Altice has announced a major reorganisation plan, saying it wants to split the company into two companies, one with its eye only on the US and the other on Europe, with the goal of simplifying the company’s structure, enhancing accountability and transparency, and paying down debt. Each unit will have its own distinct targets and balance sheet strengths.
Altice USA will be separated from Altice NV and Altice NV will become Altice Europe, with Altice founder Patrick Drahi at the helm of both units. Specifically, he will become, post separation, the president of the board of Altice Europe and chairman of the board at Altice USA. Drahi said he is committed to long-term ownership of both entities and that separation is expected to complete by the end of the second quarter, following regulatory and Altice NV shareholder approvals.
Distribution of USD 1.5 billion in cash dividends
Just before the company officially splits, Altice USA will distribute USD 1.5 billion in cash dividends to all shareholders. The payment will be funded by available Optimum revolving facility capacity and a new financing at Optimum. Altice NV will use EUR 625 million of its EUR 900 million worth of proceeds received in the Altice USA dividend to pay back debt, keeping EUR 275 million for its balance sheet. Altice USA has also approved a share buyback programme of USD 2 billon for after completion.
Reorganisation of Altice Europe, with newly created Altice Pay TV
Altice Europe will reorganise too, to include Altice France (including French Overseas Territories), Altice International and a newly formed Altice Pay TV subsidiary. This will include integrating Altice's support services businesses into their respective markets and bundling Altice Europe's premium content activities into one separately funded operating unit with its own profit & loss statement. Altice NV's ownership of Altice Technical Services US will be transferred to Altice USA just before separation for a nominal fee.
Drahi said the idea here is to support operational and financial turnaround in France and Portugal. He added that the company also has a “clear plan” to further strengthen its long-term balance sheet position as disposes of non-core asset.
More on management structures
Regarding the management structure of Altice Europe and Altice USA, there will be two wholly separate teams, focused specifically on their respective markets. With Drahi heading both teams, Dennis Okhuijsen will serve as CEO and a director of Altice Europe, with all corporate functions and country managers reporting into him. Armando Pereira will serve as COO of Altice Europe and as strategic advisor to Altice USA for all operations. Burkhard Koep will be CFO. At Altice USA, Dexter Goei will continue as CEO and a director of Altice USA. Hakim Boubazine will be COO and co-president while Charles Stewart will be CFO and co-president.
Europe: focus return to profitability
At the core of Altice Europe’s strategic agenda will be a return to revenue, profitability and cash flow growth and, as a result, deleveraging. As said before, Altice Europe will be selling non-core assets and putting its focus on France and Portugal under the leadership of new local management teams.
In order to ensure accountability and transparency, Altice Europe will have three distinct operating units:
- Altice France will include SFR Telecom, SFR Media (NextRadioTV & Press), French Overseas Territories, Altice Technical Services France and Intelcia customer services.
- Altice International will include Meo in Portugal, Hot in Israel, Altice Dominican Republic, Teads and Altice Technical Services Europe (other than France).
- The newly formed Altice Pay TV will include the Altice Content division, major sports rights (including Champions League and English Premier League), and other premium content rights (including Discovery, NBC Universal).
Altice France will cancel its existing wholesale pay TV contracts for the content and channels being transferred to Altice Pay TV and will instead become a wholesale customer of Altice Pay TV with a new revenue sharing contract and significantly reduced annual minimum guarantee, in exchange for EUR 300 million break fee payable in 2018 to Altice Pay TV. This new arrangement will include the transfer of other premium content contracts from Altice France to Altice Pay TV and allow Altice France to continue to distribute premium pay TV content to its customers including SFR Sports and Altice Studio channels.
Altice believes this will allow investors to better assess the underlying performance of Altice France compared to its market competitors. Lastly, the new organisation for Altice Europe will exclude Altice NV's international wholesale voice business, which will be separated and eventually sold.
In USA, strategy will continue as before
For Altice USA, the business strategy will continue, with the focus on investments in networks and the video product, simplification across the operations and improved customer service. Special attention will be put on KPIs to improve revenue growth, the complete implementation of opex efficiencies, and a full scale deployment of Altice One and fibre (FTTH) build out.
Separation will have no impact on the debt structure of Altice USA, made up of Optimum and Suddenlink, other than the effect of the financing transactions related to the USD 1.5 billion special cash dividend. All instruments remain in place on the same terms and the availability of revolving credit facilities will be unaffected.
Shareholder distribution and upcoming EGM
The change is not expected to have any tax impact on Altice NV or Altice USA. The transaction will up the economic ownership by public stockholders of Altice USA from 10.3 percent of the total share capital of Altice USA to an estimated 42.4 percent.
The separation was approved by the Altice NV board of directors but has yet to be approved by Altice NV shareholders. An EGM will be held sometime in Q2.
