Altice bags €2.3bn Morgan Stanley cash in wholesale deal

Altice has struck a deal with US investment bank Morgan Stanley which will see its Portuguese unit create a nationwide wholesale business.

Under the terms of the agreement, Altice will create a nationwide fibre wholesaler in Portugal. While Altice has been quick to suggest innovation in the structural separation, even going as far as to claim a ‘first’ in Europe, the new position looks similar to what is currently in the UK between BT and Openreach.

As reward for the restructure, Morgan Stanley will pay Altice €1.565 billion in 2020, an additional €375 million in December 2021 and a final lump sum of €375 million in December 2026, subject to conditions and performance. Morgan Stanley will take a 49.99% stake in the wholesale business unit.

“I am very pleased that our partnership with Morgan Stanley Infrastructure Partners, initiated in the context of our Portuguese tower transaction in 2018, now continues with a transformational fibre project,” said Altice Group CEO Patrick Drahi.

“Following this transaction, Altice Europe has obtained cash proceeds in excess of €5.7 billion through the transformational SFR FTTH transaction and the various tower sales and partnerships announced in 2018. Altice’s portfolio of infrastructure assets continues to grow. On a 100% proforma basis, SFR FTTH and our towers in France in addition to our fibre and towers in Portugal, already represent more than €0.8 billion of revenues and more than €0.5 billion of EBITDA, effectively constituting one of the largest telecom infrastructure groups in Europe.”

While diluting influence and ownership over valuable assets might be a tough pill to swallow for Drahi, this is an acquisition-addict after all, it is perhaps necessary. The digital era is fast-approaching, and if Altice is to remain competitive, it will have to spend big on its network just like everyone else.

Telecommunications has always been an expensive business to manage, though today’s dynamic presents even more of a conundrum than previous years; telcos have both 5G and fibre demands to satisfy simultaneously. Individually, these are incredibly expensive upgrade jobs to manage, however running in conjunction will force some telcos to create new avenues to secure cash.

That said, the industry is looking attractive for long-term investors, especially for fixed line assets. This is a change in the winds over the last couple of years; the consumer appetite for fibre connectivity has been demonstrated, and the Wall Street money men want in on the action. CityFibre is another which has benefitted from this surge of enthusiasm from the investment bankers, though it would not be considered unusual for more connectivity wholesalers, or challenger alt-nets, to secure additional funding.