Chello value likely to be $3-4 billion - analyst
March 1, 2000 07:57 AM
AMSTERDAM, March 1 (Reuters) - Dutch-based Internet service provider chello is likely to be valued at between $3-4 billion when its parent cable television operator UPCUPCOY floats up to 15 percent of the unit on the Amsterdam bourse later this year, according to an analyst close to UPC.
The valuation would give the chello among the highest values per subscriber in Europe at approximately $28,930 for each of its 121,000 subscribers.
By comparison, ISP World Online, which is also due to be listed in Amsterdam, is thought to be valued at up to 10 billion euros, about $5,260 for each of its 1.9 million subscribers.
Chello shares may come at a premium for at least two reasons, say analysts. It is a broadband, or high speed, ISP, and UPC, United Pan-Europe Communications NV, owns the infrastructure over which it operates.
"The service that chello is providing is worth more...people will pay a lot more for chello," said Johan Rol, analyst at Effectenbank Stroeve.
Subscribers to chello, which runs over the cable TV infrastructure, have higher speed Internet access than those who dial up over telephone lines. Subscribers pay on average about 90 guilders per month for cable-based Internet access.
"Chello is focused at an attractive group," said SNS Securities analyst Bert Siebrand. Those who are willing to pay for bandwidth are also good targets for e-commerce, he said.
ISPs with underlying networks should rightly be valued higher than ISPs without their own networks, Seibrand added.
"As an ISP, you need infrastructure," Seibrand said, although he questions whether UPC's infrastructure was adequate for serving increasing numbers of customers.
Questions about the network's speed and performance have dogged UPC. The company has refused to divulge how fast its networks run and customers have complained about access speeds. As the number of users increases on a network, the speed will be lowered per user, since all users on a node share the bandwidth.
And UPC's own share price already reflects enthusiasm for chello, Siebrand said. The price has risen more than 60 percent this year from its close of 127 euros on December 31 and by 1243 GMT on Wednesday was trading at 206 euros.
Cable television, Internet and telecommunications operator UPC is 60-percent owned by UnitedGlobalCom UCOMA while Microsoft Corp MSFT has a 7.8 percent stake.
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