Patrick Drahi tries to reassure. Caught in the corruption scandal affecting his ex-right arm and several Altice executives, the billionaire and owner of the group – including in France the activities of SFR and that in the media of BFMTV or RMC -, was expected firmly by credit analysts on Tuesday. Already on Monday, he had struggled to give guarantees to investors during the presentation of the quarterly results of Altice International, an entity which includes, among other things, the Altice Portugal division at the heart of an investigation by the Portuguese authorities revealed in mid-July.
This investigation is aimed in particular at Armando Pereira, Patrick Drahi’s right-hand man in business for nearly 30 years. He is being prosecuted for eleven alleged financial offenses (corruption, tax evasion, forgery and use of forgery, money laundering, etc.). Portuguese justice accuses him and a handful of executives of the company of having enriched themselves by playing intermediaries with companies created by their own care and by overcharging Altice for their services. Altice and the Portuguese tax authorities are victims of damages amounting to several hundred million euros according to provisional estimates.
Monday noon, Patrick Drahi said: “This case has been a shock and a disappointment. I feel betrayed (…) If the suspicions of the tax authorities turn out to be true, it would mean that a small group of individuals have hidden their actions and profited from some of our acquisitions to the detriment of Altice and my reputation. . Referring to the statements of the day before, the billionaire again endeavored to position himself as a victim, ensuring that with the freezing of a handful of incriminated suppliers and the suspension or dismissal of certain employees – including Yossi Benchetrit, son-in-law of Pereira and ex-boss of Altice USA purchasing or even the executive director of content, acquisitions and partnerships of Altice France, Tatiana Agova-Bregou-, the case had been taken seriously.
“A comprehensive review and thorough strengthening of the approval process for all purchases, payments, purchase orders and related processes, payments, purchase orders and related processes,” Altice said on Tuesday. Eight suppliers were notably incriminated, representing 2% of Altice’s purchase flow. For them, 90% of the activity has already been stopped. The impact of the case in France therefore seems weak at this stage. Patrick Drahi also gave more information on the role of Armando Pereira at Altice France. On Monday, Drahi said that Pereira had not been in the capital of the group since 2005 and that, contrary to statements by the unions, he did not centralize all of the group’s purchases. This Tuesday, the billionaire recalled that Pereira had a “key role” within SFR between 2017 and 2019 in the operational part. He also confirmed that in August 2022, the Franco-Portuguese had been assigned an advisory mission by the new boss of SFR, Mathieu Cocq.
More importantly, Drahi tried to reassure this Tuesday on the future of Altice France, weighed down by a debt peaking at 24 billion euros, in the worrying context of the sudden rise in interest rates. Patrick Drahi has in particular ensured his attachment to Altice France, of which he assured to hold, with his family, the entire capital. A group he says he has built over the past 30 years from “scratch” to make it the “first non-state-owned operator in the country”. Still, the maturities of its debt group amount to a total of 24 billion euros, including 1.3 billion to be paid in 2026 and 1.6 billion from next year. The absolute priority is “deleveraging”, insisted Patrick Drahi. In one of the slides of the presentation, Altice and its boss even borrowed from the former boss of the European Central Bank Mario Draghi his most famous phrase during the rescue of the euro, judging that the group would attack its debt “Whatever it takes” (“whatever it costs”).
Hurry up. Analysts will indeed have been hardly reassured by the results of SFR. In the second quarter, the group’s revenues declined by 2.6% compared to last year, including 2.5% for the telecoms activity. Operating income fell even more heavily, with a 5.7% drop over one year for the whole of Altice France to 1.022 billion euros. The “media” activity has seen its operating income collapse by 16% over one year.
On the telecom side, if SFR takes advantage of its investments in fiber to recruit fixed subscribers (with 243,000 more subscribers since the start of the year), residential revenues continue to fall. On mobile, the group has lost another 250,000 subscribers since December 31, 2022. While its competitors have continued to recruit since the start of the year. “It is indeed complicated but all the people who follow the file well expected it. This drop cannot be reversed in 1 or 2 quarters. We are talking about a job of 24 months minimum,” explains Benoit Soler, High Yield portfolio manager at Keren Finance.
Altice, for its part, has undertaken to reduce its debt ratio to more acceptable levels in the medium term, a promise already made in 2021 and 2020. Patrick Drahi cited several priorities including the reduction of internal costs, the possible sale of non-strategic assets or the purchase of debt. A few days ago, Le Figaro revealed the interest of several tenors of the place for the media pole of Altice composed of BFMTV in particular. A pole for which Patrick Drahi confirmed to have received marks of interest, even if this one is not in his eyes “for sale”.
