Another day, another cable deal in California

by Steve Blum • , , , ,

Altice, a European cable company with roots in France and headquarters in business-friendly Luxembourg, is buying 70% of Suddenlink for $9.1 billion. The announcement follows news that Charter is still intent on acquiring Bright House Networks.

Both Charter and Altice are considered possible candidates to buy Time-Warner, which would be a much bigger play than either Suddenlink or Bright House. Comments released by Suddenlink’s CEO, Jerry Kent, made it pretty clear this latest agreement is just the beginning

While our strong performance has afforded Suddenlink ready access to growth capital, the backing of Altice will better position the company to gain critical scale as a major consolidator in the U.S. cable industry.

A New York Times article points to Altice’s reputation as a cost-cutter, and speculates that the prospect of a foreign owner taking over a big U.S. cable company and the potential for a cut back in either service levels or system upgrades will be issues for federal regulators as they review the deal.

The California Public Utilities Commission will almost certainly have to approve the deal, too. Although it’s delayed voting on a formal rejection of the Comcast-Time Warner-Charter mega merger, and thereby setting a precedent for using broadband service as a criterion for evaluating these sorts of transactions, the CPUC is likely to consider the Suddenlink deal’s impact on the Californian Internet access market.

Suddenlink has 1.4 million subscribers in 17 states, and claims to be the 7th largest cable operator in the U.S. In California (which it refers to as “elsewhere” on its website), it owns several, relatively small systems: along the eastern Sierra, the I-80 corridor, Humboldt County, Monterey County and near the Arizona border. Bandwidth is limited on some of those systems, partly because of old technology and partly because of limited backhaul capacity. The company has a good track record of increasing service levels as more capacity becomes available.