Altice Reportedly Mulling Divestiture Of Lightpath Fiber Arm
Zacks Investment Research | Mar 07, 2019 08:06PM ET
According to a Reuters’ article, Altice USA, Inc. (NYSE:ATUS) is reportedly considering the divestment the fiber unit of its Lightpath business to focus on core operations. The sale is likely to fetch the company dry powder in the vicinity of $3 billion according to persons familiar with the proceedings.
Altice has been rolling out enhanced data and services for its business customers. Altice Business, which was formed by clubbing its Lightpath, Optimum and Suddenlink business brands, offers the best-in-class data, voice, video and managed services to about 2 million customers. As part of this effort, Altice Business has standardized its product portfolio footprint-wide, providing customers access to services that meet their needs, regardless of size or region, and creating more value and choice.
However, management presently deems the fiber unit of Lightpath, which delivers business services via fiber to larger customers, a non-core asset and intends to either sell it entirely or divest a certain ownership stake in it. Incidentally, Altice Europe NV, a Netherlands-based multinational telecom firm and the parent of Altice, also sold a 49.99% stake in its fiber optic business in November 2018 to a group of investment firms for approximately $2.05 billion.
Some experts, however, remain skeptic about the proposed divesture, given its focus on building a FTTH (fiber-to-the-home) network and deployment of its new home communications hub. The company had opined that the FTTH network would be more resilient with reduced maintenance requirements, fewer service outages and lower power usage, leading to cost efficiencies. This network was expected to satisfy demand for increasing speeds and support evolving technologies, such as the transition of mobile networks to 5G, thereby enabling it to capitalize on associated revenue-growth opportunities. Additionally, the company has been building a next-generation fiber network capable of delivering broadband speeds of 10 Gbps. Consequently, the critics view the decision to sell a prized fiber asset while promoting fiber infrastructure elsewhere an imprudent one.
Nevertheless, we remain impressed with the inherent growth potential of this Zacks Rank #2 (Buy) stock. The stock has mirrored the performance of the Zacks Investment Research
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