After Months Of Rumors, Altice USA IPO Arrives

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On Oct. 21, 2016, Reuters reported that — according to “people familiar with the matter” — Altice USA is “drawing up plans for a potential initial public offering” of stock.


On Tuesday (4/11), those rumors became reality, as the owner of the Suddenlink MVPD and Optimum MVPD service acquired as part of Altice’s $17.7 billion June 2016 purchase of Cablevision from the Dolan Family formally announced its IPO plans regarding the issuance of Class A Common Stock.

In an S-1 filing with the SEC, Altice USA formally set its IPO value at the placeholder value of $100 million. According to The Wall Street Journal, the IPO could raise upward of $1 billion. BC Partners Ltd. and Canada Pension Plan Investment Board, which together own 30% of Altice USA, are likely to sell 5% to 10% of the company, the Journal reports.

This would value Altice USA at more than $20 billion.

Altice’s 2016 consolidated revenue grew to $9.15 billion, from $8.97 billion. This was paced by growth in its broadband; business services and wholesale; and advertising segments.

Revenue for Altice’s core Pay TV segment dipped to $4.23 billion, from $4.26 billion in fiscal 2015.

Yet, Altice’s net loss shrunk in fiscal 2016 to $656.45 million, from $1.1 billion.

Altice addressed this in its S-1 filing, stating among the risks associated with its IPO.

The company said, “We have in the past reported substantial losses from continuing operations, and we may do so in the future. Significant losses from continuing operations could limit our ability to raise any needed financing, or to do so on favorable terms, as such losses could be taken into account by potential investors, lenders and the organizations that issue investment ratings on our indebtedness.”

Additionally, Altice said, “We will need to raise significant amounts of funding over the next several years to fund capital expenditures, repay existing obligations and meet other obligations and the failure to do so successfully could adversely affect our business. We may also engage in extraordinary transactions that involve the incurrence of large amounts of indebtedness.”

Thus, Altice’s IPO could be huge, but the use of term loans and bonds could also come to fruition in the coming months.

A Capital Intensive Business

While operating and maintaining its cable systems “requires significant amounts of cash payments to third parties,” Altice has also commenced a five-year plan to build a FTTH network. This will enable Altice to deliver more than 10 Gbps broadband speeds across its entire Optimum footprint and a portion of its Suddenlink footprint.

The company also plans to introduce a new home communications hub during Q2.

“We may not be able to execute these initiatives within the anticipated timelines and we may incur greater than anticipated costs and capital expenditures in connection therewith, fail to realize anticipated benefits, experience business disruptions or encounter other challenges to executing either as planned,” Altice warns. “The failure to realize the anticipated benefits of these initiatives could have a material adverse effect on our business, financial condition and results of operations.”

Additionally, Altice expects these capital expenditures “to continue to be significant” as it further enhances its service offerings. “We may have substantial future capital commitments in the form of long-term contracts that require substantial payments over a period of time,” it notes. “We may not be able to generate sufficient cash internally to fund anticipated capital expenditures, meet these obligations and repay our indebtedness at maturity.”

Accordingly, Altice may need to refinance existing obligations to extend maturities; raise additional capital, through debt or equity issuances or both; cancel or scale back current and future spending programs; or sell assets or interests in one or more of our businesses.

Among the other concerns stated in Altice’s IPO filing: Labor disruptions. On March 10, the International Brotherhood of Electrical Workers (IBEW) was certified to represent 100 employees in Oakland, N.J.

“We have not yet negotiated a collective bargaining agreement with the IBEW relating to these employees and there can be no assurance that we will be able to do so on terms,” Altice said.

RBR + TVBR