By Ruth Bender And Shalini Ramachandran
Cable tycoon John Malone's plans to consolidate the fragmented
U.S. industry could run into competition from an unlikely player:
telecommunications group Altice SA.
The company controlled by French cable investor Patrick Drahi is
in advanced talks to acquire U.S. cable operator Suddenlink
Communications in a deal that would be valued at $8 billion to $10
billion including debt and could be announced as soon as this week,
according to a person familiar with the matter.
Separately, Altice is eyeing Time Warner Cable Inc., the No. 2
U.S. cable operator by subscribers, people familiar with the
situation said. Altice has made initial contact with TWC.
Combined, the moves show the deal-hungry European company's
appetite for a major cross-border expansion. And they add another
dimension to the complex drama playing out in the U.S. cable
industry, bringing a new player into the race to consolidate the
sector.
Mr. Malone has been a vocal proponent of consolidation and has
pursued those ambitions through his investment in Charter
Communications Inc., the fourth-largest operator. Charter is
seeking a deal with Time Warner Cable, whose $45.2 billion merger
with Comcast Corp. fell apart last month, and also is in talks with
closely-held Bright House Networks.
Altice is a Luxembourg-based cable-and-telecom company with a
market value of EUR28.7 billion ($32 billion).
By buying St. Louis-based Suddenlink, Altice would get access to
about 1.5 million customers in more than a dozen states from Texas
to West Virginia. Suddenlink is the seventh-largest U.S. cable
operator by video customers and had revenue of $2.3 billion last
year. Suddenlink Chief Executive Jerry Kent, a cable-industry
veteran, founded the company early in the last decade and built it
up by purchasing cable systems from rivals including Cox
Communications Inc. and Charter.
Suddenlink is majority-owned by private-equity firm BC Partners
and a Canadian pension fund, who bought it in 2012 in a deal valued
at $6.6 billion, including debt.
There is no guarantee the Suddenlink talks won't fall apart
before a deal is reached. No deal with TWC is imminent and any
transaction would only happen after a deal with Suddenlink, one of
the people familiar with the situation said.
Time Warner Cable, with a $44.5 billion market capitalization,
would be a much bigger deal for Altice to digest. The company
operates in big city markets including New York and Los Angeles and
has nearly 11 million residential cable TV customers. It attracted
interest from Charter soon after Comcast terminated its deal with
TWC in the face of stiff regulatory resistance.
Mr. Drahi, 51 years old, has made a fortune by investing in
underperforming cable companies. Buying into the U.S. would
catapult Altice, which now owns communications companies from
France to the Caribbean, into one of the world's largest cable and
broadband markets. Mr. Drahi has been betting that the future of
the telecom industry lies in combining cable and broadband
operators with mobile companies to offer clients higher-priced
bundles combining television, broadband, fixed telephony and mobile
services.
Entering the U.S. would make Mr. Drahi a direct competitor to
Mr. Malone, whose career has served as a model in Mr. Drahi's
expansion over the past decades.
A foreign player acquiring U.S. cable companies would require
approval from the Committee on Foreign Investment in the U.S. Such
a deal would also require approval from the Federal Communications
Commission and could be subject to antitrust review from the
Justice Department.
Mr. Drahi is the second French telecom billionaire to attempt to
venture into the U.S. in less than a year. Last summer, rival
Xavier Niel with his low-cost operator Iliad SA made a bid to buy
U.S. carrier T-Mobile U.S., but his offer was rebuffed.
Altice has been searching for assets to buy in the U.S. for some
time and has looked at several potential targets, other people
familiar with the matter said.
Mr. Drahi over the past year has emerged as one of the most
aggressive deal-makers in a fragmented European telecom market.
In April last year, Altice won a hard-fought takeover battle to
buy French cellphone carrier SFR in a $23 billion deal. Only a few
months later, the company agreed to buy former Portuguese telecom
monopoly PT Portugal for around $9 billion.
Write to Ruth Bender at Ruth.Bender@wsj.com and Shalini
Ramachandran at shalini.ramachandran@wsj.com
Access Investor Kit for Charter Communications, Inc.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US16117M3051
Access Investor Kit for Comcast Corp.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US20030N1019
Access Investor Kit for Comcast Corp.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US20030N2009
Access Investor Kit for Time Warner Cable, Inc.
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=US88732J2078
Subscribe to WSJ: http://online.wsj.com?mod=djnwires