Altice strategy update: USA spin-off, Europe disposals, both deleveraging

Update

• To spin-off Altice USA (incl Altice Technical Services US; 67.2%; excl Netune stake) by end 18Q2; 0.4163 Altice USA shares (A (1 vote) or B (25 votes)) for 1 Altice share, CEO Dexter Goei. Altice USA free float from 10.3 to max 42.4% (voting from 0.6 to 47.2%), Next to hold 51.2% of votes.
• Altice Europe to reorg into France (incl FOT; bought from Int for EUR 550m o/w 300m cash), International (Meo, HOT, DomRep, Teads), Pay TV (content, sports rights, other premium content: Discovery, NBCU), Dennis Okhuijsen CEO
• Separate mgt teams, Patrick Drahi control of both (President Europe, Chairman USA) via Next.
• Altice USA plans $1.5b cash dividend prior to spin-off from Optimum facilities o/w EUR 900m for Altice Europe (o/w 625m for debt, to retain 275m).
• Altice USA plans $2b SBB after spin-off.
• Altice Europe strategy: turnaround in FR, PT; optimising performance, invest in infra, monetising content (various pay TV models & ads); non-core asset disposals (towers; DomRep; Switzerland; int wholesale voice to be sold).
• Altice France 17Q4prel: revenue declines in B2B, wholesale, equipment, FY 2017 rev -2%, target opFCF 2018 EUR 1.6-1.7b (incl 300m pay TV content expenses & 200m drag from French VAT changes); Altice Europe net debt pro forma at 170930 EUR 31.0b (5.4x EBITDA TTM), targets 4x leverage.
• Altice USA strategy: investments in networks & video product, simplification, improved customer service, improve rev growth, complete opex synergies, Altice One (platform), FTTH & MVNO (on Sprint) completion.
• Altice USA 17Q3 pro forma incl planned div: net debt $22.7b, leverage 5.8x EBITDA TTM, target leverage 4.5-5.0x (reduced from 5.0-5.5).