Cable companies try to make inroads in EuropeSeptember 30
Cablecom.
LONDON: In the film “The Cable Guy,” Jim Carrey plays a cable television installer who goes to great lengths to befriend a customer, giving him a free, unauthorized service upgrade. In the real world, American cable companies may be less eager to please, but nonetheless they dominate the pay-TV and broadband businesses.
In Europe, by contrast, “in most countries we are still the little guy,” said Mike Fries, chief executive of Liberty Global, which owns cable networks in a number of European countries, as well as Asia, Australia and Latin America. But now the European cable business wants to raise its profile, with Liberty Global and other investors trying to persuade consumers, content providers, competitors and regulators alike that the cable guys are on their side.
“Usually the cable company is the one that's providing the innovation in the market,” Fries said. “But as an industry, we are probably under-represented and underappreciated in Europe.”
Actually, the size of the cable business, as well as the level of innovation, varies widely from market to market across Europe. More European households - about 63 million - get their pay-TV from cable than from any other source.
But in countries like Germany, Belgium and the Netherlands, where cable is nearly ubiquitous, it is largely in the form of old-fashioned analogue connections. Less than one-quarter of European cable TV connections are digital, compared with about half of those in the United States, according to Forrester Research.
Even in markets where cable is predominantly digital, like Britain, cable has been left behind by satellite and free, over-the-air digital TV systems. Meanwhile, telecommunications companies have been more successful than cable companies at selling European customers bundled services like broadband, telephone calls and digital television.
“While cable is the dominant television technology throughout the region, there has been a lot of difficulty upgrading it to digital,” said Ted Hall, an analyst at Informa Telecoms & Media, a research company.
After a round of consolidation fueled by private equity deal makers, analysts have said that European cable companies may be in a better position to make the investments in networks, content and marketing that could help them compete with telecommunications and satellite companies.
Last year alone, the three leading cable operators in France merged into one nationwide provider, Numericable, and the two biggest cable companies in Britain got together to form a company now called Virgin Media. Another operator with national scale was formed a year earlier when a Spanish cable company, Ono, acquired the cable operations of a telecommunications company, Auna.
Private equity has taken an active role in the consolidation, with several of these companies helping to finance the deal in Spain. Private equity firms also control Numericable and the leading cable company in Germany, Kabel Deutschland, along with smaller operators in a number of other countries.
Liberty Global, a spinoff from the media empire of the American cable entrepreneur John Malone, has also been busy. It recently pulled out of France, Sweden and Norway, markets where analysts said it had little hope of building a dominant position, but it acquired market leaders in Switzerland and Ireland, among other acquisitions.
There has been speculation that Liberty Global, the largest international cable business, might be interested in building up its European presence by acquiring Virgin Media, which put itself up for sale in July but put the process on hold in August amid the turbulence in financial markets.
“We'll see if that asset becomes available again and then look at it if it does,” Fries said. “It has some interesting attributes.
“We're also examining opportunities throughout Central and Eastern Europe. And in certain markets in Western Europe, we'll take a look at things that come available.”
Analysts have identified Germany as potentially attractive to Liberty Global, since recent developments have suggested that a long-awaited consolidation of this most fragmented of European cable markets is under way.
While the number of cable operators has been whittled down to one in several European markets, an estimated 4,000 companies are involved in the business in Germany, according to Cable Europe, a trade group. Three of them, known as Level 3 operators, own much of the network infrastructure and some connections to consumers; most of the rest, called Level 4 providers, operate only the final link from, say, an apartment building to a customer's home.
Regulators created this separation in an effort to limit the power of Deutsche Telekom, which originally built the cable network but was not allowed direct access to customers. Deutsche Telekom was later required to sell the network, which is now in the hands of Kabel Deutschland, Unity Media and Kabel Baden-Württemberg.
30 Sep 2007 | 5:15 pm | Hitech
