Altice Europe N : France - FY 2019 MD&A

May 04, 2020 at 03:49 am EDT

MANAGEMENT'S DISCUSSION AND ANALYSIS

ALTICE FRANCE

FOR THE YEAR ENDED DECEMBER 31, 2019

Contents
Basis of Preparation	3
Key Factors Affecting Our Results of Operations	4
Discussion and Analysis of Our Results of Operations	8
Significant Events Affecting Historical Results	8
Revenue	10
Adjusted EBITDA	11
Other items Impacting Profit/(Loss)	12
Analysis of consolidated statement of financial position	14
Liquidity and Capital Resources	15
Other Disclosures	19

Basis of Presentation

The discussion and analysis for each of the periods presented is based on the financial information derived from the unaudited consolidated financial statements as of and for the year ended December 31, 2019.

Please refer to the Glossary for a definition of the key financial terms discussed and analysed in this document.

Disclaimers:

The following discussion and analysis is intended to assist in providing an understanding of the Group's financial condition, changes in financial condition and results of operations and should be read together with the consolidated financial statements of Altice France as of and for the Year ended December 31, 2019, including the accompanying notes. Some of the information in this discussion and analysis includes forward-looking statements that involve risks and uncertainties.

Unless the context otherwise requires, when used in this section, the terms "we," "our," "Company," the "Group," and "us" refer to the business constituting the Group as of December 31, 2019, even though we may not have owned such business for the entire duration of the periods presented.

The Group applies International Financial Reporting Standards (IFRS) as endorsed in the European Union. Adjusted EBITDA and Capex are not defined in IFRS, they are "non-GAAP measures". Management believes that these measures are useful to readers of Altice France's financial statements as they provide a measure of operating results excluding certain items that we believe are either outside of our recurring operating activities, or items that are non-cash. Excluding such items enables trends in our operating results and cash flow generation to be more easily observable. We use the non-GAAP measures internally to manage and assess the results of our operations, make decisions with respect to investments and allocation of resources, and assess the performance of management personnel. Such performance measures are also the de facto metrics used by investors and other members of the financial community to value other companies operating in our industry, and thus are a basis for comparability between us and our peers. Moreover, our debt covenants are based on Adjusted EBITDA and other associated metrics.

Key Factors Affecting Our Results of Operations

Our operations and the operating metrics discussed below have been, and may continue to be, affected by certain key factors as well as certain historical events and actions. The key factors affecting the ordinary course of our business and our results of operations include, among others, network upgrades, competition, acquisitions and integration of acquired businesses, disposals, macro-economic and political risks in the areas where we operate, our pricing and cost structure, churn and the introduction of new products and services, including multi-play services.

Acquisitions and Integration of Businesses

We have from time to time made significant direct and indirect equity investments in, and divestments of, several cable and telecommunication businesses and ancillary service providers in various jurisdictions. Due to the significant nature of certain of these acquisitions, the comparability of our results of operations based on the Historical Consolidated Financial Information may be affected.

Our revenues for the year ended December 31, 2019 increased by 6.0% to €10,797.8 million, from €10,187.4 million for the year ended December 31, 2018. Adjusted EBITDA increased by 13.3% to €4,200.2 million, from €3,705.8 million for the year ended December 31, 2018. The increases in revenues and Adjusted EBITDA were impacted by such acquisitions and disposals. See "-Discussionand Analysis of Our Results of Operations-Yearended December 31, 2019 compared to the year ended December 31, 2018-SignificantEvents Affecting Historical Results".

At the core of Altice France's strategy is a return to revenue, profitability and cash flow growth and, as a result, deleveraging. Altice France benefits from a unique asset base which is fully-converged, fiber rich, media rich, active across consumers and businesses and holds the number two position in its market with nationwide fixed and mobile coverage. The reinforced operational focus offers significant value creation potential. In parallel, Altice France is advancing with its preparations for the disposal of non-core assets. Key elements of the Altice France's growth and deleveraging strategy include:

Operational and financial turnaround under the leadership of a new management team;
Optimizing commercial performance with a particular focus on customer services;
Continuing to invest in best-in-class infrastructure commensurate with Altice France's market position;
Monetizing content investments through various pay TV models and growing advertising revenue, and;
Execution of the non-core asset disposal program, including part of Altice France's mobile tower portfolio

For the years ended December 31, 2019 and 2018, we incurred restructuring and other non-recurring income and cost (respectively) of €2,600.5 million and €520.1 million, which primarily include costs with respect to renegotiations or termination of contractual arrangements, employee redundancies, fees paid to external counsel, capital gain or loss on investing activities and other administrative expenses related to reorganization of existing or newly acquired businesses. In addition, we generally record goodwill relating to such acquisitions. As of December 31, 2019, the goodwill recorded on our balance sheet amounted to €11,076.3 million. Goodwill is subject to impairment reviews in accordance with IFRS and any impairment charge on goodwill would have a negative impact on operating profit/net operating income. For the year ended December 31, 2019, we did not incur any impairment losses.

Multi-Play Strategy

We have implemented a business strategy focused on the provision and expansion of multi-play product offerings, including triple- and quad-play bundles. Customers who elect to subscribe for our multi-play bundles rather than our individual services realize comparative cost savings on their monthly bill. We believe that the enhanced value proposition associated with our bundled services enables us to meet our customers' communication and entertainment requirements while concurrently both increasing customer loyalty and attracting new customers. As a result of our focus on providing subscribers with multi-play bundles, we have experienced an increase in the

number of cable/fiber customer relationships. We believe our bundled service offerings will be an important driver of our fixed-based services, partially offsetting the continued pressure on traditional fixed-based services.

Introduction of New Products and Services and Investment in Content

We have significantly expanded our presence and product and service offerings in the past. In France, we launched new offers with new sports and other content in order to differentiate the product offering and to underline our investment in sports rights and other nonlinear content.

In addition, we regularly review and invest in the content that we offer to provide our subscribers with a flexible and diverse range of programming options, including high-quality local content and exclusive premium content. The Altice group has acquired the exclusive rights to broadcast and distribute various premium sporting events, including the English Premier League, French Basketball League and English Rugby Premiership, which are commercialised in France via exclusive SFR branded channels. Moreover, in May 2017, the Group successfully acquired the exclusive rights to broadcast UEFA Champions League and UEFA Europa League fixtures in France. These rights cover the period from August 2018 to May 2021. Sports events are broadcasted in France by the Altice France Group through channels packaged and distributed by AENS. In 2016, the Altice France Group and AENS entered into a distribution agreement regarding a package of sports and news channels. We intend to continue to selectively invest in local and value-added premium content as well as sports broadcasting and distribution rights in the future to enrich our differentiated and convergent communication services from those of our competitors. We believe that such efforts will reduce our customer churn and increase ARPU.

In March 2018, we redesigned our offers, stripping out premium content, and making the telecom offers more simple and comparable to competitors. These offers are now built around two separate blocks: one centred around telecoms and one centred on premium content (Sport, Cinema/Series, etc.); these are offered as paid options, at a rate still preferential for SFR customers, for fixed and mobile offers. Altice France also launched a single brand for all of its sports content: RMC Sport, which replaced SFR Sport at the time of the Champions League launch in 2018. This strategy paid off as there was a significant uplift on gross-adds ARPU for customers taking content options.

Pricing

We focus our product offerings on multi-play offers. In France, we offer multiple play (4P) offers at various price points based on the targeted clientele (low cost, no engagement period offers through our RED brand and more premium offers with the SFR brand). The French market remains highly competitive and hence extremely sensitive to pricing strategy. The cost of a multi-play subscription package generally depends on market conditions, our competitors' pricing of similar offerings and the content and add-ons available on each platform. In general, the greater the optionality, content and usage time included in the offering, the higher the price of the multi-play package. The prices of B2B contracts are negotiated individually with each customer. The B2B market for voice services is extremely price-sensitive and entails very low margins as voice services are highly commoditized, involving sophisticated customers and relatively short-term contracts. The B2B market for data services is less price-sensitive, as data services require more customization and involve service level agreements. In both markets, price competition is strongest in the large corporate and public-sector segments, whereas customer-adapted solutions are an important competitive focus in the medium and small business segments. We have tailored our targeted pricing strategy to account for these dynamics in France.

Cost Structure

We generally work towards achieving satisfactory operating margins in our business and focus on revenue- enhancing measures once we have achieved such margins. We continuously work towards optimizing our cost base by streamlining processes and service offerings, improving productivity by centralizing our business functions, reorganizing our procurement process, eliminating duplicative management functions and overhead, terminating lower-return projects and non-essential consulting and third-party service agreements, and investing in our employee relations and our culture. We are implementing common technological platforms across our networks to gain economies of scale, notably with respect to billing systems, network improvements and customer premises equipment and are investing in sales, marketing and innovation, including brand-building, enhancing our sales channels and automating provisioning and installation processes. We have also achieved, and expect to continue to achieve, substantial reductions in our operating expenses as we implement uniform best practice

operational processes across our organization. As a result, we have generally managed to achieve growth in the Adjusted EBITDA, profitability and operating cash flow of businesses that we have acquired.

For three years running, we have incurred significant capital expenditure (between 21-23% of total consolidated revenues) in order to improve our mobile network and to roll out new fiber homes (we are the market leader in very high-speed internet). Our gross capital expenditure amounted to €2,265.6 million for the year ended December 31, 2019 and €2,373.2 million for the year ended December 31, 2018.

Network Upgrades

Our ability to provide new or enhanced fixed-based services, including HDTV and VoD television services, broadband internet network access at increasing speeds and fixed-line telephony services as well as UMTS, 3G and 4G mobile services to additional subscribers depends in part on our ability to upgrade our (i) cable and DSL networks by extending the fiber portion of our network, reducing the number of nodes per home passed and upgrading technical components of our network and (ii) mobile networks by building-out our UMTS-network and investing in LTE as well as maintaining agreements with third parties to share mobile networks. During the past four years (since 2015), we have increased our fiber deployment and upgraded a substantial part of our cable networks. For example, as of December 31, 2019, our cable networks are largely DOCSIS 3.0 enabled, which allows us to offer our customers high broadband internet access speeds and better HDTV services across our footprint. In France, the Group accelerated the build-out of its 4G network over the last two years to have a market- leading mobile network in place by the end of December 2019 (4G population coverage of 99%). The Group also aims to continue the expansion of its fiber network in France and intends to capitalize on its past investments in improved fiber infrastructure.

Competition

The Group faces significant competition and competitive pressures in the French market. Moreover, the Group's products and services are subject to increasing competition from alternative new technologies or improvements in existing technologies.

With respect to its B2C activities, the Group faces competition from telephone companies and other providers of DSL, VDSL2 and fiber network connections. With respect to pay TV services, the Group is faced with growing competition from alternative methods for broadcasting television services other than through traditional cable networks. For example, online content aggregators which broadcast over-the-top ("OTT") programs on a broadband network, such as Internet competitors Amazon, Apple, Google and Netflix, are expected to grow stronger in the future. Connected or 'smart' TVs facilitate the use of these services. With respect to the fixed line and mobile telephony markets, the Group experiences a shift from fixed line telephony to mobile telephony and faces intensive competition from established telephone companies, mobile virtual network operators ("MVNOs") and providers of new technologies such as VoIP.

In the competitive B2B data services market, price pressure has been strong. Conversely, the use of data transmission services has significantly increased. The Group is currently facing competition from software providers and other IT providers of data and network solutions, and the line between them and the suppliers of data infrastructure and solutions like the Group has become increasingly blurred. Partnerships between IT providers and infrastructure providers are becoming more and more common and are an additional source of competition but also an opportunity. Being able to face the competition efficiently depends in part on the density of the network, and certain competitors of the Group have a broader and denser network. In recent years, the B2B market has experienced a structural change marked by a move from traditional switched voice services to VoIP services.

In the French pay television market, the Group competes with providers of premium television packages such as CanalSat, DSL triple-play and/or quad-play operators such as Orange, Free and Bouygues Telecom, which provide Internet Protocol TV ("IPTV"), and providers of pay digital terrestrial television ("DTT"). In the broadband market, the Group competes primarily, though increasingly with fiber, with xDSL providers such as Orange (the leading DSL provider in France), Free and Bouygues Telecom. The Group's competitors continue to invest in fiber network technology which has resulted in additional competition to its fiber-based services. In the French mobile telephony market, the Group competes with well-established mobile network operators such as

Orange, Bouygues Telecom and Free, as well as other MVNOs such as La Poste. In particular, price competition is significant since entry into the market by Free in early 2012 with low-pricedno-frills packages.

Moreover, the competition in the fixed market has deteriorated recently with more aggressive promotions from competitors for longer periods, particularly at the low end of the market. However, the acceleration of the Group's fiber deployment in France, notably expanding FTTH coverage in low-density and rural areas, should support better fiber subscriber trends as the addressable market for very high-speed broadband services expands.

Macroeconomic and Political Developments

Our operations are subject to macroeconomic and political risks that are outside of our control. For example, high levels of sovereign debt in certain European countries, combined with weak growth and high unemployment, could lead to low consumer demand, fiscal reforms (including austerity measures), sovereign debt restructurings, currency instability, increased counterparty credit risk, high levels of volatility and, potentially, disruptions in the credit and equity markets, as well as other outcomes that might adversely impact our financial condition.

Fluctuations in Currency Exchange Rates and Interest Rates

Our reporting currency is Euros and most of our operations are conducted in Euros. We are exposed to the USD and variable interest rates as part of our debt obligations. However, we have entered into hedging operations to mitigate risk related to variations in USD and a majority of our debt is fixed rate date, thus reducing the risk of an increase in benchmark interest rates having a material impact on our interest obligations.

Discussion and Analysis of Our Results of Operations

For the year ended December 31, 2019 compared to the year ended December 31, 2018

The below table sets forth our consolidated statement of income for the year ended December 31, 2019 and 2018, in millions of Euros with the variation between the periods:

Consolidated Statement of Income	December 31,	December 31,	Change
(€m)	2019	2018
Revenues	10,797.8	10,187.4	6.0%
Purchasing and subcontracting costs	(2,897.6)	(3,382.7)	(14.3)%
Other operating expenses	(1,909.5)	(2,171.4)	(12.1)%
Staff costs and employee benefits	(1,060.1)	(929.6)	14.0%
Depreciations, amortizations and impairments	(3,475.1)	(2,671.7)	30.1%
Other expenses and income	2,600.5	(520.1)	(600.0)%
O perating profit	4,055.9	511.8	692.4%
Finance income	17.5	8.9	96.8%
Interest relative to gross financial debt	(837.4)	(807.0)	3.8%
Realized and unrealized gains/(loss) on derivative instruments	5.8	(8.8)	(166.3)%
Other financial expenses	(231.2)	(119.8)	92.9%
Net result on extinguishment of financial liabilities	(78.9)	(148.6)	(46.9)%
Finance costs, net	(1,124.2)	(1,075.3)	4.6%
Share of earnings of associates and joint ventures	(201.0)	(12.7)	1,481.7%
Profit/(loss) before income tax from continuing operations	2,730.6	(576.1)	(573.9)%
Income tax benefit/(expenses)	167.7	99.3	68.8%
Profit/(loss) from continuing operations	2,898.3	(476.8)	(707.8)%
Profit/(loss) after tax from discontinuing operations	-	-
Profit/(loss)	2,898.3	(476.8)	(707.8)%
Attributable to equity holders of the parent	2,852.6	(476.2)	(699.1)%
Attributable to non-controlling interests	45.7	(0.7)	(7,040.3)%

Significant Events Affecting Historical Results

Our historical results were impacted by the following significant events that occurred during the course of the year ended December 31, 2019

1.1. SFR FTTH

On November 30, 2018, the Company announced that it had entered into an exclusivity agreement with Allianz Capital Partners, AXA Investment Managers - Real Assets, acting on behalf of its clients and OMERS Infrastructure (together the "Partners") regarding the sale of 49.99% equity stake in SFR FTTH for a total cash consideration of €1.8 billion based on an consolidated estimated €3.6 billion equity value at closing. As a consequence, the assets and liabilities were classified as held for sale as of December 31, 2018 (Refer to Note 4.15 of the Group's 2018 financial consolidated statements).

On March 27, 2019, the Group announced the closing of the transaction with a consortium led by OMERS Infrastructure and including AXA IM - Real Assets, and Allianz Capital Partners, regarding the sale of 49.99% equity stake in SFR FTTH. The consideration received was €1.7 billion based on a €3.4 billion equity value. The total capital gain recorded for the year ended December 31, 2019, was €2,795.9 million. This partnership creates the leading FTTH infrastructure wholesaler in France and brings an additional €1.7 billion of cash to Altice France. Following the closing of the transaction, Altice France lost exclusive control over SFR FTTH as Altice France and the Partners have joint control over the new entity. Furthermore, SFR FTTH is accounted for under the equity method in the scope of IFRS 11 - Joint arrangements.

1.2. Issuance of new debt instruments

On September 27, 2019, the Group issued new debt instruments for an aggregate euro equivalent amount of €2,540 million. The Group issued Euro Notes for an aggregate amount of €550 million due in 2025 and paying a coupon of 2.5%, €1,000 million due in 2028 and paying a coupon of 3.375% respectively and USD Notes for an

amount of $1,100 million due in 2028 paying a coupon of 5.5%. At the same time, the Group also restructured the swap instruments associated with the 2024 USD Notes.

The proceeds from this issuance were used to repay the remainder of the 2024 Notes and in order to repay certain intercompany debts owed to Altice Luxembourg S.A. (Refer to Notes 23 - Financial liabilities and 24 - Derivative instruments).

1.3. Dividend payments

On May 7, 2019, the Shareholder's Meeting approved the payment of a dividend for an aggregate amount of €820 million to its shareholders, Altice Luxembourg FR S.A., Altice Luxembourg FR bis S.à.r.l and Altice Europe N.V.; of the total amount, €500 million were paid in cash and €320 million via compensation of previous upstream loans.

On August 14, 2019, the Shareholder's Meeting approved the payment of an exceptional dividend for an aggregate amount of €1,050.0 million to its shareholders, Altice Luxembourg FR S.A., Altice Luxembourg FR bis S.à.r.l and Altice Europe N.V.; of the total amount, €300 million were paid in cash and €750 million via compensation of a previous upstream loan.

On December 19, 2019, the Board approved the payment of an interim dividend for an aggregate amount of €501.4 million to its shareholders, Altice Luxembourg FR S.A., Altice Luxembourg FR bis S.à.r.l and Altice Europe N.V.; of the total amount, €319.2 million were paid via compensation of a previous upstream loan and €182.2 million was recognized as a financial debt and will be paid before the end of year.

Thus, the total dividends distributed by the Group to its shareholders amount to €2,371.4 million.

1.4. Redemption of 2024 Notes

On June 10, 2019, the Group proceeded to partially reimburse its euro and dollar denominated notes due in 2024. An aggregate of €500 million and $560 million were reimbursed. The Group paid a call premium of €29.7 million as part of the redemption. The redemptions were treated as partial extinguishments of the debt instruments and per IFRS 9, unamortised transaction costs were recycled through the consolidated statement of income to the extent of the nominal repaid. The underlying derivative instruments were restructured as well.

On October 15 and 16, 2019, the Group proceeded to reimburse the remainder of the 2024 USD and Euro Notes for an aggregate euro equivalent amount of €1,489 million (excluding accrued interests and call premia). The proceeds from the issuance of new debt described in 4.2 above were used to finance these redemptions (Refer to Notes 23 - Financial liabilities and 24 - Derivative instruments).

1.5. Financing flows with Altice Group entities

On June 10, 2019, the Group issued a new dollar denominated loan for an aggregate amount of $840 million (€745 million equivalent). This loan was fully subscribed by Altice Luxembourg S.A. with an interest rate of 10.75% (5.8572% swapped to euros). The proceeds from this issuance were used to partially redeem the 2024 Notes as mentioned in Note 4.4.

On September 27, 2019, the Group fully redeemed the loan using a part of the proceeds from the issuance of new notes mentioned in Note 4.2 above. The net impact of this issuance was recorded in the line "Other flows from financial activities" in the consolidated statement of cash flows.

On July 30, 2019, the Group made an upstream loan to Altice Group Luxembourg S.A. for an aggregate amount of €175 million. The Group drew an equivalent amount on the Altice France revolving credit facility to finance the loan.

On September 27, 2019, the Group made an upstream loan to Altice Luxembourg S.A. for an aggregate amount of €92.5 million. The proceeds from the issuance of new debt (Refer to Note 4.2 above) were used to finance this loan.

Between October 1, 2019 and December 19, 2019, the Group made several new advances to both Altice Group Luxembourg and Altice Luxembourg, for aggregate amounts of €130 million and €180 million respectively. On December 19, 2019, following the decision of the Board to distribute an interim dividend, the advances made were compensated against the outstanding dividend payment. Following this compensation, as of December 31, 2019, the Group had an outstanding debt position with Altice Luxembourg S.A. for an aggregate amount of €182.2 million and a receivable position with Altice Group Luxembourg for an aggregate amount of €258.3 million.

1.6. Disposal of Groupe L'Express

On July 19, 2019, the Board approved the sale of Groupe L'Express S.A. to Altice Group Luxembourg SA for a transaction value of €1 for the shares of Groupe L'Express and €1 for the Group's receivables based on the perspectives and business plan of Groupe L'Express. Following the announcement and the finalization of the term sheet of the transaction at the end of June 2019, the related asset and liabilities h ave been classified as held for sale in accordance with IFRS 5 as at June 30, 2019. This transaction was closed on July 30, 2019.

The disposal of Groupe L'Express has been definitively recorded as of September 30, 2019 with a net capital loss of €4 million in the caption "Other expenses and income" in the income statement.

1.7. Agreement to acquire 100% Covage by SFR FTTH

On November 25, 2019, SFR FTTH, alongside its consortium of financial investors (led by OMERS Infrastructure and including Allianz Capital Partners and AXA Investment Managers - Real Assets, acting on behalf of its clients), entered into an exclusivity agreement with Cube Infrastructure Fund and Partners Group (acting on behalf of its clients) regarding the acquisition of 100% of Covage for a total cash consideration of circa €1.0 billion, out of which €70 million non-recourse debt is expected to be raised at SFR FTTH, €465 million cash equity is expected to be contributed by the Group and €465 million cash equity is expected to be contributed by SFR FTTH's consortium of financial investors.

Covage is the 4th largest fibre wholesale operator in France with 2.4 million homes to be passed (including 0.8 million homes already built and 0.3 million homes in very dense areas) which will be added to SFR FTTH footprint of more than 5.4 million secured homes to be passed (including 1.9 million homes built as at December 31, 2019). Covage will become part of SFR FTTH, resulting in a total of around 8 million secured homes to be passed (including 2.7 million homes already built as at December 31, 2019).

The parties entered into the share purchase agreement on December 24, 2019. The transaction is expected to close in the first half of 2020.

Revenue

For the Year ended December 31, 2019, we generated total revenues of €10,797.8 million, a 6.0% increase compared to €10,187.4 million for the year ended December 31, 2018.

From January 01, 2019, the Group has changed the way it presents the revenue split by business segment in an effort to better present the underlying trends. The new split is provided in the table below.

The increase in revenues was mainly driven by an increase in our business services segment, which grew by 20.3% to €3,377.3 million for the year ended December 31, 2019. Residential business revenue declined by 1.0% year over year for the fixed segment, but grew by 1.2% for the mobile segment.

The tables below set forth the Group's revenue by lines of activity which the Group operates for the year ended December 31, 2019 and December 31, 2018, respectively:

Re ve nue s	December 31,	December 31,	Change

(€m)	2019	2018
Residential - Fixed	2,528.8	2,555.2	(1.0)%
Residential - Mobile	3,515.4	3,472.4	1.2%
Business services	3,377.3	2,808.0	20.3%
Total Telecom excl. equipment sales	9,421.5	8,835.6	6.6%
Equipment sales	923.4	888.9	3.9%
Media	452.9	462.9	(2.2)%
Total	10,797.8	10,187.4	6.0%

Revenues for the Group's residential mobile services grew to €3,515.4 million for the year ended December 31, 2019 compared to €3,472.4 million for the year ended December 31, 2018. This trend was driven primarily by the impact of consecutive positive net-adds in the residential mobile segment for the past six quarters and a stabilisation of market pricing, following an abatement of market competition. For the year ended December 31, 2019, the Group continued its positive net adds trend, adding 652k new B2C mobile post-paid customers

(compared to net adds of 1,049k for the year ended December 31, 2018), as a result of an improved customer experience and anti-churn measures implemented at the end of 2017.

Mobile equipment revenues grew by 3.6% from €888.9 million for the year ended December 31, 2018 to €923.4 million for the year ended December 31, 2019, mainly driven by the uptake of higher end smartphones by customers in 2019 compared to the year ended December 31, 2018.

The Group's residential fixed segment revenues decreased by 1.0% from €2,555.2 million for the year ended December 31, 2018 to €2,528.8 million for the year ended December 31, 2019. This decrease was mainly due to customer losses experienced in previous quarters (consecutive losses throughout 2017), the loss of favourable VAT treatment on audiobook bundling (in 2019) and partly impacted by more intense market competition following SFR's successful churn reduction and more proactive retention activity. For the year ended December 31, 2019, the Group added 137k new B2C fixed customers (compared to 187k net-adds in 2018), with 262k fibre net adds in 2019 vs 284k fibre net adds in 2018. B2C fixed revenue was also impacted by the loss of favourable VAT treatment on telecom/press bundles (ended in February 2018).

Revenues from our business services segment grew by 20.3% to reach €3,377.3 million for the year ended December 31, 2019 compared to € 2,808.0 million for the year ended December 31, 2018. This revenue growth was mainly due to the inclusion of revenues for the full nine months from our technical services, customer services and overseas territories businesses (€194.5 million), which were not included in the revenues for the year ended December 31, 2018. The business services revenue was also impacted by revenues derived from the construction business with SFR FTTH for the year ended December 31, 2019.

Revenues from the Group's media activities totalled €452.9 million for the year ended December 31, 2019, a 2.2% decrease as compared to €462.9 million for the year ended December 31, 2018. This trend was driven by continued growth of radio/television business, which grew by 11.4% (from €347.5 million for the year ended December 31, 2018 to € 387.2 million for the year ended December 31, 2019), offset by a decline in our printed press business.

Adjusted EBITDA

For the year ended December 31, 2019, our Adjusted EBITDA was €4,200.2 million, an increase of 13.3% compared to the year ended December 31, 2018 (€3,705.8 million). A reconciliation from revenues to adjusted EBITDA is presented below. This increase was mainly due to 1) the increase in revenues as explained above and 2) a decrease in customer service and maintenance costs, partially offset by an increase in content and staff costs.

Purchasing and subcontracting costs decreased by 14.3%, from €3,382.7 million in the year ended December 31, 2018 to €2,897.6 million in the year ended December 31, 2019, mainly due to a decrease in interconnection costs.
Other operating expenses decreased by 12.1% to € 1,909.5 million in the year ended December 31, 2019 from € 2,171.4 million in the year ended December 31, 2018, driven mainly due to a decrease in customer service (related to decreasing churn and hence a lower volume of call center activity) and sales and marketing costs (lower commercial activity driven by a relative stability in market prices), which was offset by an increase in business taxes (mainly related to the introduction of an IFER for the fixed business).
Staff costs and employee benefit expenses increased by 14.0%, from €929.6 million in the year ended December 31, 2018 to €1,060.1 million in the year ended December 31, 2019, mainly driven by the inclusion of staff costs of our technical services and customer services entities, as well as for our French overseas territories business for the year ended December 31, 2019 (these entities contributed partially in for the year ended December 31, 2018).
Share based expenses: the costs incurred in the year ended December 31, 2019 are related to the recharge of the costs related to the free preference shares allotted to the CEO of Altice France by Altice Europe NV.

O perating Profit	December 31,	December 31,	Change

(€m)	2019	2018
Revenues	10,797.8	10,187.4	6.0%
Purchasing and subcontracting costs	(2,897.6)	(3,382.7)	(14.3)%
Other operating expenses	(1,909.5)	(2,171.4)	(12.1)%
Staff costs and employee benefits	(1,060.1)	(929.6)	14.0%
Total	4,930.5	3,703.7	33.1%
Share-based expenses (a)	30.8	2.1	1,339.2%
Rental expense operating lease	(761.1)	-	-
Adjusted EBITDA	4,200.2	3,705.8	13.3%
Depreciation, amortization and impairment (b)	(3,475.1)	(2,671.7)	30.1%
Share-based expenses	(30.8)	(2.1)	1,339.2%
Other expenses and income (c)	2,600.5	(520.1)	(600.0)%
Rental expense operating lease	761.1	-	-
O perating profit	4,055.9	511.8	692.4%

Depreciation and Amortization and Impairment

For the year ended December 31, 2019, depreciation and amortization totalled €3,475.1 million, a 30.1% increase compared to €2,671.7 million for the year ended December 31, 2018. The increase was mainly due to the amortisation impact of customer acquisition cost assets created as part of the application of IFRS 15 and the first time implementation of IFRS 16 from January 01, 2019. Amortisation of right of use assets recorded under IFRS 16 amounted to €757.2 million for the year ended December 31, 2019. For the year ended December 31, 2018, due to the first time application of IFRS 15 and absence of IFRS 16, there was no such amortisation/impairment impact.

Non-recurring expenses and income

For the year ended December 31, 2019, our non-recurring expenses and income amounted to an income of €2,600.5 million, a 600.0% increase compared to an expense of €520.1 million for the year ended December 31, 2018.

O ther expenses and income	December 31,	December 31,	Change
(€m)	2019	2018
Net restructuring costs	(1.3)	8.6	(114.8)%
Litigation	(48.2)	64.1	(175.2)%
Gain and loss on disposal of property, plant, equipment and intangible assets	(28.9)	16.4	(276.1)%
Other	2,678.9	(609.2)	539.7%
O ther expenses and income	2,600.5	(520.1)	600.0%

The details of non-recurring income and expenses are given below:

Restructuring costs mainly include costs related to provisions for employee redundancies as part of the voluntary departure plan launched in 2017. For the three month period ended December 31, 2019, we recorded an expense of €1.3 million related to external costs from the departure plan initiated in our printed press business and external costs related to our telecom departure plan.
For the year ended December 31, 2018, we recorded a reversal in provision for certain litigation with Orange for an aggregate amount of € 120.8 million. For the year ended December 31, 2019, we recorded provisions for certain VAT litigations, which explains the expense of €48.2 million recorded in 2019.
For the year ended December 31, 2019, we recorded a capital gain related to the divestment of a 49.99% stake in SFR FTTH for an aggregate amount of €2,793.6 million. For the year ended December 31, 2018, we recorded non-recurring expenses of €609.2 million, which were mainly related to the booking of the content break fee (€300 million).

Finance costs (net)

Net finance costs amounted to €1,124.2 million for the year ended December 31, 2019, registering an increase of

4.6% compared to €1,075.3 million for the year ended December 31, 2018. A breakdown is provided below:

Financial Income	December 31,	December 31,	Change

(€m)	2019	2018
Interest relative to gross financial debt	(837.4)	(807.0)	3.8%
Realized and unrealized gains/(loss) on derivative instruments linked to financial debt	5.8	(8.8)	(166.3)%
Finance income	17.5	8.9	96.8%
Provisions and unwinding of discount	(13.8)	(28.4)	(51.4)%
Interest related to lease liabilities	(117.9)	-	-
Other	(99.5)	(91.5)	8.8%
O ther financial expenses	(231.2)	(119.8)	92.9%
Net result on extinguishment of a financial liability	(78.9)	(148.6)	(46.9)%
Finance costs, net	(1,124.2)	(1,075.3)	4.6%

The interest relative to gross financial debt increased from €807.0 million as of December 31, 2018 to €837.4 million as of December 31, 2019. This increase was mainly driven by an increase in our cost of debt related to the refinancing from July and August 2018 (€42.5 million), an increase related to an increase in the nominal amount of the debt (€215 million), as well as an increase in the interest rate of the refinanced 2022 Notes.

As of December 31, 2019, the Group decided to separate impacts of the variations of derivative instruments in order to improve the readability of its interest expense. For the year ended December 31, 2019, the net gain realized on derivative instruments included a one-off income of €258 million related to the monetization of the latent gain on certain cross currency swaps. There was no such income for the year ended December 31, 2018.

As of December 31, 2019, all fees related to refinancing were reclassified to the line item, "Net result on extinguishment of a financial liability".

As of December 31, 2019, the other financial expenses line item include the interest and realized FX loss on the redemption of the $840 million intercompany loan with Altice Luxembourg for an amount of €47.7 million.

Share of earnings of associates

For the Year ended December 31, 2019, our share of loss of associates amounted to €201.0 million, compared to €12.7 million for the year ended December 31, 2018. For the year ended December 31, 2019, we recorded the elimination of the margin on the construction business with SFR FTTH to the extent of the group's shareholding (50.01%), which

Income tax income / (expense)

For the year ended December 31, 2019, we recorded an income tax income of €167.7 million compared to an income of €99.3 million for the year ended December 31, 2018. The income recorded in 2019 was mainly as a result of the activation of certain carried over tax losses, resulting in a deferred tax income.

Analysis of the consolidated statement of financial position

Assets

Consolidated Statement of Financial Position	December 31,	December 31,	Change
(€m)	2019	2018 revised (*)
Assets
Goodwill	11,076.3	11,071.9	0.0%
Intangible assets	5,483.4	5,888.7	(6.9)%
Contracts costs	159.6	156.9	1.7%
Property, plant and equipment	6,323.1	6,331.4	(0.1)%
Rights of use assets	3,418.6	-	-
Investments in associates and joint ventures	1,551.4	19.8	7,736.9%
Financial assets	1,028.5	1,116.3	(7.9)%
Deferred tax assets	230.7	11.7	1,879.7%
Other assets	247.7	265.5	(6.7)%
Total non-current assets	29,519.2	24,862.1	18.7%
Inventories	348.5	304.0	14.6%
T rade and other receivables	3,421.5	3,549.6	(3.6)%
Contracts assets	217.4	226.8	(4.1)%
Current tax assets	48.8	110.9	(56.0)%
Financial assets	24.1	2.2	994.1%
Cash and cash equivalents	556.8	1,068.5	(47.9)%
Assets classified as held for sale	-	929.8	(100.0)%
Total current assets	4,617.0	6,191.8	(25.4)%
Total Assets	34,136.3	31,053.8	9.9%

Total assets grew by 9.9% year over year from €31,053.8 million as of December 31, 2018 to €3,4136.3 million for the year ended December 31, 2019. This increase was mainly driven by the divestment of a 49.99% stake in the newly created SFR FTTH.

Non-current assets

Total non-current assets amounted to €29,519.2 million an 18.7% increase compared to €24,862.1 million for the year ended December 31, 2018. This was mainly driven the recognition of the investment in associate related to the creation and then subsequent divestment of a 49.99% stake in SFR FTTH (€1,531.7 million). Deferred tax assets increased from €11.7 million as of December 31, 2018 to €230.7 million for the year ended December 31, 2019, as a result of the activation of certain tax losses carried forward.

Current assets

Current assets decreased by 25.4% to €4,617.0 million for the year ended December 31, 2019 compared to €6,191.8 million for the year ended December 31, 2018. This decrease was mainly driven by the divestment of a 49.99% stake in SFR FTTH in March 2019, which had been recorded as an asset held for sale as of December 31, 2018. The decrease in current assets was also due to a decrease in cash and cash equivalents from €1,068.5 million as of December 31, 2018 to €556.8 million as of December 31, 2019. Cash and cash equivalents were impacted by the proceeds received from the sale of a 49.99% stake in SFR FTTH (c. €1,706 million), offset by dividends paid to the shareholders of the company for an aggregate amount of € 2,371.4 million.

Equity and Liability

Consolidated Statement of Financial Position	December 31,	December 31,	Change
(€m)	2019	2018 revised (*)
Equity and liabilities
Issued capital	443.7	443.7	(0.0)%
Additional paid in capital	3,533.1	5,403.1	(34.6)%
Reserves	446.0	(2,025)	(122.0)%
Equity attributable to owners of the company	4,422.8	3,821.7	15.7%
Non-controlling interests	226.3	216.4	4.6%
Total equity	4,649.2	4,038.1	15.1%
Borrowings, financial liabilities and relating hedging instruments	17,336.5	17,435.9	(0.6)%
Lease liabilities	2,804.3	-	-
Other financial liabilities	312.0	367.3	(15.1)%
Provisions	460.0	476.4	(3.4)%
Non-current contracts liabilities	520.8	502.8	3.6%
Deferred tax liabilities	44.2	126.4	(65.0)%
Other liabilities	24.8	50.4	(50.8)%
Total non-current liabilities	21,502.7	18,959.2	13.4%
Borrowings, financial liabilities	426.7	359.9	18.5%
Lease liabilities	675.6	-	-
Other financial liabilities	1,170.1	1,086.0	7.7%
T rade and other payables	4,828.6	5,558.0	(13.1)%
Contracts liabilities	501.7	478.5	4.8%
Current tax liabilities	145.1	115.4	25.8%
Provisions	149.5	216.5	(31.0)%
Other liabilities	87.2	42.8	103.7%
Liabilities directly associated with assets classified as held for sale	-	199.4	(100.0)%
Total Current liabilities	7,984.4	8,056.5	(0.9)%
Total Equity & liabilities	34,136.3	31,053.8	9.9%

Equity

Total equity increased by 15.1% year on year to reach €4,649.2 million in 2019 compared to €4,038.1 million for the year ended December 31, 2018. This increase was driven mainly by the net income registered by the Group in 2019 (reflected in the increase in reserves), partially offset by the dividends paid by the Group over the course of 2019 (also reflected in a decrease in the reserves)

Non-current liabilities

Total non-current liabilities increased by 13.4% from €18,959.2 million to €21,502.7 million for the year ended December 31, 2019, mainly due to the inclusion of lease liabilities, resulting from the first time implementation of IFRS 16, Leases starting from January 01, 2019. Lease liabilities amounted to €2,804.3

Current liabilities

Current liabilities remained mostly flat year on year and decreased by 0.9% from €8,056.5 million as of December 31, 2018 to €7,984.4 million as of December 31, 2019. This decrease was a result of a decrease in liabilities associated with assets held for sale (related to SFR FTTH, which was held for sale as of December 31, 2018). This decrease was offset by the first time recognition of current lease liabilities (related to IFRS 16), for an amount of €675.6 million, a decrease in trade and other liabilities of 13.1% (from €5,558.0 million as of December 31, 2018 to €4,828.6 million as of December 31, 2019).

Liquidity and Capital Resources

Cash and Debt Profile

As of December 31, 2019, our consolidated cash and cash equivalents amounted to €556.8 million on an actual basis (net of overdraft).

Our most significant financial obligations are our debt obligations. As a result of the various acquisitions we have made since 2014 and the financing transactions that we entered into to fund such acquisitions, our financing profile has undergone a substantial change in this period. Our total third-party debt (excluding certain other long term

and short-term liabilities, finance leases and operating lease debt generated by the first time application of IFRS

as of December 31, 2019 was €9,934.6 million relating to bonds and €7,372.7 million relating to loans from financial institutions, including drawings under the Existing Revolving Credit Facilities. As of December 31, 2019, our revolving credit facilities had been drawn for an aggregate amount of €90 million, leaving an amount of €1,315 million free to finance any liquidity needs (including available credit facilities at Hivory).

The following table presents the detail of the Group's debt:

	Current	Non-current	Total
Financial Liabilities breakdown	December 31,	December 31,	December 31,	December 31,	December 31,	December 31,

(€m)	2019	2018	2019	2018	2019	2018
Bonds	257.2	278.5	9,677.4	9,474.4	9,934.6	9,752.9
Loans from financial institutions	169.4	81.4	7,203.3	7,167.3	7,372.7	7,248.7
Derivative financial instruments	-	-	455.8	794.1	455.8	794.1
Borrowings, financial liabilities and related	426.7	359.9	17,336.5	17,435.8	17,763.2	17,795.8
hedging instruments

Finance lease liabilities *	24.3	22.9	42.5	56.4	66.8	79.3
Operating lease liabilities	651.3	-	2,761.8	-	3,413.2	-
Lease liabilities	675.6	22.9	2,804.3	56.4	3,479.9	79.3
Perpetual subordinated notes ("T SDI")	-	-	56.8	53.0	56.8	53.0
Deposits received from customers	33.9	37.2	166.9	162.4	200.8	199.6
Bank overdrafts	6.2	39.2	-	-	6.2	39.2
Securitization	152.9	229.5	-	-	152.9	229.5
Reverse factoring	601.2	600.0	-	-	601.2	600.0
Commercial paper	149.0	107.0	-	-	149.0	107.0
Other (a)	226.8	50.3	88.4	95.6	315.2	145.9
O ther financial liabilities	1,170.1	1,063.1	312.0	310.9	1,482.1	1,374.1
Financial liabilities	2,272.3	1,445.9	20,452.9	17,803.2	22,725.2	19,249.1

For the year ended December 31, 2019, variations in financial debt are listed below:

On June 10, 2019, the Group proceeded to partially redeem 40% of its 2024 EUR and USD Notes. The impacts are listed below:
o €500 million reimbursed at a call premium of 2.813% (€14.0 million);
o $560 million (€495.5 million equivalent) at a call premium of 3.125% ($17.5 million or €15.5 million equivalent).
On June 10, 2019, the Group also issued an $840 million fully subscribed by Altice Luxembourg S.A. bearing a semiannual coupon of 10.5% (5.8572% swapped into euros), the proceeds from which were used to partially redeem the 2024 Notes.
On September 27, 2019, the Group issued the following new bonds for an aggregate euro equivalent amount of €2,545 million:
o €550 million Notes due in 2025 and bearing a coupon of 2.5%;
o €1,000 million Notes due in 2028 and bearing a coupon of 3.375%; o $1,100 million Notes due in 2028 and bearing a coupon of 5.5%.

All the Notes were issued at par with an issuance fee of 0.5% per instrument.

On September 27, 2019, the Group used a portion of the new debt to:

Fully redeem the $840 million Notes (including accrued interest from the date of issuance) for an aggregate amount of $866.95 million (€792.8 million equivalent);

Pay an accrued dividend of €175 million (portion of the €1,050 million dividend approved by the general assembly of the Group in August 2019);

Make a new upstream loan of €92.5 million to Altice Luxembourg S.A.

As of December 31, 2019, the remainder of cash issued from the new debt issued by the Group was held on balance sheet in order to fully redeem the remainder of the 2024 Notes (€750 million and $815 million). The carrying amount of these debts was restated to current debt for the year ended December 31, 2019.

As of December 31, 2019, the Group considers that as it had the intention to fully repay the remaining portion of the 2024 Notes, the call premia associated with the redemption, as well as unamortised deferred financing costs were fully recorded via the statement of income. For the year ended December 31, 2019, and including the impact of the partial redemption of the 2024 Notes in June 2019, the Group recorded €79.1 million as costs of

extinguishment of debt (of which €74 million pertaining to call premia and €5.1 million related to the accelerated amortization of deferred financing costs).

For the year ended December 31, 2019, we recorded liabilities related to the capitalisation of our operating leases, resulting from the first time application of IFRS 16. The total amount of operating lease liabilities amounted to 3,413.2 million.

The terms of our debt instruments contain certain restrictions, including covenants that restrict our ability to incur additional debt. As a result, additional debt financing is only a potential source of liquidity if the incurrence of any new debt is permitted by the terms of our existing debt instruments.

Sources of Liquidity

Our principal source of liquidity is expected to be the operating cash flows of our operating subsidiaries and, if required, borrowings under the Existing Revolving Credit Facilities. As of December 31, 2019, our revolving credit facility was drawn for an aggregate amount of €90 million. We expect to use these sources of liquidity to fund operating expenses, working capital requirements, capital expenditures, debt service requirements and other liquidity requirements that may arise from time to time. The availability of borrowings under the Existing Revolving Credit Facilities is conditioned upon compliance with specified leverage ratios. Our ability to generate cash from our operations will depend on our future operating performance, which is in turn dependent, to some extent, on general economic, financial, competitive, market, regulatory and other factors, many of which are beyond our control. We believe that our cash and cash equivalents, the cash provided from the operations of our operating subsidiaries and any available borrowings under the Existing Revolving Credit Facilities will be sufficient to fund our currently anticipated working capital needs, capital expenditures, and debt service requirements during the next 12 months, although no assurance can be given that this will be the case. However, as our debt matures in later years, we anticipate that we will seek to refinance or otherwise extend our debt maturities. No assurance can be given that we will be able to complete the Refinancing Transactions or otherwise extend our debt maturities. In this regard, it is not possible to predict how economic conditions, sovereign debt concerns and/or any adverse regulatory developments could impact the credit markets we access and accordingly, our future liquidity and financial position. In addition, sustained or increased competition, particularly in combination with adverse economic or regulatory developments, could have an unfavourable impact on our cash flows and liquidity.

The debt issued by the subsidiaries of the Company is subject to certain restrictive covenants, which apply in the case of debt issued by Altice France to SFR S.A. and its restricted subsidiaries.

The debt issued by the Group's subsidiaries is subject to incurrence based covenants, which do not require ongoing compliance with financial ratios, but place certain limitations on the relevant restricted group's ability to, among other things, incur or guarantee additional debt (including to finance new acquisitions), create liens, pay dividends and other distributions to shareholders or prepay subordinated indebtedness, make investments, sell assets, engage in affiliate transactions or engage in mergers or consolidations. These covenants are subject to several important exceptions and qualifications.

To be able to incur additional debt under an applicable debt instrument, the relevant restricted group must either meet the ratio test described below (on a pro forma basis for any contemplated transaction giving rise to the debt incurrence) or have available capacity under the general debt basket described below or meet certain other exceptions to the limitation on indebtedness covenant in such debt instrument.

Senior Secured Debt and Senior Debt is subject to an incurrence test as following:

Senior Secured debt of Altice France is subject to an incurrence test of 3.25:1 (Adjusted EBITDA to Net Debt) and Senior Debt is subject to an incurrence test of 4.00:1 (Adjusted EBITDA to Net Debt)

In addition, the Group can use various 'baskets' as defined under its debt covenants to rely on when incurring indebtedness.

The Company or its relevant subsidiaries are allowed to fully consolidate the EBITDA from any subsidiaries in which they have a controlling interest and that are contained in the restricted group as defined in the relevant debt instruments.

The Group has access to a revolving credit facilities, which are subject to maintenance covenants. The terms of these facilities are no more restrictive than the incurrence covenants contained in other debt instruments.

The Issuer is a holding company with no direct source of operating income. Therefore, the Issuer will be dependent on dividends and other payments from its operating subsidiaries to meet its liquidity requirements.

Working Capital

As of December 31, 2019, the Group had net current liability position of €7,984.4 million (mainly due to trade payables amounting to €4,828.6 million) and a negative working capital of €1,430.1 million. The negative working capital position is structural and follows industry norms. Customers generally pay subscription revenues early or mid-month, with short days of sales outstanding, and suppliers are paid in the beginning of the following month, thus generating a negative working capital. Payables due the following month are generally covered by operating cash flow. We expect that our operating cash flows and, if required, available borrowings under the Existing Revolving Credit Facilities will be sufficient to meet our working capital requirements during the next 12 months.

Cash flow statement

Consolidated Statement of Cash Flows	December 31,	December 31,	Change
(€m)	2019	2018 restated (*)
Net income (loss), Group share	2,852.6	(476.2)	(699.1)%
Net cash flow provided (used) by operating activities	4,087.4	2,710.8	50.8%
Net cash flow provided (used) by investing activities	(666.4)	(3,116.3)	(78.6)%
Net cash flow provided (used) by financing activities	(3,921.0)	1,045.2	(475.1)%
Net increase (decrease) in cash and cash equivalents	(500.0)	639.7	(178.2)%
Effects of exchange rate changes on the balance of cash held in foreign currencies	(11.7)	(22.6)	(47.9)%
Cash and cash equivalents at beginning of period	1,068.5	451.3	136.8%
Cash and cash equivalents at end of period	556.8	1,068.5	(47.9)%

Net cash provided by operating activities

Net cash provided by operating activities increased to €4,087.4 million for the year ended December 31, 2019 compared to €2,710.8 million for the year ended December 31, 2018. This trend was the result of higher operating profit recorded for the year ended December 31, 2019 which was offset by a working capital unwinding effect for in 2019 as compared to the same period in 2018 (-€532.2 million vs -€244.7 million). For the year ended December 31, 2018, working capital was impacted by the recognition of the content break fee (€300 million) and the outstanding amount for the departure plan still booked as social payables at the end of that period (c. €68 million).

Net cash provided by (used in) investing activities

For the year ended December 31, 2019, we had a net cash outflow used in investing activities for an amount of €666.4 million, compared to net cash used in investing activities of €3,116.3 million for the year ended December 31, 2018. The difference can mainly be attributed to the closing of the SFR FTTH divestment for which the group received net cash proceeds of €1,616 million for the year ended December 31, 2019, whereas for the year ended December 31, 2018, the Group recorded cash outflows related to the acquisition of its technical services, customer service and French overseas territories businesses (€791.4 million). Capital expenditure for the year ended December 31, 2019 amounted to €2,265.6 million compared to €2,372.2 million for the year ended December 31, 2018.

Net cash provided by (used in) financing activities

For the Year ended December 31, 2019, net cash used for financing activities amounted to €3,921.0 million, compared to €1,045.2 million provided by financing activities for the year ended December 31, 2018. This difference was mainly due to, 1) Dividend payment of €2,371.4 million in 2019 compared to 0 in 2018, 2) proceeds from the sale of a 49.99% stake in Hivory for an aggregate amount of €1,766.8 in the year ended December 31, 2018 and 3) the first time implementation of IFRS 16 on January 1, 2019. We recorded an expense of €821.2 related to right of use liabilities for the year ended December 31, 2019 compared to nil for the year ended December 31, 2018.

Other disclosures

Unrecognized Contractual Commitments

We have other contractual obligations incurred in the ordinary course of business, including commitments relating to building or upgrading network infrastructure, purchase of set-top boxes, modems, mobile handsets and other end-user equipment and various maintenance and support contracts primarily relating to the maintenance and support of network infrastructure and equipment, purchase commitments for content, royalty payments to regulatory authorities and authors' rights to societies and commitments under interconnection contracts. See Note 32 to the audited consolidated financial statements of Altice France for the year ended December 31, 2019.

For the Year ended December 31, 2019, following the implementation of IFRS 16-Leases, commitments related to operating leases were recorded on the statement of financial position, thus leading to a decrease in unrecognised contractual commitments million compared to the year ended December 31, 2018.

Defined Benefit and Defined Contribution Pension Plans

In addition, we have obligations under defined benefit and defined contribution pension plans. Our cash outflow relating to these obligations will vary depending on many factors. In the case of defined benefit plans, we have recognized a liability regarding employee benefits in the statement of financial position of Altice France which represents the present value of the defined benefits liability less the fair value of the plan assets, and the past service costs. The liability in respect of defined benefit plans is determined using actuarial valuations. The actuarial valuation involves making assumptions with regards to, among others, discount rates, expected rates of return on assets, future salary increases and mortality rates. Due to the long-term nature of these plans, such estimates are subject to uncertainty. Actuarial gains and losses are reflected in the statement of income and statement of other comprehensive income in the period in which they arise, as part of the salary costs. Deposits in a defined contribution plan in respect of severance pay or in respect of emoluments are recognized as an expense at the time of the deposit in the plan, in parallel to the receipt of the labour services from the employee and no additional provision is recognized in the financial statements. As of December 31, 2019, our total defined benefit plans liabilities were €164.7 million. See Note 26 to the audited consolidated financial statements of Altice France for the year ended December 31, 2019 for more details.

Post-Balance Sheet Date Events

Issuance of New Senior and Senior Secured Debt

On January 24, 2020, Altice France issued €500 million aggregate principal amount of its euro denominated 2.125% Senior Secured Notes due February 15, 2025 (the "2025 Altice France Senior Secured Notes").

On January 24, 2020, Ypso Finance Bis issued $1,225 million aggregate principal amount of its dollar denominated 6.000% Senior Notes due February 15, 2028 (the "2028 Ypso Finance Bis Dollar Senior Notes") and €500 million aggregate principal amount of its euro denominated 4.000% Senior Notes due February 15, 2028 (the "2028 Ypso Finance Bis Euro Senior Notes" and, together with the 2028 Ypso Finance Bis Dollar Senior Notes, the "2028 Ypso Finance Bis Senior Notes").

Exchange offer completed by Ypso Finance Bis and automatic exchange

On January 24, 2020, Ypso Finance Bis commenced an exchange offer to noteholders of Altice Luxembourg's (i) 2019 Altice Luxembourg Dollar Senior Notes and (ii) 2019 Altice Luxembourg Euro Senior Notes, to exchange the 2019 Altice Luxembourg Dollar Senior Notes for an equal aggregate principal amount of corresponding dollar denominated 10.500% senior notes due 2027 issued by Ypso Finance Bis (the "Ypso Finance Bis Exchange Dollar Notes") and the 2019 Altice Luxembourg Euro Senior Notes for an equal aggregate principal amount of corresponding euro denominated 8.000% senior notes due 2027 issued by Ypso Finance Bis (the "Ypso Finance Bis Exchange Euro Notes" and, together with the Ypso Finance Exchange Dollar Notes, the "Ypso Finance Bis Exchange Notes"). At the expiration of the exchange offer, a total of $1,562 million (accounting for 97.63% of the outstanding aggregate principal) of the 2019 Altice Luxembourg Dollar Senior Notes and €1,317 million (accounting for 94.10% of the outstanding aggregate principal) of the 2019 Altice Luxembourg Euro Senior Notes were tendered and accepted. On February 27, 2020, $1,562 million of Ypso Finance Bis Exchange Dollar Notes and €1,317 million of Ypso Finance Exchange Bis Euro Notes were issued by Ypso Finance Bis.

Upon satisfaction of certain conditions, comprising full discharge, cancellation and/or redemption of 2019 Altice Luxembourg Senior Notes and 2019 Altice Luxembourg Senior Notes, at the discretion of Ypso Finance Bis (i) the Ypso Finance Exchange Dollar Notes were automatically exchanged for an equal aggregate principal amount

of dollar-denominated 10.500% % senior notes due 2027 to be issued by Altice France Holding, (ii) the Ypso Finance Exchange Euro Notes were automatically exchanged for an equal aggregate principal amount of euro- denominated 8.000% senior notes due 2027 to be issued by Altice France Holding, (iii) the 2028 Ypso Finance Bis Dollar Senior Notes were automatically exchanged for an equal aggregate principal amount of dollar- denominated 6.000% senior notes due 2028 to be issued by Altice France Holding and (iv) the 2028 Ypso Finance Bis Euro Senior Notes were automatically exchanged for an equal aggregate principal amount of euro- denominated 4.000% senior notes due 2028 to be issued by Altice France Holding (the actions described in subclauses (i)-(iv) collectively, the "Automatic Exchange").

COVID-19 Pandemic

On March 11, 2020, the COVID-19 outbreak was declared by the World Health Organization (WHO) as a global pandemic, highlighting the health risks of the disease. In this context and following regulatory requirements published by governments over the last weeks in countries in which the Group operates, the Group continues to assess conditions in order to adapt to the business and social environment in which it operates.

The COVID-19 pandemic can have an adverse effect on the Group's business, financial condition and results of operations, depending on the nature and period of governmental measures in the countries in which the Group operates. Impacts may include:

The slowdown of the production capabilities of China or other affected countries may have a negative impact on hardware, software and other providers of outsourced services that the Group relies on to provide its services, and the global reach of the pandemic may lead to a situation where there are no clear or cost effective alternatives;
Delay in infrastructural projects;
Productivity of the workforce may decline due to an increase in sick leaves, quarantine procedures and work or travel restrictions;
Habits and financial situation of customers may change due to the economic slowdown and possibility of a worldwide recession, e.g., postponing purchase decisions, breaking contracts and personal or corporate bankruptcies.

The Group has activated a response program in order to minimize the impact of this risk, by protecting employees, securing the supply chain, and continuously monitoring the situation and leveraging at the same time the Group's services that may help in the virus containment efforts, such as videoconferencing and online classes. In addition, networks play a key role in keeping people connected and the Group is monitoring its network usage and assessing its policies and procedures to best support its customers.

As of the date of issuance of the Consolidated Financial Statements, the Group is facing a decline in handsets sales (low margin activity) in the context of the closure of its shops, some delays in the construction of FTTH homes passed and a decline in the advertising businesses (NextRadio TV); but the impact has been limited since the crisis only began at the beginning of March 2020.

The situation continues to evolve, including further regulatory requirements published by governments, and it is difficult to predict the effect on the Group's operations and financial performance. Based on the information above, the Group considers that the assessment of the going concern assumption for the Group is not impacted.

Related Party Transactions

Other than as disclosed in the consolidated financial statements of Altice France as of and for the year ended December 31, 2019, the Group had no other transactions with related parties. See Note 31 to the audited consolidated financial statements of Altice France for the year ended December 31, 2019.

Off Balance Sheet Arrangements

We are not party to any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditure or capital resources, other than the contractual commitments relating to purchase of property plant, and equipment, operating leases or as disclosed below or in the audited consolidated financial statements of Altice France (note 32) as of and for the year ended December 31, 2019.

Quantitative and Qualitative Disclosures about Market Risk

We are exposed to market risks relating to fluctuations in interest rates and foreign exchange rates, primarily as between the U.S. dollar and Euro, and use financial instruments to manage our exposure to interest rate and foreign exchange rate fluctuations.

Credit Risk

The Group does not have significant concentrations of credit risk. Credit risk may arise from the exposures of commitments under a number of financial instruments with one counterparty or as the result of commitments with a number of groups of debtors with similar economic characteristics, whose ability to meet their commitments could be similarly affected by economic or other changes.

The Group's income mainly derives from customers in France. The majority of our B2C clients are on direct debit, thus reducing credit and recovery risk from our biggest operating segment. The Group regularly monitors its customers' debts and provisions for doubtful debts are recorded in the consolidated financial statements, which provide a fair value of the loss that is inherent to debts whose collection lies in doubt.

Liquidity Risk

Ultimate responsibility for liquidity risk management rests with the Board of Managers, which manages liquidity risk by maintaining adequate reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecasted and actual cash flows and by matching the maturity profiles of financial assets and liabilities. The Group has a strong track record of driving operating free cash flow generation and specializes in turning around struggling businesses and improving the cash generation of existing businesses. As all external debt is issued and managed centrally, the executive directors of the Group have a significant amount of control and visibility over the payments required to satisfy obligations under the different external debts.

Additionally, as of December 31, 2019, the Group has access to revolving credit facilities of up to €1,315.0 million (which remained drawn for an amount €90 million as of December 31, 2019) to cover any liquidity needs not met by operating cash flow generation.

Interest Rate and Related Risk

For fixed rate debt, changes in interest rates generally affect the fair value of the debt instrument, but not our earnings or cash flows. Accordingly, interest rate risk and changes in fair market value should not have a significant effect on the fixed rate debt until we would be required to refinance such debt at maturity. On a consolidated basis, taking into account our swap portfolio, our primary fixed rate debt obligations were in an amount equivalent to €9,934.6 million, while our primary floating rate debt obligations were equivalent to €7,372.7 million.

Foreign Currency Risk

As part of its financial risk management strategy, the Group has entered into certain hedging operations. These are split mainly into either fixed to fixed or floating to floating cross-currency and interest rate swaps that cover against foreign currency and interest rate risk, FX forwards that cover against foreign exchange risk only, or interest rate swaps covering interest rate risk only. For details regarding the Group's outstanding derivative instruments to secure foreign currency liabilities and to reduce foreign currency exposure, see Note 24.4 to the audited consolidated financial statements of Altice France as of and for the year ended December 31, 2019.

Critical Accounting Policies, Judgments and Estimates

For details regarding the Group's critical accounting policies, judgments and estimates, see Note 2 to the audited consolidated financial statements of Altice France as of and for the year ended December 31, 2019.

For details regarding the Group's adoption of IFRS 16 and its impact on its financial statements, see Note 1.2 New standards and interpretations to the condensed consolidated financial statements of Altice France for the Year ended December 31, 2019.

Key Income Statement Items

Revenue

Revenue consists of income generated from the delivery of fixed-based services to our B2C and B2B customers, mobile services to our B2C and B2B customers, wholesale and other services. Revenue is recognized at the fair value of the consideration received or receivable net of value added tax, returns, rebates and discounts and after eliminating intercompany sales within the Group.

Fixed-basedresidential services: Revenue from fixed-based services consists of revenue from pay television services, including related services such as Video on Demand ("VoD"), broadband internet services, fixed-line telephony services and ISP services to our customers. This primarily includes (i) recurring subscription revenue for pay television services, broadband internet and fixed-line telephony (which are recognized in revenue on a straight-line basis over the subscription period), (ii) variable usage fees from VoD and fixed-line telephony calls (which are recognized in revenue when the service is rendered), (iii) installation fees (which are recognized in revenue when the service is rendered if consideration received is lower than the direct costs to acquire the contractual relationship) and (iv) interconnection revenue received for calls that terminate on our cable network.

Mobile residential services: Revenue from mobile telephony services primarily consists of (i) recurring subscription revenue for our post-paid mobile services (which are recognized in revenue on a straight-line basis over the subscription period), (ii) revenue from purchases of our pre-paid mobile services (which are recognized in revenue when the service is rendered), (iii) variable usage fees for mobile telephony calls (which are recognized in revenue when the service is rendered), (iv) revenue from the sale of handsets (which are recognized on the date of transfer of ownership), and (v) interconnection revenue received for calls that terminate on our mobile network.

Business services: Revenue from wholesale services primarily consists of revenues derived from renting our network infrastructure services, including IRUs and bandwidth capacity on its network, to other telecommunications operators, including mobile virtual network operations ("MVNOs") as well as related maintenance services. Revenue from B2B services is the same as the above fixed and mobile services, but for the business sector. This segment also includes revenues from our other services primarily consists of revenue from businesses such as (i) datacenter activities, (ii) content production and distribution, (iii) customer services, (iv) technical services, and (v) other activities that are not related to our core fixed or mobile businesses.

Media: Revenues from the media segment includes mainly advertising and subscription revenues derived from news, radio and printed press businesses.

Intersegment Eliminations: Intersegment costs, which primarily relate to services rendered by certain centralized Group functions (such content production and customer service) to the operational segments of the Group, are eliminated in consolidation.

Purchasing and subcontracting services

Purchasing and subcontracting services consist of direct costs associated with the delivery of fixed-based services to our B2C and B2B customers, mobile services to our B2C and B2B customers, wholesale and other services. We present purchasing and subcontracting services paid for the procurement of the following services:

Fixed-basedresidential services: Purchasing and subcontracting services associated with fixed-based services consist of all direct costs related to the (i) procurement of non-exclusive television content, royalties and licenses to broadcast, (ii) transmission of data services and (iii) interconnection costs related to fixed-line telephony. In addition, it includes costs incurred in providing VoD or other interactive services to subscribers and accounting

variations arising from changes in inventories of customer premises equipment (such as modems, set-top boxes and decoders).

Mobile residential services: Purchasing and subcontracting services associated with mobile services consist primarily of mobile interconnection fees, including roaming charges and accounting variations arising from the changes in inventories of mobile handsets.

Business services: Purchasing and subcontracting services associated with wholesale primarily consist of costs associated with delivering wholesale services to other operators. Other purchasing and subcontracting services consist of the (i) cost of renting space for datacenters (subject to certain exceptions), (ii) utility costs related to the operation of datacenters (such as power and water supply costs), (iii) in our technical services business, the cost of raw materials used in the technical activities related to the construction and maintenance of the network, cables for customer connections, etc., and sub-contractor fees associated with the performance of basic field work and the supervision of such sub-contractors, and (iv) direct costs related to our call centers operations, such as service expenses, telecom consumption subscriptions and energy costs, in our customer services functions.

Media: Purchasing and subcontracting costs for our media business mainly consists of direct costs related to capacity rental for our TV and radio businesses.

Other operating expenses

Other operating expenses mainly consist of the following subcategories:

Customer service costs: Customer service costs include all costs related to billing systems, bank commissions, external costs associated with operating call centers, allowances for bad customer debts and recovery costs associated therewith.

Technical and maintenance: Technical and maintenance costs include all costs related to infrastructure rental, equipment, equipment repair, costs of external subcontractors, maintenance of backbone equipment and datacenter equipment, maintenance and upkeep of the fixed-based and mobile networks, costs of utilities to run network equipment and those costs related to customer installations that are not capitalized (such as service visits, disconnection and reconnection costs).

Business taxes: Business taxes include all costs related to payroll and professional taxes or fees.

General and administrative expenses: General and administrative expenses consist of office rent and maintenance, professional and legal advice, recruitment and placement, welfare and other administrative expenses.

Other sales and marketing expenses: Other sales and marketing expenses consist of advertising and sales promotion expenses, office rent and maintenance, commissions for marketers, external sales and storage and other expenses related to sales and marketing efforts.

Staff costs and employee benefits

Staff costs and employee benefits are comprised of all costs related to wages and salaries, bonuses, social security, pension contributions and other outlays paid to Group employees.

Depreciation, amortization and impairment

Depreciation and amortization includes depreciation of tangible assets related to production, sales and administrative functions and the amortization of intangible assets. Impairment losses include the write-off of any goodwill or tangible and intangible assets that have been recognized on the acquisition of assets based upon a reevaluation of the cash generating capacity of such assets compared to the initial valuation thereof.

Non-recurring expenses and income

Non-recurring expenses and income includes any one-off or non-recurring income or expenses incurred during the on-going financial year. This includes deal fees paid to external consultants for merger and acquisition

activities, restructuring and other non-recurring costs related to those acquisitions or the business in general, any non-cash operating gains or losses realized on the disposal of tangible and intangible assets and management fees paid to related parties.

Interest relative to gross financial debt

Interest relative to gross financial debt includes interest expenses recognized on third party debt (excluding other long term liabilities, short term liabilities and other finance leases) incurred by the Group.

Other financial expenses

Other financial expenses include other financial expenses not related to the third party debt (excluding other long term liabilities and short term liabilities, other than finance leases) incurred by the Group. Such expenses mainly include interest costs of finance leases, variations in the fair value of non-hedged derivative instruments and the inefficient portion of hedged derivative instruments.

Financial income

Financial income consists of changes in the net fair value of the financial derivatives, gains from the disposal of financial assets, net exchange rate differences, and other financial income.

Share in net income/(loss) of associates

Share of profit of associates consists of the net result arising from activities that are accounted for using the equity method in the consolidation perimeter of the Group.

Income tax expense/(income)

Income tax expenses are comprised of current tax and deferred tax. Taxes on income are recognized in the income statement except when the underlying transaction is recognized in other comprehensive income, at which point the associated tax effect is also recognized under other comprehensive income or in equity.

Adjusted EBITDA

Adjusted EBITDA is defined as operating profit before depreciation and amortization, impairment and losses, other operating and non-recurring items and other adjustments (equity-based compensation expenses) in EBITDA. Adjusted EBITDA is unaudited and is not required by or presented in accordance with IFRS or any other generally accepted accounting standards. We believe that this measure is useful to readers of our financial as it provides them with a measure of the operating results which excludes certain items we consider outside of our recurring operating activities or that are non-cash, making trends more easily observable and providing information regarding our operating results and cash flow generation that allows investors to better identify trends in its financial performance. Adjusted EBITDA should not be considered as a substitute measure for operating income and may not be comparable to similarly titled measures used by other companies.

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Altice Europe NV published this content on 30 April 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 04 May 2020 07:48:06 UTC

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Altice Europe A

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ATC

NL0011333752

Integrated Telecommunications Services

Altice Europe N : France - FY 2019 MD&A

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Sector Other Integrated Telecommunications Services