.” 

Altice also has the financial wherewithal to do a deal. In addition to generating a ton of free cash flow — $458 million in Q3, 48% above consensus and three times the prior year figure — the cable operator is expected to receive about $1.1 billion in cash from the sale of a 49% interest in its LightPath business telecom unit to Morgan Stanley Infrastructure Partners. That deal is expected to close in the fourth quarter. 

Little Guys Seek Deals 

According to sources in the cable M&A community, smaller operators are indeed looking to do deals. In addition, TPG, the Dallas-based private equity firm that owns RCN, Grande Communications, EnTouch Communications and Wave Broadband, agreed to sell its systems with more than one million customers to private equity group Stonepeak Infrastructure Partners and Patriot Media in a deal valued at about $8.1 billion, including the assumption of debt. 

TPG, which put the assets on the block in September, purchased the systems in three separate deals, agreeing to pay $2.25 billion for RCN and Grande in 2016, and completing its $2.36 billion purchase of Wave in 2018. It purchased Entouch in September, adding 22,000 customers. 

While most of the attention is heaped on large, publicly traded cable operators, the industry is still peppered with small, family-owned operations that dot the country. According to Kagan, a unit of S&P Global Market Intelligence, there are more than 700 cable operators across the country with less than 100,000 subscribers, with a number of those companies located in states where Suddenlink operates, like Kansas (29), Kentucky (28) and Texas (23). 

One small operator that asked not to be named added that the number of companies willing to do deals isn’t necessarily increasing, it’s just that as other growth opportunities fade, they are becoming better noticed. 

“To some extent, I think those deals in the smaller operator space have always existed,” the operator said. “I don’t think we have seen any particular uptick.” 

According to analysts, while Altice USA’s growth strategy includes edging out its current footprint and driving penetration rates in its existing territory, it is a bit hamstrung by its popularity in its bigger markets. Penetration rates in its Optimum service footprint — basically metropolitan New York — are more than 50%. While opportunities are greater in its more rural Suddenlink markets, with penetration rates of 30% to 40%, buying systems still appears to be the fastest way for Altice to achieve its goals. 

In a research note, MoffettNathanson principal and senior analyst Craig Moffett acknowledged Altice’s M&A desires, adding that a combined strategy of organic growth and M&A deals are what will most likely drive the stock in the future.

Growth Strategy 

“Altice clearly wants to grow, not only through acquisition, but also by edging out into unserved adjacent rural markets,” Moffett wrote. “And that’s precisely what the market wants.” 

Barclays Research media analyst Kannan Venkateshwar agreed, adding that while Altice does have some strong growth drivers, its high penetration rates and industry-high ARPU (average revenue per user) limit visibility in the long term. 

“Consequently, we do believe [Altice USA] is likely to more actively seek smaller cable deals over the course of the next year, to extract growth from synergies instead,” he wrote. 

After an impressive 66% run in 2019, Altice USA shares have slid about 3% this year. A lot of the pressure on the stock is due to investor concerns that its nearly fully penetrated in the competitive New York market. 

“Anything that Altice can do to geographically diversify away from their legacy Optimum footprint would be welcomed by the market, even if they have to pay a premium to do it,” Moffett wrote.

Altice had strong Q3 results — broadband growth at 26,000 subscribers was above consensus expectations — in line with other larger operators. Altice USA also managed to convert a large chunk of broadband subscribers that were receiving service as part of the Keep America Connected pledge, where most providers agreed not to disconnect broadband service during the pandemic. Altice said that during the second quarter about 10,000 customers under the KAC pledge were past due on payments for more than 90 days. Now that number of delinquent accounts is under 3,000, the company said. 

Broadband Boom 

Altice USA’s broadband growth comes as larger companies continue to rack up high-speed internet subscribers. The country’s largest cable operator, Comcast, added 633,000 broadband customers in Q3, its best quarter for broadband growth ever. No. 2 Charter Communications added 537,000 broadband customers in Q3, and has gained more than 1.4 million broadband customers in the past 12 months. 

On a conference call with analysts, Comcast chairman and CEO Brian Roberts marveled at the continued momentum for the broadband product, which most cable operators began offering in earnest at the turn of the 21st century. 

“To have the best broadband quarter in the company’s history sitting here in 2020, when it’s a 20-year-old product, give or take, is a pretty dramatic and amazing statement in my opinion,” Roberts said on the call. 

Broadband growth has been robust to say the least during the pandemic. According to Moffett, high-speed internet growth rates at Charter have been between 6.1% and 8.8% for the past three quarters, while Comcast has ranged between 5.5% and 6.7% growth. Altice, which has a much smaller and more highly penetrated customer base, grew between 2% and 3.7% over the past three quarters. 

While Altice, like its larger peers, is building out its footprint to include homes previously not receiving service, that won’t likely be enough on its own to move the growth needle. Altice said it is extending its network to about 150,000 new homes per year. Charter is building out between 500,00 and 600,000 homes and Comcast is doing about the same. In a conference call with analysts Oct. 30, Charter chief financial officer Christopher Winfrey said while the effect of the build outs has had a “meaningful” impact on broadband subscriber growth, it hasn’t been “material.” 

“It’s helpful, but it’s not the material driver for our growth,” Winfrey said. That would mean for companies like Altice, acquisition — any acquisitions — may be the only way to turn the corner on growth fast enough to satisfy Wall Street. 

“To be sure, waking up to news that Altice has bought a small operator many people won’t have ever heard of before isn’t as sexy as waking up to news that they’ve been bought by Charter would be,” Moffett wrote. “But it is infinitely more likely, and Altice shares are cheap enough that buying a small operator or two might be all that is needed to finally close the valuation gap.”

Altice USA, more than one month after its unsolicited bid for Cogeco Communications was soundly rejected by the Canadian telco’s controlling shareholder, has increased its bid by 8%, including upping its offer for Cogeco’s US operations, Atlantic Broadband.

In a statement, the Audet family, which controls about 69% of Cogeco's vote, again rejected the deal. 

Altice USA said on Sunday that along with Canadian telecom giant Rogers Communications, it was raising its offer for 100% of Cogeco to C$11.1 billion ($8.4 billion) in cash. Altice USA said if the offer was accepted, it would pay about C$5.1 billion ($3.9 billion) for the Atlantic Broadband assets and sell Cogeco’s Canadian businesses to Rogers for the remainder. 

Altice and Rogers offered a combined $7.8 billion for Cogeco on Sept. 2. Of that amount, Altice said it would pay about $3.6 billion for Atlantic Broadband.

Cogeco’s ruling Audet family rejected Altice and Rogers’ earlier bid in September, adding that the family had no intention to sell its stake. 

At the time Louis Audet, Cogeco executive chairman and leader of the Audet Family Trust, Gestion Audem, said in a statement that the family’s rejection of the bid “not a negotiating tactic.”

In a statement issued late Sunday, the family held fast to that stance.

"As we did on September 2nd, 2020, following the announcement of their first unsolicited proposal, members of the Audet family unanimously reject this further proposal. Since this is apparently not registering with Rogers and Altice, we repeat today that this is not a negotiating strategy, but a definitive refusal. We are not interested in selling our shares," said Louis Audet in the statement.

He added that the Audet family's stewardship of the company over 63 years has allowed Cogeco to grow into the only broadband provider with significant operations in the U.S. and Canada, and its stock price and operating results have outperformed  both Altice USA and Rogers.

"Rogers has freely chosen to accumulate shares in the Corporations with full knowledge of the implications," Louis Audet continued. "The Audet family regrets that Rogers' capital allocation decision is causing the Rogers family and Board such anguish."

A good chunk of the bid increase is targeted at the Audet family, led by Cogeco chairman Louis Audet. Altice said that about C$900 million ($682 million) of the purchase price would go to the family for their shares, up from the C$800 million ($612 million) they would have received in the earlier offer.

“We are pleased to present an incredibly attractive revised and enhanced offer for Cogeco that significantly rewards all shareholders and incorporates feedback from recent discussions with holders of subordinate voting shares,” Altice USA CEO Dexter Goei said in a press release. “We encourage the Cogeco boards to act in the best interest of all shareholders and stakeholders as they thoughtfully consider this offer, and we respectfully request that the boards engage with us to discuss our proposal.”

Most analysts expected Altice to increase its bid. 

Altice said in a press release that it was giving Cogeco until Nov. 18 to accept the offer, after such time it would withdraw the bid.

After a tersely worded rejection by the head of the family trust that controls most of the voting rights of Canadian telecom company Cogeco Inc., Altice USA may have to focus its efforts on the remaining family members if it wants its unsolicited takeover attempt to move forward.

Altice USA joined hands with Canadian communications giant Rogers Communications to launch an aggressive $7.8 billion takeover of Cogeco, the fourth-largest telecom company in Canada, on Sept. 2. Altice USA, based in New York, is only interested in Atlantic Broadband — Cogeco’s U.S. cable operations — which it offered to buy for $3.6 billion, or about 10.2 times forward-looking cash flow. Rogers, which owns a 41% interest in Cogeco, has offered $4.2 billion for the company’s Canadian operations. 

It didn’t take long for Cogeco to reject that offer. In a statement, Louis Audet — Cogeco’s executive chairman and head of Gestion Audem, the holding company for his family’s stake in the telco — did so flatly.

 “Our stocks are not for sale,” Audet said. “And let me be clear, our refusal is not a negotiating position, it is final.”

That didn’t appear to faze Altice USA CEO Dexter Goei who, at the virtual Bank of America Merrill Lynch Media, Communications & Entertainment conference Sept. 9, said Altice was still working on getting a deal done.  

Altice’s Long Game

“This is a marathon, not a sprint,” Goei said at the conference. “We’re committed to trying to come to an end game. From our standpoint, that’s very simple, which is we’d like to be able to acquire the U.S. assets.”

Altice burst on the scene in 2015 with its $9.1 billion purchase of Suddenlink Communications and followed that with the $17.7 billion buy of Cablevision Systems a year later. An IPO in 2017 raised about $1.9 billion and created a deal currency many expected would be used to roll up smaller operators. But since the Cablevision deal, Altice USA has managed just one purchase — Service Electric Cable TV of New Jersey for $150 million —  an all-cash deal that closed in July. In the meantime, under some pressure from analysts to maintain its growth trajectory,  the company has made M&A a priority.  “We will always be looking at stuff out there,” Goei said at the Bank of America conference.

In detailing the offer on Sept. 2, Altice USA said that because of Cogeco’s corporate structure — Gestion Audem owns 69% voting control of Cogeco and 71% of Cogeco Connections’ voting rights — a deal would have to receive the Audet family’s blessing. Unlike other unsolicited deals, trying to circumvent the family by soliciting the favor of other shareholders would serve no purpose. 

So if Altice and Rogers are serious, they’ll have to appeal to individual family members, a notion not lost on Evercore ISI media analyst James Ratcliffe.  In a Sept. 2 note, he pointed out that the tone of the press release announcing the offer seemed to indicate it had yet to convince Louis Audet of the benefits of a deal. 

“The release appears designed to appeal to other members of the Audet family, and also to an argument on the fiduciary duty of independent members of the Cogeco board,” he wrote.

In a Sept. 2 press release, Altice highlighted the $612 million in cash as part of the offer that would go to Gestion Audem.  

The situation is reminiscent of an earlier unsolicited takeover of a family-controlled media asset: News Corp.’s $5.6 billion purchase of Dow Jones & Co. in 2007.

Back then, the Murdoch family-led News Corp.’s unsolicited $5 billion bid — a 67% premium to its share price — blindsided Dow Jones’s ruling Bancroft family. As with Cogeco, initially the Bancrofts rejected the offer, concerned about News Corp.’s tabloid reputation. But three months later, after targeting younger, more eager-to-sell members of the Bancroft clan, Murdoch had a deal.

Whether that can be the path toward a Cogeco deal remains to be seen. The Bancroft trust included dozens of family members with diverse interests regarding their stakes. According to the Cogeco website, Gestion Audem is more closely held, with Louis Audet, the only family member among Cogeco senior management, holding the biggest piece (29.16%). He is followed by his brothers Bernard (17.7%) and Francois (13.89%) and two trusts: Fiducie la Fuente (17.71%) and Fiducie des Aulnes (21.53%).

Ultimately, a sale would depend on Altice and Rogers’ ability to increase the offer and the Audet family’s willingness to accept it. While Rogers has long coveted Cogeco’s Canadian assets, Altice USA’s ability to up the ante could be trickier.

Price May Be Too Steep

“If they can get it for anything like their offer price, it would be a great addition,” MoffettNathanson principal and senior analyst Craig Moffett said in an email.  “It would help them diversify away from the low-growth New York-area Optimum business, and would give them a longer runway for broadband growth and consolidated margin expansion.”

Sanford Bernstein media analyst Peter Supino said given the potential of the Atlantic Broadband systems, Altice USA should have no problems going higher if it wants to.“I think that the company should be willing to pay higher prices and really pay right up to its point of economic indifference for the asset,” he said.

Despite a rather pointed rebuff from Cogeco’s largest shareholder, Altice USA CEO Dexter Goei isn’t throwing in the towel just yet, saying at an industry conference that his company remains committed to its effort to purchase the Canadian telecom operator.

Altice USA launched a $7.8 billion bid to purchase Cogeco on Sept. 2. As part of that offer -- made in partnership with Rogers Communications -- Altice would purchase Cogeco’s Atlantic Broadband U.S. cable business, while Rogers would buy its Canadian operations for $4.2 billion. The offer -- C$106.53 per share -- represented a 36% premium to Cogeco’s stock price on Aug. 31.

Cogeco responded quickly, publicly stating on Sept. 2 that its board would evaluate the offer, but adding that its controlling shareholder -- the Audet family -- had not expressed any intention to sell. On Sept. 7, Cogeco executive chairman Louis Audet, also the top representative for the Audet family trust that holds its Cogeco interest, made it clear that the family did not intend to sell.

“I want to provide absolute clarity to stakeholders regarding our intentions in response to the recent unsolicited proposal to acquire Cogeco. Our stocks are not for sale,” Audet said in the statement. “And let me be clear, our refusal is not a negotiating position, it is final.”

At the virtual Bank of America Merrill Lynch 2020 Media, Communications & Entertainment Conference Wednesday, Goei didn’t seem ready to give up yet.

“We’re working,” Goei said. “This is a marathon not a sprint. We’re committed to trying to come to an end game. From our standpoint, that’s very simple, which is we’d like to be able to acquire the U.S. assets.”

He added that Rogers already owns a 33% interest in Cogeco Communications and 41% of Cogeco, which it has held for a “very, very long time.” 

“They’d like to be able to sort out their situation, one way or the other,” Goei continued. “We are going to be committed to continuing this process and this project. We’ll see where it ends up.”

Goei wouldn’t say how that would happen or if Altice USA would raise its offer, but he did say that the deal would be a good fit, likening Atlantic Broadband to a smaller Suddenlink, the Midwestern operator the company purchased in 2015. 

“That entire Florida to Maine footprint that they have is geographically pretty contiguous,” Goei said. “We like cable, we like traditional MVPDs, and size matters in our space -- for the technology investments, for the infrastructure investments, for  the content costs, for all of the amortization of the operational costs of the business. It’s pretty straight forward in terms of the synergies. They’re in every single line item across the board.”

While Goei said the business will continue to do well without the deal -- Altice USA had its two best quarters of growth in Q1 and Q2 -- opportunities like Atlantic Broadband don’t come around often.

“The opportunity came to us as we got introduced to Rogers,” Goei said. “Rogers has a big focus on Canada and no interest in the U.S. and vice versa. It’s just a question of timing. ...It’s not a question in any shape or form of us needing to do anything in particular. It’s just that you need to be reactive in M&A situations and this was a perfect opportunity for us to be reactive.”

While the hope is that an agreement can be reached, Goei said if a deal does not materialize, life will go on. 

“Plan A all the time to the extent there is attractive M&A is available, we’ll always prioritize that,” Goei said. “We will always be looking at stuff out there, and to the extent that we find a target that we find very attractive for whatever part of our business we are looking to grow, then we will use those proceeds for that. Assuming that doesn’t happen, because M&A is fraught with low probabilities of success depending on what the asset is and who the seller is and what the process is, we will look to buy back more shares and even maybe delever our balance sheet. It depends on the opportunity.”

Altice USA CEO Dexter Goei is talking to sports networks about possible rebates on affiliate fees paid during times when no sports are played, adding that while it is still early days, he does expect to get at least some relief.

"We’ve had initial discussions with all of the major sports programmers, both on a regional and national basis,” Goei said on a conference call to discuss Q1 results. "We’re engaging with them currently on these discussions.”

Goei revealed the talks as Altice USA reported the loss of another 42,000 pay TV customers in the first quarter. The cable operator's TV base now stands at only 3.14 million subscribers. Altice USA lost 10,000 video customers in the first quarter of 2019.

Goei pointed to a letter he and other providers received Wednesday from NY State Attorney General Letitia James, asking operators to investigate offering rebates to customers for the lack of sports programming. 

“We’re in complete agreement with the New York AG,” Goei said. “So this becomes a contract-by-contract discussion with each one of the providers. I can't give you any particular insights because every contract is quite different from the other. But we would expect to get some relief, for sure.”

Sports networks have been without live games since mid-March, when the COVID-19 pandemic effectively shut down every professional sports league. As the drought continues, consumers have gotten increasingly frustrated in paying fees for games they can’t watch.

Comcast, which also owns sports networks, said earlier today that it is speaking with the various leagues about rate relief, and would pass any savings to distributors, who have in turn pledged to return that savings to customers. But the question of whether distributors and networks will get relief depends on the deals they have signed. Most U.S. sports rights deals hinge on a minimum number of games delivered, and so far that does't appear to have been breached.

In her letter -- which was sent to Altice USA, Comcast, Charter Communications, AT&T, RCN, Dish Network and Verizon -- Attorney General James requested that operators “promptly and voluntarily provide relief to affected New York consumers from high cable television charges,” adding that it is "simply inappropriate for New Yorkers to be burdened by high costs for services that cable providers are not able to deliver, and programming that is a mere vestige of what has been expected. Reducing those burdens is not only legally and practically appropriate, it is clearly the right thing to do."

But James is kind of barking up the wrong tree. Cable operators are charging their customers sports fees because they are still paying rights fees to networks. Most distributors have said they would pass any savings on to customers, but that would mean that the sports networks, which pay rights fees to the respective professional sports leagues, would have to receive relief too.

Altice USA investors headed for the exits after the New York-area cable company said it would likely report negative broadband customer additions in the fourth quarter, a potential sign of weakness in cable’s long-standing dominance in the high-speed data market. That looks like it might be an overreaction.

Shares in Altice USA, a top performer in the sector (up 90% between Dec. 31, 2018 and Nov. 5, 2019), fell more than 20% on Nov. 6 after the statement about losing broadband customers in the fourth quarter. The Optimum and Suddenlink parent also reported flat revenue and cash-flow growth in the period and reduced full-year revenue growth guidance to 2.5% from 3% to 3.5%.

Cable stocks have enjoyed some of their most robust growth in the past 18 months, rising about 40% in 2018, due to broadband’s potency. It seemed like the industry had finally shaken the albatross of video customer losses (about 3 million in the past three years) that have consistently dragged on shares.

Broadband Is the Driver

Broadband is key to the future of the cable industry. Any glitch in that status, no matter how small or short-term, has an impact. Despite the recent introduction of wireless services by Comcast, Charter Communications and Altice, those products are largely seen as retention tools. It’s not like Wall Street believes the cable business has anything to fall back on.

In a research note, MoffettNathanson principal and senior analyst Craig Moffett said though several factors may have led to the cable sector rally, three could derail it: slower unit growth, slower pricing growth and the threat of new regulation.

“The results reported today [Nov. 6] play to both of the first two fears,” Moffett wrote. “With the stock up this much, it is tempting to say that these risks are now more urgent, and to argue that investors had become complacent.”

While growth was “perilously slow” in some areas, Moffett added, that was more due to pricing.

“The warning about higher churn in Q4 due to promotional rolloffs will only heighten anxiety, as it speaks to unit growth deceleration, which may be the greater concern,” Moffett wrote.

Altice USA CEO Dexter Goei said he expected broadband additions to get back on track in 2020, blaming the expected Q4 losses on the expiration of promotional offerings and the conversion of some Suddenlink customers to a new billing system that shut down some systems for a week, preventing the new installations.

“It just happens to be that we’re hitting a vortex of a lot of the promos rolling off in the second half of this year,” Altice USA CEO Dexter Goei said during the earnings conference call with analysts.

Altice stock fell as much as 22% on Nov. 6, before closing at $25.98, down 17%.

The rest of the sector was relatively stable. Charter dipped about 1% on Nov. 6 and Comcast was about even for the day, down 6 cents per share to $44.22.

Comcast added 373,000 broadband customers in Q3, its best Q3 growth in a decade, while Charter’s 351,000 broadband additions solidly outperformed the prior year’s 266,000 adds in the period.

Leichtman Research Group president Bruce Leichtman said the Altice guidance shouldn’t have a big effect on the overall broadband market, with big gains at Comcast and Charter in Q3 pointing to continued growth.

“Take it with a grain of salt,” Leichtman said of the Altice guidance. Despite high penetration rates for cable broadband, the industry has a proven success rate in attracting customers in new housing builds.

“New home builds represent another million houses per year, and they [cable] are getting all of it,” Leichtman said.

Altice USA didn’t say how many broadband customers it expected to lose, just that it will lose some. Other analysts, like Evercore ISI’s James Ratcliffe, who had earlier expected Q4 additions to be in the 20,000 subscriber range, now pegs the Q4 broadband loss at about 5,000 subscribers.

No Shift in Fundamentals

“We don’t see this as changing the fundamental long-term trend of 1-2% broadband subscriber growth, roughly in line with household formation,” Ratcliffe said in a research note.

Sanford Bernstein media analyst Peter Supino wrote that Altice USA’s aggressive growth strategy, an ongoing fiber-to-the-home build and the prospects for mobile service gains outweigh any short-term challenges. He predicted “improving fundamentals for years to come.”

Strong operational fundamentals had made Altice USA one of cable’s favorite stocks, praised for aggressively pricing mobile and video offerings. In addition to pricing its Altice Mobile service at $20 per month for existing video and/or data customers, Altice launched a price-for-life campaign for video and data customers that would lock in pricing for as long as the customer stayed with the service.

On a conference call with reporters before the analyst call, Goei said because of heavier than expected promotional expirations in Q4 Altice anticipates “heavy” disconnects of service. He said subscriber numbers should return to normal subsequently and one of the motivations behind the price-for-life campaign was to mitigate against declines in the future.

“As we start replacing promotional rolloffs with price for life, that will continue to abate,” Goei said. “The real goal of price for life is to drive less customer interaction and have people feel a lot better about their product and not getting some very large step-ups in pricing once they come off promotionals.”

Altice USA said its fiber-to-the-home network is now reaching more than 500,000 homes, covering about 10% of its Optimum-branded footprint.

“We view fiber-to-the-home as an end state of the network which is superior to other future cable DOCSIS network upgrades,” said Dexter Goei, CEO of Altice USA, to investment analysts on Tuesday during the cable operator’s third-quarter earnings call.

“We believe future iterations of DOCSIS will end up with a fiber deep node+0 architecture anyway,” Goei added.

Related: Altice USA Revenue, Cash Flow Flat in Q3

Altice USA’s network evolution comes as a direct correlation develops between customers taking faster internet speeds and those using more data. Goes said that customers with 200 Mbps speeds and higher use an average of 290 GB per month of data, a rate that was up 20% in the third quarter and that was 75% higher than those who take less than 200 Mbps.

“Given the proliferation of new streaming services, we feel very well positioned to benefit from continued growth in demand for our broadband services which is at the heart of everything we do,” Goei said.

Altice USA saw its broadband customer base rise by 15,000 users in Q3, comparable to a year-ago performance of 14,000.

Slow start for Altice Mobile

The company reported customer growth of just 15,000 subscriber lines for its new consumer wireless service, Altice Mobile.

Goes said it’s “a little too early” to be concerned about that, "given that we're just about two months into the launch. And we still haven't opened up all of our channels and we still haven't really targeted non-customers. I think as we go broader which is really let's call it Black Friday into Christmas season and going into the first quarter of next year that's going to be something that I'm happy to share with them.”

About four years ago, Altice USA was being mocked by seasoned cable watchers who doubted the company’s plans to shave about $900 million in costs out of an already lean business, employing what its former French parent Altice N.V. (now Altice Europe N.V.) called a European-style cost discipline to the business.

Since buying Suddenlink Communications for $9.1 billion in late 2015 — and Cablevision Systems for $17.7 billion less than a year later — Altice USA has managed not only to meet those cost-cutting targets, but exceed them. Along the way its stock, which had languished well below its $30-per-share June 2017 initial public offering price as investors continued to be skeptical, soared by more than 75% so far this year, which could put the operator back in the hunt for more cable properties. In the meantime, Altice USA, the Multichannel News 2019 Distributor of the Year, has reduced year-over-year video customer losses for six straight quarters and boosted broadband subscribers.

This month, it launched its own wireless offering, Altice Mobile, at a price that is less than half that of its cable peers and nearly one-third less than its competition.

Defying the Skeptics

Analysts, many of whom highly doubted Altice’s ability to survive in the cutthroat U.S. cable business, are now singing the company’s praises.

“I have to admit that I was among the skeptics and I’ve been proven wrong,” said MoffettNathanson principal and senior analyst Craig Moffett. “They’ve done everything they said they were going to do and there’s no evidence that their service delivery has been compromised in any way. Most of their quality scores are trending in the right direction. They are to be commended. They’ve done an exceptional job managing those assets.”

RELATED STORY: Altice One Burns the Churn

The numbers back up that assessment. In the second quarter, Altice USA reported revenue and cash-flow growth of 3.7% and 7.3%, respectively. Video subscribers fell by 21,000, better than the 24,000 it lost in the same period last year and the sixth straight quarter of year-over-year improvement. Four years into the company’s grand experiment, it appears Altice’s European approach is working in the USA.

Altice USA CEO Dexter Goei said what was considered to be a radical way to run a cable company four years ago was merely Altice’s normal way of doing business.

Altice N.V., a Netherlands-based cable, telecom and wireless service provider (its top markets are in France, Israel and Portugal) burst on the domestic cable scene in surprising fashion. It purchased Suddenlink Communications in late 2015 after emerging as a potential competing bidder to Charter Communications for Time Warner Cable. After Charter won that contest, Altice turned its attention to Cablevision Systems.

Altice N.V. split from Altice USA in June 2018, creating Altice Europe, housing the European telecom, cable and wireless assets, and Altice USA, the domestic cable business. Both companies, although separate, are controlled by Altice founder Patrick Drahi, who also serves as chairman of both Altice Europe and Altice USA.

Goei said that in studying the U.S. market, he was surprised to see how low operating margins were for cable operators compared to their European counterparts. One of the things that intrigued the company was that EBITDA minus capex numbers — considered a strong measure of a company’s profitability — were consistently in the 15% to 20% range, with 30% EBITDA margins and 15% to 20% capex margins, while in Europe Altice was operating similar businesses in the 30% range (50% EBITDA, 20% capex). The excuse given for the low range for cable operators had always been higher programming costs, but even when those expenditures were removed, nonprogramming operating expenses (a phrase Altice says it coined) were five to seven times higher than what Altice was experiencing in some of its European markets.

“That is purely an efficiency issue and a technology choice decision in terms of the pace you’re investing and the products you’re investing in,” Goei said.

Margin Walkers

Today, Altice USA’s operating margins are among the highest in the industry and, in the second quarter, they reached 44%, up from 36.2% in second-quarter 2016.

To put that in perspective, cash flow margins at the much bigger Comcast and Charter Communications were 40.5% and 36.9%, respectively, in Q2.

“They still have plenty of runway left for higher margins as the mix shifts more and more toward broadband,” a profitable product, Moffett said. In a research report after Altice’s Q2 results, Moffett said margins could approach 50% in the next few years.

On a conference call with analysts to discuss Q2 results in July, Altice USA co-president and chief financial officer Charles Stewart said that, except for mobile losses of about $5 million in the quarter, margin growth at 44.2% was about 800 basis points better than when Altice closed the Cablevision purchase three years ago, and 170 basis points better than last year alone.

“That substantial margin improvement as we often discussed is supporting higher investments in all of our growth initiatives and as always, we’ll continue to look for ways to optimize our cost structure,” Stewart said on the call. “Further, the mindset in our efficiency practices are really ingrained in the company’s culture at this point.”

Altice USA has focused on broadband growth, like its peers, adding about 13,000 high-speed internet customers in Q2 to reach about 4.2 million broadband customers across its footprint. Unlike some other cable companies, it also still has a keen eye on video.

Moffett said Altice seems more committed to video than its peers do. That seems to fly in the face of the current business model, which favors broadband over lower-margin video. Cable One, which has the highest cash-flow margins in the industry at 47%, has lost nearly 25% of its video customers over the past four years and has not suffered financially. As more and more consumers stream video, other operators are starting to follow suit.

“I never would have thought we’d see the day when Altice seems more committed to video than Comcast does, whether that’s a function of the unique demographics in their footprint, or simply a different perspective on the role video pays in the bundle,” Moffett said. “You certainly can’t pretend that they don’t fully understand the argument. They just apparently don’t agree. They still think video is extremely important and worth defending with real energy.”

Goei has a fairly simple explanation: Altice still likes the video business.

“It all kind of peels together because our mindset is, this still is a profitable business,” Goei said. “Let’s make it more profitable than it is with the tools that we have.” He said he isn’t sure that Altice USA will continue to show year-over-year improvement on the video customer side, but he believes it will do better than its peers.

Scale is the Answer

Margin help could come by getting bigger through acquisitions, something that was a hallmark of its former European parent, now called Altice Europe N.V., in the earlier part of the decade. Altice N.V. spent about $30 billion on acquisitions in 2014 alone, but that has been put on the back burner as the company focused on shoring up its U.S. cable business. Now, with a healthy stock price — shares were priced at $28.89 on Sept. 11, up 75% for the year — Altice USA has a currency with which to seek out deals.

“I think about it every day,” Goei said of increasing scale. “The premise was always very difficult for us in the last 18 months because our stock price wasn’t there. We’re up [75%] to date; Charter is up [50%]. We’re starting to narrow the gap in valuation with our peers. And so we’re going to continue to see if we can continue to narrow that gap, to make at least the discussion with anyone out there — whether it be a Charter, a Cox, a Mediacom, a Cable One or even some of the overbuilders — a proper valuation discussion based on proper numbers.”

With about 4.2 million broadband and 3.3 million video customers, Altice USA is still a distant third behind Comcast’s Xfinity (22.1 million video customers and 26.5 million high-speed internet subscribers) and Charter’s Spectrum (15.8 million video and 24.2 million broadband subscribers).

Altice USA is also two distinct companies in one. Suddenlink is in mostly secondary markets in the South, West and Midwest; Optimum (the former Cablevision footprint) is in the largest media market in the country, the New York metropolitan area. Suddenlink’s broadband penetration is in the 30% range while Optimum’s hovers around 70%.

Goei makes no predictions about how the cable landscape will shake out, but he said as the wireline and mobile businesses converge, so too may cable operators and wireless providers.

Outside of outright purchases, Goei sees a near future in which cable operators and wireless companies band together to build out networks in competitors’ territories — for example Charter and Verizon pairing up to build out residential footprint in Comcast territory.

“That’s where it’s going to end up, because the bigger you are with both infrastructures, it’s going to allow you to spend a lot more money to go after more customers and deliver a better experience,” Goei said. “We’d love to be part of that equation. We’re too small today. We don’t know how it will pan out, but I can’t believe we’re going to be in the same situation in five years.”

How Altice USA will fit into that future has yet to be determined. In the meantime, the company will continue to roll out products and services geared to increasing its reach, including on the video side, where Goei said a large portion of its customer base — especially in the New York tri-state area for its Optimum branded product — continue to be heavy users of video. The company realized early on that a focus on customer service and the customer experience would help preserve the base, he added.

That led to heavy investments in the Altice One platform, the fiber-to-the-home build, and its investment in programming like business-news streaming service Cheddar, he said.

Altice purchased Cheddar in April for about $200 million, folding that operation into Altice News, which includes its News 12 hyperlocal news channels and international news network i24 News. Altice News is headed by Cheddar founder Jon Steinberg, who reports to Stewart. Stewart also heads up Altice’s advertising unit, a4.

While news programming may keep customers glued to their sets for awhile, Altice also made a bold customer service move last month with its “Price for Life” campaign, offering new customers 200 channels of video and a 200 Megabits per second internet service for $64.99 per month (not including taxes and charges) for as long as they remain a subscriber. For customers who want more video and internet, “Price for Life” has three other tiers: Select, with 340 channels and 200 Mbps internet for $74.99; Core TV with 220 video channels and 400 Mbps for $84.99; and Premier TV with 420 channels (including premium channels HBO and Showtime) and 200 Mbps for $94.99.

The idea is that a Price for Life offer will strengthen customer loyalty. The upside is that, after a certain amount of time, customers will most likely upgrade to higher-priced broadband speeds.

“When you give someone the peace of mind that he will have that price and that package for as long as he lives, he will never churn,” Goei said. “He will never even call, probably. He’s just happy.”

All About the Network

But a video service, and a broadband offering for that matter, is only as good as the network it runs on. In 2017 Altice embarked on a five-year plan to bring fiber-to-the-home to its customers, called Generation Gigaspeed. To date, Altice has about 1 million homes in its footprint passed by fiber and expects to add another 1 million homes next year.

“The network is the foundation of everything we do,” Altice USA chief operating officer Hakim Boubazine said.

Perhaps the highest profile product to come out of the rebuild has been Altice’s in-home communications hub, Altice One (see Platforms). It launched in 2017 and has gone through three different versions. Altice One 3.0 was released in May and is a version the COO is especially proud of.

“We nailed it,” Boubazine said. “We have a great device that’s simple to install, simple to use, has a great UI which is very engaging and now we’re aggregating services.”

One of the more popular aspects of that version was a Sports Hub, a feature that allows customers to get an overview of games taking place within 48 hours of their original airing and the ability to select a customized view for their favorite teams. Even though the product was launched when baseball season was already underway and football had not yet started, “tens of thousands” of customers signed up their teams.

“They saw the app and went straight to booking their favorites to get ready for the season,” Boubazine said. “That’s great, because having that cloud-based platform that we can modify at will remotely helps us deliver what is the most important factor whenever you come up with an innovation — to create a ‘wow’ effect right out of the gate.”

As the fiber build progresses, Boubazine said the plan is to leverage the network even more and eventually move to a “headless architecture,” which he said essentially eliminates the need for internal wiring. Eventually, he sees a day where pay TV distributors serve more as content aggregators, where they make apps for specific programmers available in a package for a fee.

“When we architected the Altice One platform, we had that in mind, because we knew at some point those guys would come,” Boubazine said. “What happens whenever a market passes the threshold of fragmentation? It consolidates somehow. We are there.”

Boubazine doesn’t believe that consolidation will happen through M&A, but through platforms. The company with the most powerful platforms and relationships wins.

But perhaps the biggest impact of the network will be on Altice Mobile, the wireless service that was launched at the beginning of the month.

According to Boubazine, the convergence of cable wireline broadband and wireless network technology is at the very core of the operator’s agenda.

Huge investments in fiber-to-the home, improving the home WiFi experience through the Altice One platform and expanding the reach of public Wi-Fi hotspots have all been “in preparation of our mobile adventure,” Boubazine said.

“Our vision has always been convergence,” he said, explaining the cable company’s quest to deliver seamless connectivity to its subscribers when they step out of the home.

As Boubazine explained, average revenue for cable services is around $150 a month right now. Wireless is business that generates almost as much — $140 a month, Boubazine noted. And as cable looks to exploit the opportunity, Altice USA has an advantage that Comcast and Charter do not.

To launch its new wireless service, which has the lowest price point in the industry starting at $20 a line, Altice USA is leveraging what it calls an “infrastructure-based” MVNO deal with Sprint. This means it essentially owns the core network, the Home Location Register database (HLR) and Subscriber Identity Module (SIM) components.

One of the roadblocks to controlling core/HLR/SIM management has been the device and SIM providers. “But Altice already had the scale and relationships with device/SIM providers in Europe and the Dominican Republic to leverage for the U.S.,” said Gregory Williams, analyst for equity research company Cowen.

“Our ambition is not to only feed the home, but to deliver the best broadband outside the home, as well,” Boubazine said.

Altice USA was late to cable’s latest wireless wave, with Comcast rolling out Xfinity Mobile in April 2017 and Charter launching Spectrum Mobile last year. That delay might have worked to Altice’s advantage. Several analysts have pointed to Altice’s superior MVNO economics. Its deal with Sprint (and eventually T-Mobile, when that merger is complete) gives the cable company the ability to transfer wireless traffic to its own WiFi network and to substantially reduce costs. That is more than reflected in the price point for the wireless service: $20 per month for life for Optimum and Suddenlink customers, $30 per month for everyone else. That’s about half the $45 per month Comcast and Charter charge for wireless, and about one third the $70 monthly average for wireless customers of Verizon and AT&T.

“The fact that they have come out with a wireless offering at $20 a month for life, that they swear 16 ways to Sunday they can make money on, is nothing short of extraordinary,” Moffett said. “That suggests that they have a cost structure in their MVNO agreement that is radically better than anyone imagined.”

A $20 or $30 price point should also help attract subscribers. In a research note, Barclays media analyst Kannan Venkateshwar estimated that Altice USA has about 5 million subscriber homes and 8.5 million homes passed within its footprint, implying a potential base of 13 million to 22 million wireless customers. Given that Altice said it will also be able to sell wireless outside of its footprint — particularly in Manhattan, where it does not have a cable presence — that base could be even higher.

Venkateshwar estimated that Altice could capture more than 10% of that potential wireless base in the first two years of operation, which would add another 200 basis points of revenue growth annually.

“Given the price point, our present wireless revenue estimate and therefore full-year revenue growth estimate could prove conservative,” Venkateshwar wrote in a report.

Goei has said he expects the wireless product to be profitable in about 12 months, adding that the pricing for the product isn’t predatory.

“We are not pricing this at a negative gross profit per customer,” Goei said on a conference call announcing the product. “We intend to make this very profitable going forward.”

There might be doubters concerning the company’s ability to make wireless profitable: Comcast and Charter have already lost hundreds of millions of dollars on their respective wireless offerings, which have been touted primarily as retention tools.

Goei, though, has stared down skepticism before.

“You can’t offer a $20 product in a market where the prevailing ARPU is close to $50 and not make noise,” Moffett said. “People will have to take notice and they will have an impact on the market.”

Daniel Frankel contributed to this report.

Altice USA said its new mobile service has completed its employee testing and is ready for a commercial launch “this summer.”

Reporting 3.7% second-quarter revenue growth to $2.45 billion, the Bethpage, N.Y. cable operator highlighted the imminent launch of its new mobile service, and explained to investment analysts just how it will function now that its major MVNO partner, Sprint, has been purchased by T-Mobile.

Pending regulatory conditions and commitments, Altice USA’s MVNO deal with Sprint will be “expanded” into a seven-year wholesale agreement to utilize T-Mobile’s wireless network, including T-Mobile’s emerging 5G infrastructure.

Related: Report: Altice USA Close to Selling Lightpath Stake

The MVNO deal extends through the life of the seven-year consent degree, laid out in T-Mobile’s agreement with regulators to buy Sprint for $26 billion. According to Altice USA CEO Dexter Goei, the merger effectively extends Altice Mobile's MVNO deal three more years beyond the expiration of its legacy Sprint MVNO agreement.

That, according to Goei, gives Altice “three more years” to think about a future in which it moves beyond MVNO arrangements, building out its own wireless infrastructure.

“And the expansion organically or inorganically, will allow us to market to more geographies,” he noted.

Goei said Altice USA is pleased with how its MVNO situation shook out amid the processes with the FCC and U.S. Justice Department. He cautioned that arrangements could change at the state attorney generals level. 

Beyond the T-Mobile MVNO deal, Altice Mobile will leverage the cable operator’s upgraded public WiFi network, its fiber assets and the shared small-cell infrastructure it had been building out under its agreement with Sprint.

Separately, Altice USA announced a new complementary nationwide roaming agreement with AT&T, which it said will give its new mobile platform 99% nationwide coverage.

Goei gave no details on Altice Mobile pricing. Is the $25-a-month price reported for the employee test, the price we can expect to see when the service rolls out? “You’ll see when we launch," he said.

Meanwhile, Altice USA lost 21,000 video customers in the second quarter, vs. 24,000 in Q2 2018, marking what the company said was the sixth straight quarter in which it has reported year-over-year churn improvements.

The cable operator attributed this improvement to its Altice One CPE platform.

“And we have somewhat of a unique footprint,” Goei added, noting that the New York area has a “high video bundle market.”

Altice USA added 13,000 high-speed broadband users in Q2, an improvement over the 10,000 added in Q2 2018. Goei said that with the upgrade of the company’s Suddenlink footprint to DOCSIS 3.1, all of Altice USA’s footprint can now offer 1-gig speeds.

In the Optimum region, where Altice is rolling out fiber, the company expects to start delivering 10-gig symmetrical speeds in early 2020.

Hand in hand with the network investments have come improved financials for business services, which saw a 6.1% revenue increase in Q2.

Other financial data: Altice USA’s net income for the quarter was $86 million vs. a $98 million loss a year ago; adjusted EBITDA grew 7.3% to $1.08 billion.

Also, Altice USA is reportedly close to selling a minority stake in its commercial telecom unit Lightpath to Stonepeak Infrastructure Partners, a New York private equity firm.

“This is an opportunistic situation for us,” Goei said. “It’s not a must-do.”

Reporting a loss of 15,000 video customers in the fourth quarter, an improvement over the 25,000 lost a year prior, Altice USA is hopeful that it’s new Altice One CPE platform is helping to reduce churn in the same way as Comcast’s advanced video platform, X1, has.

But even with the platform supposedly yielding improved Net Promotor Scores among its customers, Altice doesn’t feel just yet like it has the goods to aggressively tie it to reduced churn in the same way Comcast has in recent years with X1.

Altice One is distributed in only about 300,000 homes, accounting for only around 10% of Altice USA’s video user base. Altice USA believes the platform needs a little more time to prove itself.

Related: Broadband Helps Drive Q4 Growth at Altice USA

“We haven't talked about it broadly because we still think it's too early to tell to be very proactive in our commentary,” said Altice USA CEO Dexter Goei during the company’s fourth quarter earnings call Thursday.

“We did want to start highlighting that we're seeing better NPS scores on the Altice One platform than we are seeing relative to legacy set-top boxes. You've also seen the improvement in video [revenue generating units] quarter-over-quarter throughout 2018. We don't want to attribute that yet to Altice One. So it's too early to tell whether that is a churn impact or whether there are things that are happening in other video technologies out there that are helping our video trends,” Goei added.

The platform’s ability to integrate popular OTT platforms like Netflix—and soon, Alice said, a vMVPD—is adding to Altice One’s allure, he noted.

“I don't think we are seeing a degradation, let's call it, of our linear viewership because there is access to OTT apps in an easier format,” Goei said. “I think it's really a question of a much, much better user experience and being able to access all the direct-to-consumer options that are out there in a very easy way, in a very aggregated way you're not switching between your HDMI 1, 2 and 3 on a regular basis on your television set.”

Meanwhile, with Altice USA actually promoting 1-gig fiber-to-the-home services in Long Island and surrounding parts of its Optimum footprint, Goei dismissed any notion during Thursday’s call that the operator will be looking at the cable industry’s emerging “10G” DOCSIS-enabled technologies, such as Full Duplex.

“Obviously, we're part of CableLabs. So as part of whole CableLabs experience, we're part of that. But we are more focused on our fiber-to-the-home GPON technology than we are on coax 3.1 10G technology,” Goei said. 

Altice USA continues to tout the benefits of its “full MVNO” approach for a mobile service it still says is on track to launch in the first half of next year.

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.”

Altice USA has asked the FCC to let it conduct CBRS trials in Jonesboro, Ark. beginning Sept. 1.

According to the filing, Alice would like to conduct indoor and outdoor tests using prototype small cells and equipment from vendors including Ericsson, Nokia, Airspan Networks, Arris’ Ruckus Networks and Berkeley Varitronics Systems. According to Altice’s “special temporary authority” application, the operator would like use its 3.5GHz band trials to “evaluate propagation, capacity and mobility characteristics.”

Related: Altice USA Eyes CBRS Small Cell Strategy

Alice USA, Comcast and Charter Communications are all looking at the potential of small cell networks that utilize the emerging CBRS (Citizens Band Radio Service) shared spectrum band.

In April, Altice USA issued a request for information on CBRS small cell products, along with a request for proposal on a multi-phase trial.

As reported by Multichannel News in May, Altice USA believes it is well positioned to build a small network in part to its access to low-cost sites and a workforce that could be trained to install and maintain the new small cell network.

Tied to Altice USA’s CBRS effort, the operator is building out network infrastructure for its MVNO deal with Sprint. Altice expects to launch a mobile service based on this relationship next year.

Speaking to investors two weeks ago for Altice USA’s Q2 earnings report, CEO Dexter Goei talked about the ongoing “densification of Sprint’s network,” as well as upgrades and expansion of Altice’s Wi-Fi network.

“We are also testing CBRS spectrum with equipment in a 3.5 gigahertz band as this may be good complementary capacity for us,” Goei said.

Last month, the FCC announced that it will begin on Sept. 10 accepting initial commercial deployment proposals for CBRS.

The FCC has also conditionally approved a group of Spectrum Access System (SAS) administrators, which include Google, Sony, Amdocs, CommScope and Federated Wireless.

While Comcast and Charter Communications have enjoyed a close partnership for their respective mobile business, sharing everything from merchandising plans to backend technology, their appear to be limits as to just how much Altice USA can collaborate with the two biggest U.S. cable companies in regards to its own MVNO business.

“Ours is a facility based. Theirs is a light MVNO, which makes it a little bit difficult today to cooperate specifically around infrastructure,” said Altice USA CEO Dexter Goei, during his company’s second quarter earnings report.

Related: Comcast, Charter Form Mobile Platform Partnership

“We clearly can cooperate around whether it be marketing, cross-marketing, maybe some supplier acquisition stuff,” Goei said. “But as you know, we are so active globally as a group, and we've maintained very good relationships on a global level with the key suppliers, that we've been able to go ahead and do a lot of this stuff on our own. But I don't ever eliminate the possibilities or the attractiveness of teaming up with our friends from Charter and Comcast on anything relating to that.”

Last year, Altice USA announced an MVNO partnership with Sprint. The cable operator said it will deploy a mobile service built around the deal in 2019.

Related: Altice USA, Sprint Strike ‘Full’ MVNO Deal

“We have a full infrastructure-based MVNO, which has attractive economics and flexibility features for us,” Goei said. “We have a dedicated and experienced mobile management team which will lead the development, launch and ongoing mobile strategy. In terms of network development the densification of Sprint's network, which we're helping with our AirStrand deployment is comfortably ahead of schedule as are the upgrades to and expansion of our WiFi network. We are also testing CBRS spectrum with equipment in a 3.5 gigahertz band as this may be good complementary capacity for us.”

Despite the growing trend to shift focus to broadband-only subscribers across the industry, Altice USA chairman and CEO Dexter Goei said video customers still have value, even to mid-sized operators.

Altice, which has about 4.6 million customers, has been a pioneer in connectivity going back to its predecessor Cablevision Systems. And though larger operators are also seeing the value of focusing on broadband – Comcast said in its Q2 last week that broadband growth was its best in 10 years – Goei said video is still an important part of the bundle.

“The video business continues to be a significant churn enhancer. Relative to a data-only subscriber, bundled video and data subscribers churn 50% less,” Goei said on a call with reporters prior to announcing Q2 results. We do want to offer as many attractive services as possible, but we continue to see very strong take up of our bundles with data.”

But Goei said 60% to 65% of Optimum customers continue to take video, and the company sees substantial runway ahead to increase its video footprint. For example, in its Suddenlink markets in the South and Midwest, video penetration is just 30%, leaving ample room for growth.

“We have no objective today to de-emphasize our video bundle,” Goei said. “Clearly the cost of programming continues to be a most painful thing, but it’s still a profitable business with a lot of features to it.”

With Suddenlink markets the next target for its whole-home communications hub, Altice One, that opportunity has grown significantly.

Goei said Altice USA is expected to ramp up marketing for Altice One in the second half of the year, after taking a scheduled pause to work out bugs in the system.

“We’ve spent the better part of the last 4-to-5 months improving the product significantly, stabilizing any deficiencies,” Goei said. “As we start the back-to-school campaign, we’re ready to be very proactive on reinitiating a big media campaign across Optimum and Suddenlink.”

Goei said he still sees opportunity for organic growth, adding scale through acquisitions wouldn’t move the bar much.

“The one thing that size would give us more of, is little more weight in discussions with programmers,” Goei said. “Getting larger doesn’t help us get better. It [scale] is not a must have, it’s a nice to have.

After decades of trying to boost its status among its competitors in the pay TV service industry, cable companies believe they have finally found the answer to better customer care: take the cable out of cable TV. It’s not as easy as it sounds. 

But after years of laying the groundwork by building fiber networks that anticipated service outages before they happened, promoting technology and equipment that made accessing TV content and the internet easier and faster and shortening appointment windows to one or two hours instead of a full day, cable is moving toward a time when customers will be able to buy, provision, troubleshoot and repair service almost entirely by themselves.

Related: Cable’s Retail Efforts Take Center Stage

That is the path the banking industry — once at the bottom of customer satisfaction rankings and now near the top — has taken over the years, starting with ATMs and evolving into allowing customers to pay bills, transfer money and apply for new credit online.

To an extent, it’s already happening in the cable business. Customers can now provision some services online, and with technology like Comcast’s X1 operating system, Charter’s upcoming Worldbox and Altice USA’s Altice One hub, the era of plug-and-play cable service and provisioning is coming quickly. For some, it couldn’t come soon enough.

A Do-It-Yourself Era

“Ultimately, the idea is for us to go full self-install,” Altice USA chairman and CEO Dexter Goei said at the J.P. Morgan Global Technology, Media & Communications conference earlier this month. “You should be able to connect your headless gateway at your drop, push a button … [plug] in your mini-box into your TV and into the wall for power, and should be able to self-provision everything.

“Every incidence going forward should be able to be dealt with remotely,” he said. “Unless there is a fault in the box itself, where we have to replace the box, nothing should require a customer technician coming into your home anymore.”

Altice USA is in the middle of a company-wide fiber buildout, dubbed Generation Gigaspeed, that will bring fiber to the home to all of the company’s 4.6 million customers in the next five years.

Cable has made some monumental strides in the past several years. Appointment windows are now from one to two hours in length, shaved down from windows of eight to 12 hours. Customers can now use their cellphones to track technicians and upgrade internet service speeds or add additional channels via the cable box. Yet cable continues to rate near the bottom of customer care lists compiled by independent researchers.

According to The Temkin Group, an independent customer care consultant in Waban, Mass., cable has consistently placed near the bottom of the company’s independent surveys. In its latest — the March 2018 Temkin Experience Report — cable again brought up the rear, running neck and neck with used car dealers, no-frills airlines and health-care insurers in almost every major category.

Best Efforts:In the March 2018 Temkin Experience Report, cable placed at the bottom of the list when customers were asked how easy it was to interact with the company. (Source: The Temkin Group)

Cable operators have taken customer care seriously for decades. To share ideas and concepts, the industry has formed the Cable Center Customer Care Committee (C5), a consortium of executives from the largest operators in North America and Europe that is focused on expanding industry knowledge and facilitating new approaches to customer care. Dr. Charles Patti, a University of Denver and Queensland University of Technology professor emeritus and the James M. Cox professor of customer experience management and senior fellow at The Cable Center, leads the C5 efforts.

In the past, Patti told Multichannel News, cable’s customer care efforts were centered on Net Promoter Scores (NPS), which are determined when customers get asked how much they would recommend a service on a scale of one to 10. While NPS still plays an important role, other metrics and terms are beginning to creep their way into cable’s customer care vocabulary. In the future, terms such as “Trust,” “Effort,” “Likability” and “Forgiveness” will become mainstays in the cable dictionary.

All About the Journey

Patti said the focus now in the cable industry is on the “customer journey,” or how a subscriber to cable services gets to where they currently are in the relationship. Making sure their travels are enjoyable should be a top priority for every cable company.

Patti said other industries have used more emotional terms to measure their customer care success, including banks, retailers, supermarkets and fast food companies.

“You’re trying to find the relationships between the measures that you use,” he said. “The downside of Net Promoter Score — it’s essentially one question: How likely is it that you would recommend Comcast, Cox, whatever, on a scale of 1-10? But it doesn’t tell you why, just how likely are you to recommend. There may be 50 different things going through your mind, as a responder, as to why you’re saying that.”

Those can be addressed in additional questions. NPS has a transaction score, which could ask for customers to base their recommendation on an installer visit. If that score is low, then the company knows it may have to offer additional training to that installer.

That inquiry, too, can lead a customer down a rabbit hole. Maybe the installer was late for the appointment, but he or she fixed the problem quickly.

Sweet Smell of Success:Asked to what degree customers were able to accomplish what they set out to do with a company, cable firms again did poorly. (Source: The Temkin Group)

“That’s why companies will look at multiple measures, because if you improve effort, then you’re natural inclination should be, what is the relationship between that and my Net Promoter Score?” Patti said. “Is it increasing? If it’s not, then I have something else I have to explore.”

At Medallia, a customer-care software vendor that counts Comcast among its clients, senior customer care principal Brian Andrews said 60% to 70% of his company’s customers still use NPS as the primary metric, and for many it is a fine way to determine how a company stacks up against the competition.

“You have a group of customers that love them, a group of customers that hate them, and a group of customers that are in between,” Andrews said. “It’s a fairly easy concept to understand. You want to reduce the number that hate you.”

Companies find out quickly that customer care isn’t quite that cut and dried.

“If you are a customer and you’re dealing with cable company A, and you have an issue and call in, your likelihood to recommend is probably not going to be based on that one agent and that one call,” Andrews said. “It tends to be over time.”

Better NPS scores can come from reducing the effort a customer must exert to get their issue resolved, not having them answer the same questions repeatedly and making the overall experience as enjoyable as possible.

“You generally want less friction,” Andrews said.

Emotional Rescue:Asked to think about how they felt with their interactions with the company over the last 60 days, cable companies trailed the pack. (Source: The Temkin Group)

Patti said cable can learn from other industries and from competitors. Companies like Uber, Amazon Prime and Netflix made their mark initially through ease of use and lower prices. Cable companies are starting to take the hint. Comcast even bundles Netflix with its broadband service, something that would have been unheard of just a few years ago.

“It’s really what is the customer’s experience from end-to-end, how do we modify processes to simplify the customer experience, minimize any challenge points for the customers and create an experience that makes it easy for them,” Cox Communications, senior vice president of customer care Peter Lilly said. “The journey work is a big part of what we’re doing and it’s informing all of the other initiatives that we’re spinning up after the fact.”

One of those initiatives is alternate channel support, where Cox is using social media to help customer better interact with the company. While Twitter and Facebook are what most people think of when they think of social media, Lilly said Cox is giving customers the option to online chat or text with an agent rather than calling on the phone and waiting on hold.

Case management, or how the company gets to know each customer’s habits, is also important, he said. If a customer starts out on an online web or chat channel and then calls a support center on the phone, Cox will be able to transfer the information so it doesn’t have to repeatedly ask that customer the same questions.

Tracking Customer Questions

“In today’s world, it’s not uncommon that we would have to ask the same question a couple of times,” Lilly said. “In the future we hope we can eliminate or minimize the need for that. As you expand case management out further it points to the future, which is allowing customers to self-help.”

For Cox, the decision to license Comcast’s X1 operating system — to power Cox’s Contour platform — was also a big step toward improving the overall experience, with voice activated remotes and a better user interface that integrates services like Netflix and YouTube. Net Promoter Scores have risen 200% since Cox introduced Contour, MSO spokesman Todd Smith said.

“I think that has certainly changed the experience for the customer,” Lilly said. “It certainly has changed the way we support customers, because we’re getting questions and issues that we never had before, but in many ways they are easier to resolve than in the old days, and it’s more of an educational solution than a technical problem.”

Gateway devices like the Panoramic WiFi, which enables wireless home connectivity and will allow the company to launch wireless boxes and expand the level of services it provides on the road to self-help.

“Whether it’s web or mobile web, applications need to be really tight,” Lilly said. “As you expand your services, customers don’t want to call you for everything. They want to be able to resolve their issues themselves and be able to learn and use the products, because they’re simple and easy.”

Altice USA’s fiber-to-the-home project won’t only allow the cable operator to provide new services, it will be a key component in the company’s goal to move to a full self-install model, chairman and CEO Dexter Goei told an industry audience Tuesday.

Altice USA began its FTTH buildout – dubbed Generation Gigaspeed – about a year ago with the express goal of completing it in five years. The company has so far passed about 500,000 homes with fiber.

At the J.P. Morgan Global Technology Media & Communications conference in Boston, Goei said once fiber is deployed to the home it is connected directly to CPE units – not the inside wiring – and from there video and data is distributed throughout the house. He added that coupled with its Altice One hub – which should be fiber enabled by the first half of next year – the need for in-home technician visits declines dramatically.

“Ultimately, the idea is for us to go full self-install,” Goei said. “You should be able to connect your headless gateway at your drop, push a button, WiFi gets transmitted, you're just plugging in your mini-box into your TV and into the wall for power, and should be able to self-provision everything. Every incidence going forward, should be able to be dealt with remotely. Unless there is a fault in the box itself, where we have to replace the box, nothing should require a customer technician coming into your home anymore. …Self-install is already a big part of our business in Europe today. We should be able to get self-install and self-provisioning here in the U.S.” 

Altice USA improved its video losses in the first quarter – shedding about 30,000 subscribers in the period versus 35,000 in the prior year – but chairman and CEO Dexter Goei told reporters that they shouldn’t expect that to turn into positive growth anytime soon.

“I’m not going to go out on a limb,” and predict positive video subscriber growth," Goei said on a conference call with reporters to discuss Q1 results, adding that he doesn’t see an acceleration of video losses either.

Other cable operators have seen video subscriber losses increase in the first quarter due to several factors, including added pressure from over-the-top service providers. Comcast shed 96,000 video customers in Q1, compared to gain of 42,000 the year before. And Charter Communications touched off a meltdown in cable stocks in late April when it revealed it lost 112,000 video customers, well in excess of expectations.

Related: Half Full

Goei said the Q1 subscriber losses were due very specific issues – its weeks-long carriage dispute with premium channel Starz and several severe snowstorms in its service territory. Although the Starz dispute was resolved in February,  competitor Fios TV capitalized on the impasse with an aggressive marketing campaign to try to lure customers away.

Altice also has started rolling out its much-touted communications hub – Altice One – in the quarter in its Optimum areas and already has installed the product in about 100,000 homes. The cable company initiated a soft launch of the product, which offers seamless navigation across traditional video, OTT apps and whole-home WiFi and other services, in Suddenlink markets in the second quarter and will expand across the footprint in Q3. 

Altice USA also is making progress on its wireless offering, a mobile virtual network operator agreement with Sprint that could see daylight by the first quarter of 2019. Goei said he did not anticipate problems with the arrangement in light of Sprint pending acquisition by T-Mobile.

For the quarter, revenue was essentially flat – up 1.2% to $2.33 billion from $2.3 billion in the prior year – and cash flow increased 4% to $981 million. Goei said he expected Q1 to be the low point of growth for the company, predicting that revenue will rise between 2.5% and 3% for the full year.

Altice USA hosted an event with U.S. Senator Richard Blumenthal (D-Conn.) and company CEO Dexter Goei with students at Dolan Middle School in Stamford, Conn. to introduce its Altice Connect Smart digital literacy education program.

The program, developed in partnership with EVERFI, will provide digital citizenship education in select schools nationwide across Altice USA’s service areas -- beginning in Connecticut – and reinforcing the company’s commitment to education and digital accessibility in the local communities. The curriculum, donated by Altice USA, enables students to build digital skills and understand the risks and rewards of technology while tackling important issues including privacy, security, cyberbullying, digital relationships, and digital addiction.

The event featured remarks from Sen. Blumenthal, Goei, and Principal Charmaine Tourse. Dolan Middle School was selected as the host school for the launch event based on their initial success with the program and commitment to using the program across the entire eighth grade next year.

“It is important for our young people to learn the risks and opportunities of social media and the internet. I commend Altice USA for taking steps to help students navigate today’s increasingly complex digital world and to raise awareness of such important issues,” Sen. Blumenthal said in a statement

The Altice Connect Smart program is an interactive, new-media learning platform that combines instructional design, rich media, and gaming. The 3.5-hour curriculum is designed for students in the 6th – 9th grades and aligns with national standards established by the International Society for Technology in Education (ISTE), as well as emerging state standards. The curriculum also focuses on building digital skills, such as creating a blog, maintaining a responsible social networking profile, and evaluating online research sources for legitimacy. The learning platform tracks both knowledge gain as well as students’ attitudes and behaviors on these important issues.

“As a technology company, we are committed to supporting education and delivering connectivity as we look to advance digital literacy in the local communities where we live and work, and we are honored to partner with Senator Blumenthal and EVERFI to launch the Altice Connect Smart education program to help accomplish this goal,” Goei said in a statement. “The program will prepare today’s students – our future innovators – by ensuring they have the skills they need to engage with technology safely and responsibly.”

The Museum of the Moving Image will honor Altice USA CEO Dexter Goei and CNN anchor and chief Washington correspondent Jake Tapper at its annual benefit at the St. Regis Hotel in New York on June 12.

Each spring the Museum holds this event to recognize top leaders in the media industry.

"We are delighted to be honoring Dexter Goei at our annual industry gala," said Museum co-chairman Ivan Lustig in a statement. "Under Dexter's leadership Altice USA has experienced extraordinary growth and is now one of leading broadband communications and video service providers in the country. We are also pleased to welcome the company to our neighborhood following their recent headquarters move to Long Island City."

Altice USA is the fourth largest cable operator in the country and offers service under the Optimum and Suddenlink brands. Goei was named chairman and CEO in June 2016 and is responsible for the company’s overall strategic vision and growth in the United States.

Goei joined Altice N.V., Altice USA’s parent company, in 2009 as CEO and helped lead the company’s development and growth from a French cable operator to a multinational telecommunications company operating in France, Portugal, Israel, the Dominican Republic and, most recently, its expansion into the U.S. with the creation of Altice USA. Prior to Altice, Goei was co-head of Morgan Stanley’s TMT Group.

Tapper, CNN anchor and chief Washington correspondent for the network, hosts a one-hour weekday program – The Lead with Jake Tapper – and CNN’s Sunday morning show, State of the Union. Tapper won the 2017 Walter Cronkite Award for Excellence in Television Political Journalism for his coverage of the 2016 presidential election. He is also the author of three books, including his debut novel, The Hellfire Club, which came out on April 24. Tapper joined CNN in 2013 after nine years with ABC News.

“Jake Tapper is among the most respected, trusted, and admired journalists on television,” said the Museum’s executive director Carl Goodman in a statement. “His intelligence and tenacity for uncovering the truth are well known. We are very pleased to be honoring him at our annual industry event.”

The Museum of the Moving Image is the only institution in the United States that deals comprehensively with the art, technology, enjoyment, and social impact of film, television, and digital media. It houses the nation’s largest collection of moving image artifacts and screens over 500 films annually. Its exhibitions—including the core exhibition Behind the Screen and recent addition The Jim Henson Exhibition—are noted for their integration of material objects, computer-based interactive experiences, and audiovisual presentations. Funds raised from this evening will help the Museum maintain and strengthen its education programs, which serve over 70,000 students and teachers each year.

Altice USA stock, weighed down by the enormous debt load of its parent, European telecom stalwart Altice N.V., is getting some needed relief in the form of a spinoff that should remove at least some of the shackles that have restrained the shares since the company’s June IPO.

Altice N.V. announced its plan to complete the split from the U.S. division by the second quarter. As part of the deal, Altice USA will issue a $1.5 billion dividend, which will mainly fall to the Altice N.V. shareholders that own about two-thirds of the U.S. unit. After the deal is closed, the European operation will be renamed Altice Europe and be led by current Altice N.V. chief financial officer Dennis Okhuijsen, rising to CEO. Former CEO Michel Combes left the company in November and was named president and CFO of Sprint earlier this month.

Altice USA CEO Dexter Goei and his team will remain in their current roles after the closing. And Altice founder Patrick Drahi will remain in control of both companies, serving as president of Altice Europe and chairman of Altice USA.

The separation should remove one of the biggest overhangs on Altice USA stock — its parent’s heavy debt load and uncertainty surrounding the European telecom market. Altice USA went public in June 2017 at $30 per share and enjoyed a strong run-up in the days after the IPO, rising as high as $34.30 per share by June 23. But concerns over that heavy debt — about $55 billion — and competitive issues over its wireless business in France negatively affected the U.S. stock. Altice USA finished the year down about 35% ($11.48 each) to $21.23 per share.

Investors appeared pleased with the split, driving Altice USA shares up 9.6% Jan. 9 to $23.11 each.

Taking the Long View

While the split was expected to remove much of the onus on the U.S. stock, Goei, in a conference call with reporters after the transaction was announced, said short-term market reaction is not one of the company’s biggest priorities.

“We feel we’ve positioned the U.S. stock and the European stock to perform to the best of its abilities and to reflect appropriately the value that the respective business should be valued at relative to its peers,” Goei said. “Let’s see how the market reacts, but this is obviously not a short-term thing we are doing today.”

In a research note, Jeff Wlodarczak, Pivotal Research Group CEO and senior media & communications analyst, wrote that the spin solves a lot of problems for the U.S. operations. It not only removes concern that the U.S. business may be pressed into shoring up the European operations (particularly in France), but also simplifies the structure and boosts the U.S. stock’s public float from 10% of outstanding shares to 42%, which should attract a wider swath of investors and free the company to return capital to shareholders through more aggressive buybacks.

Altice USA said that as part of the separation, it plans to buy back about $2 billion of its stock over the next three years.

But this plan doesn’t solve everything quite yet. Despite a management pledge to reduce leverage targets from 5.0-to-5.5 times cash flow to 4.5-to-5.0 times, initially the deal will increase debt at the U.S. company to about 5.8 times cash flow.

That added debt and the overall climate around deals means it is unlikely that Altice USA will embark on any buying spree — one of the early reasons to buy the stock — anytime soon.

“I don’t think we are there yet in terms of thinking about where our acquisition strategy could be,” Goei said on the reporters’ call. “I think this is an important moment for the group to focus on our existing operations and deliver on what we’ve promised in our respective geographies in Europe and the U.S. Over time, we suspect that the clarity and simplicity of our structure will help our investor base be supportive in things that we may want to do going forward.”

But he hinted that M&A isn’t totally out of the picture. “The DNA of the group is to try and grow strategically over time, but it is clearly not a focus today,” he said.

New Commitment to U.S. Arm

For now, the deal appears to further solidify Altice’s commitment to the U.S. operation. Problems at its European unit began to surface in November, when a big earnings shortfall at the company’s French wireless operations spooked investors, sending the European stock into a tailspin. For U.S. investors, the French unit’s failures signaled possible flaws with the domestic model, and the possibility that the U.S. business would be pressed to bail out its parent.

And though many analysts were skeptical of Altice’s cost-cutting ambitions — when it bought Cablevision in 2016 it pledged to shave $900 million in expenses, a move many believed would eviscerate the company — it has so far kept its promise. In Q3 Altice USA said its run-rate non-programming efficiency savings were more than $900 million since the Cablevision purchase.

In a research note in November, MoffettNathanson principal and senior analyst Craig Moffett noted that per-subscriber programming costs increased between 6% and 7% at Altice USA, almost half the 12.7% increase at much larger Comcast in the period. While Altice said it expects future programming-cost increases in the high single digits, Moffett added that Altice has captured much of the efficiencies it promised already, and there is no reason to believe more won’t come.

“With margins still rising rapidly, both [year-over-year] and sequentially, it doesn’t appear they are done yet,” Moffett wrote in the report.

European telecom giant Altice N.V., parent of No. 3 U.S. cable operator Altice USA, announced a sweeping management restructuring Friday that will see the CEO of the operation step down, while the chief of its domestic operations will assume a dual role.

Altice N.V. CEO Michel Combes resigned Friday and Altice USA chairman and CEO Dexter Goei will take on the additional role of CEO of the European parent. Altice founder Patrick Drahi will also return as president of the board of directors of the European telecom giant.

The moves come after Altice N.V. has stumbled in its European telecom business. Its stock was down more than 20% Nov. 3 after a disappointing third quarter and the revelation that it would come in at the low end of earnings guidance for the year. So far this year Altice N.V. shares are down about 40% and the bleeding has spread to Altice USA, which has seen its stock fall more than 25% since its June IPO, mainly, according to analysts, because of its ties to the parent company.

According to reports, some investors have worried that Altice N.V.’s poor results could jeopardize its ability to service its heavy debt load – about five times its cash flow and substantially higher than its European telecom counterparts.

In a statement Altice N.V said the new management structure “is designed to better implement Altice's strategy, create clearer accountability amongst management and improve the operational and financial performance of the business. It aligns more fully the interests of founders and group management, both with significant ownership in the group, and the public shareholder base.”

In addition to Drahi’s and Goei’s new roles, Altice N.V. chief financial officer Dennis Okhuijsen will assume the additional role of CEO of Altice Europe; and SFR Media CEO Alain Weill was named chairman and CEO of SFR Group and chief operating officer of Altice Media.

"Michel has been an important part of the Altice story when he first joined the Board of Altice,” Drahi said in a statement. “He provided key support and judgment as we developed our expansion strategy.  As CEO, Michel critically created the group structure to operate a transatlantic communications business while driving key technology, research and innovation initiatives, which will serve Altice for the future.  I would like to personally thank him for his contribution, integrity, loyalty and friendship."

Combes joined Altice N.V. in 2015 as chief operating officer, after leaving equipment maker Alcatel-Lucent which was acquired by Nokia. He became Altice CEO in 2016, when Goei stepped down from that role to take over as head of the U.S. cable operations.

"I would like to thank Patrick and the team for their confidence over the past years,” Combes said in a statement. “It has been a privilege to be part of the Altice story, accompany the expansion of the group and lead the industrialization of the convergence strategy. With Patrick returning as President of the group, Altice will be well positioned to execute its strategy across all operations."

Comcast Cable CEO Dave Watson has been named chairman of the C-SPAN board's executive committee.

That came at C-SPAN's board meeting in New York.

Watson joined the board earlier this year, succeeding Comcast CEO Neil Smit after he stepped down.

Also joining the board of the public service networks funded by the cable industry were Dexter Goei, president of Altice N.V and chair/CEO of Altice USA, and Wide Open West CEO Steven Cochran.

Elected to additional two-year terms were board members Pat McAdaragh, president of Midco; and Alan Block, chair of Block Communications.

The executive committee can be empowered to set strategy and over see finances on behalf of the 15-member board.

Altice USA stock rose as high as $32.74 per share, up 9% or $2.74 each from its $30 IPO price, in its first day of trading on the New York Stock Exchange.

Altice USA, a subsidiary of European telecom giant Altice N.V., priced its IPO Wednesday night at $30 per share. The cable company, which bought Suddenlink Communications in December 2015 and Cablevision Systems in June 2016, offered about 63.9 million shares to the public, raising about $1.9 billion.

The stock peaked at $32.74 each before closing at $32.71 per share on June 22.

Altice USA backers BC Partners and the Canada Pension Plan Investment Board were the biggest beneficiaries of the IPO, selling a combined 51 million shares in the offering. Altice USA sold about 12 million shares, the proceeds of which will be used to pay down bond debt incurred by Cablevision prior to its deal closing.

Wall Street expects Altice USA to use its new stock to purchase more cable companies, with many focusing on Cox Communications, despite the Atlanta-based company’s repeated insistence that it is not for sale.

Altice USA CEO Dexter Goei told CNBC Thursday that he agreed Cox “is not for sale,” adding that is possible over the next three or four years that the public company could find opportunities to “buy other stuff.” However, that doesn’t appear to be a priority in the short-term.

“Our whole job is to be ready,” Goei told CNBC. “We’re ready. We’ll let things play out as they are over the next several years. We’re not in any hurry to do anything, we’ve got a lot of operational work to do, a lot of big, big projects on fiber to the home and our One Communications Hub. We’re not in any hurry but we need to be prepared. That’s really the reason why we went public."

Altice USA, the domestic cable arm of European telecom giant Altice, is considering extending its cable news channels throughout its footprint in an effort to further differentiate the service.

Related: Altice Unveils New Global Brand, Logo

Altice operates News 12 channels in seven Optimum markets in the New York metropolitan area – Long Island, Westchester County, Brooklyn, Hudson Valley, the Bronx, and parts of Connecticut and New Jersey. In a briefing with reporters Tuesday, Altice USA chairman and CEO Dexter Goei said the company is considering expanding News 12’s reach to its Suddenlink markets in the U.S.

News 12 was the brainchild of Cablevision Systems, which Altice purchased in June for $17.7 billion. Altice purchased Suddenlink in December 2015 for $9.1 billion.

At the briefing, Goei said Altice is looking to content to differentiate it from the competition, but that it would most likely focus on its news content.

News 12 Networks president Patrick Dolan said that the idea of expanding News 12 throughout Suddenlink is still being considered, but he added that Suddenlink markets in Texas and Oklahoma, where high school sports is tremendously popular, could be potentially lucrative markets.

News 12’s hyper-local focus in suburban markets includes extensive coverage of high-school sports through its News 12 Varsity offering and its daily news programs.

“It’s beginning to be discussed,” Dolan said of the expansion. “A future version may be very sports oriented.”

As over-the-top, streaming video and skinny bundle packages proliferate, cable operators have scrambled to try to find unique ways to attract and retain subscribers. In April, Charter reached a deal with AMC Networks where the programmer would develop content that would be available exclusively to Charter customers for a time. “That’s not something we’re looking at today,” Goei said.

Altice hinted that its international news channel – i24 – could also gain wider distribution. The channel, which Altice developed in 2013 and with news operations in New York, Paris, Tel Aviv and Washington, D.C., offers news from the Middle East and the world 24 hours a day, seven days a week. The channel is currently available throughout the Optimum and Suddenlink footprint and via an online app.

Altice executives said Tuesday that targeting the widest audience possible for i24 is the ultimate goal.

Goei also touched briefly on Altice USA’s wireless strategy, adding that it is still being evaluated.

Related: Altice USA Open to MVNO Deal

Asked if he would consider partnering with other cable companies or providers to offer a wireless offering similar to a recent agreement between Comcast and Charter for their wireless product, the Altice USA chief seemed to back away from that path.

Part of the Comcast-Charter agreement is jointly procuring equipment and platforms, something Goei said is not a top priority for Altice, which already has an extensive mobile network in Europe and doesn’t need to “team-up” with other companies to obtain supply and technology discounts.

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.”

Taking a page from former Cablevision CEO James Dolan, Altice USA chief Dexter Goei told an audience of broadcasters at the NAB Show in Las Vegas that he is talking to programmers about possibly adding access to non-linear OTT content to the cable company’s lineup.

The move is reminiscent of Dolan, who sold his Cablevision Systems to Altice in June for $17.7 billion, when he began offering easier access to SVOD services and online programming through its Optimum set-tops in an effort to lure cord-cutters and cord-nevers to pay TV.

While it appears that Goei and Altice would offer any non-linear shows in concert with its traditional line-up instead of as a replacement or in a separate package, it still shows that the Altice USA CEO is ready and willing to think outside the box.

In a keynote session moderated by Multichannel News and B&C editorial director Mark Robichaux, Goei said that integrating some OTT content is the logical next step.

Though short on specifics, he did make a clear distinction between OTT services that are direct competitors and those that provide content that are more like pay TV channels. The latter seem to be the best candidates for integration into the Altice USA programming package.

“Clearly there are certain providers that are unique to the non-linear world that makes sense to integrate into the user experience,” Goei said, adding that the company is working with several companies.

Watch a clip of Goei's keynote below:

A post shared by VixenRedCarpetLTD (@vixenredcarpetltd) on Apr 25, 2017 at 12:53pm PDT

Altice USA, a unit of European telecom giant Altice N.V., burst on the U.S. cable scene in 2015 with the $9.1 billion purchase of Suddenlink Communications and in the next year bought Cablevision Systems for $17.7 billion. With about 4.3 million residential customers in the New York metropolitan area and the Midwest, Altice USA quickly established itself as the sixth largest cable operator in the country.

“This is a starting point for us in the U.S.,” Goei said, adding that in the market Altice saw an opportunity to bring its knowhow, innovation and technical savvy to a growing sector.

Goei was reluctant to say whether Altice USA plans to add to its cable portfolio, but said that part of the reason for its upcoming initial public offering is to ready itself for any opportunities that arise.

Goei kept any expansion plans close to the vest, citing the quiet period surrounding its IPO – Altice filed documents with the Securities and Exchange Commission on April 11,  but has yet to disclose when the offering will take place or how much it hopes to raise. And while he said newly issued stock could help the company should any acquisition opportunities arise, it also could lay fallow. “Maybe we never have to use it,’ he said.

In the meantime Altice USA will stick to growing its existing business, which includes an aggressive fiber buildout – it plans to go full-fiber in the U.S. over time – and the introduction of a communications hub in every customer home that will be a combination set-top box, DVR and 1 Gbps WiFi router. Altice N.V. has already introduced a similar product in France – called La Box, a name that will be changed for the U.S. rollout, Goei shared – to great success. 

The communications hub, Goei said, will bring cost efficiencies for both user and provider, adding that its increased reliability and functionality will enhance the customer experience.

It was remarked before and during Goei's session that he was the highest-profile cable-TV executive to keynote an NAB convention, a sign of the times after the demise of the cable industry's annual convention (lately called INTX). Goei said he enjoyed being at the convention and said Altice gets along well with program suppliers, including broadcasters. 

Soon after closing its acquisition of Cablevision Systems, Altice has launched its U.S.-focused Web site, including a page dedicated to its new leadership team for the region, as well as key stats for Altice USA (i.e. more than 18,000 U.S. employees, 4.3 million residential customers, and 350,000 business customers)

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.”

Altice announced a reorganization of its group management structure as the company nears the close of its proposed acquisition of Cablevision Systems.

Among the moves, Dexter Goei has been tapped as chairman and CEO of Altice USA and president of Altice N.V., and named Michel Combes to the post of CEO of Altice N.V.

Earlier, also in expectation of the growing U.S. video business, Altice named former Comcast and NBCUniversal executive Michael Schreiber as chief content officer.

Combes, the former CEO of Alcatel-Lucent (now part of Nokia), joined Altice as COO in September 2015. In his new role, Combes will continue his day-to-day responsibilities for Altice Group and have all operating affiliates, country CEOs and corporate functions report to him. Combes will also join the Altice N.V. board as director.

Goei stepped down as CEO of Altice N.V. to focus on the integration of Cablevision and Suddenlink (acquired by Altice in late 2015), the company said.

Goei, who will also replace Patrick Drahi as president of Altice N.V. and continue to lead its global M&A activities, is also tasked with the further development of Altice’s U.S. division.

Drahi, a founder a controlling shareholder of Altice, will continue to head up the strategic, operational and technology agenda for the group, and will lead a newly-formed Altice Group Advisory Council, the company said.

Altice said the revised structure “is reflective of the global presence of Altice N.V. centered around Europe and the US and ensures critical senior leadership, entrepreneurial spirit and best-in-class management in both regions.”

The reorganization comes just days after the New York State Public Service Commission approved, with conditions, Altice’s proposed purchase of Cablevision Systems, removing a final hurdle in the $17.7 billion deal.

“I am extremely excited about our U.S. business which is accounting for approximately 40% of our group and offers huge development opportunities,” Drahi said in a statement. “Dexter exemplifies the entrepreneurial and commercial spirit of Altice and will provide the same vital leadership to our U.S. business he displayed when building the Altice Group in the last 8 years with me.

“Since joining us last year,” Drahi continued, “Michel has been instrumental in structuring and harmonizing our operations and strengthening our management teams across the board. I am very pleased to work with him in his new role as the Altice Group embarks on its next phase of development. I look with full confidence into the future: the Altice Group has never been in a stronger position.”

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

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

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

EYES Q2 CLOSE

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

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

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

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

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

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

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

PLANS TO INVEST

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

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

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

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

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

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

SIDEBAR: Altice in the Family

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

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

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

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

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

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

SOURCE: Altice