Patrick Drahi will not put their hands on Time Warner Cable, the cable number two in the US. Charter Communications, the US leader, blew his case on May 26 You can not win every time. A week earlier, the boss of Altice has taken everyone by looping short redemption of 70% of cable operator Suddenlink seventh player in the US market, for $ 9.1 billion.
The discussions had been initiated a year ago. Even as Xavier Niel of Iliad mobilized the teams on the redemption T-Mobile, the fourth US mobile operator. He also sees far and wide. The offer to $ 15 billion had been retoquée by the shareholder Deutsche Telekom, but the creator of Free could console themselves with Monaco Telecom and Orange Switzerland, which he took control via its holding NJJ Capital. Nothing now seems to curb the two French entrepreneurs of telecommunications: the world is their playground But their strategies differ radically
The industrial strategy:.. The cable king and the apostle of mobile
With Suddenlink, President of Altice – parent-Numericable SFR – returns to his first love: the cable. In all countries where it has invested – France, Belgium, Israel and Portugal – this X-Telecom has always been a first step by buying fixed telecommunications networks, and especially in the cable industry, which he considers a future technology and where the companies are undervalued. Secondly, it takes a position in the mobile and built convergent offers. In the United States, Patrick Drahi wants to participate in the consolidation of a highly fragmented and very dynamic cable market, with growth Annual almost 7%, while Numericable penalty, merely growth 1-2% in France, a market ultradominé by ADSL technology, driven by Free.
Xavier Niel, meanwhile, has never believed to cable opportunities in France. He judges the outdated infrastructure, mainly due to lack of investment of French operators over time. “The founder of Iliad does not prohibit reviewing cases elsewhere in the sector, particularly in Northern Europe,” a connoisseur of such records. But it is first on the mobile he now bases its acquisition strategy. This has happened in the United States, Israel and Switzerland. The businessman seeks above all to growth to fuel its business, whose cost structure is extremely tight. Cutting costs is a sport practiced assiduously by both men. With some variations
Cutting costs. Consolidator cost killer and sober Developer
At their American campaign failed, the Iliad teams had highlighted the synergies that ‘they might engage in restructuring T-Mobile. At the heart of this reorganization, the information system, which is a huge cost to the operators. This platform, which both manages the network traffic as customer billing, is itself the result of a unique organization deployed by Xavier Niel, which allows the group to function in daily life frugally.
But beyond technology choices, the executive committee of eight members has not changed since a decade, teams and wages are tightened, the performance is rewarded, research and development are internal … A sobriety that is bearing fruit in the latest rankings published by powerful bosses Challenges, profitability (on capital employed) of Iliad is approaching 19% a year, when barely exceeds that of sector 8%
Meanwhile, Patrick Drahi demonstrated its cost killer talent. His empire, he built it by acquiring existing operations and in bad shape. By consolidating the cable sector in France, he had the opportunity to try their hand on a myriad of variable-sized companies since 1999. The businessman has a reputation for buying at the right time and the right price and to restructure without qualms. Hunt for big salaries, hunting consultants, extreme pressure on suppliers … All means are good to reduce cost structures. Xavier Niel Patrick Drahi or these slimming cures, however, not have the same purpose
The financial capacity. Priority to the repayment of debt or lower prices
A Altice, hunting costs helps accelerate the repayment of debt that Patrick Drahi remains at peak levels. The US operation door Altice net debt to 33.4 billion euros, or 5.5 times its EBITDA, according to a note to RBS analysts. For comparison, Charter Communications, the group of John Malone, the American cable king Patrick Drahi describes as his mentor, has a ratio of 5. A situation that does not seem to worry the markets: in one year, the valuation of ‘Altice was up 160% to some 32 billion euros. For investors, Patrick Drahi has the wind in the back with historically low interest rates, and a method that allows it to generate maximum cash acquisitions.
This efficiency is readable in First quarter results 2015 Numericable-SFR, in which it is estimated at 200 million the savings made. At this rate, they already exceed 150 million financial expenses provided quarterly to the repayment of the SFR acquisition debt. No wonder that the group provides for 2015 an EBITDA up 20% to 2 billion, when analysts expected 1.3 billion. So much so, says Anthony Carvalho, Fourpoints analyst for the investment fund, “their record is not enough in debt. They have the space to pursue their ambitions in Europe.” Or fund new US acquisitions.
Iliad uses the cash generated to maintain the lowest possible price and gain market share. The group is not allergic to debt and had demonstrated in 2008, managing to complete the financing of the repurchase Alice week after bankruptcy Lehman Brothers. And yet the United States last summer: the operation T-Mobile demonstrated the group’s ability to quickly raise $ 15 billion in an acquisition. And mobilize his troops
The reconciled guards. Task force and very French international commando
During his American campaign, Xavier Niel has demonstrated the effectiveness of its task force . At the heart of the device, the secretive Rani Assaf Floor on the network and computer systems. At the operational, it can rely on its general manager, Maxime Lombardini: it is he who turns the house Free overnight. To work with the banks, it is based on Thomas Reynaud, its paying agent, now deputy director general at the head of a team of five young wolves. There finally Boukobza Michael, who lives in Tel Aviv, but was requisitioned by Xavier Niel when to restructure.
To support it in its offensive in the United States, Patrick Drahi can rely its very international commando team, led by Dexter Goei, Franco-American, 43, the CEO of Altice. This virtuoso of finance is helped by a CFO weight: Dutchman Dennis Okhuijsen, 45, former treasurer of John Malone
The small staff also includes Jeremie Bonnin, 40, most loyal. General Secretary of Altice and two latest recruits: German Burkhard Koep, a former Morgan Stanley joined the team there less than a year to support the whole part mergers and acquisitions. And Alexander Brand, Patrick Drahi legal advice, founder of Franklin Paris office, who participated in fifteen Altice operations.
Used to work together, men Drahi the commando took the habit “to list all the best practices of each operation,” said a familiar of the businessman: document format methods discussion through the negotiations, everything is stored and reused in the following deals.
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