52 TVBEurope Business
in the previous month, of All3media for £550 million in a joint venture with Discovery Communications. The move to buy into content surprised many given the sale in February 2014 of Chellomedia to AMC Networks for €750 million. Liberty Global retained its Dutch premium channel business of the Film1 and Sport1 channels. Such content deals by infrastructure companies are much more risky given the nature of the content business, the entry of new content players, such as Amazon and Netflix, and the high leverage and lower profit margins.
Higher equity valuations European operators are seeing significant value in consolidation as organic growth becomes increasingly difficult in crowded multi-service markets. Based on reported purchase prices for deals conducted since the beginning of 2011, companies making acquisitions during 2013 and 2014 are paying multiples of more than three times those paid during the previous two years. Liberty Global’s acquisition of cable operator Kabel BW in December 2011 cost $1,807.3 per
www.tvbeurope.com September 2014
Figure 3: Potential for cable consolidation in eastern Europe by subscribers, as of end-2013
video subscriber, based on a purchase price of $4.16 billion and 2.3 million TV subs – the highest value deal of 2011 and 2012 in the sector. By comparison, Liberty Global paid $5,702.7 per video sub for Virgin Media in 2013.
As the best opportunities for consolidation are swallowed up, deal prices have increased with
more players attempting to get a slice of a shrinking pie. Vodafone snapped up Germany’s largest video service provider, Kabel Deutschland, with eight million subs in June 2013 for €7.7 billion, representing a $1,319.0 per sub value. However, only a year later in March 2014, it was paying €7.2 billion for Spanish cable operator Ono with 0.78 million video subs, at
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2014
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