KDDI Commands Cable Market With $4B Deal
KDDI will pay international cable giant Liberty Global Inc. (Nasdaq: LBTY) US$4 billion in cash for the stake.
KDDI already owns the country's second biggest MSO, Japan Cablenet Ltd., which boasted nearly 1.5 million customers at the end of 2009. Adding J:COM to its portfolio would significantly boost KDDI's cable operations.
At the end of September 2009, J:COM, which offers broadband services up to 160 Mbit/s downstream, passed more than 12.5 million homes, and had nearly 3.25 million customers, of which more than a quarter were triple-play customers. (See Netgear's Big in Japan.)
The move makes KDDI a stronger rival to NTT in Japan's fixed broadband and triple-play sector, where NTT has built a commanding position with more than 12 million fiber-to-the-home (FTTH) customers. At the end of 2009, KDDI had 1.4 million FTTH subscribers, plus a further 1 million DSL customers and 1.9 fixed voice users, in addition to its cable customers, giving it a domestic fixed-line subscriber base of 5.8 million to go with its 31.4 million mobile customers.
The new cable deal will also boost KDDI's top line. In the first nine months of 2009, J:COM generated revenues of nearly $2.6 billion, a 26 percent increase from a year earlier.
KDDI today announced revenues for the nine months to the end of December 2009 (the first three quarters of its fiscal year) of ¥2,630 billion ($29.2 billion).
Of course, that also knocks a hefty chunk of revenues off Liberty Global's top line, as J:COM accounted for 32 percent of the international cable group's revenues of $8 billion for the first nine months of 2009. (See Liberty Global Reports Q3 and Liberty Global Posts Q2.)
But Mike Fries, president and CEO of Liberty Global, noted in its official announcement of the deal today that his company has "demonstrated a disciplined and opportunistic approach to rebalancing our business interests globally. Exiting the Japanese market at a substantial premium allows us to redirect our capital into more strategic consolidation opportunities in our core markets as well as our ongoing stock buyback initiatives."
Those strategic opportunities include beefing up its European operations, it seems, as Liberty Global announced the $5.2 billion acquisition of Germany's second largest cable operator, Unitymedia, in November 2009. (See Liberty Splashes $5.2B on German Operator.)
— Ray Le Maistre, International Managing Editor, Light Reading