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Less Uncertainty For SFR?

09 January 2018 by lberuti

A number of changes were announced last night in the Altice sphere. As a reminder, Altice NV – which is 44.9% owned by Patrick Drahi’s Next investment vehicle - is the top holding company, and owns stakes in the various Altice entities. Its 67.2% stake in Altice USA will be spun off, and simultaneously Altice USA will pay a $1.5Bln dividend, funded by debt issued by the US operating company. Altice NV will hence get a roughly €900mln windfall. Within Europe, Altice is forming Altice Pay TV, which will hold the content that the group has recently invested in or won rights to. This content will be transferred from Altice International. SFR will cancel its existing wholesale pay TV contracts for this content, and will become a customer of Altice Pay TV, with a new revenue sharing contract and “significantly” reduced minimum guarantee, in exchange for a €300mln break-up fee. This reads as positive for SFR as it suggests less downside regarding the upcoming Champions League content, and investors initially sent SFR’s 5-year risk premium 25bps tighter at 335bps. Altice’s also benefitted during the first exchanges, and its 5-year CDS was also 25bps tighter at 390bps. But as the day wore on, people effectively focused on the step back the whole move represents from ambitions to create a global group with scale efficiencies, and both credits closed the session slightly wider on the day. As you can see on the above grapple, the trajectories of SFR’s and Altice’s risk premia are still far from reintegrating the cohort of their Communications European peers they left two months and a half ago.