By Mathieu Rosemain and Anjali Athavaley
PARIS/NEW YORK (Reuters) - Altice founder Patrick Drahi is reshaping his telecoms and cable group for the second time in as many months by splitting its U.S. and European operations, hoping to end a drastic downward share-price spiral.
Heavily indebted Altice said it would spin off its U.S. arm, which owns the country's fourth-biggest cable operator, to existing investors, and would prioritise efforts to turn around its European operations including French telecoms operator SFR.
Altice USA will pay a parting dividend of $1.5 billion to the European arm, to be named Altice Europe. Divestments of non-core assets, some of which are already under way, should also help to pay down debt, Altice said on Tuesday.
Analysts at brokerage Raymond James said that Altice's European arm as a whole could eventually become an acquisition target for rival French telecoms companies.
"A separate listing of Altice Europe makes a sale of this asset easier, to Bouygues or Iliad for instance, which could both consider market consolidation synergies in France, in our view," they wrote.
"We're very focused on the operating story, specifically in France and Portugal," Goei told reporters during a call. "Over the medium and longer term, I'm certain this question will be asked again and maybe we'll have a different response."
The group's leveraged loans also rebounded strongly in Europe's secondary loan market.
The two companies will be led by separate management teams with Franco-Israeli billionaire Drahi retaining control of both and garnering a large share of the dividend as well as of a $2 billion share buyback planned by Altice USA.
No new executive recruitment was announced, however, with Altice remaining managed by the same close team that has seen it transform from a small France-based company into a global group.
Several analysts said that this light and centralised top management may hamper Altice's capacity to define an efficient and clear marketing strategy in each of its markets.
Altice, whose operations stretch from Israel to the Dominican Republic, saw its shares plummet after a financial report signalled it would fail to grow in France in 2017, despite large investments in mobile and fixed networks.
This led to the ousting of Altice's chief executive, a rare apology by Drahi to investors at a conference last year and the promise that Altice, whose debt equals more than twice its yearly revenues, would shift focus from large acquisitions to sales growth and debt management.
The company largely fulfilled its promise to cut costs aggressively at the businesses it bought but often failed to achieve the operational turnarounds and growth it targeted.
The listed U.S. business, no longer owned by Altice NV, will then be shielded from concerns about the European operations, while its liquidity will quadruple to 42 percent of total shares outstanding.
"With U.S. activities clearly split, the contagion effect will not be felt," said Thomas Coudry, an analyst at Bryan, Garnier & Co.
Altice's managers had in the past said that potential risks associated with the company's consolidated debt were alleviated by the so-called "silo structure" of the group, under which each entity would have to make its own repayments.
Drahi has recently shifted gears, saying there was a path to further strengthen the European balance sheet over the long term through non-core asset disposals, such as telecom towers.
($1 = 0.8388 euros)
(Additional reporting by Sonam Rai and Supantha Mukherjee in Bengaluru; Additional reporting by Sudip Kar-Gupta and Leigh Thomas in Paris; Editing by Georgina Prodhan, Keith Weir and Susan Fenton)
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