Altice slide prompts Patrick Drahi to retake group’s reinsHeat Profit
Listen to this article
This is an experimental feature.
Give us your feedback.
Thank you for your feedback.
What do you think?
Patrick Drahi, the billionaire founder of Altice, has retaken the reins at the European telecoms company after a one-third drop in its shares sparked the resignation of its chief executive.
Investors were not entirely reassured by the Thursday night reshuffle, which saw Mr Drahi named president, Michel Combes depart as chief executive and Dexter Goei reinstated one year after he moved on from the role. Altice shares dropped an additional 2 per cent on Friday morning.
Mr Drahi’s intervention follows a turbulent week in which Altice’s share price dropped in the wake of a poorly received trading statement last week. Altice has now lost 44 per cent of its value since the start of the year amid fears that rising interest rates could make it hard for the group to service the €50bn in net debt it has racked up with a series of high profile deals.
“Altice is great at cutting costs,” said Ameet Patel, a senior equity analyst at Northern Trust. “But they took their eye off the ball on the commercial front in France and you can’t do that in telcos, especially in a tough Market. It has come back to haunt them.”
Mr Drahi, who owns 60 per cent of Altice, stood down from the board last year after the Netherlands-listed company completed its acquisition of two US cable networks.
At that time, Mr Goei moved to run the newly formed Altice USA business and Mr Combes, the former head of Vodafone Europe and chief of Alcatel-Lucent, was promoted to chief executive. Mr Goei will retain his role as head of Altice USA alongside the group chief executive role.
The departure of Mr Combes follows that of Michel Paulin, the director-general of SFR, who resigned in September. Altice said on Thursday that it had promoted Alain Weill, SFR Media’s chief who has never run a telecoms company, to SFR Group chairman and chief executive. Armando Pereira, a founding partner of Altice, has been named Altice Telecom chief operating officer in addition to his responsibilities for France.
The Altice parent company has made more than 30 acquisitions since its inception in 2002.
“Investors’ issue with Altice is not so much who is in charge but which strategy is pursued: massive Investment and M&A in networks and in content or higher cash flows to reduce high gearing,” Stéphane Beyazian, head of telecoms and media equities at Raymond James. “I am doubtful you can conciliate both in a context of rising interest rates.”
The acquisitive and highly leveraged company, which raised $1.9bn by listing its Altice USA business earlier in 2017, has been linked with a number of potential deals this year, including a $185bn swoop on US cable company Charter.
But its progress in the US, underlined by a deal this week with Sprint to launch a mobile phone service to bolster its cable growth, has been hindered by continued problems in Europe, where its SFR mobile unit has failed to turn round its lacklustre performance.
The group has spent heavily in France on content such as sports rights to add to its telecoms bundles, betting that this will help it attract and retain customers, and improve the average revenue per user.
However, this expensive strategy has yet to pay off. Altice announced last week that it had lost about 75,000 broadband customers in France in the three months to the end of September.
The divergence of performance between the US and Europe, with the US growing 19 per cent in the third quarter while SFR and the Portuguese telecoms operations struggled, has put the company under pressure. It has net debt equal to more than five times earnings before interest, taxes, amortisation and depreciation.