February 28, 2019 / 8:55 PM / 6 months ago

Altice picks Morgan Stanley to gauge interest in Israel unit: sources

LONDON/FRANKFURT/PARIS (Reuters) - Altice Europe has hired Morgan Stanley to review options for its business in Israel as Franco-Israeli founder Patrick Drahi wants to streamline the heavily indebted group and raise cash to take part in France’s 5G auction, sources told Reuters.

FILE PHOTO: Patrick Drahi, Franco-Israeli businessman and founder of cable and mobile telecoms company Altice Group attends the inauguration of the Altice Campus in Paris, France, October 9, 2018. REUTERS/Philippe Wojazer/File Photo

The review is at an early stage and Morgan Stanley is helping Altice gauge investors’ appetite for the unit, two sources familiar with the matter said, cautioning no deal was certain.

Altice declined to comment while Morgan Stanley wasn’t immediately available.

Based in the Netherlands, Altice Europe’s unit SFR ranks as France’s second biggest telecoms operator. The group also runs operations in Israel, Portugal and the Dominican Republic.

The Israel unit reported adjusted earnings before earnings before interest, tax, depreciation and amortization (EBITDA) of 475 million euros in 2017 and may be worth about $1 billion, the sources said.

The move comes as the Amsterdam-listed telecom carriers is conducting a series of divestments to slash its 30 billion euro debt pile.

If pressing ahead with a sale, Altice will add extra cash to an estimated $5.69 billion of proceeds from the ongoing sale of part of its high-speed fiber network business in Portugal, several sources familiar with the process said.

Altice needs to shore up its cash reserves to take part in France’s 5G telecoms frequencies auction which is expected to start in the autumn, with licenses likely to be awarded at the start of 2020.

Its share price has been under pressure since 2017 over concerns about the ability of the highly-leveraged group to improve performance in France.

Drahi, who founded Altice in 2002, has tasked several investment banks to conduct a series of infrastructure disposals.

Last year the group raised some 4 billion euros from selling stakes in its towers businesses in France and Portugal. It also sold part of its French fiber network to a consortium of Allianz Capital Partners, AXA Investment Managers and OMERS Infrastructure in November.

Lazard is currently running a process to find a buyer for part of Altice’s Portuguese fiber network and has asked interested parties to submit indicative offers by mid March, the sources said.

Altice’s Portuguese network business serves 4.5 million of Portuguese homes and aims to cover 100 percent of the country or 5.3 million homes. Unlike its French network it offers bidders steady returns and no extra cost to lay down the cable infrastructure.

The sources said several investment funds are working on the deal including Brookfield Asset Management, Stonepeak Infrastructure Partners, Blackstone and Digital Bridge. The funds were not immediately available to comment.

Reuters has previously reported on interest from KKR, Morgan Stanley Infrastructure Partners, Ardian, Macquarie Group and I Squared Capital.

Additional reporting by Sergio Goncalves in Lisbon; Editing by Alexandra Hudson

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