Euro Cable Operators Splash Some Cash
European cable operators Telenet and Numericable-SFR opened their wallets today, but for different reasons.
Telenet, the biggest cable player in Belgium, announced a non-binding agreement to pay €187 million (US$247 million) in cash for UPC Belgium, a cable operator owned by Liberty Global Inc. (Nasdaq: LBTY). The deal is expected to close within the next month.
French cable operator Numéricable, meanwhile, is investing an unspecified sum in a next-generation network that will enable it to provide high-speed broadband services to more than 9 million households by the end of 2007. (See Numericable Upgrades.)
In buying UPC Belgium, Telenet will add 125,000 cable TV and about 40,000 cable broadband subscribers in Brussels and Leuven to its existing customer base of 1.6 million Belgian households. [Ed. note: Stupid Flanders!] All those existing customers take TV services from Telenet, while nearly 700,000 use its broadband service.
Telenet says it is paying 10 times the estimated 2006 EBITDA (earnings before interest, tax, depreciation, and amortization) for UPC Belgium, prompting analysts at Lehman Brothers to note that, while the acquisition is "a good strategic fit… at a first glance it does look like Telenet is paying a full price." There should, though, be cost and revenue synergies that could bring the multiple down to 8 times the estimated 2007 EBITDA figure, add the analysts in a research note.
The move comes as Telenet reports revenues of €601.8 million ($797 million) for the first nine months of this year, up 11 percent year on year. The operator also reported a net profit of €3.2 million, compared with a net loss of €38.9 million ($51.5 million) in the first nine months of 2005.
So does the acquisition mean that Liberty Global is abandoning yet another European market? The cable giant has been shuffling its pack regularly in the past year, exiting France and Norway, and buying into Ireland and the Czech Republic. (See Liberty Completes French Sales, Liberty Offloads UPC Norway, Liberty Global Buys NTL Ireland, and Liberty Global Buys Czech Operator.)
Not at all. Liberty Global actually owns a controlling 28 percent share of Telenet after upping its stake earlier in November. (See Liberty Boosts Belgian Stake.)
Numéricable boeufs up its network
French cable player Numéricable, which passes 9 million French homes, is an operator created from a number of acquisitions by private equity house Cinven Ltd. , deals that included the purchase of UPC France from Liberty Global to add to the acquisition of Noos and France Telecom Cable. (See Liberty Bails Out of France.)
Now Cinven is investing in its French cable giant, realizing that it needs to offer very high-speed access services if it is to compete with the ADSL2+, VDSL2, and FTTH access services and plans of its telco competitors, such as Orange (NYSE: FTE), Iliad (Euronext: ILD), Neuf Cegetel Group (Euronext: NEUF), and Telecom Italia (TIM) . (See Iliad Buys Into French FTTH, Neuf Cegetel Heads for IPO, and Italians Prep Big French DSL Rollout.)
Numéricable's plan is to hook up some homes with fiber and boost the access bandwidth of its existing network using Cisco Systems Inc. (Nasdaq: CSCO) technology that, by using downstream channel-bonding technology, combines several RF channels to offer theoretical bandwidth of more than 100 Mbit/s, though in the field the actual rates will be much lower.
Cisco's technology, which it calls Wideband, includes its uBR10012 cable modem termination system (CMTS), xDQA24 edge quadrature amplitude modulator (QAM), and Scientific Atlanta EPC2505 cable modems. Cisco says the Wideband solution, which is already being deployed elsewhere in Europe, conforms to the recently issued Docsis 3.0 specs. (See CableLabs Issues DOCSIS 3.0 Spec and TV Cabo Taps Cisco for Wideband Rollout.)
Jim Scott, Cisco's operations director for the European cable market, says the vendor has conducted tests and trials of its Wideband solution with 20 European cable operators during the past six months.
— Ray Le Maistre, International News Editor, Light Reading