Altice does Netflix deal, launches IPO, slams door on dividends

Just a month after announcing that Altice is one group, with one goal and one set of technology decisions, it has cut a deal with Netflix, which on the surface of it excludes the US.

We can see clearly that co-operating with Netflix in the US is a very different deal than outside the US – for a start its percentage penetration is significantly higher there, and it has less need of a hand, but also recent deals, such as the one it has with Comcast, require a higher degree of integration with the set top architecture.

The likely takeaway for Altice US is that it very probably will do a similar deal with Netflix in the US, but that this requires longer preparation, and will be announced later.

For the time being the global partnership Altice and Netflix announced this week will operate in France, Portugal, Israel and the Dominican Republic

The deal requires Netflix’s content to be made available to Altice customers into all eligible devices and comes after significant investment from Altice is its own original studio creations, especially in Sports, and recent acquisitions of TV series and movie rights.

France gets the content first through SFR and customers will be able to sign up directly for Netflix from June 13th there. The rollout will advance to other countries through 2017.

This deal comes on the back of recent Altice news about its run in with the European Commission over its purchase of Portugal Telecom, whereby the European Commission gave it permission for the takeover but subsequently issued a statement of objections.

The EC aid that Altice breached the EU Merger Regulation law, by taking control of Portugal Telecom before it was supposed to, and while the Commission says it has the power to fine up to 10% of its annual turnover, we suspect that any fine that comes out of this will be a mere slap on the wrist.

Finally Altice was in the news in the US where it has launched initial public offering of 46.5 million shares which is expected to raise around $350 million before costs for the company, but the main aim of the IPO is to allow fellow investors BC Partners and the Canada Pension Plan Investment Board to cash out to the tune of around $607 million and $393 million respectively. Total amounts raised will be between $1.255 billion and $1.44 billion. There are an extra 5 million shares up for grabs if it goes well which will raise an extra $145 million or so for the company, if they end up getting sold.

The plan is to use the net proceeds to redeem a portion of Senior Notes due 2025 but also the company said that the Cablevision management used to offer quarterly dividends and in Q4 2016, paid out $445 million to stockholders along with $170 million in Q1 2017. It now plans to pay out one more dividend of $670 million which is mostly paid for by debt and then to stop all future dividend allocations.