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Digital TV Europe

April 2010

News digest

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European cable no longer a “toxic wasteland”, says Hahn

By Stuart Thomson >

The European cable industry has moved from being a “toxic wasteland” a few years ago to become a positively viewed investment opportunity, outper- forming telco rivals in the wake of the economic crisis of the last year, John Hahn, managing director of Providence Equity Partners, owner of German cable operator Kabel Deutschland (KDG), told the Cable Congress in Brussels in early March.

In line with the upbeat mood at the Congress, delegates heard that investors had returned to cable following last year’s financial crisis. “We start- ed off [last] year very anxious,” he said. “It was a very uneasy time, but some businesses have done well or really well. Naturally the markets take a while to catch up, but anyone

Belgium

CAB > Euro digital growth

Digital TV now accounts for over half of cable TV revenues, according to figures released at cable association Cable Europe’s Cable Congress in Brussels in March. Cable revenues overall in the 27 EU states grew by 3%

last year, taking the total to €17.9bn. Broadband revenues were up 3% to €4.8bn while telephony grew 7% to €3bn. Digital TV revenues were up

O’Neill: KDG is a “bridge too far” for

Liberty Global.

level than previously, cable was “still viewed broadly as a good asset class”. However, equity investment opportunities in Europe were now few and far between, he said.

Of KDG’s forthcoming IPO,

who invested in either equity or debt has had a spectacular year.” Hahn said that Providence’s decision to invest in cable had paid off, vindicating a move that at the time was viewed with scepticism. “When we invested in cable it was not flavour of the day. It was a toxic wasteland and not for the faint-of-heart. Since then, collectively people have done well but it was not obvious [that they would] at the time. It’s not yet over in terms of the progress [that we need to make] but it’s been a good invest- ment.” Hahn said that, despite valuations now being at a lower

20% to €4.74bn, representing 51% of TV revenues. Revenues from video-on-demand were up 18.3% to €358m. Cable broad- band subscribers rose by 13.4% to 21.5 million, while telephony subs rose by 14.8% to 16.2 mil- lion. Germany performed partic- ularly strongly, with cable inter- net subscribers up 45% and telephony up 50%. Broadband now represents 27% of all cable revenues, while telephony accounts for 17% and TV 56%. Some 16 EU countries now have 100Mbps-plus cable internet

Hahn said that Providence Equity had been laying the groundwork for this since last year. He said the decision to go down the IPO route rather than sell the company reflected Providence’s long-term strate- gy. “We have proved ourselves to be patient investors,” he said. “When we got in again three to four years ago we had a long- term vision. That’s why we are doing a partial monetisation rather than full.” Shane O’Neill, chief strategy

officer at cable group Liberty Global, told delegates at the Cable Congress in Brussels that he expected merger activity in the European cable industry to

services. “Most cable companies have decided to go down this path to create more competitive parameters,” said Manuel Kohnstamm, Cable Europe presi- dent. “DOCSIS 3.0 allows us to go to speeds which for our com- petitors are for now difficult to match and will require addition- al investment.” He said that cable’s ability to provide such speeds helped demonstrate that cable offered a future-proof path to consumers and demon- strated the value of infrastruc- ture competition to politicians.

ramp up significantly in the next 12 months. O’Neill confirmed that Liberty Global had about US$3bn (€2.2bn) to spend on acquisitions and said that he expected significant M&A activ- ity in the cable market in gener- al in a number of territories this year. “Over the next 12 months you will see a lot of activity around German and Benelux,” he said. “Ziggo may come to market in the next 12 to 18 months. Also, central and east- ern Europe is the other big mar- ket for us.” O’Neill ruled out any interest in KDG, following Liberty Global’s entry into the market via its recent acquisition of Unitymedia. “It would be great to put those together but we have to be realistic and sensitive to the regulatory environment in Germany,” he said. “Right now it’s a bridge too far.”

Finland

CAB >Welho 200Mbps

Cable operator Welho has launched a 200Mbps broadband service, following a trial that saw the operator upgrade 500 110Mbps subscribers to 200Mbps for a month at the end of 2009. Welho’s entry level service has been upped to 10Mbps and cus- tomers can also choose from 40Mbps, 110Mbps and 200Mbps. Welho has offered a 110Mbps service since August 2008.

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