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Liberty Bails Out of France

Pan-European cable operator Liberty Global Inc. (Nasdaq: LBTY) is selling its French operations for €1.25 billion (US$1.5 billion) to private equity firm Cinven Ltd. and Cinven's cable operator group, Altice One.

The move is the latest European market exit by Liberty, which is focusing on potential high-growth markets, particularly in Eastern Europe. In January the company sold its Norwegian business, UPC Norge, for €448 million ($537 million), and it's currently seeking a buyer for its Swedish operations. (See Cable Adds to Euro Pressure and Liberty Offloads UPC Norway.)

"Together with the sale of our Norwegian asset, we are exiting sub-scale markets tax-efficiently and at attractive prices, with the intention of refocusing that capital on existing or new markets that offer greater long-term growth and stability," stated Liberty Global CEO Mike Fries in a prepared statement.

And investors clearly liked the price. Liberty Global's stock soared by $1.38, more than 7 percent, to $20.70 on today's news.

But the company isn't just selling assets. It acquired Swisscom AG (NYSE: SCM)'s chief competitor, UPC Cablecom , for $2.2 billion last September, boosted its stake in Belgian player Telenet , bought Romania's leading cable company, and then snapped up assets in Ireland and Austria. (See Liberty Intercepts Cablecom IPO, Liberty Global Buys Romania's Astral, Liberty Boosts Telenet Stake, Liberty Global Buys NTL Ireland, and Liberty Global Buys Inode.)

So what is Liberty selling? In 2005 its French business generated revenues of $514 million and operating cashflow of $97 million from 1.6 million customers, of which 295,000 subscribe to the company's broadband service as well as TV. It also has 134,000 voice service subscribers.

Now, if the sale is completed, it will become part of Cinven's growing cable portfolio, and will make the private equity firm the dominant force in the French cable market with about 4 million customers, nearly the entire market.

Cinven already owns Liberty's main rival, Numericable-SFR , which it acquired for €528 million ($633 million) in March 2005, while Est Vidéocommunication , which operates in eastern France, is part of the Altice One group. Cinven acquired a 70 percent controlling stake in Altice One, which also owns cable operators in Belgium and Luxembourg, in November 2005 for €525 million ($629 million).

Cinven declined to comment on today's deal or its strategy until the acquisition is closed. Liberty says the sale agreement should be signed during the second quarter of this year, after which the closing of the deal "will be subject to the receipt of necessary regulatory approvals."

While Cinven would own practically the whole of the French cable market, there are plenty of other service providers offering the same combination of video, voice, and broadband in France, making regulatory approval from a competition standpoint a distinct possibility. (See Iliad Profits From Triple Play, FT Plans Euro IPTV Assault, and Neuf: Time Is Right for IPTV.)

— Ray Le Maistre, International News Editor, Light Reading

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