Cable Operators In Europe Gird For M&A Era
By JOON KNAPEN
DOW JONES NEWSWIRES
April 14, 2004
AMSTERDAM -- Europe's cable-television industry is ready to step into a new era of mergers and acquisitions, after years of sorting out debt from a previous round of deals.
Recent activity has put the industry under the spotlight and highlights its shift from repairing balance sheets and restructuring operations to building scale through investments and expansion.
Earlier this month, Germany's largest cable operator, Kabel Deutschland GmbH, bought three rival operators for about €2.7 billion ($3.3 billion), creating one of the largest cable companies in Europe. Last month, Liberty Media Corp. of the U.S. acquired the biggest company in the French cable market, Noos, from Suez SA for €660 million. Industry observers expect more deals to come. "The European cable market is still very fragmented and offers opportunities for further consolidation to improve economies of scale," says Bert Holtkamp, communications director for Liberty Media-controlled UnitedGlobalCom Inc.
The deal-making isn't just being driven by hungry cable companies, either. Regulatory heat in countries such as Portugal, Denmark and Hungary is spurring former telecommunications monopolies to sell their cable assets.
As a result, investor sentiment toward cable companies is turning positive. In the U.K., NTL Inc.'s recent £811 million ($1.5 billion or €1.24 billion) bond issue, launched just two years after the U.S.-listed, U.K.-based cable operator defaulted on its bonds, shows European debt markets are reopening to cable firms. Also, the recent asset deals show that company valuations are on the rise.
Many cable firms see the need to scale up in the face of increasing competition from telecoms for high-speed Internet access and video business. The cable firms are beginning to compete with telecoms using new technologies, such as voice over Internet protocol.
Although UGC and parent company Liberty Media decline to speculate on specific opportunities, Liberty Media recently announced a spinoff of its international cable assets, including UGC, Europe's largest cable firm. A separate listing on the Nasdaq Stock Market is seen as a way for Liberty to get into the empire-building mode again.
Liberty Media's next move could be to acquire a 60% stake in the joint venture that will merge the cable assets of France Telecom SA and Canal Plus SA, people familiar with the matter say. Canal Plus is owned by Vivendi Universal SA.
The deal by Kabel Deutschland -- which is owned by a consortium of Goldman Sachs Group Inc., Apax Partners and Providence Equity Partners -- involves buying rival operators Ish, the cable operator in the German state of North Rhine-Westphalia; KabelBW, the operator for the state of Baden-Wuerttemberg; and iesy, the cable operator in Hessen.
Another factor behind the M&A activity in the industry: venture-capital firms. These firms, for the past few years the only buyers of European cable assets, are now looking for ways to start taking profits from their investments. Carlyle Group Inc. and GMT Communications Partners Ltd. own Casema in the Netherlands, EQT acquired Comhem in Sweden, while Apollo Management LP, financier George Soros and Goldman Sachs own Cablecom in Switzerland.
Regulatory pressure is driving sales of cable-company assets in certain countries where telecom incumbents still own cable assets. Besides deal-making in Germany and France and the increasing regulatory pressure in Denmark, Portugal and Hungary, other M&A activity is expected in Sweden, where Tele2 AB's Kabelvision is up for sale; in the Netherlands where Carlyle and GMT could decide to exit Casema, and in Belgium, as Telenet could be picked up by Liberty Media, some industry observers speculate.
In the U.K., it is widely expected that NTL and Telewest Communications PLC will merge to gain scale in order to compete with satellite pay-TV operator British Sky Broadcasting Group PLC and with BT Group PLC. |
