Nick Brown - IR Michel Combes - Chairman & CEO Dexter Goei - Chairman and CEO-Altice USA Dennis Okhuijsen - CFO Michel Paulin - CEO-SFR Telecom.

Philip Cusick - JPMorgan Jason Bazinet - Citi Spencer Kurn - New Street Research Andrew Lee - Goldman Sachs Jonathan Dann - RBC Andrew Beale - Arete Research Frederic Boulan - Bank of America Merrill Lynch Ben Swinburne - Morgan Stanley Nicolas Cote-Colisson - HSBC Daniel Morris - Barclays Jakob Bluestone - Credit Suisse.

Good day and welcome to the Altice NV, Altice U.S.A. SFR Q2 2017 Results Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Mr. Nick Brown, Chief Investor Relations Officer. Please go ahead, sir..

Hello, everyone, and welcome to Altice’s Q2 2017 earnings call. In a moment, I will hand you over to Michel, Dexter, and Dennis who would take you through the presentation. As today’s presentation may contain forward-looking statements, please read the legal disclaimer on Page 2 of the presentation.

And with that, it’s my pleasure to hand over to Altice’s CEO, Michel Combes..

Thank you, Nick. Hello, everyone. Starting with the key takeaways for Q2 on Slide 4. We continue to have success executing on our growth and efficiency targets. Altice Labs and Altice Technical Services remain at the core of our Group’s strategy supporting our fiber deployment globally.

Altice Media is driving our convergence strategy as we had new premium content, new channels, and grow our free-to-air businesses.

In our telecommunication businesses in Europe, we are benefiting from our accelerating investment in high-speed mobile 4G and fiber networks with better commercial performance and we expect our content investment to further drive growth.

We have successfully listed Altice U.S.A., stepped up our fiber rollout here, and kept improving both our customer service metrics and margins. At the same time, we have seen a rapid deleveraging of our U.S. businesses, creating more optionality for capital deployment.

Slide 5 shows how all of our group’s financial metrics are moving in the right direction. Altice is growing on a sustainable basis. Revenue increasing 2.7% year-over-year in Q2.

This is a huge turnaround of the year ago as we’ve been able to stabilize the telecommunications businesses in France and Portugal since Altice took control, as well as accelerate growth in the U.S. Recent efficiencies achieved in Altice USA have driven the group EBITDA margin now above 40% as we’ve reinvesting more in Europe in content.

But as we have entered the next phase of the turnaround in Europe, we should see further margin expansion towards our target here as well. And this is all dropping to higher cash conversion for the group. Slide 6 is another reminder that Altice model is driving significantly better results in every market.

This quarter again revenue improved year-over-year in all our major businesses. And so, we remain confident in all of our 2017 guidance. Moving to Slide 7.

As we are targeting in the coming months of run rate of 4 million to 5 million additional fiber homes back to Europe, this will be the fastest FTTH deployment of any of our peer across Europe and U.S.

Because of the scale and speed of the deployment, this brings us real cost advantages as we are converging our networks globally with the same future-proof technology. This network differentiation will provide better quality services to our customers including faster broadband speed over 10 gig and provide us with additional operating efficiencies.

We are now made commitments for national wide fiber coverage in both France and Portugal, and we cover 100% of Optimum’s network with FTTH, as well as part of the Suddenlink footprint. Slide 8 is a recap on the Altice Media Strategy as we continue to diversify into0 this area to drive growth.

Our content investment and new channel launches are differentiating our telecom bundles. This helps us reduce churn and increase revenue for higher ARPU, additional revenue opportunities in wholesale, and new OTT platforms.

For example, we are getting good traction with our SFR sport channels in France where we have a quite premium sports rights such as English Premier League and will have Champions League and Europa League from next year. In the new segments, we have premium brands such as BFM, i24 and News 12.

And with the proposed acquisition of Media Capital, we will have TVI24 as well. We have also recently made a minority investment in Cheddar in the U.S. And in the Entertainment segment, we have global distribution partnership now with Netflix, Discovery and NBC, which will also support our new Altice Studio film channel from August.

We are also investing in already known cinema and series production with Altice Studio. We intend to integrate program from Media Capital as our global production is centered to leverage this really great business.

Lastly, it’s worth noting, our advertising business globally, including our free-to-air assets, now generate over €1 billion in annual revenue and is the fastest-growing business in our group.

With new data analytics technology from Audience Partners and Teads, we are able to increase our advertising yields with highly targeted multi-platform digital advertising solutions. Slide 9, gives another example of how Altice looks to drive efficiencies in all of the businesses, which is acquired.

We always focus on simplifying our bundled offerings and standardizing our pricing and billing structures. And we reinvest in our sales channels including digitalization such as for enhancing our e-commerce channel such as optimum.com and suddenlink.com and developing e-commerce on promotions.

As a result, the share of gross adds that are acquired for online channels has increased significantly at SFR, Optimum and Suddenlink and is still increasing, as you can see in the chart, and we intend to drive digitalization not only in e-commerce but also in e-care and in e-communications.

All Altice companies -- and that’s what you can see on Slide 10 -- benefit from being a part of a global media and communications group. And as we are establishing one unified company with one coherent convergent strategy, we are rebranding all of our commercial brands to Altice in the next year.

The group gives access to innovation, management expertise and best practices developed and tested in other Altice Group markets. For example, our new U.S. entertainment hub is based on Lubbocks from France, while our global cyber network build-out is leveraging Altice Lab GPON technology from Portugal.

Another key benefit is increased scale such as we have procurements of technical functions such as installations or network maintenance, where we have set up and centralized highly-specialized units called Altice Technical Services to carry out these functions globally.

On Slide 12, we want to take a step back and take a look top down and dramatic turnaround in France since Altice took cover SFR. Revenue was declining 3% to 5% annually if you look at 2014 and 2015. But we have been able to stabilize revenue which has now been flat towards the past nine months despite a very competitive environment.

The mobile side, our network is better than ever, supporting the postpaid mobile consumer base, returning to growth over the last nine months from significant loses previously.

And we have significantly improved the fixed line loss trend but we still have room for improvement here with our fiber network expansion, company investments and focus on improving customer service. This is a top priority for management.

Lastly, at the same time, we are executing on the next stage of SFR turnaround with the company’s reorganization to make the business much more efficient. On slide 13, on the left-hand side, you can tell that we have raised investments in the last 12 months.

We want to have the best network and drive infrastructure-based competition instead of price-based competition. In the middle chart, we show SFR 4G service now covers 91% of the population exceeding our 90% target for 2017 six months early. SFR is a leader for 4G territory coverage and active for 4G antennas.

And based on the latest Arcep survey, SFR is number two in terms of quality and still improving quickly. On the fixed side, we are almost doubled our number of fiber homes passed since we increased investment and have also announced a new nationwide fiber plan as you can see on the next slide.

Slide 14 shows we are now targeting to cover 100% of the territory in France by 2025 without requiring public subsidy and we can do this within the existing Altice CapEx envelope.

It is an ambitious program but just as we achieved the fastest 4G deployment in terms of volume, we are confident we can now expand our fiber FTTH network at this space as well. We are creating a new structure entirely dedicated to this rollout called Altice Infrastructure.

The first deployment will begin in September and the first household will receive the new -- their new FTTH service in the fall. This will help us reduce the data and wholesale fees with better range which are still around €800 million and actually allow us to gain share in the wholesale market.

This is consistent with our group strategy to own the infrastructure we operate, reduce our dependence on third parties, and strengthen our capacity to provide innovative services to our customers. Slide 15, the focus on our B2C mobile postpaid trend.

In Q2 and for the third quarter in a row, our mobile B2C postpaid customer base continued to grow supported by network improvements and the continued success of our convergent SFR FAMiLY! offers.

The left-hand side of this slide shows we added 34,000 new customers in Q2, a substantial increase if you compare to the same quarter last year when we have lost about 300,000 customers. Our postpaid ARPU also increased by just under 1% year-over-year, supporting the mobile service revenue growth you can see on the right-hand side.

Now, as we love the content and bundling initiatives implemented in May 2016, the ARPU and revenue comparison to last year will be tougher in the second half of 2017. But we no longer have a drag we had previously from continued subscriber losses, which should underpin our growth for next year. Now, looking at our SFR B2C fixed business on slide 16.

The trend in Q2 is similar to what we had seen in Q1. Our DSL trends have improved again with minus 51,000 net losses this quarter, which is the best performance for SFR since 2014. We have seen a meaningful churn reduction and supported by the new box we launched in January, the new pricing strategy we adopted at the end of Q1.

On the fiber side, net additions remain below our target. We believe we are taking the right steps to improve this trend, including expanding our cyber network, which will increase our addressable market and offering and content bundle. And you can see if we are successful in retaining and attracting new customers here.

We can stabilize a customer base as we add for in our mobile business. Total fixed ARPU declined about 1% year over year, impacted by the lapping of the content and bundling initiatives implemented in May 2016, which again will mean a tougher comparison year-over-year in the second half of 2017.

We’re also seeing some gross adds ARPU dilution from the commercial traction of SFR while comparing low-end DSL offers. But we think it’s important to protect our base here now again to underpin future growth. Turning to our Portuguese business on slide 17.

Like France, you can see our revenues continue to be stable in Q2 after years of decline which were much worse before Altice took over. See now to France, we have also raised our investments in our fiber network and content to provide a better customer experience.

We have continued national-wide FTTH fiber rollout with an accelerated rate, reaching 3.5 million homes by at the end of Q2 which puts us well on track for the target of 2017 and on track to reach full nationwide coverage by 2020.

This has meant we are seeing much higher fiber subscriber growth than previously, and we reported the best B2C customer trend for the year. And as we explained, our addressable market here, our overall fixed churn should keep improving as we can further mitigate the DSL loses.

We have also seen a big turnaround in our mobile business, as you can see on the right-hand side. Lastly, we have appointed a new CEO in Portugal, Claudia Goya, to drive the next phase of growth. And now, I will hand over to Dexter for his review of Altice U.S. performance..

Thanks, Michel. Good morning, everyone. Starting with slide 18 and a summary of Altice U.S.A. revenue dynamics. Pro forma revenue growth was 3.2% year-over-year in U.S. dollar terms, again, above the level before Altice took over the business. Broadband continues to be a key contributor here as we are seeing continued demand for higher-speed tiers.

And as we invest more in Generation Gigaspeed fiber project, we should see continued improvement in customer service metrics, reduce churn, and further efficiency savings. On Slide 19, you can see we have positive year-over-year customer and ARPU trends again for both Optimum and Suddenlink which is driving a higher revenue growth.

On the left-hand side, you can see Optimum residential B2C revenue has really been supported by ARPU growth of 1.6% on a constant currency basis. For Suddenlink on the right-hand side, it was driven by 1.2% growth in unique customers and 2.8% growth in ARPU year-over-year.

Despite continued competition including aggressive AAA offers from Verizon, it’s worth noting Optimum video customer losses in Q2, we’re in line with Q2 of 2016 if you adjust the deposit benefit we saw from the strike Verizon had last year. So, we have seen no underlying deterioration at all.

Suddenlink saw similar seasonality in Q2 in the subscriber trend to previous year and also was better than last year on video RGUs when you adjusted for a one-time change in billing practices.

Remember, our new home entertainment hub will put us in the much stronger position across our whole business and we’re just coming out of this couple of beta testing right now. Adding that, Verizon content to our Suddenlink bundle should also help as we keep improving this video product.

Moving to Slide 20, you can see again how our network investment to increase broadband speed delivered to our customers are continuing to pay off.

The proportion of Altice USA new residential customers taking high-speed broadband packages 100 megabits or greater increased again to 79% in Q2 with the proportion of customers base now enjoying over 100 megabits increasing to about 40%.

But the average broadband speed taken by Altice USA’s customers has increased significantly to over 90 megabits in Q2, almost double from when we closed the acquisition of Optimum. Furthermore, Suddenlink has been recognized as the fastest Internet service provider in the U.S.

On Slide 21, we summarize Altice USA’s margin progression where we can see that we reached now 42.7% adjusted EBITDA margin in Q2 on a GAAP basis, with operating free cash flow margins at 32.9%. Remember, our largest peers had about a 4-percentage-point better gross margin advantage over us because of the scale on the programming side.

So, adjusting for this, our EBITDA margin and operation free cash flow margin will be more like 47% and 37%. As a result, we’ve seen again strong adjusted EBITDA growth, up almost 22% in Q2 year-over-year and operating free cash flow grew 41.3%.

CapEx should to continue to ramp up in the second half of 2017 because of the phasing of our new FTTH upgrade since we are accelerating our rollout now. We continue to focus on reducing non-programming OpEx for subscriber at the same time as investing for growth and better customer service. This strategy is still working very well.

And with that, I’ll hand it over to Dennis..

Yeah. Thanks, Dexter. We are on slide 23. It shows the Altice NV pro forma consolidated financials with the same parameter as Q1, so it includes our media assets in France, and Altice USA excludes Newsday it also excludes Belgium and Luxembourg, as we’ve now sold that in the second quarter.

For the second quarter of 2017, total group revenue of €6 billion grew 2.7% year-over-year on a reported consolidated basis or 1.4% on a constant-currency basis. All major markets contributed to the revenue improvement trend, both on an organic and reported basis.

Altice USA and Israel grew again very strongly by 3.2% and 3.8%, respectively, on a constant currency basis, while revenues in France and Portugal remained stable, as Michel described. Group adjusted EBITDA increased 6.9% to €2.4 billion or up 5.4% on a constant currency basis.

Altice USA saw another quarter of very strong growth in EBITDA of 22% in constant currency. France and Portugal EBITDA both declined by 5% and 8%, respectively, due to the new additional content costs compared to last year, some of which will start to annualize in the second half of 2017.

We will also get more of the benefits of the reorganization in France realizing EBITDA from Q4 2017 onwards as more people will have left our payroll by then. Group operating free cash flow was up 16% by €2.13 billion or up 10% on a constant currency basis, mainly driven by the strong growth of Altice USA growing over 40%.

Slide 24 shows our usual overview of our group debt structure which reflects all of our recent refinancing activity. As before, it’s diversified across different silos with no recourse to each other. Our target leverage remains 4 times at Altice Europe. That’s the consolidated view, including the Luxembourg HoldCo debt.

And for Altice USA, our leverage targets remain 5 to 5.5 times. Net leverage at Altice Europe, on a consolidated basis, was five times at the end of Q2. Leverage in France was 4.1 times.

Altice has increased its stake again in SFR to 94% through additional off-market private transaction and Altice stake in Altice U.S.A has also increased slightly following the IPO to just over 70% as we crystallized our carry on the sponsors. Altice International net leverage decreased to 3.7 times.

As of June 17, the group leverage was 5.3 times on the last 12 months basis. In absolute terms, our group debts came down by €1.4 billion this quarter mainly driven by the appreciation of the euro compared to the dollar. Our available liquidity at €4.9 billion remains very strong. On Slide 25, you can see the U.S.

leverage continues to come down rapidly. Suddenlink leverage reduced to 5.3 times on the last two quarters annualized basis in dollars, or five times if you exclude the dividend payments made in the second quarter. So, it’s now at low-end of our target range.

Optimum leverage reduced to 5.6 times on the last two quarter annualized basis or 5.3 times if you exclude the dividend payments made pre-IPO. So, Altice U.S.A has already reached its leverage targets as we promised it would.

We are very comfortable with this profile and the long tenure of our debt, which should give us plenty of options as what we do with the excess cash going forward. On Slide 26, you can see our updated maturity profile. The average life our debt is now 6.3 years with weighted average cost of 5.9% for the group.

We recently extended the Altice Corporate financing facility to 2021 and we used some primary proceeds from the Altice IPO to repay part of the 2025 10.875 senior notes. The chart shows, as before, that we have no major maturities at SFR or Altice International until 2022 and none at Suddenlink till 2020.

Some of Optimum’s debt maturity is in the near term, but remember, we have still got a €2.1 billion revolver in place which we can use to cover these maturities for the next few years if we want. And with that, well turn the call over for Q&A. Operator, we can start the Q&A..

Thank you. [Operator Instructions] We will, however, take our first question now from Philip Cusick from JPMorgan. Please go ahead. Mr. Cusick, if you are there, please go ahead..

Hi.

So, can you hear me?.

We can indeed, sir..

Go ahead, Philip..

Nick, can you hear me?.

Yeah, we got you..

Okay. Good. So, let’s start with -- can you talk about the competitive level in the U.S. and the potential for RGU improvement, especially on the video side from here? We’ve got Viacom coming back in over the next few months. How is that going to go and how should we think about video numbers over the rest of the year? Thanks.

And [Nawar] is on the line as well..

Thanks, Phil. Let me take that. Listen, I think on the video side, we’ve not seen any deterioration in our video business. As you can see from the numbers that you just for the Verizon strike, just for some billing practices. We’ve actually done better on the Suddenlink RGU side quarter-over-quarter relative to 2016.

I think that bodes well obviously for anticipated rollout of our box, which we are, as we mentioned, finalizing our beta testing, which is going very well. We just want to ensure that there are absolutely no bugs in the systems and that we can roll it out very successfully when we do. That should be in the next month or so.

Outside of that with the Suddenlink product continuing to improve here with Viacom coming on board as of mid-August and with the balance of the year between mid-August and the end of the year will be at over 90% coverage of our Suddenlink footprint with Viacom product.

We are cautiously optimistic that we should do at least as well if not better on the video RGU trend. If you remember on the Suddenlink side, we have just about 32% video penetration, which is extremely low, with obviously the large amount of our competition coming from satellite providers in the Suddenlink footprint.

So, we don’t see why we shouldn’t be able to at least maintain to take market share at the Suddenlink side, which hopefully would bode well for the coming years in terms of our video performance there. On the Optimum side, we don’t see any change as to what’s happening on our video RGUs.

We continue to see a large disproportion of our growth ads, taking the video product over 70% of our gross ads to take the video product which is very much in line with our penetration. So, we’re not seeing any acceleration whatsoever in its duration of video product..

Got it and how quickly should we expect this overall out of the new box across the footprint..

So, no, we’re going to start off with discreet areas in the Optimum footprint when we start to launch it in the next month or so. And then, it will be targeted towards triple play gross ads and double-play gross ads. And then, we’ll continue to accelerate that for the balance of the year going into 2018.

I think we will obviously continue to be aggressive on maintaining good inventory levels here to the extent that we want to use it for the purposes such as retention, such as key clients wanting to swap out, but I don’t think we have a policy put in place today as to how we’re going to do that and when we’re going to that.

I think it will be a function of making sure that the roll out is very smooth on a gross ad basis for the balance of the year..

Understood. Thank you..

Our next question comes from Jason Bazinet from Citi. Your line is open..

Thanks so much. One quick question. In terms of the EBITDA margin improvement that you guys have made, one question has come up from clients regarding just the absolute level and how much advantage you guys might get from having lower gross additions and therefore, having less run through the P&L.

So, if you just had to give us a rough number in terms of how much SAC runs through the P&L for gross add, that would be most helpful just so we can at least dimensionalize what benefit you might be getting from pure gross adds Thanks..

Good question, Jason. We’re not -- we don’t give out specificity around our SACs distribution channel, but what I can say is that we’ve been increasing our spend on sales and marketing overall..

Yeah..

So, year-over-year that is increased. So, there’s been no improvement whatsoever from lower gross additions here due to sales and marketing. So, even with lower gross additions given on a year-over-year comp basis relative to the Verizon strike, we’ve been increasing our marketing spend, primarily through media acquisition..

Okay. Very helpful. Thank you..

Really not adjusted at all for sales and marketing, so that’s where we’re over investing, and we’re taking cost out from all the other line items..

Perfect. Thank you very much..

Our next question comes from Jonathan Chaplin from New Street Research. Please go ahead..

Hey. Thanks. This is Spencer for Jonathan. So, Comcast and Charter are cooperating on wireless and we love to know your thoughts on your opportunity to join.

Given your desire to own the assets you utilize, how do you think about considering MVNO, versus a network-sharing deal, versus an outright acquisition? And with all the options, how do you think about cooperating with your pears, versus going alone? Thanks..

Listen, I think we’ve been very public that number one we’re not focused on acquiring wireless today that we will today that we will continue to look at other forms of wireless opportunities such as MVNOs or network sharing opportunity. That continues to be the case as Altice USA.

I think in terms of cooperating with our peers, we’ve got a great relationship with our peers. We’ve got very open dialog such to the extent there’s an opportunity to do something together, we will absolutely look at it very seriously. I think that’s the gist of it..

And just to follow up, is the general MVNO after for you or would a cooperation need to be deeper than your traditional MVNO?.

Well, to your point we like to own infrastructure, right.

So, the MVNO model as it is presented today in the market is something that is probably overall less attractive to us to the extent we can get more control over the infrastructure and the subscriber that is something that’s more interesting to us very much like when we do and we provide to other operators and some of our other market.

So, that’s really the model will continue to be about be able to drive and improve customer service experience which is all about getting closer to the network..

Great. Thanks very much..

We will take our next question from Andrew Lee from Goldman Sachs. Please go ahead..

Yes. Hi, everyone. I just had a question on France, a question on Portugal, and then just a follow-up question on kind of capital allocation. So, France, I guess everyone has got a little bit nervous about customer perception and particularly competitive intense in the market.

Just wondering if you could talk through your view and your scope to grow ARPU in SFR as more content comes online? And has commercial activity really got tougher because the results don’t really suggest that? Secondly, on Portugal outlook. Portugal missed.

Some of this appears to be content, but there’s also been much more customer investment it looks like. So, what’s the outlook for Portugal to start growing EBITDA again and the timing on when and where we see the improvements? And then, finally just on French consolidation.

What’s changed here and what are the obstacle? Do you see the French government as a supporter or an obstacle and how should we think about the prospects of that which has been talked down over the last week by other operators? Thank you..

Okay. Andrew, I will start with your last question on consolidation. Right now, as you know, we are very focused on operational execution and the next phase of SFR transformation as I have highlighted. So, we are not going to speculate on the opinion of the government, and so I have no other comment to make on this point.

On your question on Portugal, just maybe, I would like to highlight that we are quite happy with what we have delivered in Portugal, meaning that the strategy that we have highlighted is really starting to deliver good results. Meaning the investments in network and in content has allowed us to turn our commercial in a positive territory.

When you look at our place in terms of postpaid and prepaid net adds from the mobile side, as well as the very strong improvement of our net adds in fixed, mainly led by, let’s say, a strong increase of our net adds in FTTH, the highest level in the past few years.

I guess that it clearly highlight the fact that our strategy does deliver and is working. So, I have no doubt that all that will -- stabilizing or even improving and we will somewhat, let’s say, strengthening of our ARPU in the next coming quarters will continue to reignite growth in Portugal, which will translate in EBITDA improvement.

We have, let’s say, midterm guidance for EBITDA in Portugal of 50%, which, let’s say, we stick to. And so, we are quite comfortable on our ability to deliver on this guidance.

As far as your first question is concerned, which is about strength, it’s clear that the French market remained extremely competitive in the past few months as it has been highlighted by most of the operators. In this context, I guess that our achievements in terms of net adds is quite good. As you’ve seen, our mobile base now is well-stabilized.

It has been stabilized in the past three quarters. Our fixed base is stabilizing, not yet exactly where we would like to be, but improving quarter after quarter. So, no doubt that we will stabilize a bit as well in this area.

In terms of our content strategy, we’ll be able to continue to increase ARPU in the next coming quarters and hence support the revenue profile for B2C in France. So, there as well with investments in fiber on one side, on 4G on the other side, and investments in content, we believe that it will support our growth strategy for the next coming years..

Our next question comes from Jonathan Dann from RBC. Please go ahead..

Hi there. I’ve got two questions. One on the advertising and ad tech initiatives. Can you sort of give some idea of, say, the addressable market and how much, if the plan are successful, how much incremental revenue or profit do you think you can drive? And then my second question is really on the competitive landscape in France.

Can you give us an idea of whether the cable and DSL? Is that driven by reducing churn or is it sort of advertised or are you promoting and getting more gross ads? Can you give some color on the inflows and outflows?.

Well, on your first question I guess that we already highlighted a few quarters ago that it was a multibillion opportunity. We are today generating over €1 billion of revenue mainly in France and in the U.S. plus in some other countries.

And let’s say we have the ability for us to join forces in between partner and our different businesses in the different countries. We believe that we can capture a significant amount of this opportunity, meaning that it’s without any doubt for the next coming years a multibillion revenue generation engine.

On your second question which is around the competitive landscape in France, I can say that -- let’s say from a gross ad perspective, we have been quite strong in the market. Meaning that we have been able to reignite our commercial stance in the market which have been iterated in the past few quarters.

And so, which means that now we have offers which are compelling and competitive in the marketplace; both for mobile and for fixed, leveraging our two brands; Red, which is our digital brand mainly around connectivity and SFR which is let’s say, high-end brand mainly focused around content and connectivity.

So, good traction in terms of commercial from both brands Red as we present today more or less one third of our gross adds in total. In terms of churn, we have improved churn in DSL which has allowed us to improve the net adds evolution in DSL.

As you’ve seen, we have reduced the amount of losses in DSL with the lowest level in the last two or three years. As far as fiber is concerned, we are not yet where we would like to be meaning that our level of churn is still too high compared to our competitors. That translates in a level of net adds which is low compared to our target.

And so that’s where all the management is focused on right now.

I have no doubts that with the investments in fiber rollout in one side, the investment on content on the other side, and investments in terms of process reconfiguration on the third side, that will pay off and we will be able to reach the level of 70,000 to 80,000 net adds that we would like to reach in the coming quarters..

Thank you..

Our next question comes from Andrew Beale from Arete Research..

Hi. I wanted to dig in to Altice Technical Services and infrastructure if I could. So, first one, ATS, how many U.S.

staff at Optimum and Suddenlink have been transferred across already and how many will you transfer in total? And more generally how should we think about the cost benefit from using ATS against the current way of working, and what should we look out for across the group in terms of how and where cost CapEx and cost going forward? And then on the infrastructure side in France, I mean, how well Altice infrastructure should be capitalized? Will it be third parties? And would you consolidate it? And how should we think about the overall CapEx with the overall with the overall plan? Will your total investment go up against the current plan? And how -- and should we think, though, the capital leases or other arrangements between SFR and the infrastructure business? Thanks..

I could take the first. Yeah, I’ll take the first one. So, Andrew, on the amount of employees I think we’re being very specific, but it’s obviously multiple thousands of operational people here. I think in terms of the impact on our existing business at Altice USA, we’re seeing no incremental margin improvement from that transfer.

Obviously, as you ramp up and you work through the logistics of moving thousands of people over, there are some lots of speed bumps in the road to deal with. So, that is a medium-term project of improvement that we see. It’s going to take time for ATS to implement its operational expertise.

So, we’ll start hopefully seeing filtering through improvement in our margins relating to the jobs that we are tasking outside suppliers to be doing in the near future but not at all now. I think going forward, we’ll continue to look to transfer a meaningful amount of employees as we do it region by region over the course of the balance of 2017..

Your question on Altice infrastructure, I think we are financing this from the French cash flows. It will be fully consolidated at the Altice level. So, it will be on balance sheet and not off-balance sheet.

And I think the total investments, in terms of CapEx that we see even with the new fiber program in France, I think we can do it within the existing group CapEx guidance which we have given at €4 billion for the year..

Thank you..

Our next question comes from Frederic Boulan from Bank of America Merrill Lynch..

Hi. Just if I could follow up on the French business, in the phasing of that improvement in EBITDA, I think in May you told us from Q3 we should start to see the benefits of the voluntary departure plan.

I guess most of that will be quite back-end loaded in the year, but could you tell about the phasing here? And also on wholesale cost reductions, it’s €800 million is an item you’ve talked about since for a couple of years. Where are we on that.

Is it primarily predicated on the FTTH rollout, or is there is upside to come from migration from DSL to cable? Secondly, if I could ask around the VAT discussion and the assessment by the Finance Ministry, if you could clarify a little bit the value at risk, how you see here? That will be helpful. Thank you..

So first, on your question related to EBITDA and with some questions that you have raised. Maybe just a few points on the cost savings that we intend to do around people.

The first phase of inventory plan started in December with SFR distribution business, and we agreed to almost 1,000 departures by the end of Q1, an exceptional charge of €128 million was taken at the Q3 results for the Q3 last year. We only realized less than €10 million of EBITDA savings in Q2 from this first phase in Q1.

Of course, that will increase in the next coming quarters when people will actually leave the company. We’re only recording the savings when people have served out their notice and we are no longer paying them.

To the second phase, we have seen a further around 1,500 departures, although they are still on the payroll, and so we may not see the savings here until Q4. And we have identified over 500 more we expect to leave in the next three months. So, in total, that is around 3,000 of the total 5,000 planned so far.

So, we are on track even ahead of what we were expecting, and so well on track to deliver the 5,000 we are committed to deliver. Of course, if you take what I’ve just told you, looks like then half of the savings will be recognized this year.

So, the biggest chunk of the €400 million savings will appear in 2018 as we have always flagged, and will have an impact on our EBITDA margin in this year. On the second point concerning what is related to the €800 million that we are paying to a range.

As we have flagged, it’s obvious that this amount will reduce over time with our fiber rollout, so we have always said that it was a midterm target, and with the new announcement that we have done which is that we intend now to cover the full country with our own fiber that the total of this €800 million which would disappear in time.

On top of it, I should highlight that not only we’ll reduce the cost, meaning that we’ll see this €800 million disappearing. But as we intend to build our own infrastructure, we’ll also get some wholesale business on top of it which will be also a positive in our accounts and so a positive in our EBITDA margin.

So, that’s while let’s say we are comfortable that we will reach our target EBITDA margin in the mid-run. In terms of your third question related to VAT, I’m not going to comment on this specific VAT we pay on a particular bundle in France.

We are as you can expect in full compliance with all tax legislation, and we have made significant investment in press and media assessing front, and we’ll continue to do so. We will settle that the estimated claims in the press are ludicrously high..

Excellent. Thank you very much..

Our next question comes from Ben Swinburne from Morgan Stanley. Please go ahead..

Thank you. I want to ask Dexter and Michel about capital allocation.

You guys have a really big free cash flow and sort of financial capacity opportunity coming out of Altice USA and so I’m wondering as you head into the back half of this year into next year, Dexter, how you’re feeling about the M&A pipeline, would you look beyond sort of core cable to apply the Altice way to other assets, whether it’s sort of fiber assets or maybe content? And Michel, if there isn’t anything to do in the U.S.

and leverage is dipping below Altice USA’s sort of target level, are there opportunities in Europe to be dividend cash up to NV and deploy through accretive acquisitions outside the United States?.

So, Ben, look on your first question, we continue to be focused here on the operations, and we’ll be opportunistic on the acquisition front. Obviously, our preference here -- and we’ve been very clear about it -- is to focus on cable right now. So alternative telecoms, even wireless today are not a priority.

And as you know, obviously, you need people willing to do things in order for us to do stuffs. So, I think we’re going to maintain our flexibility here in the U.S. to be opportunistic and react to attractive situations as they come along..

Okay. And let’s have the second part of your question. I would say that if there is no potential accretive acquisitions in the U.S., there are always other ways to look at -- using our cash, for example, buy back share or whatever..

Okay. Thank you..

Our next question comes from Nicolas Cote-Colisson with HSBC..

Yeah. Thank you. Hi. I start with fiber in France. I was wondering what were the magic trick that turns a rural area into a profitable area without it? Has anything changed recently, or is it just because you’re not intending to reach the remote site? And I’ve got another question on Portugal, a follow-up actually.

There was a strike, also angry comments from the Portuguese prime minister. So, I was wondering what does staff cuts represent within the 50% margin target in Portugal? Thank you..

So, first, on your second your question concerning Portugal. We have starting moving some employees within the group, meaning in between PT and some other subsidiaries that we have in Portugal, which has prompted strikes. We’re actively working with the unions and the government to do this in a very transparent and open way.

We’re investing a huge amount in Portugal including in building national-wide fiber network to the leading -- to be the leading fiber operator in the country and we’ll continue to do so.

I’ve also highlighted that, obviously, we will continue to improve the efficiency of our operations in Portugal in order to deliver this 50% target which will be reached all by -- on one side, reigniting growth, and on the other side, continuing to improve our operational efficiencies.

So, there is no change there, and that’s what we intend to do in the next coming quarters. In terms of fiber, I don’t believe that there is a magic recipe, as you say. There are maybe, let’s say, a few things that can be highlighted.

First, of course, let’s say, the scale benefit of our FTTH deployment now around the world, leveraging all the capabilities, which have been developed in Portugal from a technology, but also from an operating point of view which has allowed the first for us to rollout fiber. Second, there is also a priority issue.

I mean, we have been number one in fiber in France for years. But I guess that in the past 18 months, Michel Paulin and the team were heavily focused on mobile efforts in order to catch up with, let’s say, our competitors. As we have seen now, we are leading the shore again in mobile. So, we can turn gear to fiber in a stronger manner.

So, one side, priority; on the other side, a better ability to deliver and to roll out in a low -- in a more efficient manner. So, that’s the reason why we have elected to announce these acceleration of our fiber plan. But our intent has always been to own our infrastructure in France.

So, then it was more matter of speed and timing in which we would do it. So, that’s just what we have announced in the past few weeks..

And so, just a follow-up. How long will it take for Altice infrastructure to be in a kind of a industrial mode? Because delivering 2 million to 3 million homes seems to be even higher that what Orange can deliver today..

Well, first, as you know, we have already tapped toward fiber. Meaning that we deliver the term, in between 1.5 million and 2 million fiber home connected. So, we are thinking about acceleration of the plan -- let’s say a plan starting from zero.

Second, as you know we can also leverage what we have in other country which gives us scale which probably Orange doesn't have. So, we’ll start to really deliver full -- directly full infrastructure in September. And then ramp up in the next coming quarters.

But, let’s say, with the resources that we have in place, no doubt in my mind that we will reach the full ramp up by 2018..

Thank you..

Our next question comes from Daniel Morris from Barclays. Please go ahead..

Thanks for taking the questions. I just have one first of all on the little bolt-on you announced in France, fixed mobile customers which looks like it could be up to a five-year increase for those customers. I understand there’s some kind of opt-out particularly on the fixed side and it doesn’t impact all the customers.

So, then if you can provide some kind of color on, first of all, your thinking behind the structure of that particular product and also the likely financial impact. Second of all, just another brief follow-up on the French fiber. You obviously talked a little bit about how you scale up the build.

Can you also give us some sense of the cost of that build and then Orange just talked about up to €1,000? I think by implication, given the kind of CapEx run rate you’re talking about, maybe you’re thinking it’s rather cheaper than that for you guys. Thanks very much..

Okay. So, first on your second question, as we have always answer to that question in the past, we are not going to give a specific for homes as this is commercially sensitive since we believe we have competitive advantage with our technology and expertise here.

Once again, I guess that no one should forget that we are never one in the world in terms of FTTH roll out in Europe or in the U.S. and in that, let’s say, type of activity, still an expertise matter.

So, we believe we can build out and maintain network for less money and quicker than when industry is used to especially thanks to these scale and so more cheaper and more quicker than any other operator. So that’s what I’ll say for your second question.

For your first question which I guess is related to the new offers that we have started to roll out first week of July for most of our mobile and fixed base.

As our mobile customers are concerned, we have decided to offer a new benefit for our customers or the ones which were on limited voice to go for unlimited voice for [indiscernible] and for the ones which are on limited data bundles to turn to unlimited data bundles for €325 more.

That’s, let’s say, the way we are -- let’s say, we are changing their bundles right now. And for fixed customers -- and I’ll get back to the ones you are referring to.

We are giving to our fixed customers the option -- and so that’s an option to include our new Altice studio channel, which is going to be launched in August in their bundle for €205 depending on the bundle they are in.

And so, there is a need for our customers to opt out but, of course, let’s say, we expect most of the customers to take it as we are launching a very compelling new channel with very compelling new programs..

Thanks very much..

Your next question comes from Jakob Bluestone from Credit Suisse..

Hi. Good afternoon. I’ve just got one question on French fixed line. Just trying to understand the slowdown in Europe B2C fixed line revenues will look better. Q1, they grew by about 2.5%; in Q2, they fell by about 2.5%. You mentioned that there was a comps effect from annualizing your new offers.

But if I look, for example, at your fiber ARPU, it’s been pretty steady at about €40 for the last four quarters. And in Q2, they were down at €38. So, a fairly large sequential and year-on-year drop.

So, can you maybe just give a little bit more color on why French B2C fixed line revenues deteriorated quite so much, and if possible, split out what is the comp effect and what’s driven more by at a temporary factors or, sort of, commercial pressures? Thank you..

So, in our fixed business in France, as you know, let’s say, the two effects are on side of the base. And so, we have continued to lose capital within the past few quarters, and even if the situation had improved, we have not yet been able stabilize the base.

This should improve in the next coming quarters as the decrease is slowing down, and the goal is to turn it to positive in the next coming quarters. Then the second is ARPU.

So, as far as ARPU is concerned, you probably remember, we have an ARPU increased effect in Q2 last year starting to kick in that fit based on some the price increase that we have done at that stage. And so, that comparison starts to be, let’s say, a little bit positive year-over-year.

It will mainly impact the second half of the year that has started to impact second quarter. So, that’s the way you can read out of it. Nevertheless, with the new offers that we are rolling out in the market content reach with what I’ve just mentioned runs a privilege offer.

I’d expect that on one side, the customer numbers should improve in the next coming quarters. Once again, thanks to FTTH rollout, thanks to improvement in processes and thanks to new content offers. And second, I expect an ARPU benefit from the new content add-on that we are implementing in our offers as mentioned the privilege offer.

And then you will see in the month to come, our back to school offers and our offers by the end of the year, which would incorporate more and more content that will germinate in 2018 with the returns on fee, which will be a very strong ARPU driver for our fixed business in France.

And the reason why I am, let’s say, comfortable on our ability to turn it in positive territory..

Thank you..

Ladies and gentlemen, this concludes today’s question-and-answer session. At this time, I would like to turn the conference back to our speakers for any additional or closing remarks..

Thank you very much for joining, and we look forward to catching up with you in the next few weeks. Thank you..

This concludes today’s call. Thank you for your participation. You may now disconnect..