In turn, Altice presented its results for the second quarter. The poor performance of SFR pull the cable operator down, but remains optimistic thanks to good performance in the US.
At Altice, all is well almost. During the presentation of its results for the second quarter, the parent of SFR has tried to highlight its “ successful transformation “into a giant of providing Internet access and content. A goal achieved by the closing of the acquisition of Cablevision and the media groups in France said Michel Combes, Executive Director of Altice.
SFR , a stone in the shoe of Altice
Altice of revenues declined slightly in the last quarter, with 5.83 billion euros against 5 98 billion a year earlier. This decrease is mainly due to poor performance of SFR on the last three months, and to a lesser extent to Optimum (formerly Cablevision) whose turnover has shrunk by 1% in one year. Kickbacks that Suddenlink and Altice International (MOE, HOT, Green …) did not manage to forget.
The EBITDA of the group amounted meanwhile to 2.27 billion euros, 2.7% more than last year in the same period. Again, it should separate the results of SFR (-6.8%) from other branches who all Altice signed a growth of between 8.7 and 16% of that side. SFR is the only branch of Altice to register a decline in cash flow. While at this level Suddenlink posted growth of 57.3% and 38.8% Optimum SFR reported a declining 35.7%.
Michel Combes has also not mince his words at the time to discuss the results of its French subsidiary “ in France, our operations recorded significantly lower results than others, particularly in terms of cash flow “. A low level, which he confirms the need for major restructuring of the operator at the red square. The planned restructuring in 2019 is expected to cost € 800 million SFR but allow EUR 400 million in savings per year.
A plan to restore SFR on track
one of the first steps taken by SFR has been to “ less destructive react deals margin of competition “, especially in the segment of entry. Michel Combes believes it is the role of the brand RED to hunt in this segment, but this should not be at the price negative margins. Nevertheless, it is a question of a wave of more aggressive promotions for the autumn.
SFR also wants to focus on the migration of its customer base in ADSL to its network “Fiber” . The slowdown in recruitment in FTTx does not meet the management that wants to exploit its 8.5 million marketable taken in France. This should pass through incentives to move to fiber , but also by better informing consumers about the benefits of this network compared ADSL.
the benefits are also not only client side, Altice believes that significant migration to its home network would be higher income source, costs better mastered, and a lower churn rate.
the operator’s practices must also be revised, thanks to Meo experience returns to Portugal and Hot in Israel, other ISP driven Altice . It is such issue to stop automatically cut off the ADSL a week after a migration request to the “fiber” (terminated optical or coaxial). . Michel Combes noted that sometimes the internet is cut off before the installation of the new line, which causes a high rate of cancellations
Home installation is also blamed “ technicians must not only bring the box to the customer but to install it and make sure everything works “trumpets the current group CEO SFR , which has obviously learned a lot from other subsidiaries of Altice.
Suddenlink and Optimum, the new cash machines Altice
During this time, the United States, everything seems to smile Altice, Suddenlink and Cablevision (now called Optimum). “ We did not progress as quickly ” enthuses Dexter Goei, CEO of Altice. He sees in fact many opportunities on the retail market while the penetration rate of its offers in companies would still be very low.
The two US cable operators continue to garner new subscribers, but at a fairly steady pace: + 2.9% in one year to Suddenlink and 1% for Optimum. Meanwhile, ARPU continues to climb, with 116.5 dollars to 159.9 dollars for first and second. Figures which must leave dreamers many European operators. In comparison, the ARPU of SFR on its offers “fiber” is between 38 and 40 euros depending on the quarterly value ever high on the french market.
the first phase of synergies have already been held between the two companies, is beginning to bear fruit, including a significantly higher cash flow than last year for each of them. Altice plans to use these funds to accelerate the modernization of the infrastructure of the two brands, with in one case a plan to extend the geographical coverage of its Gigabit offers and the other to lay the foundation of the rising rate plan required by New York.
Debt remains imposing
Last but not for the group of Patrick Drahi: debt. This continues up to € 50.5 billion after the completion of the acquisition of Cablevision, or 6.0 times EBITDA of the group.
On the side of SFR , the net debt was 15.118 billion euros, with a ratio of 4 times EBITDA or the extreme limit imposed by the french government at the time the redemption of the operator. Therefore, brand red square has announced that it will not pay any dividend to its shareholders in 2016, to allow time to improve this indicator.
no big refund is expected by the end of the year, but the real fun will begin in 2017 and 2018 with Optimum which will pay 845 million euros and 1.4 billion euros to its creditors. To SFR , the first major event is planned for 2022 with 4.4 billion euros out. In this year alone, the Altice Group as a whole will find 14.2 billion euros to meet its obligations. By then the Dutch group will certainly have time to renegotiate its loans.
In exchange, investors HomeI very favorably all this news. The action Altice has jumped more than 13% sitting, valuing the company at over 16 billion euros. Living with SFR , although the lackluster results were beyond expectations of the steps and action therefore climbed more 9%, for a valuation of 10 billion euros. The confirmation of the signing of labor agreements with unions may also have played a role in this increase.
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