November 10, 2017 / 12:44 PM / 14 days ago

Altice ousts CEO after shares dropped 30 percent in a week

LONDON/PARIS (Reuters) - Altice NV has ousted Chief Executive Michel Combes and brought back founder Patrick Drahi as president as the telecoms group seeks to reassure investors after its shares dropped around 30 percent in a week.

Michel Combes, Chief Executive Officer of Altice Group, attends a news conference in Paris, France, March 21, 2017. REUTERS/Philippe Wojazer/File Photo

Combes, 55, was brought in two years ago to put Altice’s ailing French mobile operator SFR back on track.

But the performance of France’s second largest carrier has hardly improved, squeezed between market leader Orange’s higher quality services and Iliad’s cheaper offer.

Shares in Altice have plunged about a third in value since the Amsterdam-based company said last week it lost around 75,000 broadband customers in France in the third quarter and its debt had reached 49.6 billion euros ($58 billion).

A company insider told Reuters Combes had struggled to find his place alongside Drahi’s inner circle, which includes Altice USA boss Dexter Goei, SFR director Armando Pereira and General Secretary Jeremie Bonnin.

“Michel was not part of the inner circle, which became a problem because Altice is almost run like a family business, around a close clan of trusted allies,” said the person, who declined to be named due to the sensitivity of the matter.

Combes and Drahi have very different public profiles. Part of the French establishment, having graduated from the elite Ecole Polytechnique, Combes was close to France’s previous Socialist government, while Franco-Israeli tycoon Drahi has come under fire for not paying more tax in the country and President Emmanuel Macron has publicly criticised Altice’s high debts.

Altice said Drahi would return as president after stepping down from that role in 2016, while Goei was named as CEO and will also continue as CEO and chairman of Altice USA.

Drahi is widely respected in the industry and is Altice’s largest shareholder with a 31.1 percent stake, according to Thomson Reuters data. Goei is the 10th-largest shareholder with a 0.75 percent stake.

“The organisation changes are meant to align public shareholders’ interests with the ones of the group’s managers, and seek to restore investors’ confidence, but we are not convinced it will be the case,” Bryan Garnier analysts said in a note to clients.

“The concentration of the new governance around historical Altice executives might indicate the group is having difficulties attracting and retaining top executives from the industry.”

At 1200 GMT, Altice shares were down 4.4 percent at 10.175 euros.

‘CART BEFORE THE HORSES’

Under Combes, Altice embarked in a media spending spree, bidding for expensive sports rights and acquiring digital companies. However, bankers and analysts said the poor quality of its network was regarded as the main issue to be solved by customers and investors.

“There is a general feeling that he put the cart before the horses”, said a banker close to Altice.

Another Altice insider said Combes’ announcement in July of an ambitious fibre roll-out project to connect the whole of France was another reason that prompted Drahi to replace him.

Altice’s poor performance in Europe has led investors to question its strategy and fuelled concerns the highly leveraged company will not be able to maintain its debt level in an environment of rising interest rates.

Altice says 85 percent of its debt has fixed interest rates and the group has refinanced 36 billion euros of debt over the past 18 months, extending maturities. As a result, only 44 percent of its debt matures before 2023.

“The U.S. has been doing well, better than expected, and the European operations have generally been sort of bouncing along the bottom,” said Pivotal Research Group analyst Jeff Wlodarczak. “Change had to be made.”

Combes was appointed chief operating officer of Altice in 2015, after leaving as head of telecoms equipment maker Alcatel-Lucent ahead of its takeover by Finland’s Nokia. He became Altice’s CEO the following year when Goei stepped down from the role to take the reins at Altice USA.

In other changes, Dennis Okhuijsen was named Altice Europe chief executive in addition to serving as chief financial officer of Altice NV, and Alain Weill, CEO of the company’s SFR Media unit, was appointed SFR Group chairman and CEO as well as Altice Media chief operating officer.

($1 = 0.8585 euros)

Reporting by Alan Charlish; Editing by Leslie Adler and Mark Potter

Our Standards:The Thomson Reuters Trust Principles.
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