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Tele Columbus Announces IPO

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9/30/2014
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BERLIN -- Tele Columbus AG (“Tele Columbus” or the “Company”), the third largest German cable network operator, is preparing its initial public offering (IPO). The Company intends to list its shares on the regulated market (Prime Standard) of the Frankfurt Stock Exchange by the end of 2014 subject to market conditions. The IPO will consist of new shares from a capital increase and shares from existing shareholders through a holding company. Tele Columbus would expect the primary proceeds from the offering to be not less than c. EUR 300 million. The Company intends to use the primary proceeds to reduce its current financial indebtedness and provide more financial flexibility to continue executing its growth strategy. The planned IPO will be combined with a refinancing of the existing debt to fully align its capital structure to the new profile of the Company and generate significant interest savings. Tele Columbus expects to reduce its financial leverage to around 3.5 times Normalised LTM EBITDA post the offering. As a future listed cable network operator with a strong presence in Eastern Germany, Tele Columbus seeks to substantially accelerate its growth potential and increase profitability in the coming years. The company has a clear investment plan to deliver further benefits to its customers and strengthen its relationships as a trusted partner of the housing industry.

“We are very excited about the future prospects of Tele Columbus as a public company. The significant growth potential of Tele Columbus is based on one of the best performing cable networks in the German market and a very attractive customer base with significant potential for selling additional products and services beyond cable TV services. This puts us in an excellent position to further grow our business over the coming years in one of Europe’s most attractive cable markets”, says Ronny Verhelst, Chief Executive Officer of Tele Columbus AG.

Tele Columbus provides a variety of attractive television and telecommunication services to its customers. These include basic cable television, premium television packages as well as Internet and Telephony services. With c.1.7 million connected households, as of 30 June 2014, Tele Columbus is the third largest cable network operator in Germany, Europe’s largest cable market. The Company has leading market positions in its core regions in Eastern Germany, with market shares of c.66% in Saxony-Anhalt and c.40% in Berlin-Brandenburg in 2013. The Company also operates successfully in selected regions in Western Germany, primarily in North-Rhine Westphalia and Hesse. Tele Columbus has a stable and attractive customer base that ensures reliable income streams and additional selling opportunities through up- and cross-selling. A considerable part of the customer relationships are based on long-term contracts with a diversified base of large and small housing associations.

Tele Columbus is an integrated Level 3 / Level 4 operator with 54% of homes connected upgraded for two-way communication and connected to its own Level 3 network as of 30 June 2014. The Company’s hybrid fibre-optic cable networks have a high node density with an average of 450 homes per node and are largely upgraded to the internet transmission standard Docsis 3.0 providing the ability to deliver speeds of up to 150 Mbit/s with potential to increase these speeds at any time in the near future.

Going forward, the Company plans to continue investments to further migrate networks from third party Level 3 operators and increase the share of homes connected to its own networks. These migrations are an important pillar of the Company’s growth strategy, as they are expected to result in further savings on signal fees to third parties driving margin expansion and will also allow for substantially increased up-selling and cross-selling potential for additional services – such as premium TV products, Internet and Telephony via cable. The Company also aims to increase the number of homes connected beyond the existing footprint.

The success of the Company’s strategy and strong execution by the management team are already reflected in the financial results for the first half of 2014. Tele Columbus secured medium-term financing and completed an organisational and strategic realignment at the beginning of 2014. Driven in large part by the positive momentum in the Internet and Telephony service business, revenues increased by 3.6% year on year to EUR 107.0 million whereas Normalised EBITDA increased by 11.6% year on year to EUR 48.8 million representing a 45.6% normalised EBITDA margin.

“Our positive business development in the first half of 2014 confirms that we have made the right choices to drive growth and further increase our operating profitability. We have also intended to create the necessary financial leeway for further investments in the next years to expand our own cable network and strengthen our position in the German cable market. We expect our leverage to be approximately 3.5 times Normalised LTM EBITDA post the offering. In the medium term, we intend to maintain a target leverage of 3.0 to 4.0 times Normalised EBITDA, although our leverage may temporarily increase in case of accelerated investments or acquisitions”, explains Frank Posnanski, Chief Financial Officer of Tele Columbus AG.

“We set ourselves three clear objectives we want to achieve over the medium term in the context of our growth strategy: firstly, we want to increase the number of products per customer from today’s 1.4 to 1.7. Secondly, we want to grow the monthly average revenue per customer from EUR 14 to EUR 17. Thirdly, we want to facilitate this by growing the share of upgraded households supplied with own signals from 54% to 70%. With our high-performance network, our clear growth strategy and the greater financial and strategic flexibility we would gain from the planned IPO, we are in an excellent position to achieve these goals”, says Ronny Verhelst.

Goldman Sachs International and J.P. Morgan Securities plc are acting as Joint Global Coordinators and together with BofA Merrill Lynch and Berenberg as Joint Bookrunners. Rothschild is a financial advisor to the Company.

Tele Columbus highlights
Single-country exposure to highly attractive German cable market with strong macro backdrop

  • Germany has sound macro fundamentals and secular cable market growth
  • Significant upside potential for fixed broadband penetration – with cable winning market share mainly at the expense of DSL – and strong growth outlook for the Pay TV market
  • Tele Columbus provides a unique opportunity to invest in “pure” German cable

    #3 German cable operator with strong presence in regional markets

  • Tele Columbus has market leading positions in core regions of Eastern Germany, where fixed broadband penetration upside is even more pronounced
  • Attractive expansion strategy in selected Western German regions Stable, long-term customer relationships supported by housing association business model
  • German housing market characterized by high share of housing associations
  • Strong and stable long-term relationships characterizing current housing association contract portfolio, ensuring reliable income streams and additional selling opportunities
  • Proximity as key differentiator, Tele Columbus is perceived as a trusted partner State-of-the-art, integrated and flexible network providing competitive advantage
  • Tele Columbus has built one of the top performing cable networks in the German market
  • Ability to deliver speeds of up to 150 Mbit/s in homes upgraded to Docsis 3.0 – with significant further upside potential
  • Flexible network readily adaptable to growing customer demand and geographic expansion Clearly defined network investment plans driving proven cable growth strategy
  • Majority of future Capex purely success-driven, due to advanced, high capacity network
  • Investment focus on migration away from third party Level 3 operators to increase share of homes connected to its own networks and driving mechanical margin expansion
  • Continued migration and network upgrades increase the base for up- and cross-selling Strategic option value providing further upside
  • Potential upside from further German telecom and cable market consolidation Highly experienced management team with strong track record
  • Clean-up works constraining the growth strategy in the past are completed
  • Stable management team since 2011 has successfully realigned the Company and turned the focus to growth
  • Clear growth strategy implemented – and already showing early success

    Tele Columbus AG

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