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Perhaps the dominant theme of 2015, for the telecoms sector, has been the race to the quad play. French broadband operators Iliad and Altice have established themselves as disruptive fixed/mobile players at home, and are looking to repeat that elsewhere. Iliad failed in talks to buy T-Mobile USA, but its rival is having better luck, and has agreed to buy its second US cableco, Cablevision, for $17.7bn.
Altice has already acquired the smaller cable operator Suddenlink, signalling its interest in taking part in the ongoing consolidation of US telcos and cablecos. It backed away from talks with Time Warner Cable, subsequently snapped up by Charter Communications (after a proposd merger with Comcast fell through earlier this year).
Now it plans to pay $34.90 a share for the most disruptive and WiFi-driven of the US MSOs, and Cablevision. Unlike Comcast and others, which repeatedly flirt with acquiring their own cellular spectrum or network partners, Cablevision has remained steadfastly focused on using WiFi to underpin its wireless services. It was the most aggressive MSO in building out hotspots for its subscribers; and recently it announced a WiFi-only smartphone-based service called FreeWheel.
This has clear echoes of strategies which Altice has seen working well in France, where Iliad’s Free Mobile unit has harnessed its hotspots and homespots to achieve wide WiFi coverage. WiFi offload and WiFi-first services have reduced the strain on its cellular networks, thus enabling it to lower its cost of delivery and undercut its rivals’ mobile tariffs, sparking a price war and subsequent consolidation. Altice was the beneficiary of that, buying up the second French MNO, SFR, to add to its Numericable unit. The two are now working on WiFi/cellular offerings to rival Free’s.
The same process of WiFi-driven disruption, wireless price wars and consequent consolidation is affecting the US, where smaller MNOs have been rapidly disappearing and the cablecos are now engaged in a series of mergers to achieve the scale to compete with Comcast, Verizon and AT&T in the multiplay arena.
Altice expects to finalize its Cablevision deal in the first half of next year and will finance it with a $14.5bn share issue, $3.3bn in cash and cash on hand in Cablevision.
In a recent interview with the Wall Street Journal, Altice CEO Patrick Drahi said that his vision was to take quad play bundles to the US, where the market is far less developed than in France and some other European countries.