SFR FTTH buys fibre wholesaler Covage for a billion euros

The French fibre sector is undergoing a spot of consolidation with the news that Altice-owned SFR is acquiring the country’s fourth largest fibre wholesaler.

Covage is currently owned by hedge fund Cube Infrastructure, which has apparently decided its time to liquidate its position. It currently serves 800,000 homes with fibre, with another 1.6 million in the pipeline. This acquisition will give SFR FTTH current coverage of 2.5 million homes and 5.5 million on the way.

“I am very pleased that we are further expanding the leading FTTH wholesaler in Europe,” said Patrick Drahi, Altice founder. “We are extremely proud to integrate Covage, a great company, with a portfolio of areas in France complementary to ours. With this transaction we also bring onboard excellent local relationships.

“We continue to be focused on deleveraging Altice Europe notably thanks to growing revenues and EBITDA which will be supplemented with disposal proceeds. As I have explained previously, we are in advanced discussions with several parties in relation to our Portuguese fibre asset. This process is supported by the significant appetite for fibre in Europe clearly demonstrated by the present transaction which has been strongly supported by our financial partners in SFR FTTH.”

Dropping a cool billion on an acquisition is a funny way of deleveraging, but who are we to argue with a telecoms tycoon? SFR is the main competitor to Orange in the French fibre market, with both of them acting as wholesalers in what seems to be a fairly competitive environment. Further consolidation wouldn’t come as a surprise, especially with the help of a bit of creative accounting.

Altice raises €2.5 billion by flogging some towers

Debt-riddled French telco conglomerate Altice has raised some much-needed cash by selling stakes in two of its tower holdings to private equity.

The the total cash consideration is €2.5 billion, with KKR getting half the French towers business, while three quarters of the Portuguese towers business are being snapped up by Morgan Stanley and Horizon. There is much talk of what a good deal this is and how it will enable the relevant bits of Altice to focus on their core stuff, but this is all about eating into its massive debt pile in a bid to repair the catastrophic damage it experienced last year.

“I am enthusiastic about creating new tower partnerships in France and Portugal,” said Altice founder Patrick Drahi. “With KKR, Morgan Stanley Infrastructure Partners and Horizon Equity Partners, we have found long-term partners of the highest-quality who share our vision to invest in leading infrastructure and growth opportunities.

“We will create a leading European tower business, including the number one in France. Both tower businesses will be uniquely positioned to grow as they provide increasingly important infrastructure services to operators in both markets. Simultaneously, these transactions underline our commitment to delever and proactively manage our balance sheet while highlighting the significant underlying value of Altice Europe’s business.”

If Drahi hoped this move alone would have a profound effect on Altice’s share price he must feel pretty disappointed as it has been met with a distinct shrug. The French tower joint venture is called SFR TowerCo, but Altice stock is far more sensitive to the fortunes of the SFR telecoms business than a few towers, and that remains a challenge. You can read further analysis of the move at Light Reading here.

Nokia invests in its IoT portfolio with SpaceTime Insight acquisition

Networking vendor Nokia has snapped-up machine learning-powered analytics firm SpaceTime Insight, which it says will augment its IoT offering.

SpaceTime Insight specialises in the use of predictive analytics to manage and optimize the use of enterprise assets. It has packaged all this cleverness into an IoT platform and it’s this application that seems to have caught Nokia’s eye. Specifically Nokia is going to integrate SpaceTime into its IoT software portfolio and expects to produce better IoT apps as a consequence.

“Adding SpaceTime to Nokia Software is a strong step forward in our strategy, and will help us deliver a new class of intelligent solutions to meet the demands of an increasingly interconnected world,” said Bhaskar Gorti, president of Nokia Software. “Together, we can empower customers to realize the full value of their people, processes and assets, and enable them to deliver rich, world-class digital experiences.”

“Today marks a transformational moment for SpaceTime, and I’m delighted to join forces with one of the world’s top organizations-a global brand that is reshaping the future of networking and intelligent software,” said Rob Schilling, CEO of SpaceTime Insight, who’s hanging around. “I am excited for this incredible opportunity to help accelerate and scale Nokia’s IoT business and provide a new class of next-generation IoT solutions customers cannot find anywhere else.”

It has been a busy start to the week for Nokia. On the software side its Nuage SDN division announced a deal win with Telefónica Spain to software-define its datacentres. This is an extension of an SD-WAN rollout last year and the usual claims of agility, scalability and efficiency apply.

“To meet the rapidly emerging business requirements for agility and on-demand deployments, we moved aggressively to build our business connectivity services around a new cloud-based architecture,” said Joaquín Mata, director of operations, network and IT at Telefónica Spain. “Nuage Networks provided us with a highly scalable SDN architecture that could support all our services across all our regions without disruption. We are confident our customers will significantly improve their businesses with these new cloud-based services.”

Lastly Nokia has got together with French operator SFR to claim the first French 5G NR call over the 3.5 GHz spectrum. It was a test conducted at Nokia’s Paris campus and seems to be a pretty standard affair, designed as much to give the protagonists some 5G kudos as anything else.

“SFR is developing a roadmap for the evolution of its networks that takes into account the benefits and complexity of implementing 5G,” said François Vincent, head of Mobile Network at SFR. “The joint projects and trials will enable us to meet future data demand in the most effective way, while exploring new ways to deliver our media content that will increase the subscriber experience.”

SFR gets fined for the print of its fine print

French telco SFR has lost its argument in the Paris Court of Appeal for illegal and abusive clauses, with the ruling also noting font size T&Cs was too small for the consumer to fully appreciate the contract.

The case itself was brought forward by French consumer group UFC-Que Choisir, which claimed a number of the clauses in SFR contracts were not fair to the consumer. One of these clauses allowed SFR to deny responsibility for any network issues resulting in up to 10% failure rate in calls and texts. Another clause would allow the telco to add additional fees to the users contract should the user want to change payment method.

These clauses would certainly be of interest, but perhaps the most bizarre aspect of this case is the ruling on font size. The Paris Court of Appeal upheld the complaint that 3mm was too small for users to read and appropriately understand the agreement into which they were entering. This is of course a common tactic for the more nefarious individuals and organizations around the world, but considering the ‘creative’ advertising strategies which we have seen in the telco space, we are not surprised by any underhanded tactics employed by operators to secure additional profits.

Whether this is the beginning of another trend remains to be seen. The ‘up to’ metric is being done away with and operators are generally being forced to be more realistic with speed promises in advertising, but the T&Cs is another area which needs to be addressed. Right now understanding mobile contracts comprehensively is limited to those with legal degrees, this is unfair and unreasonable so should be given consideration. Making the type font bigger would certainly help.

Altice tries desperately to restore investor confidence

Embattled telecoms group Altice has been forced to issue a statement addressing recent market speculation as its shares have continued to dive.

Companies are generally reluctant to respond to ‘rumours and speculation’, but if that speculation results in a self-reinforcing downward spiral for its she price then exceptions have to be made.

In this case there had been growing fears that heavily-indebted Altice might not have enough ready-cash to handle its financial obligations and may therefore have to flog some shares. Such a fire-sale would presumably have to be done at a discount, which seems to have been one of the reasons for the price drop. The company also moved to deny that Next Alt, founder Patrick Drahi’s company that is the largest Altice shareholder, is selling Altice shares.

Here are the issues the Altice announcement addressed:

  • Altice is not in preparation of a cash raising by means of an equity- or equity-linked issuance and has no intention to pursue such action
  • Next Alt S.à.r.l. (“Next”) does not have any margin loan exposure to Altice and has not sold any material number of shares since the IPO
  • Management has not taken any active decision to sell Altice shares
  • Altice plans to de-lever its balance sheet and does not have margin loan exposure within the group

It’s all very well trying to put current rumours to bed but they were themselves the product of a sequence of events that had already contributed to Altice shares losing more than half of their value in the latter half of this year alone. So the rest of the Altice announcement sought to clarify its current strategy.

In a nutshell it all comes down to paying down some of the €50 billion or so of debt it has accumulated in the acquisition of companies like SFR and Cablevision. Central to this, of course, is not adding to it, so Altice promises not to go on any shopping sprees anytime soon. Other than that it needs to sort out SFR, where most of the numbers seems to be going in the wrong direction, and flog some ‘non-core’ assets such as its tower portfolio.

Of course it’s never a good sign when a company has to whack out an emergency announcement saying everything’s cool, but investors do seem to have derived some reassurance from this one – pushing shares back up a bit. Other than that all Altice can do is start delivering on all the promises made when it started its M&A frenzy four years ago and, as a consequence, pay down some of that debt.

Here’s a vid from happier times, when Altice IPOed on Euronext.


Altice share plunge costs CEO Combes his job

The share price of French telecoms group Altice has been going down the toilet, resulting in the departure of CEO Michel Combes.

The value of the company has been in steady decline since the middle of this year, but fell off a cliff last week following its Q3 earnings announcement, which revealed higher than expected churn at French mobile operator SFR and warned that group earnings are expected to grow at the lower end of its guidance range. The current public value of the company is less than half what it was in early August 2017.

It looked like the scapegoating had been concluded early when the SFR Deputy CEO Michel Paulin decided to quit ‘for personal reasons’ on 11 September, with Combes clinging on. Not for long, it turned out, with the owner of Altice – Patrick Drahi – apparently deciding that if you want something done properly you have to do it yourself.

“Michel has been an important part of the Altice story when he first joined the Board of Altice,” said Drahi. “He provided key support and judgment as we developed our expansion strategy. As CEO, Michel critically created the group structure to operate a transatlantic communications business while driving key technology, research and innovation initiatives, which will serve Altice for the future. I would like to personally thank him for his contribution, integrity, loyalty and friendship.” You’ve got a funny way of showing it Patrick.

“I would like to thank Patrick and the team for their confidence over the past years,” said Combes, who presumably got a tidy pay-off. “It has been a privilege to be part of the Altice story, accompany the expansion of the group and lead the industrialization of the convergence strategy. With Patrick returning as President of the group, Altice will be well positioned to execute its strategy across all operations.”

Combes had only been at Altice since the middle of 2015, having moved on from Alcatel-Lucent when it was acquired by Nokia. Within a year of joining as COO he was promoted to CEO, presumably because he’d done such a great job. The CEO role will be filled once more by his predecessor Dexter Goei, who has been heading up Altice’s US efforts, but the big change is that Drahi himself is returning to day-to-day management, with SFR at the top of his to-do list.

It looks like Drahi has his hands full. Altice has gone big on content acquisition, especially in France, but with subscriber numbers heading in the wrong direction it’s hard to view that as a success. Furthermore the group is sitting on a ton of debt from its M&A frenzy of recent years, leaving it especially vulnerable to macroeconomic fluctuations. It’s going to take more than a slick corporate rebrand to sort all that out.