Altice NV expanding USA territory?
Most people have probably heard of media mogul Patrick Drahi. Mr. Drahi has been at the helm of the European media industry. His empire provides almost all of Europe with fast internet access and other broadband services. Drahi’s name only became synonymous with media in the US between 2015 and 2016.
In 2015 Drahi-owned Altice NV bought the US cable corporation Suddenlink for a few billion. Altice then bought Cablevision in 2016. With these two assets, estimated at a total $27 billion buying price, Altice NV started Altice USA.
Now almost everyone in the US knows Altice. Ranked fourth largest after AT&T among other broadband providers, Altice USA (Pending: ATUS) serves almost five million users daily. The company has markets across more than ten states and is looking into expanding.
On Wednesday Altice USA announced that it would launch into the NYSE soon. The company stated that its IPO would be worth $100 million. According to Bloomberg, this number may just be a placeholder amount. Wall Street agrees with that assessment. According to people familiar with how the company works, Altice USA can raise up to $1 billion with its initial issuance. The deal is that the company will sell part of its common stock with help from JP Morgan, Goldman Sachs, Citi, Barclays and RBC Capital Markets.
The difference between the proposed deal size and the estimated earnings is large. No one can be certain how the company will perform in the end because there are so many factors in play. For example, those who argue for Altice USA say that the company had a lot of growth potential. In fact, there was news earlier this year that the company would acquire Cox Communication Inc. None of the companies commented on this. However, an acquisition like that would give Altice USA a chance at competing with companies like Verizon and AT&T. The alleged news was supported in part by the company’s good financials for the past two years. Not only did Altice USA bring in more revenues in 2016 than 2015 but also lowered its losses for the same period.
For the skeptics, the losses were the driving issue. Over the past two years, Altice USA has made losses amounting to over $1.7 billion. To top that off, Altice USA has outstanding debt of $20.5 billion at present. With the current uncertainty about interest rates, that’s not good news for the company. If interest rates go any higher, even the best case scenario for the IPO can’t do much for the firm.
Dexter Goei, the CEO of the Altice empire US wing, said that the company has big plans. According to the former Morgan Stanley man, an Altice USA expansion is just what the company needs. Goei said the expansion could take two forms. One, Altice USA starts its own news channel. In the second, it sets up Fiber to The Home (FTTH) network service to give its users access to the faster net. These two options are all good and dandy, but there’s a question as to whether they can help the firm. After all, both options are expensive and highly competitive.