As it attempts to obtain regulatory approval for its pending purchases of Cablevision (NYSE: CVC) and Suddenlink Communications in the United States, analysts are concerned that France's Altice's cost-cutting plans for the two companies may be too aggressive.
The European conglomerate has pledged to cut out $900 million in expenses from Cablevision and another $215 million from Suddenlink, pledging to increase the companies' margins to European levels.
"One of the dangers is that they don't just cut the fat out but also the meat and bones and that has negative consequences," said Roger Entner, analyst at Recon Analytics, to Reuters. "That's part of what we see in Europe: the savings came first immediately and now the churn (or customer defection) goes up."
Indeed, MoffettNathanson analyst Craig Moffett told Reuters that Altice might be planning to cut too much. "You're talking about huge cuts to customer service levels to installation and maintenance costs to marketing and promotions," he said. "You can't expect to be able to make dramatic cuts... without having an impact on the business."
Altice's troubles in Europe are fanning these concerns. The company's shares in Europe tumbled 10 percent last week on worse-than-expected third-quarter earnings results. Specifically, investors are concerned that Altice's Numericable Sfr PA has been losing wireless customers as Altice tries to cut costs at the French telecom unit.
Altice executives, meanwhile, attribute the subscriber losses to what they say is a poor-network-quality situation that has existed since before Altice bought the company.
Altice's shares are down 40 percent since the company agreed to pay $9.1 billion in May to acquire a controlling interest in Suddenlink.
U.S. analysts are concerned that such price cutting will result in the same kind of dynamic being seen at Numericable.
- read this Reuters story
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