Patrick Drahi pursues his American dream

After the takeover of a first overseas cable operator in the spring, the new tycoon of media and telecoms seizes Cablevision, number 4 of the sector.

After Suddenlink Communications, bought 9.1 billion dollars (8 billion euros) in the spring, the insatiable Patrick Drahi (major shareholder LibĂ©ration ) confirms its huge appetite for the US cable market, in full consolidation. The owner of Numericable-SFR, now the third French fortune, announced Thursday the acquisition by its group Altice, for $ 17.7 billion, Cablevision, the fourth US cable operator. A crucial new step in its conquest of the United States, the world’s largest cable and telecom market, for which it does not hide its great ambitions.

Altice has set itself the goal of generating half of its revenues in the US futures, against 15% expected by the end of the year. This implies that the group is not finished with his purchases, especially as the number 1, Comcast, cannot grow because of its size and the other two behemoths, Charter and Time Warner, are merging. Targets for Altice include Verizon Communications FiOS, valued at approximately $ 34 billion, a company that concentrates the cable and copper activities of Verizon, the telecom operator, or the few remaining cable operators that remain independent. Cox.

As for the previous acquisitions of this expert in financial arrangements, the operation is financed by a massive recourse to the debt, supplemented by a contribution in cash- payday loan consolidation via Taylorstrecker. In addition to the company’s assets, valued at $ 9.6 billion and repurchased with a 22% premium over Cablevision’s closing price on the NYSE on Wednesday night, the French group is also taking over 8.1 billion dollars of Cablevision debt. That is to say 17.7 billion in total, financed for 14.5 billion by debt and for the rest by a capital increase of 3.2 billion its holding Altice, side on the Amsterdam Stock Exchange. The transaction was well received by the markets, the Altice stock appreciating by 7% at the opening of the Dutch financial center on Thursday.

Bulimia of acquisitions

The deal will add to Altice’s already massive debt, which marks its sixth acquisition in just under a year after successive acquisitions of SFR, Virgin Mobile, Portugal Telecom, NextRadio TV (owner of BFM TV and RMC) and the American Suddenlink. That’s about 33 billion purchases at the least and a binge of acquisitions never seen in such a short period of time. Last spring, Patrick Drahi even approached the giant Time Warner for a possible takeover. But the Charter Communication group, owned by Patrick Drahi model John Malone, for which he once worked in Europe, finally won, putting $ 55.3 billion on the table.

Founded in 1973, Cablevision is a family-owned Dolan-owned group with a strong presence in the lucrative New York cable market and in neighboring states (New Jersey, Connecticut, Pennsylvania, etc.). It generated a turnover of $ 6.46 billion in 2014, for a net profit of $ 465 million. The group, headquartered in New York State, employs 15,000 people. Although no reconciliation has yet been announced between Cablevision and Suddenlink, Altice estimates that the expected synergies from this acquisition will be in the order of $ 900 million.

This operation scheduled to be completed in early 2016 must still be approved by the competition authorities, who do not necessarily see a good eye the US cable to gradually reduce to a handful of very large companies. Jostled by the increasingly threatening competition of new players in the Net (Netflix, Hulu, Amazon or Apple TV), who market directly on the Internet their services at prices broken compared to increasingly prohibitive prices of major historical players (Comcast, Time Warner Cable, Cox, Charter, etc., where the monthly bill can reach more than 100 dollars against a dozen for Netflix), the cable operators have embarked on a race to gigantism all the way to try to maintain their dominance in the content market.

Economies of scale

Growing their subscriber base, large cable operators are banking on economies of scale to reduce costs and are able to cushion their investment in content to a wider audience, the nerve of the war of battle. What are the giants of the American media doing today? ” The pressure to consolidate this highly competitive sector remains total,” said an analyst after a summer that saw the stock market values of major US TV groups collapse on the stock market in early August despite more than respectable results. In the question, the certainty of investors that the “great implosion of the media”, as called specialists, will quickly weaken traditional players in the sector, unable to adapt quickly enough to the revolution of television uses caused by the generalization of the mobile Internet.

According to various sources, Patrick Drahi does not intend to enter a logic of price war but relies on an improvement in the quality of services at a time when American consumers are increasingly unsubscribing from the cable. Consumers will need in the coming years a high-quality connection to the fixed broadband (via wi-fi) to take advantage of these new services. Ultimately, Altice, created in 2001 and employing 40,000 people, could offer triple play offers (Internet, mobile, television) or quadruple play (fixed, mobile, Internet, TV) as the AT & T telecom operator, which recently bought $ 48.5 billion worth of Direct TV satellite TV service. If he still finds bankers willing to lend him money, there are still many possibilities for Patrick Drahi to continue to grow in the United States.