Cablevision shares are down 1.6% in early trading — but Altice, trading in Amsterdam, was up 5.3% — after the Wall Street Journal reported that officials in the Big Apple and Empire State are looking askance at the French telecom company’s $10 billion acquisition plan.
The fear is that Altice’s extravagant vow to investors to find $900 million in cost savings and synergies will lead it to skimp on customer services.
“We are certainly not afraid to disapprove a transaction,” city Mayor Bill de Blasio’s Legal Counsel Maya Wiley told the paper. Altice told her and other officials that it would improve service by installing more fiber optic lines. But she says the city wants “the demonstration of the ability to make good on a promise.”
The state Public Service Commission plans to rule in April on Altice’s acquisition. Cablevision has 2.6 million video customers, most concentrated in the tri-state area around New York City including its outer boroughs and Long Island.
Many Wall Streeters, and especially Altice shareholders, are skeptical that it will be able to find $900 million in benefits or savings after buying Cablevision. That’s more than Charter expects to find from its $67 billion transactions to pick up Time Warner Cable and Bright House Networks.
MoffettNathanson Research’s Craig Moffett wrote last week that he believes that “Altice dramatically overpaid, and that their attempts to cut costs are both overly ambitious and are potentially injurious to what we already expected to be very weak operating results.”
Bernstein Research’s Paul de Sa believes that if Altice buys Cablevision then it probably will avoid “margin-destroying head-to-head price wars” with Verizon FiOS.
Shareholders seem to agree that Cablevision has more to gain, and Altice more to lose, from the deal. The cable company’s shares appreciated 9.9% since just before the transaction was announced in mid-September. Altice is down 46.6% over the same period.
Altice says that it looks “forward to a fair and open regulatory process with the relevant authorities in connection with our proposed Cablevision transaction, and as in all of our other territories we expect to deliver significant benefits to consumers and their communities in the Tri-state area.”
On Monday the company secured a foothold in the U.S. cable business by closing its $9.1 billion acquisition of 70% of Suddenlink.