Is Altice's Acquisition of Suddenlink Just the Opening Play?

Altice Will Need a Stronger Position to Shake Up the Multiplay Status Quo

May 20, 2015, 15:20 ET from Strategy Analytics

BOSTON, May 20, 2015 /PRNewswire/ -- Altice is continuing its global acquisition strategy, picking up a majority stake in the seventh largest US cable operator Suddenlink for $9.1 billion.  This may only be the starting point for the company's entry in the US market, as Time Warner Cable is also considered a target for Altice.

"Altice has shown its expertise in creating synergies and cost savings through its acquisition strategy," stated Jason Blackwell, Director of Service Provider Strategies (SPS).  "Suddenlink is a great starting point in the US market, as the company has a good customer base and multiplay strengths.  Suddenlink should benefit from Altice's business model."

Mr. Blackwell added, "However, with only a million video subscribers at Suddenlink, Altice will need to go after bigger targets like Time Warner Cable to truly achieve the subscriber scale required in the US cable market moving forward.  Altice will face much bigger challenges in those deals from John Malone and Charter Communications' high aspirations."

Altice has built a global telecommunications business with operations across France, Israel, Portugal, and the Dominican Republic.  The company has built its strategy on synergies and cost savings, which will be the keys to success in the video and broadband businesses moving forward.  Altice has also been successful with its multiplay bundle strategy and has leveraged its success in Israel and the Dominican Republic into other regions like France.  The pressing question will be whether Altice can shake up the US market with tactics like we have seen in France – both from Altice and French competitor Free (Iliad) – as well as offer anything new to the multiplay bundle. 

Suddenlink has struggled recently on the video side of the business.  An intense negotiation with Viacom resulted in Suddenlink dropping Viacom's content and losing some subscribers as a result.  In the first quarter of 2015, Suddenlink reported 1,132,000 video subscribers, down from 1,187,500 in the first quarter of 2014.  Broadband subscriber growth has been a strong point for the company, with Suddenlink adding 81,000 new broadband subscribers (7.3% CAGR) over the past twelve months. 

Suddenlink may be a good first tentative step in the US market but more daring ventures must surely follow.  In order to truly make an impact in the US, Altice will need bigger scale in terms of subscribers, and also a bigger footprint.  Addressing only a small percentage of US households will not allow the company to make any significant changes to the overall landscape or competitive environment.  We have strong expectations that the deal with Suddenlink will only be the opening play in a new round of merger and acquisition activity.

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