November 25, 2019 / 7:18 AM / 20 days ago

Altice Europe to buy telecoms fibre company Covage for $1.1 billion

FILE PHOTO: Patrick Drahi, Franco-Israeli businessman and founder of cable and mobile telecoms company Altice Group attends the inauguration of the Altice Campus in Paris, France, October 9, 2018. REUTERS/Philippe Wojazer/File Photo

PARIS (Reuters) - Debt-ridden telecoms and cable company Altice Europe (ATCA.AS) said it would acquire French fibre wholesale operator Covage for about 1 billion euros ($1.1 billion), expanding the range of its fibre network business.

Telecoms infrastructure has been a focus for takeover activity this year as countries invest in new networks. In one of the latest deals, private equity firm KKR (KKR.N) bought Britain’s fibre telecoms firm Hyperoptic in October.

Altice Europe said its deal, expected to close in the first half of 2020, would result in Altice’s SFR FTTH unit and Covage deploying fibre networks over the next three to four years, as France sets up new 5G telecoms networks.

The acquisition will be financed with 70 million euros worth of non-recourse debt, 465 million euros of cash equity to be contributed by Altice and 465 million euros of cash equity to be contributed by SFR FTTH’s financial investors.

Altice Europe has been cutting down its large debt burden, and company founder Patrick Drahi said this process was still underway. Altice Europe shares were flat in early trading.

“We are in advanced discussions with several parties in relation to our Portuguese fibre asset. This process is supported by the significant appetite for fibre in Europe, clearly demonstrated by the present transaction which has been strongly supported by our financial partners in SFR FTTH,” Drahi said.

MB Capital director Marcus Bullus said that, while the Covage takeover looked positive, it was unlikely to give much of a lift to the Altice stock price, which has already surged more than 200% in 2019 as a result of lower debts and better results.

“Altice is not a stock we like, and although we view this as a positive move for the company to be proactive and make this purchase, overall we don’t see this as a catalyst to create any movement for shareholders short to medium term,” said Bullus.

Roche Brune Asset Management fund manager Gregoire Laverne echoed those views, saying Altice Europe’s debts remained a cause for concern. Altice Europe had net debts of around 30.6 billion euros at the end of the third quarter.

Reporting by Sudip Kar-Gupta; Editing Sherry Jacob-Phillips and Edmund Blair

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