Altice/Cablevision Not Seen Raising Major Regulatory Red Flags, Experts Say

Altice's $17.7 billion takeover of Cablevision announced Thursday is expected to close in the first half of 2016. "The time is right for new ownership of Cablevision and its considerable assets," Cablevision CEO James Dolan said in a statement. Meanwhile, Altice still is awaiting Wireline Bureau approval for its $9.1 billion takeover of Suddenlink (see 1509140011). The addition of Cablevision to the mix likely won't "be a tipping point for U.S. regulators, given that if approved Altice will line up as the fourth largest cable company," Adonis Hoffman, adjunct faculty member at Georgetown University and former chief of staff to FCC Commissioner Mignon Clyburn, told us in an email. "That means there is still ample competition in the marketplace."

The Cablevision takeover is "a done deal, as shareholder approval has been received and we don't foresee any major regulatory hurdles," Wells Fargo analyst Marci Ryvicker said in a note. Jeffrey Wlodarczak, principal at Pivotal Research, also said his firm didn't foresee regulatory issues.

Not buying Cablevision-affiliated networks like AMC "removes a whole chunk of competitive harm arguments," Esbin told us. Questions likely will be asked whether Cablevision has any agreements with distributors that make it harder for online video distributors to make deals with those same programming distributors, but even a combined Altice/Cablevision wouldn't have much leverage to exact particularly significant distributor concessions, she said.

Combined, Cablevision and Altice would be the fourth-largest cable operator in the U.S., Altice said. Cablevision has 3.1 million customers, primarily in the New York City metropolitan region, and the New York Public Service Commission will be heavily involved and likely impose some conditions, said James Horwood, legal counsel for the public interest group Alliance for Community Media. The post-merger Altice still would be greatly overshadowed by Comcast and post-merger Charter, so size likely won't be a major regulatory issue, said Lee Charles of Baker Botts, who has represented a number of media companies in mergers and acquisitions. "Charter would have more scrutiny buying a cable company right now than Altice would."

The foreign-ownership issues -- Altice is French -- "adds another wrinkle" to the regulatory process, said New America Foundation Open Technology Institute Policy Counsel Josh Stager, because it requires approval by the Treasury Department's Committee on Foreign Investment in the U.S. When asked Thursday about foreign-ownership issues with Altice, Chairman Tom Wheeler said the agency will look at license transfer issues and work with lawyers at such agencies as the Justice Department and the Department of Homeland Security on national security, law enforcement and other concerns. Being foreign, Altice might also face some questions regarding its commitment to localism, Stager said.

OTI and/or the FCC will likely ask for interconnection commitments, and will have questions about Altice's data cap policies, especially since data caps are more common in Europe, Stager said. And since Clyburn pushed for a low-income discount broadband offering in AT&T/DirecTV, she may bring that up again in Altice/Cablevision, Stager said.

Altice might face some Communications Workers of America opposition, given its penchant for cost-cutting, Horwood said. Agreed Hoffman, chairman of Business in the Public Interest: "One of the big questions Altice will have to address is its reputation for stripping companies down to almost bare bones. Not sure how that will play in an election year." But he said the Cablevision takeover "is a good move for Altice's global media strategy. It may also be a good move for U.S. consumers by providing another competitor with scale in the market. One of the true tests will be how it structures programming. I would encourage Altice to be very open to independent and diverse programming and content providers, and build in on-ramps going into the transaction. This would speak volumes to the industry and the regulators on its intention to advance the public interest in programming."

More Altice M&A might be forthcoming. "We don't think it's done acquiring in the United States," Ryvicker said. In a note Thursday on the Oct. 1 split of Madison Square Garden Co. into separate media and sports team businesses, BTIG analyst Brandon Ross said, "With a deep pocketed new owner of Cablevision, could Altice even have interest in owning sports teams in the NYC area?" Wlodarczak said the company's next potential takeover target "could include any telco assets not nailed down," including CLECs and private cable operators such as Mediacom, or partnering with post-merger Charter on buying T-Mobile. But Wlodarczak said the Cablevision deal "seems to put to bed the idea of Altice somehow getting FiOS assets."