Now cable companies might have to calculate a different kind of churn rate as they churn through deals to buy and sell (but mostly buy) each other to gain strength through consolidations.
In the latest deal, Altice, a cable operator based in France, said it will buy 70% of privately held St. Louis-based Suddenlink for $9.1 billion.
The deal, which has been approved by both companies, is the first cable acquisition since Comcast dropped its proposed acquisition of Time Warner Cable in April in the face of opposition expressed by regulators.
Cable companies are under pressure from services such as Netflix, Amazon.com, and Hulu that bypass cable and transmit entertainment to households over the Internet. Even pay-TV stalwart HBO offers access to its shows through an Internet service. Another threat is Google, with its emerging Google Fiber high-speed Internet service.
In Suddenlink, Altice gets the seventh-biggest US cable company. Suddenlink reported 2014 revenue of $2.3 billion from serving 1.5 million cable-TV and high-speed Internet subscribers in Arizona, Arkansas, Louisiana, Texas, West Virginia, and 9 other states.
The company is a subsidiary of Cequel Communications Holdings, which is owned by BC Partners, the CPP Investment Board, and members of Suddenlink management. BC Partners and CPP Investment Board will retain a 30% stake in Suddenlink.
Altice is one of the largest telecom operators in France, with about 6.5 million fixed-line customers and 22.5 million mobile customers. Altice’s cable properties are operated by its Numericable-SFR division.
In accepting Altice’s offer, Suddenlink found a partner in the race to consolidate.
“While our strong performance has afforded Suddenlink ready access to growth capital, the backing of Altice will better position the company to gain critical scale as a major consolidator in the US cable industry,” Jerry Kent, Suddenlink chairman and CEO, said in a statement.
Judging from Altice’s record in Europe, Suddenlink might be an appetizer. Altice has bought several cable and telecom assets, including some owned by Vivendi and Portugal Telecom, to form Numericable-SFR.
Press reports indicate that Time Warner could be on Altice’s menu. The other cable deal on the table is the proposed acquisition by Charter Communications, the #3 cable company, of Bright House, the sixth-biggest cable company. And a Charter bid for Time Warner is a possibility.
Whatever is next, Altice expects to be involved.
“Everything below Comcast is in consolidation mode,” said Altice CEO Dexter Goei in a conference call, according to a Reuters report. “It augurs for an interesting next six to 18 months, and we clearly expect to be right in the middle of that.”