The Comcast-Time Warner Cable merger may be dead but cable M&A is alive and well -- and now featuring some international flair. Cable stocks jumped Wednesday in an otherwise lackluster tape after Luxembourg-based Altice (ATC.AS) announced plans to acquire a controlling stake in Suddenlink Communications from its private equity owners for $9.1 billion.
The deal is relatively small and with 1.5 million subscribers, St. Louis-based Suddenlink is only the seventh-largest cable operator in the U.S. But the Suddenlink deal is widely viewed as a beachhead for Altice and founder Patrick Drahi's plans to tap the American cable industry.
The Moroccan-born, French-bred Drahi is viewed as the John Malone of Europe, having built an empire largely via debt-financed acquisitions. In just the past year, Altice spent $35 billion on France's SFR and Portugal Telecom, according to Breaking Views. The company also has cable and telecom operations in Belgium, Switzerland, Israel and the Dominican Republic. The allusions to Malone are no accident as Drahi once worked for the American cable billionaire.
After the Suddenlink deal, about 12% of Altice's portfolio would be based in America and "the goal is to be fifty-fifty," Altice CEO Dexter Goei said on a conference call with analysts Wednesday. "This is a very attractive market for us that'll be consolidating for many years to come."
Goei noted Europe is about two times ahead of the U.S. in terms of broadband penetration, viewing that as an opportunity for the industry moving forward. "The churn numbers across U.S. cable are significant" relative to European counterparts, he said. "That, in our mind, has a lot to do with processes and customer care on the way to approach the retention of subscribers who tend to disconnect and reconnect, which is a very expensive proposition for an operator. And we think we can operate that and do a lot better."
Getting to 50-50 would require Altice buying much bigger fish than Suddenlink and, sure enough, various news outlets report the firm is interested in acquiring Time Warner Cable (TWC). If true, that could put Drahi on a collision course with his former mentor. Malone's Liberty Broadband (LBRDA) is the biggest shareholder of Charter Communications (CHTR) and the two firms tried to acquire Time Warner Cable last year. Meanwhile, Charter is moving ahead with plans to acquire Bright House Networks, the nation's sixth-largest cable company. Just to keep things really interesting (or is it confusing?) Malone's other company, Liberty Global (LBTYA) is rumored to be in merger talks with Britain's Vodafone (VOD).
"If you listen to the conference call today, it's pretty clear [Altice] didn't want to stop with this first acquisition; they want to buy more," said Walt Piecyk, a tech and telecom analyst at BTIG. "They've executed quite well in Europe -- buying companies and finding synergies. They've been doing this in Europe for a while...and the U.S. market offers robust monthly payments."
Amid all this dealmaking and deal-rumoring, Time Warner Cable shares rose 5% Wednesday while Cablevision (CVC), another potential target, soared 18%.
Aaron Task is Editor-at-Large of Yahoo Finance. You can follow him on Twitter at @aarontask or email him at email@example.com.