‘Differentiated Approach’ Drives Altice USA Growth

Altice USA said it was going to take a different approach to the cable business after it purchased Suddenlink Communications in 2015 and Cablevision Systems in 2016 for a combined $27 billion. And while its results since then have been pretty much in line with the rest of the industry, it has excelled in growing operating profits, which in the fourth quarter were more than twice some of its peers at 12.2%.

Altice USA finished the year with a loss of about 25,000 video customers, slightly higher than the 21,000 it lost in the prior year. High-speed data growth at 26,000 was in line with the prior year gain of 36,000. Revenue grew 2.6% to $2.4 billion.

But the company really outshone its peers with 12.2% cash flow growth, nearly two times the 6.2% much larger Charter Communications reported in its Q4 results and nearly three times the 4.2% at Comcast’s cable division in the period.

When Altice purchased Cablevision Systems in 2016 it said it had a plan to drastically cut costs and drive cash flow growth. Although it was met with some skepticism at the time, so far Altice as delivered.

In a conference call with reporters, Altice USA CEO Dexter Goei said the Q4 numbers shouldn’t come as a surprise.

“We’ve been very open that we’ve brought a differentiated approach to running these businesses,” Goei said. “Now we’re about two years into it and have been able to realize a significant amount of opex, capex and direct cost synergies here, to drive our business and drive better free cash flow margins. I think it’s a combination of coming from an environment which is very highly regulated in Europe and somewhat more competitive with much lower ARPU levels, which means we have to work a lot harder for less in our European properties. We’ve instilled that mentality into our Altice USA employee base. Secondly, I think we have taken the historic capex budgets and been able to save quite a bit of money with key suppliers as well as eliminate what we would view as non-core projects and reinvest that into things like the Altice One box which is a game changer for us, like fiber to the home and like a full MVNO.”

Altice USA unveiled its communications hub, Altice One, in November, offering seamless navigation across traditional video and over-the-top services as well as whole-home WiFi connectivity, a voice remote and other features. Its fiber to the home project, which will enable a more connected home and higher data speeds, is progressing with construction to connect several hundred thousand homes in New York, New Jersey and Connecticut underway. The fiber network build is expected to accelerate in 2018 with the first commercialization of FTTH services later this year. The company struck a full Mobile Virtual Network Operator agreement with Sprint to offer a wireless service. Goei said the company expects to launch the service in 2019.