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6 December 2018

Altice invites infrastructure investors to market with SFR FTTH sale

Advanced countries such as France will have more than 50% of households taking 1 Gbps by 2023, as revealed by the Gigabit Broadband report and forecast from our research arm Rethink TV last week, and one operator in particular wants to get ahead of the pack. Altice subsidiary SFR raised €1.8 billion this week through selling almost half of the business – money it plans to inject straight into fiber deployments to become a European FTTH powerhouse.

In doing so, Altice has given three major infrastructure investors significant influence in the French fiber market. But can their expertise in energy and transport translate to broadband, urging other European operators to strike similar deals, or is the lack of experience in the consumer and network technology sectors make this destined for failure?

Through a cash sale to equity partners Allianz Capital Partners, AXA Investment Managers, and Omers Infrastructure, for a 49.99% stake, Altice Europe claims to have created the leading FTTH infrastructure wholesaler in France, planning to pass 5 million homes by 2022.

It creates “the only nationwide infrastructure challenger to the incumbent with a very strong competitive position on its footprint.”

SFR FTTH claims 1 million homes will be passed by the end of this year, deploying fiber “massively” with more to be franchised or acquired. It says it will sell wholesale services to all operators at the same terms and conditions, and will source its technical services from Altice France for the construction, subscriber connection and ongoing maintenance of its FTTH network. Combined with Altice France’s other fixed infrastructure assets, the group owns a FTTB network covering 9 million homes, delivering speeds of up to 1 Gbps, and 2.5 million FTTH homes in some of the country’s most densely populated areas.

Today, about 16% of homes in France have 1 Gbps lines, representing just over 4 million, forecast to rise to 58.5% by 2023, second only to South Korea in terms of penetration, according to Rethink TV data. The rise of France as Europe’s outright broadband force is down to the 4 converged telco style operators offering fiber and fighting aggressively against each other, and one of these also offers DOCSIS.

Altice has become an increasing force in French TV, having negotiated exclusive deals with Discovery and NBCUniversal, while building its own portfolio of premium channels, and it launched an Android TV device back in July called the Connect TV de SFR. This comes with a voice-activated remote control and 4K support, retailing at €69.

Two weeks ago, it reported its best quarter since 2005, clawing back at least 1 million French customers in the year to date, more than it lost in the previous 3 years. For Q3, it added 166,000 customers, 52,000 in broadband, against a 75,000 loss last year, and 64,000 additions to its fiber base and today has 40% of its French broadband customers on fiber.

Altice also launched an OTT service called RMC Sport in Q3, gaining 114,000 customers. Mobile accounted for 378,000 net additions which compares with just 16,000 last year, which it puts down to having Champions League rights. It says its Portugal Telecom acquisition is also performing well, but only added 8,000 net additional customers there, against losses last year. It gained 44,000 fiber customers and 37,000 mobile. However, Altice revenue fell 4.6% year on year and its margin was down too, but spent €706 million on capex and a colossal €1.01 billion for the Champions League rights.

Patrick Drahi, founder of Altice, said, “I am very pleased that three of the most renowned infrastructure investors in the world are becoming our partners and committing large resources to build the leading FTTH wholesaler in Europe. With this transformational transaction and the various tower sales and partnerships announced earlier this year, Altice Europe has been able to crystallize €8 billion of infrastructure value and obtain cash proceeds of €4 billion in total in a few months. Through these transactions, Altice France and Altice Europe will deleverage and will have access to new and cheaper liquidity to invest in its fiber infrastructure.”

As well as operating in France, Altice Europe owns Meo in Portugal, Hot in Israel and Altice Dominicana in the Dominican Republic.

Meanwhile, in unrelated but important news, the FTTH Council Europe again addressed the misuse of the word fiber in advertisements this week, relating to the trend of telcos continuing to advertise “fiber-like speeds” for copper services.

“Where consumers know what they can choose from and understand the difference in performance between fiber and copper-based connections, they consciously choose fiber: the degree of satisfaction of FTTH end-users is substantially higher than recorded for any other Internet access technology in Sweden and 94% of non-FTTH users would consider subscribing to FTTH if it was made available in their area,” said FTTH Council Europe President Ronan Kelly.

He’s right, such deceptive campaigns is the last thing the broadband market needs right now and it’s bewildering that the FTTH Council Europe should even have to issue such warnings.

“We urge Member States, National Regulatory Authorities and BEREC to take action both individually and collectively to prevent misleading fiber advertising. This will contribute to unlocking the investment potential in fiber across Europe as well as to ensuring that consumers can make well informed choices based on genuine, transparent information,” said Kelly.