Ref: IMD-7-1861

Case study

Reference: IMD-7-1861

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Dialing for dollars: The Altice acquisition growth strategy

Stefan Michel

By Professor Stefan MichelStefan Michel, Ioana Mihut, Jon Bechert and Pavel Sanin

By 2014 Altice had made over 20 acquisitions in 8 countries followed by an IPO resulting in a market capitalization of €5.7B. By mid-2015, it was worth $35B, 369% higher than the IPO price.

It entered the US market with a successful bid for a major US cable operator, becoming the only European provider to take an aggressive position in the US market. It subsequently made an offer for Cablevision, but its stellar capitalization growth was interrupted by a 70% drop in share price, driven by investors’ concern about its ability to continue to execute its M&A playbook, especially with larger integrations in the US. Altice responded by increasing equity financing and playing down further M&As.

Another investors’ concern was customer attrition, experienced by Altice in some markets due to over-aggressive cost-cutting, resulting in poor network quality and customer care. In response, it increased CAPEX in France, Israel and Portugal but was it enough to stop attrition and increase revenues? Or should it exploit other options to drive incremental revenue, e.g. leveraging and expanding content creation capabilities or moving beyond voice and data into cloud computing, internet security, call centers etc.

Having started as a small regional operator, Altice became a significant global player and #4 in the US, proving that an M&A strategy can create value. It took average performing businesses and created greater value based on its strong telecom and M&A capabilities.

Now, Altice must decide how to stay ahead of the game and which resources and capabilities to develop. The case explores how Altice applies its M&A playbook and leverages its capabilities to compete and grow in a mature industry. Why do telecom operators sell to Altice and how can it offer more than other firms? The case also promotes discussion about the sustainability of Altice’s business model, future strategic moves and its reasons for entering the US market.

Learning Objective

  • The forces shaping the industry
  • Altice’s strategy using Strategy Diamond
  • Industry KSFs
  • Resources and capabilities a firm needs to compete
  • Type of synergies Altice pursues
  • Estimating future synergies
  • Pros and cons of ownership structure and leadership style and how they impact decision making?
  • Why the US market?
  • Sustainability of business model
  • What could go wrong?
  • Resources and capabilities to stay competitive long term
  • What could you apply to your company in your industry?
2002 – 2016
TypeField Research
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Reference: IMD-7-1861

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Reference: IMD-7-1861

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