Altice plans 'French champion' after SFR deal; secures backing from banks

Altice has laid out its vision for a merged SFR and Numericable, saying it plans to create a "French champion" in the field of very high-speed broadband and fixed and mobile convergence.

 SFR, Altice, Bouygues, Orange, Vivendi

Altice founder Patrick Drahi
Copyright: Aude de Cazenove REA

The company, which is currently in exclusive negotiations with Vivendi over its bid for SFR, also said it has received the backing of a syndicate of nine international banks to fund its planned purchase, Reuters reported.

The Altice offer comprises an €11.75 billion ($16.3 billion) payment to Vivendi and a 32 per cent share in the equity of the combined listed entity. Altice said €3.4 billion would be financed through a capital increase and €8.35 billion through debt.

Altice, which was founded by entrepreneur Patrick Drahi and owns 40 per cent of Numericable, is clearly banking on the advantages that will be brought by the complementary nature of Numericable's and SFR's respective networks, and confirmed that the merged entity would operate under the SFR brand and be based in France.

"The combined Numericable-SFR will own one of Europe's largest networks, providing fixed-mobile convergence to customers with the fastest broadband speeds (up to 200 Mbps), an attractive mobile offering, and…Numericable's 'la Box Fibre'," Altice said. "The new company will leverage the power of the SFR brand and boast a multi-channel distribution network of about 850 shops."

The company also committed to future network and fibre investments, employment in the French market and no rises in LTE prices. It said it would work with "the best French suppliers", in efforts to allay concerns of French ministers who had expressed a preference for a competing bid submitted by Bouygues.

Altice set out some medium-term objectives for the new entity: annual revenue growth of between 2 per cent and 5 per cent; an EBITDA margin of 40 per cent; and capex of about 20 per cent of turnover. It confirmed that it expected to make savings of up to €1 billion in annual cash flow over time.

As for Bouygues, which is probably still nursing hopes that the Altice talks with Vivendi will fail, it's speculated that the company's telecoms unit will end up merging with Iliad whatever the outcome.

Bouygues had come to an agreement to sell its mobile network to Iliad should it gain approval to buy SFR, but without SFR, Bouygues Telecom would find itself increasingly under pressure from its larger rivals. The company had already been hard hit by Free Mobile's sub-€20 mobile plans launched in January 2012.

"It seems likely that one way or another Iliad and Bouygues will end up in each others' arms," Bernstein analyst Claudio Aspesi wrote in a research note.

Asked for his view on a potential Iliad-Bouygues tie-up, Altice founder Drahi told Reuters: "Well if they do merge, it should not pose any problem!"

For more:
- see this Altice statement
- see this Reuters article
- see this separate Reuters article

Related Articles:
Altice/Numericable see €1B in savings from SFR deal
Vivendi opts to hold exclusive talks with Altice on SFR
SFR bidder Altice hails need for mobile and fixed convergence
Bouygues cooks up Iliad network deal in bid to secure SFR merger
Bouygues hails need for consolidation, as the battle for SFR commences

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