Owning Suddenlink Likely Won't Affect Altice Bid for Cablevision, Experts Say
Altice's proposed takeover of Cablevision might not face much more difficulties before the FCC than its recently approved purchase of Suddenlink, merger experts told us. FCC approval "is never a sure thing," but the Cablevision acquisition is less problematic for the commissioners than a number of other mergers have been, Andrew Schwartzman, who's representing Zoom Telephonics, an interested party in the proceedings, told us.
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The Suddenlink deal saw little opposition because it was Altice's first purchase in the U.S. and there were no competitive or other claims made that the deal would cause harm to the public, one communications lawyer with cable and merger experience told us. Suddenlink's takeover was approved last week with no major conditions (see 1512180035). The Cablevision deal is different because it affects a major media market -- the New York City metro area -- and it has upset a major union, the Communication Workers of America (CWA), the lawyer said. But even with Suddenlink and Cablevision under its belt, Altice still wouldn't be a major competitive threat in terms of concentration, and it would end Cablevision's vertical integration issues, which would be a major public benefit, the lawyer said. Meanwhile, the alleged harms brought up in objections, such as potential job losses and worse service quality, are generally not FCC regulatory issues, the lawyer said.
Altice's owning Suddenlink likely doesn't affect how the FCC will view the Cablevision deal because all the filings and arguments in the Cablevision proceeding already have built in the assumption that Suddenlink was going to be approved, including Altice's public interest statement, Schwartzman said. In the response filing, Altice pointed to the FCC's approval of Suddenlink, which the agency said would likely lead to better broadband service and investment, when it said, "Altice expects to bring these same benefits to Cablevision’s subscriber base" by buying Cablevision.
The Altice/Cablevision deal likely faces a bigger regulatory problem from New York City than from the FCC, said Gary Lutzker at BakerHostetler, pointing to the city's Department of Information Technology and Telecommunications' letter last month to the state's Public Service Commission that it has "a number of important concerns about the transaction.
In a statement Wednesday, Altice said it "look[s] forward to a fair and open regulatory process with the relevant authorities in connection with our proposed Cablevision transaction, and as in all of our other territories we expect to deliver significant benefits to consumers and their communities in the Tri-state area."
None of the parties that raised questions or objections to Altice's planned takeover of Cablevision "credibly disputed the demonstrable public interest benefits" of the proposed $17.7 billion deal, the two companies said in joint reply comments posted Wednesday. The replies were in response to comments that were due Tuesday and saw a variety of parties propose various conditions (see 1512090034).
Red flags raised by CWA and MFR Consulting "reflect a fundamental misunderstanding of financial markets, Altice's business plan for Cablevision, and Altice's track record of investment in its service provider affiliates," Altice and Cablevision said. The incremental interest expense at Cablevision due to the takeover will be $550 million annually, about $100 million less than CWA alleged, and Cablevision's existing debt will be refinanced, the two said. Meanwhile, most of the $900 million in Cablevision cost savings over three to five years "will have nothing to do with areas that bear directly on the customer experience," and instead would focus on overhead, procurement, and general and administrative expenses, they said. And Altice has followed this business model in other areas outside the U.S. "without triggering the parade of horribles" predicted, it and Cablevision said.
Meanwhile, objections by and proposed conditions from Cogent Communications and Zoom Telephonics indicate "a desire to transform this transaction review into a mechanism for advancing broader business and policy objectives," and their comments shouldn't be taken into account, Altice and Cablevision said. Cogent's interconnection-related conditions would be better suited to a rulemaking proceeding, not a merger review, Altice/Cablevision said.