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10 June 2021

UK fiber in global spotlight as Altice snatches surprise stake in BT

While Faultline remains a strong sceptic about BT fulfilling its full-fiber broadband rollout roadmap, given the empty promises of so many overambitious operators, the British MSO has attracted the attention of France’s Altice – acquiring a 12.1% stake for a reported $3.1 billion.

Outdoing Deutsche Telekom by just 0.1%, Altice becomes BT’s largest shareholder, although billionaire owner Patrick Drahi has assured the BT board that this approach is not a precursor to an aggressive takeover of the business. We don’t trust Drahi as far as we could throw him.

It comes as the BT Sport wing was supposed to be finding a new buyer, but here we are with a French outfit taking a sizable bite of the main course just as the UK network infrastructure scene has been placed under the global spotlight following the UK government’s sweeping fiber expansion plans.

It is also rather apt that the deal has occurred in the same week as the virtual version of Anga Com, the German trade show, which was busy trying to place Germany on a pedestal as Europe’s fiber network powerhouse. Well, the UK has certainly stolen the event’s thunder, following BT’s recent full-fiber plans to reach 25 million premises by the end of 2026, although the long-term fiber war is far from over.

As for the video angle, no one has suggested that Altice’s approach of a stake in BT might have been spurred on by a certain announcement this week, concerning BT’s new set top, the TV Box Pro HDR. The new device features 4K, Dolby Atmos, and WiFi functionality, plus 1TB of storage and four tuners so viewers can view one stream while recording three simultaneously. Ok, we jest, fiber is the primary selling point here, although Altice is no stranger to the value of the double and triple play bundle, so we are keeping an open mind that Altice has one eye on BT’s video operations.

Drahi commented, “BT has a significant opportunity to upgrade and extend its full-fibre broadband network to bring substantial benefits to millions of households across the UK. We fully support the management’s strategy to deliver on this opportunity. We understand that the expansion of the broadband network is one of the UK government’s most important policy objectives and a core part of its levelling up agenda.”

There have been some interesting recent developments in Altice’s native France, where it owns SFR. Incumbent Orange decided to sell 50% in the Orange Concessions division earlier this year to a consortium of local French equity firms, raising funds to pursue an aggressive fiber roll out in rural France, either directly though infrastructure build outs, or investing in or acquiring smaller regional fiber operators. The $1.6 billion raised will go a long way to helping Orange realize its Engage 2025 vision, a set of plans published in August 2020 providing a rough guideline for how Orange will reinvent its operator model over the next five years.

Through its Openreach division, which handles the building and running of the fixed network, BT could pursue a similar strategy to Orange on the acquisition front, although there are fewer smaller broadband providers rural areas of the UK, compared to France, for BT to potentially swallow.

This would likely be met with regulatory scrutiny anyway.

Meanwhile, back on the other side of the pond, Altice USA announced something similar around the same time, selling a stake of a little under 50% in its fiber business Lightpath to Morgan Stanley Infrastructure Partners for $2.3 billion. Despite this sale, Altice USA has been eager to remind us of its expanding gigabit availability and its commitment to building out FTTH infrastructure, claiming that over three quarters of its entire footprint now has access to 1Gbps broadband speeds.

We should remember that Altice USA was officially separated from Altice NV back in 2018, although it will take longer than that for the two entities to start behaving independently of each other.

With the two entities still sharing similar strategies, this is a good time to take a look at Altice USA’s latest three-pronged fixed network strategy. The first and primary focus is the rollout of FTTH network services in the Optimum footprint, where the operator is actively upgrading and migrating customers to technology with a roadmap of getting 10Gbps+ symmetrical speeds.

The second aspect of its network strategy is a fiber and coax-based network edge-out initiative in the Suddenlink market. Here, Altice USA has reached about 40% penetration within 12 months of a new build, which it has described as a “remarkable result”. Last year, Altice USA significantly accelerated its network edge-outs with 130,000 new build homes.

Its third and final focus is on expanding beyond edge-outs, pointing to the purchase of cable operator Service Electric of New Jersey in July, for a reported $150 million, as one recent example. Altice USA says it is exploring other cable opportunities to expand its footprint, and it has also filed for the upcoming FCC Rural Digital Opportunities Fund option, to invest in network builds in rural areas with partial subsidy by the government.

It comes as Altice USA has been building out its fiber plant pretty robustly across 23 states – plans which have been accelerated by streaming traffic surging 46% on the Altice USA network. Altice USA’s network was able to meet that challenge thanks to an aggressive FTTH plan before the pandemic took hold, which put Altice USA in a strong position to respond to bandwidth demands.

Targeting small and medium-sized businesses (SMBs), a market experiencing robust growth in the pandemic’s wake, is another driver behind Altice’s fiber investments. In Altice USA’s case, it has been offering more bandwidth and payment plans to help keep SMBs afloat in the near-term. In the long-term, Altice USA ultimately wants to help reinvent and grow emerging businesses via its products and services, which could otherwise be read as increasing bills and throwing add-ons at subscribers that not so long ago were struggling.