More Cable Consolidation is on the Way
broadband-daily.com
France is poised to become the next major European country, after Germany, to see consolidation in the cable sector, with US investors AOL Time Warner and Liberty Media expected to acquire big chunks of that cable market over the next 12 to 18 months. Suez Lyonnaise denied French press reports on Tuesday that it plans to sell its 50.1% stake in Noos, France's largest cable operator. But industry observers say it's only a question of time before the French utility giant hands over control to a strategic cable partner. And Noos is not the only cable company in town – France's other two large cable operators, NC Numéricâble and France Télécom Câble, are also expected to come up for sale soon.
"Everything is up sale for one or two big guys who will take everything over," said a Paris-based cable industry veteran who preferred to remain anonymous.
France, as with the rest of Europe, has already gone through a first round of consolidation, which has seen a myriad of tiny cable systems consolidate into the hands of a few players, including United Pan-Europe Communications, NTL and Callahan Associates International. A big catalyst has been France Télécom's decision to divest its stakes in the country's cable properties prodded by the European Commission.
But industry observers believe the game is far from over. They expect France Telecom to put its fully owned France Télécom Câble subsidiary up for sale. Moreover, they also expect Vivendi Universal's Canal Plus to seek new investors for NC Numéricâble – the third-biggest cable operator – after CAI's exit from that company (and the French market) in July. And of course there's Noos.
"Noos is potentially one of the most interesting [cable] assets in Europe," said the Paris-based cable industry executive. Noos, which has 2.7 million homes passed and 765,000 customers out of France's total 8.5 million homes passed and 3.1 million subscribers – serves wealthy Paris. It could soon reach close to five million homes passed via the integration of further cable assets in the surrounding Paris regions. Compared to other cable operators in France, Noos is also advanced both in terms of digital TV and broadband Internet, with 244,000 and 63,000 customers, respectively.
But a Suez Lyonnaise spokesperson said on Tuesday that the company has no plans to divest its stake in Noos, in which NTL owns 27%. "The sale of Noos is not on the agenda," she told the451 following press speculation that the company is planning to divest its stake, and that a number of US investors, including AOL Time Warner, have expressed interest in the stake.
The communications division represents only a tiny fraction of Suez Lyonnaise's overall income, and some say the group is coming under pressure from investors to focus more on its core utility business in order to face up to rivals, such as Vivendi Environment. However, Suez Lyonnaise maintains that its communications division – now worth €5bn ($4.38bn) and includes TPS, M6, FirstMark and Paris Première – adds value to the group.
But in the long term, observers still expect Suez Lyonnaise to dilute its holding in Noos and transfer control of the company to a strategic third-party investor, perhaps at the time of the company's planned IPO. Certainly, with TMT share prices having fallen considerably since their peak at the beginning of last year, now is not the best time to sell. But it may only be a question of time. "They will look for a strategic partner to put more cash into the company, and they're gone," predicted one analyst.
Observers say NTL's £4.8bn ($6.79bn) debt, coupled with concerns that it may not be fully funded to reach cash-flow breakeven, make it a less likely candidate to take over Noos than a deep-pocketed company like Liberty Media or Time Warner. Morgan Stanley holds a 22.9% stake in Noos.
Liberty Media is emerging as a key player in the European cable market, having agreed to buy 10 mi llion cable homes from Deutsche Telekom in Germany. The company also controls UGC, the parent company of UPC, which is one of Europe's biggest cable operators with 8.5 million customers.
As for AOL Time Warner – the world's largest media and communications group – it has no cable properties in Europe yet, but says it wants to increase its overseas' revenue from 17% to 50% over the next 10 years. Analysts say cable is a sound investment, as it will provide the fattest pipes into the home, for supplying services such as high-speed Internet access, digital TV, telephony and video on demand. Furthermore, European cable has the advantage of not having any foreign-ownership limits.
A change of cable ownership in France could mean a change of technology providers. Currently, Canal Plus Technologies and OpenTV are the main suppliers of interactive TV software to cable operators in that market. But as cable owners change, so will suppliers, with companies such as Microsoft TV and Liberate Technologies likely to enter the fray. |
