Altice offers to buy out SFR shares, unveils new strategy

SFR HQ building

Altice unveiled an offer to buy out minority shareholders in France-based operator SFR and also outlined a broader plan to implement a new corporate strategy called the “Altice way” at all units within the group including SFR.

The Netherlands-listed telecoms and cable group, which is also in the process of integrating recently acquired assets such as U.S.-based Cablevision, plans to buy the 22.5 per cent stake in SFR that it does not already own by offering to exchange eight new shares in Altice NV for five SFR shares. The transaction is expected to close in the fourth quarter of this year.

Altice’s offer values SFR shares at about €24.72 ($27.60) per share. Bloomberg estimated that Altice would have to pay about €2.4 billion for the stake, while Reuters valued the stake at €2.35 billion based on SFR’s market capitalisation of about €10.6 billion.

The offer to buy all outstanding shares in SFR comes just over two years after Altice acquired a majority shareholding in the operator from Vivendi in June 2014, despite deep opposition to the deal within France. Altice beat off fierce competition from Bouygues Group, which had hoped to secure SFR in order to prop up its own telecoms business.

SFR has since been grouped together with Altice-owned Numericable to form a new mobile and cable conglomerate on the French market with a strong focus on convergence. However, recent results indicate that SFR as well as market leader Orange are continuing to struggle, while Bouygues Telecom’s standalone strategy appears to be paying off.

The French mobile market was shaken to its core in 2012 when Iliad launched Free Mobile as the country’s fourth mobile operator and introduced a highly aggressive pricing strategy. Free has continued to build up its subscriber base in the last four years, while its three rivals have been forced to cut prices and launch aggressive promotions to prevent customers from leaving.

Although the situation has eased in the last year, second-quarter results from SFR indicated that the company is still shedding too many customers. Reports in August also suggested that the operator could cut around one third of its domestic workforce by mid-2019.

Altice has already implemented several new strategies at SFR, including the creation of SFR Media as part of a stronger focus on content and convergence. By acquiring all shares in SFR, Altice intends to simplify its group structure, improve organisational flexibility and cash flows, and facilitate the sharing of skills and best practices within the group.

The “Altice way” is how the group describes this new industrial strategy at group level. It essentially means that units such as SFR will increasingly benefit from processes that are implemented across the group. For SFR in particular, this relates to the development and the maintenance of the company’s fixed and mobile network.

Altice added that France still accounts for 47 per cent of its business. As part of its new strategy, it also plans to buy suppliers Parilis and Intelcia and launch Altice Studios, to create original movies and series, and Altice Channel Factory, to create more new channels.

For more:
- see this Bloomberg article
- see this Reuters article
- see this Altice statement on the SFR offer (disclaimer required)
- see this Altice release on its new corporate strategy

Related articles:
Altice, Vivendi sign final agreement on SFR-Numericable merger
Report: SFR wins union approval for 5,000 job cuts
SFR Q2 revenues hit by subscriber losses