Transformation of regional cable operator into a French telecoms champion

European private equity firm Cinven today announces that it fully realised its investment in Numericable with the sale of its remaining shareholding in Altice N.V. ("Altice") on 1 March 2016.  This residual holding in Altice was a result of Cinven rolling part of its remaining stake in Numericable into Altice, the listed international media and telecom group and main shareholder of Numericable.

In 2005 and 2006, Cinven acquired 70% of Numericable, investing alongside Patrick Drahi's Altice, which owned the remaining 30%, for an enterprise value of €528 million.  Following numerous acquisitions and transformational changes to the business, Numericable today has an enterprise value of around €30 billion.

This realisation is the culmination of an 11 year investment during which Cinven backed Patrick Drahi and Numericable to build it into the second largest French telecom group. As a result and in summary, Cinven has returned €2.2 billion to investors, representing a net capital gain of €1.7 billion, an internal rate of return (IRR) of 157% and a money multiple of 4.7 times.

Cinven's TMT team first targeted the French cable industry in 2002, when the industry was underinvested and fragmented compared to the new ADSL technology. Cinven partnered with Altice's founding team led by Patrick Drahi to build the vision and investment strategy. Together, they recognised a strong and contrarian potential for the cable network  to deliver next generation (fibre) 'triple play' services (including high speed internet, high definition TV and on-demand content),  and a significant buy-and-build opportunity for the French cable industry to consolidate and create a national fibre alternative champion to the incumbent operator.

Numericable successfully executed a consolidation strategy of the French cable sector including seven acquisitions of French B2C and B2B telecom operators:

  • the acquisition of the cable assets of France Télécom, Canal+ (Vivendi) and TDF in March 2005, and combination of the three companies' operations and networks;
  • the acquisition of Altice One in November 2005, which comprised of Estvideocom, the third largest cable operator in France as well as cable assets in Belgium and Luxembourg;
  • the acquisition of the number two cable provider in France, Noos-UPC France, from Liberty Global in July 2006; and
  • the acquisition of Completel (B2B services) in a public-to-private transaction in September 2007. Completel acquired Altitude Telecom, a smaller B2B operator in December 2010.

Under the ownership of Cinven and its co-investors, Numericable significantly invested in network upgrades and in multi-play products. In June 2014, Numericable signed the acquisition of SFR, the number two French fixed and mobile telecom operator to create Numericable-SFR, the French Champion in very high speed fixed-mobile convergence.

Cinven's realisation strategy involved:

  • several recapitalisations and refinancings of the Group, including through the issuance of high yield bonds;
  • the partial sale of a 38% stake in Numericable to Carlyle in March 2008;
  • a highly successful IPO of Numericable on the NYSE Euronext Paris in November 2013, oversubscribed by over 10 times at the top end of the indicative price range;
  • the disposal of its remaining Numericable shareholding partly for cash and partly through a roll-over into Altice shares; and
  • the sell-down of its Altice shares.

Post IPO, Numericable and Altice generated total shareholder returns of 202% and 102%, respectively, from their IPOs to 1 March 2016.

Commenting on the transaction, Nicolas Paulmier, Partner at Cinven, said:"The sale of our remaining shareholding in Altice ends what has been an epic case study of the backing by Cinven of an exceptional Entrepreneur, Patrick Drahi and his team, in a contrarian project. During Cinven's ownership, Numericable underwent a complete transformation from a regional operator to the number one alternative French telecom operator and clear French leader in high speed networks.

"Not only has Numericable generated highly attractive financial returns for its shareholders, the Group has also delivered improved products and quality of service to its customers thanks to the dedication of its employees and a significant investment in both its networks and technology."

Thomas Railhac, Senior Principal at Cinven, added:"The returns achieved from this investment are the result of the strong combined vision and partnership between Cinven and Altice, the telecom company founded by Patrick Drahi, who has since become one of Europe's most successful telecoms entrepreneurs, as well as Carlyle, who joined us in 2008.  It also demonstrates the way in which Cinven is able to capitalise on its capabilities and expertise across its different teams - its TMT sector, French regional and Capital Markets teams."

Patrick Drahi, President of Altice commented:"Investing with Cinven and working with Nicolas and his team has been my best experience in the business world. The great moments were not only related to the superior IRR over the period but also to the tougher times during the 2008-2010 financial crisis when together we built the best solutions for Numericable by implementing an aggressive and innovative investment and improvement industrial program while reengineering the whole financial structure, both on the debt and the equity markets with several successful bonds issuing and two major IPOs in Europe. I am looking forward to working again with the Cinven team in future projects."

Cinven has a strong track record in the European telecom sector, with the successful investment in Ziggo, the Dutch cable operator, which listed on NYSE Euronext Amsterdam in March 2012 and was subsequently acquired by Liberty Global. The investment generated total proceeds of €1.7 billion and a total money multiple of 2.8 times.  More recently, Cinven invested in Ufinet, the Spanish fibre operator, in June 2014.