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Altice USA CFO: After Starz dispute, Q1 to be 'low point of growth' in 2018

In the wake of Altice USA Inc.'s six-week standoff with Lions Gate Entertainment Corp.'s Starz premium cable networks, the cable operator expects its first-quarter results to be the "low point of growth" in 2018, according to Altice USA CFO Charles Stewart.

Speaking during a Feb. 27 earnings conference call, Stewart said Altice USA expects to record total revenue growth of about 2.5% to 3% in 2018 as compared to 2017, when the company recorded full-year revenue of $9.33 billion. But Stewart noted this growth "is likely to be more second-half weighted."

While multiple factors contribute to the company's forecast, Stewart said the estimate also reflects "some temporary disruption from our recent Starz dispute."

Altice USA customers lost access to Starz (US) and Encore channels at midnight Jan. 1 after the two sides were unable to reach a new carriage agreement. Ultimately, it took six weeks for the companies to strike a new deal, with the restoration of the full suite of Starz channels beginning Feb. 13 and stretching through the end of the month.

"We had a protracted dispute with them for about six weeks," Altice USA CEO Dexter Goei said during the call, adding that within the company's 2018 guidance, "that's clearly taken into account."

But the CEO noted the expected first-half softness also reflects the timing of Altice USA's price changes and secular shifts in political advertising. The Starz dispute, Goei added, "was just a little bit of a blip for us in the first six weeks of the year, which probably translates really into first couple of months."

All in all, Altice USA ended 2017 with roughly 4,906,300 unique customer relationships, up from 4,891,800 at the end of 2016. These figures include 3,405,500 pay TV subscribers at the end of 2017, versus 3,534,500 at the end of 2016, and 4,046,200 broadband subscribers, up from 3,962,500 a year earlier.

For 2017, Altice ended the year with net income attributable to company stockholders of $1.52 billion, or $2.18 per share, as compared to a pro forma attributable net loss of $721.6 million, or $1.11 per share, in 2016. Altice USA's pro forma results treat the Cablevision Systems Corp. acquisition as if it closed Jan. 1, 2016.

For the fourth quarter of 2017, Altice reported attributable net income of $2.25 billion, or $3.06 per share, up from an attributable net loss of $236.7 million, or a loss of 36 cents per share, in the year-ago period.

Both the full-year and fourth-quarter 2017 results were positively impacted by tax reform as the company recorded a noncash deferred tax benefit of $2.34 billion.

The GAAP S&P Capital IQ consensus estimate was a loss of $1.05 per share for the full year, and a loss of 7 cents per share for the fourth quarter.