Altice USA looks to offload Suddenlink

Altice USA shares spiked Thursday on a Bloomberg report that the cable operator is considering a sale of telco Suddenlink for as much as $20 billion.

Why it matters: That $20 billion is an important number because that's roughly the size of Altice's debt load. The cable operator had been on an acquisition spree during the back half of the 2010s, during the peak days of the pay-TV bundle.

• Altice bought Suddenlink for $9.1 billion in 2015, which was a precursor to its $17.7 billion Cablevision deal a year later.

By the numbers: Shares of Altice closed up 22% Thursday at $11.23 a share and at one point were up as much as 43.5%, which would have regained pretty much all of its stock losses since the start of the year.

• Shares continued to trend upward slightly on Friday.

The big picture: Like most cable and satellite providers, Altice has faced declining subscriber numbers and competition from Verizon, particularly for its Optimum brand that operates primarily in the New York metro area.

• Suddenlink, on the other hand, operates along 17 states in the Southern, Midwest and Western regions and doesn't have a ton of competition from a national brand like Verizon, though it is mostly in more rural areas.
• Altice had previously announced it was merging its Suddenlink brand with Optimum.

Altice USA CEO Dexter Goei hinted the company was looking at a Suddenlink sale back in May, telling investors during the MoffettNathanson Media & Communications Summit: "Strategically, it's not a footprint that makes you sit there and say 'Wow, that's the most strategic footprint out there.'"

• "So are we sellers or restructurers of certain of our assets in other areas outside of Cablevision? We're always open to listening to people out there if it makes sense for us to trade, swap, sell certain assets."

What they're saying: "Even cable bears would likely concede that Altice USA is trading below its intrinsic value. What is surprising, at least to us, is that they are considering a breakup and sale while they are still a public company," MoffettNathanson analyst Craig Moffett said in an email to clients on Thursday. "We believe there would be significant interest from both private equity and strategic buyers."