What will Altice's acquisition of Cablevision mean for customers?

In a bid to expand its US market, European cable conglomerate agreed to purchase New York-based Cablevision, but questions remain about the company's practice of cost-cutting.

Philippe Wojazer/Reuters/File
Patrick Drahi, Franco-Israeli businessman, executive chairman of cable and mobile telecoms company Altice and founder of Numericable attends a hearing at the French National Assembly in Paris, France, May 27. European telecoms group Altice will become a major force in the lucrative US cable market after it agreed to buy fourth-largest operator Cablevision for a mix of cash and shares in a deal worth $17.7 billion including debt.

With US cable companies continually facing declining subscription numbers as viewers switch to cheaper streaming services like Amazon, Hulu, and Netflix, the acquisition of the cable giant Cablevision for $17.7 billion seems like an interesting move.

European telecommunications conglomerate Altice, the company agreeing to take over New York-based Cablevision is still little known in the United States.

But the deal, announced on Thursday, would make Altice one of the largest cable operators in the country, behind Comcast, Time Warner Cable, Cox Communications, and Charter Communications, The New York Times reports.

The company will pay $34.90 a share for the company, currently valued at $7.89 billion, financing the takeover through banks and the sale of additional shares.

Currently, Altice owns large cable companies in France and Switzerland as well as several other media properties in Europe, including French newspaper Libération, the magazines L’Express and L’Expansion and i24, an Israeli television station.

Acquiring Cablevision, which has 3.1 million subscribers, isn’t the company’s first foray into the American cable market, which came with the acquisition of the St. Louis-based Suddenlink Communications for $9.1 billion, in May.

But company executives say Cablevision, which is owned New York's billionaire Dolan family and operates primarily in the suburbs of New York City, offers the chance to snatch up a newer, more upscale market.

“It’s an expansion into the most attractive and affluent parts of the United States,” said Dexter Goei, the company’s chief executive, on a call with analysts, the Times reports.

Altice’s founder, French-Israeli billionaire Patrick Drahi, has an mixed reputation in Europe. A telecommunications engineer by training, he is known for investing in technology to upgrade the cable systems his company acquires. But the company is also known for aggressively cutting costs in order to ramp up the profitability of companies it acquires, according to the Times, a move which sometimes disappoints cable customers.

One open question is whether Mr. Drahi will invest in technology upgrades at Cablevision, which currently competes with the newer fiber-optic technology and broadband internet provided by rivals like Verizon.

As news of the deal broke, shares of Cablevision increased 16 percent, to 33.12 by the end of the day on Wednesday. Altice’s stock increased 0.6 percent in late trading in Amsterdam, according to the Times.

The deal also comes amid several consolidations in the cable market in the US and Europe, including AT&T’s $48.5 billion merger with the satellite TV provider DirecTV, making it the largest pay-TV company in the US.

Considering Altice’s reputation in Europe for cutting costs, some analysts wondered about how the acquisition of a major US cable company might fit into Altice’s already existing strategy.

The company said on Thursday that it would not sell Cablevision’s media properties, including Newsday magazine, the website amNewYork and local news station News 12 Networks, though they were losing money, according to the Times.

“There’s been a lot of cost-cutting,” Stephanie Baghdassarian, a telecom analyst in Paris for the American research company Gartner, told the paper. “They focus on that because cable is such a competitive market.”

This report contains material from Reuters.

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