Toekomstbeeld schreef op 4 november 2017 11:46:
UPDATE 1-Altice shares plummet as investors lose patience with high spending strategy
Reuters Staff
6 MIN READ
* Share slide erases close to 6 bln euros off market cap
* Investors now focused on revenue growth, not costs* Several executives left French unit since September (Recasts story, adds closing shares, CEO comments, analyst comment)
By Mathieu Rosemain and Sophie Sassard
PARIS, Nov 3 (Reuters) - Altice’s shares had their worst day ever on Friday, shedding more than 20 percent as investors fretted about the telecoms group’s ability to recover market share in France and grow in the United States.
The magnitude of the market reaction, which wiped close to 6 billion euros ($7 billion) off the company’s market capitalization, signalled rising concerns about Altice’s strategy and whether the group could keep spending at its current pace or maintain its high debt level in a rising interest rate environment.
The Amsterdam-based group said late on Thursday that it lost about 75,000 broadband customers in France, its biggest market, in the third quarter, with some lured by heavy promotions on offer at rivals Iliad, Bouygues Telecom and Orange.
Altice has invested billions of euros in its networks. It has also paid hundreds of millions of euros for sports rights including for the Europa League and English Premier League televised soccer - aiming to win back thousands of customers who have left its French unit SFR since Franco-Israeli tycoon Patrick Drahi bought it out in 2014.
“We have not yet grabbed the benefits of those investments as we needed to fix some basics,” Altice’s Chief Executive Michel Combes told analysts in a call.
HIGH DEBT
Drahi won favour from investors for slashing costs in the companies that he has acquired in both Europe and the United States, but shareholders in Altice now want to see if he is also capable of growing the “top line” or sales.
Since Drahi took control of SFR, France’s second-biggest telecom operator, it has lost more than 1.6 million mobile customers and over half a million fixed broadband customers.
“Investors are realizing the company is struggling too much in France,” said Javier Borrachero, an analyst at Kepler Cheuvreux with a “hold” recommendation on Altice.
“The management has been saying for several quarters: ‘the next quarter is going to be better’, so somehow they (the third-quarter numbers) are disappointing,” he said.
Altice’s debt burden reached 49.557 billion euros ($58 billion) by the end of the third quarter, an increase of 361 million euros from the previous quarter, and equal to more than five times Altice’s annual core operating profit.
The group has a B+ long-term credit rating by S&P, which is four notches below investment grade.
“In a worse-case scenario, with extreme pressure on the stock expanding to refinancing... Altice might consider a sale or IPO (initial public offering) of some assets to accelerate debt reduction,” said Stephane Beyazian, an analyst at Raymond James.
The company’s shares closed down 23 percent at 12.51 euros, their lowest since February of last year, and have now fallen by a third since the start of 2017.
TOO RUTHLESS?
The fall in the value of Altice’s stock on Friday could make it harder for the cable company to finance another large deal in the United States, a banker involved in telecoms deals said, after the group bought two cable operators in the past two years.
The departure of several top executives at SFR in the past two months - including CEO Michel Paulin, for “personal reasons” - has also raised concerns about its management.
“We’re wondering if the Altice machine has gone too far with its ruthless methods and whether managers can keep up with its pace in the long run,” a telecoms investor with a small interest in Altice said.
Altice Group CEO Combes is now head of SFR as well, while Drahi’s business partner and Altice co-founder Armando Pereira joined SFR in September to oversee its core telecoms business. Pereira is known for his ruthless focus on cost management.
The same telecoms investor said SFR’s decision in July to automatically lift prices by 3 to 5 euros a month for some customers had irked some of them.
Still, some industry specialists said that Altice investors might be overreacting and that the company’s high capital expenditure, expected to total 4 billion euros this year, would eventually yield results in the longer term.
SFR has committed to roll out fibre optic broadband across all of France by 2025.
“I remain optimistic for them because it’s a business where infrastructure and size matters,” the banker said.
“It’s not a glamorous period for them, it will take time. Markets are impatient, they want good news every quarter,” according to the banker.
All major European telecoms operators including Orange, Deutsche Telekom and Telecom Italia face pressure to improve their fixed networks, as EU authorities urge expansion of fibre-optic broadband to meet growing demand for data services.
The race for better fixed networks implies heavy capital expenditure, and in that respect Altice is in a strong position: its capex amounted to close to 20 percent of sales last year, a high proportion relative to its peers. ($1 = 0.8620 euros) (Reporting by Mathieu Rosemain in Paris and Sophie Sassard in London; Editing by Susan Fenton)