Malone in Belgian cable talks
Fri Apr 30, 6:00 AM ET
TheDeal.com
by Brian Cattell in London
John Malone is in talks about taking a stake in Belgian cable operator Telenet Cable Group Holding NV, as the Colorado cable tycoon looks to boost his European presence, sources said Thursday, April 29.
Malone's Englewood, Colo.-based Liberty Media is negotiating the possible purchase of a 22% stake in the Flanders operator from Cable Partners Europe Ltd., which is run by Malone's Denver rival Richard Callahan. Buying that minority stake could then serve as a springboard for acquiring more shares in Telenet, which is both fast growing and profitable.
Callahan's August 2002 investment valued Telenet at €944 million ($1.13 billion). But the company's performance has since improved exponentially. Buoyed by the acquisition of local TV assets, Telenet's Ebitda soared 178% in 2003 to €230 million while revenue leapt by 63% to €502 million.
Buying into Telenet would complement Malone's existing network in neighboring the Netherlands and would offer him a business operating in a relatively benign regulatory climate. The Belgian operator is also successfully implementing Malone's favored triple play strategy. That means that, unlike most other European cable operators, it is actually making money from TV, telephone services and broadband Internet.
Focusing on Telenet may also offer an alternative avenue for Malone if he pulls out of the auction for Numericable, the French cable network belonging to France TÉlÉcom SA and Vivendi Universal SA's Canal Plus.
The Colorado entrepreneur offered in March to pay up to $811 million for Noos, the leading French cable operator, and plans to merge it with his operations in France. Cable sources said, however, that he may consider buying Numericable a step too far, especially given a difficult regulatory climate in France.
"The concern for Malone in France is that France TÉlÉcom wants to get rid of its own cable activities and then could use predatory pricing of its own ADSL business to wipe out the new owner [of the cable network]," said one industry source. There may also be political opposition in France, the source added, to the idea of Malone buying Numericable in addition to Noos.
France TÉlÉcom, meanwhile, confirmed that it has received preliminary bids from at least five private equity funds. It declined to name the bidders but they include Washington-based Carlyle Group and Paris-based Axa Private Equity. Other reported bidders are London- and New York-based Apax Partners, Providence, R.I.-based Providence Equity Partners Inc., New York-based Blackstone Group and Palo Alto, Calif.-based Spectrum Equity Investors.
"This whole auction seems to have been thrown together in a bit of a rush," said Terrence Tehranian, a managing partner at London-based PE group GMT Communications Partners Ltd., who follows European cable. "I think what you'll see is a lot of people putting in a first bid in order to get their foot in the door but it's hard to say how the auction will actually end up."
While Malone's enthusiasm for France may have its limits, Tehranian said that Telenet would fit well with the other cable assets that Liberty has in the low countries.
In an interview, Telenet CEO Duco Sickinghe said he would welcome Liberty's increased involvement in Telenet. The U.S. company already exerts an influence through its purchase in December 2003 of a €90 million loan note issued by Cable Partners.
"We've always had an accomplished U.S. company as a shareholder," said Sickinghe. "Liberty is a very sophisticated cable operator and could bring a lot of expertise to Telenet. The personal contacts that we have had with them have been very positive."
Sickinghe said Telenet is in talks with Cable Partners about a new ownership structure for Telenet. Besides Cable Partners, Telenet's other major shareholder is a group of Belgian municipal authorities that own a combined 34% stake. Other shareholders include Belgian electricity utility Electrabel, which has a 5% stake and Belgian pension-fund-cum-buyout firm GIMV.
"I am sure that there are active talks between Liberty and Callahan [about Liberty buying Callahan's stake]," said Sickinghe. |
