European operator Altice's foray into US adds to consolidation wave, but what does it mean?

Industries Associated Press

European telecoms operator Altice has made a deal to buy Cablevision, a New York based-cable company, marking its second foray into the U.S. market, following its announcement in May that it was buying St. Louis-based Suddenlink. It's one more tie-up in a wave of consolidation that is sweeping the U.S., which in recent months has seen Charter agree to merge with Time Warner Cable and AT&T buying DirecTV.

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Here's a quick look at what's behind the trend and what it means for consumers.

Q: WHY ARE THESE DEALS HAPPENING?

A: Online video providers like Netflix and Hulu are taking a toll on traditional satellite and cable TV providers, capping their growth and leading some customers to cut or shave their pay TV plans, even while programming costs are rising. So cable and satellite companies are teaming up to trim costs, re-invest in their profitable broadband Internet networks, and create new bundles such as ones that marry mobile phone service to your home Internet connection and video service.

Q: WHAT IS ALTICE'S PLAN?

A: By joining Cablevision's 2.6 million video customers with Suddenlink's 1.1 million, Altice is creating the 4th largest video provider in the U.S., behind Cox with 3.9 million. It plans to save some $1.05 billion in annual costs over the next 3-5 years in part through bulk purchases of set-top boxes and modems, by eliminating overlapping corporate functions, and improving and simplifying its network.

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Q: HOW COULD CABLEVISION CUSTOMERS BE AFFECTED?

A: In several ways: a simpler cable bill, a better Internet network, and possibly fewer channels. Altice CEO Dexter Goei said on a conference call Thursday that the vast majority of customer service calls have to do with billing questions, and he aims to cut those calls by simplifying billing. Investing in modernizing the network will also reduce breakdowns and expensive maintenance, he said. While he didn't address programming, Suddenlink's decision to drop Viacom channels like Comedy Central, MTV and Nickelodeon last October suggests Altice will be a tough negotiator with channel operators who are seeking fee increases, especially given its bigger customer base.

Q: WILL IT SPIN OFF CABLEVISION'S MEDIA BUSINESSES LIKE THE NEWSDAY NEWSPAPER AND NEWS12 TV CHANNEL?

A: No. Although the two businesses lose a combined $60 million per year, Goei said they are deeply embedded in the local community and plans to keep them, while perhaps running them more efficiently over time.

Q: WILL THERE BE FURTHER CONSOLIDATION?

A: Yes. Goei said the company looks to continue to expand in the U.S. Even if big players like Charter and Time Warner Cable are spoken for, there are several smaller cable operators it could possibly make a play for, including Cox, Mediacom, Wow! and Cable One.