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19 December 2019

Altice Portugal sets the bar for European fiber with 49% sell out

For the second time in the space of a year, European telco powerhouse Altice has sold a chunk of valuable fiber infrastructure. Altice Portugal (aka Meo) is the latest division to secure investment – inking an agreement with Morgan Stanley Infrastructure Partners to sell 49.99% of the fiber arm for €2.3 billion after months of deliberations. The significance is that almost 2/3 of the Portuguese population have access to gigabit-capable fiber – miles ahead of Europe’s biggest economies.

The Portuguese FTTH project is decidedly similar to Altice’s French FTTH sale from late 2018, which involved selling a 49.99% stake in SFR FTTH to a trio of infrastructure investors. Altice claims the Portuguese deal with Morgan Stanley marks the first time an incumbent European telco has spun off its fiber network business into a dedicated wholesale vehicle.

Of course, the SFR FTTH deal with equity partners Allianz Capital Partners, AXA Investment Managers, and Omers Infrastructure was all about establishing a nationwide infrastructure challenger to the incumbent, not for the incumbent. It means Altice Portugal, which passes more homes with fiber than any other operator in the country at 4 million premises, will sell wholesale services to all Portuguese operators at level pricing. The funds will go straight into further fiber rollouts, another of which is due to be finished sometime in 2020.

Fiber subscribers in Portugal are climbing nicely. Altice is closing in on 1 million fiber customers after adding another 38,000 connections in the third quarter, an annual increase of 158,000 subs, from a total fixed consumer business of 1.6 million subscribers. So, an impressive 58% of the fixed base were on fiber as of the end of Q3 – and rising – while fiber churn is at an enviably low 8%.

Altice uses GPON and NG-PON2 (next generation PON) at its Portugal Telecom subsidiary, but as far as we know that uses all standardized off the shelf equipment.

Meo covers some 6.7 million people with gigabit-capable fiber, on par with NOS and Vodafone, according to Viavi’s Gigabit Monitor. This means 65% of the population are covered by fiber, ranking Portugal 7th globally for percentage of population covered. However, Altice’s own figures say Meo has passed 4.8 million homes with fiber.

Altice acquired Meo in 2015 and for some brief background, we know a combination of Alcatel-Lucent and AuthenTec were revealed as core suppliers enabling the Meo Go TV Everywhere service. This is an extension of its Mediaroom IPTV system – using the MediaFirst TV platform now operated by new company MediaKind, which is partly home grown and partly inherited from Ericsson’s acquisition of Azuki.

Altice Portugal’s fiber expansion will allow OTT video and future viewing formats to flourish, harnessing user data in the process. That said, video search technology vendor Utelly has an intriguing deal with Altice Labs in Portugal to dive into recommendations based on TV subscriber behavioral data.

Spearheaded by sponsorship money from the European Union’s research and innovation division, Utelly and Altice Labs say they aim to provide better collaboration between public and private sectors across Europe by breaking down barriers with world-class scientific innovations. Altice Labs will provide an environment for which Utelly will collect and digest anonymized TV consumption data from Altice Portugal set top users (Samsung-made for satellite, Arris for Meo 4K).

It isn’t the first time Altice Portugal has done business with Morgan Stanley Infrastructure Partners, having only last year engaged in a towers transaction. This towers deal, as well as the SFR FTTH transformation, has amassed cash proceeds exceeding €5.7 billion, which will help Altice accelerate its debt reduction program.

Altice recorded €1.56 billion revenue from its Portuguese operation during the first nine months of 2019, down marginally by 1% from the same period last year, with an operating loss of €133.1 million.

We said at the time of the SFR deal that should the project be successful, it would likely spark similar European operator projects.

“SFR FTTH and our towers in France in addition to our fiber and towers in Portugal, already represent more than €0.8 billion of revenues and more than €0.5 billion of EBITDA, effectively constituting one of the largest telecom infrastructure groups in Europe,” according to CEO Patrick Drahi.