Altice shares tumble as analysts digest revenue warning
Lowered guidance for French business overshadows restructuring efforts
Shares in Altice NV, the acquisitive global telecoms group that is fighting to shore up investor support, dropped more than 7 per cent on Wednesday, as analysts focused on a revenue warning that overshadowed plans to break up the company.
The share price decline highlights the debt-laden company’s challenge in seeking to convince investors that it can move beyond cost-cutting and increase sales, particularly at its largest unit, SFR in France.
Analysts attributed the share price move to comments from Dennis Okhuijsen, Altice’s chief financial officer, who told an analysts’ call on Tuesday that the company’s fourth-quarter sales in France would come in worse than expected.
The guidance came as Altice sought to explain plans to spin off its US business, restructure its European operations and shift senior managers to roles focused on individual regions.
After extended questioning from Redburn analyst, Dimitri Kallianiotis, Mr Okhuijsen said Altice was now forecasting sales in its French business would fall 7 per cent for the fourth quarter of 2017.
Analysts following the company closely said consensus forecasts for the performance of SFR had been for a decline of between 2 to 4 per cent and that the new guidance flies in the face of the company’s defence of its French business, which is the country’s second-largest wireless operator.
The group’s revenue selling to businesses has declined sharply, they said, because of Altice’s larger financial problems.
“Business-to-business is a disaster. It is difficult for a chief investment officer to justify to its chief executive using SFR with the negative headlines of the past six months and constant reorganisation,” said Stephane Beyazian, an analyst with Raymond James.
However, the guidance for a 7 per cent decline could also suggest that SFR’s consumer business also performed weakly because of significant promotional activity to get the business growing again. “That’s a new round of downgrades in SFR estimates,” said Mr Beyazian.
Another analyst who declined to be named, said: “The [French] business is going backwards, but while they had everyone focused on [this week’s] restructuring, they snuck out a warning.”
Altice confirmed the guidance, but added that SFR’s business of selling to consumers was “starting to pay off”.
Doubts about the performance of SFR were the initial catalyst for the sell-off in Altice’s share price, which has nearly halved over the past three months.
In November, Altice was forced to reassure investors about its financial position following weaker than expected third-quarter results at SFR and concerns about the €51bn debt it had amassed during an acquisition spree across the US, France, Portugal and Israel.
Under the changes announced by Altice this week, Mr Okhuijsen is set to run the company’s European business.
Dexter Goei will focus on running Altice USA, relinquishing responsibilities he picked up when he stepped in to run the overall company after the departure of French executive Michel Combes in November.
Both Altice units will be controlled by its largest shareholder and founder, Patrick Drahi, who has become a billionaire and enriched his lieutenants on the back of the company’s growth.
News of the restructuring prompted shares in Altice NV to climb 10.5 per cent on Tuesday, but they finished 7.2 per cent lower on Wednesday to €9.68.
Shares in Altice USA fared better, falling just 1.2 per cent to $22.83 on Wednesday.