Dig, dig, dig. UPC. Sand fly'in around like when our Lab hits the beach.
boards.fool.com
From BillyBoy:
Okay, with all those reports around talks between Excite@Home and Chello I dove a little in to the European news. What I found might give some insight into what motivates both Excite@Home and UPC (Chello) to make any deal. I found these insights:
Issue 1
For some time now UPC is trying to buy MediaOne's stake in Telenet (a large Belgium Cable-guy (see my (old) post for details on Telenet (http://boards.fool.com/Message.asp?id=1060256006375000) to increase UPCs ambitions in Europe. (FYI MediaOne International owns 25% of Telenet and will sell its stake in Telenet after Ts purchase of MediaOne). Telenet has been looking for a strategic partner (a cable-guy) to take over MediaOne's stake ever since Ts announcement/intention to take over MediaOne. (see press release A below) For details on Telenet size and potential see my (old) post for details on Telenet (http://boards.fool.com/Message.asp?id=1060256006375000). Telenet would fit very nicely with UPC, since geographically it makes sense (next to Holland) and since UPC would be able to leverage Telenet upgraded pipes with almost perfect penetration very profitably with its triple play offering/expertise: (digital) cable, cable-telephone, cable-internet.
Issue 2
Excite@Home has a contract with Telenet (http://www.home.net/news/pr_991018_01.html ) to provide cable-internet services to Telenet customers. If UPC would buy MediaOne's stake in Telenet it might not be able to launch Chello on Telenet's cable, due to this contract. However, if Excite@Home and UPC would work together with some kind of deal everybody wins.
Issue 3
UPC (Chello) is being put under pressure by the European community and the Dutch government to open its cable to other IPSs (sounds familiar!!!). And if you think we worry about this stuff, just hear what Mark Schneider CEO of UPC had to say yesterday evening 'We don't let those people screw around on our network' (see press release B below). UPC knows opening its network will happen some time in the future. And although UPCs Chello is a good product, it probably could be much better (read more competitive through improved content and ?Excite 2000? expertise) if they would work together with Excite@Home. (Chello currently has limited content and would have do something here anyway to improve its competitive position as time goes on and pipes open up.)
Issue 4
Ever since Excite@Home made a deal with the German TeleColombus to offer cable internet services (Sept. '99 home.net ), we have been hearing in Excite@Home press releases that more deals would follow while DT (Deutsche Telekom) sells more of its cable infrastructure. I quote ,?The joint venture is also intended to extend to other cable operators including future regional cable companies that investors may acquire from Deutsche Telekom. ? So far Excite@Home has been hugely unsuccessful to penetrate the large German cable market except for the TeleColombus deal. UPC on the other hand just announced a press release it will likely buy one of DTs pieces, which will become another piece for cable for Chello instead of Excite@Home. The bottom line is that due to the successful aggressive expansion of UPC there are increasingly less cable markets opportunities for Excite@Home in Europe. Although Bell has mentioned that he wants to aggressive expand internationally, there are increasingly fewer opportunities out there. Because of this Excite@Home has an incentive to deal directly with the UPC and form some kind of alliance or Chello merged offering.
Issue 5
I believe there is only one primary reason why UPC wants to float Chello. The cash proceeds, which are estimated around $350 million to $460 million (10% share float of Chello estimated to be worth B EUR3.6 to B EUR4.6). The float and the proceeds would enable UPC to borrow even more, which will enable UPC to continue its aggressive expansion in Europe. Right now (things we know about) UPC is negotiating deals with TeleWest (UK) and Deutsche Telekom. Instead of improving the balance sheets with say $400 from the float, it might be much more interesting to do a deal with Excite@Home and improve UPC balance sheet and borrowing power that way.
FYI: UPC just released a press release saying Chello currently has 210,000 broadband subscribers and that Chello will have a positive cha-flow with about 600.000 to 700.000 subscribers. Also Microsoft just announced it increased it stake in UPC and has warrants to increase it even more.
A
COMPETITION FOR UPC IN BID FOR TELENET
Het Financieele Dagblad - The Netherlands, May 12, 2000, 104 words
Callahan Associates International, the American investment company, wants to take over Flemish cable company Telenet for between Fl 3.8bn and Fl 4.4bn. The companies reportedly want to sign an agreement-in-principle this week. Dutch-based cable company UPC, which has been in talks with Telenet for some time, will lose out if the deal goes ahead. Belgian newspaper De Standaard reported that UPC will try to take over UPC anyway. UPC wants to make a bid for Telenet together with Anglo-American telecoms company NTL, the newspaper reported. 'We do not comment on speculations and rumours in the market', UPC said. Telenet, which is 35 per cent owned by Flemish municipalities, has been looking for an international strategic partner since last year (1999).
World Reporter All Material Subject to Copyright
B
UPC rebuffs calls to open up its network
Cable company UPC will not allow other internet service providers (ISP) to use its network in Holland, UPC 's chief Mark Schneider told shareholders yesterday. It would be technically impossible to run the UPC system with more than one ISP on its broadband network, Schneider said.
UPC already has its own ISP 'Chello' operating on its network. Schneider was reacting to recent calls by the liberal VVD party and the centrist D66 party to prevent cable operators running their own ISP on their network for a period of more than two years. |
