Liberty Global Inc. (LBTYA), a leading cable operator in Europe, Latin America, and Australia, recently consolidated its footprint in its core European market. The company has won the auction and purchased Kabel Baden-Wuerttemberg GmbH & Co KG, the third largest cable operator in Germany, for approximately $4.5 billion. The deal is expected to be closed in the second half of 2011.
Germany is the fastest growing economy in Europe and its cable TV market is highly lucrative. The acquisition of Kabel Baden followed Liberty Global’s January 2010 acquisition of UnityMedia GmbH, the second largest cable operator of Germany. If the company gets regulatory approval, then Liberty Global will become a formidable player in the German cable TV market offering triple play video, voice and Internet services. The enlarged Liberty Global will manage around 7 million subscribers, coming second to Kabel Deutschland GmbH, which manages about 9 million subscribers. However, with respect to both revenue and profit, Liberty Global may now surpass Kabel Deutschland.
Beside Germany, Liberty Global already enjoys a strong foothold in Europe with operations in Austria, the Czech Republic, Hungary, Ireland, the Netherlands, Poland, Romania, Slovakia and Switzerland, and Belgium. In December 2010, Liberty Global entered into an agreement with London-based private equity firm Mid Europa Partners LLP to acquire 100% stake of Aster Sp. Z.o.o. for around $805 million. Aster is the fourth largest cable TV operator in Poland. The deal is subject to the approval of the regulatory authority and is likely to close by mid-2011.
Western Europehas become a lucrative segment for cable operators. These markets are witnessing growing demand for pay-TV services together with triple-play bundled services that combines basic cable TV, Internet, and telephony. In the coming years, we believe Liberty Global’s revenue will continue to benefit from a ‘triple play’ of video, broadband, and telephone, as it signs up more “bundled” customers in Europe. The company’s triple play customer base increased 38.2% year over year in the fourth quarter of 2010.
Deployment of high-speed DOCSIS 3.0 network has helped the company to differentiate its offerings in the industry. With DOCSIS 3.0, the company can now offer speed comapred with other large European cable operators, such as, Virgin Media Inc. (VMED) and BT Group plc. (BT). Management has devised a plan to deploy EuroDOCSIS 3.0 in the range of 80%-90% of all UPC broadband divisions in Western, Central, and Eastern Europe. The company is also conducting DOCSIS 3.0 trial runs in Belgium.
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