Market Watch

Liberty Global Buys Poland's Aster from Private Equity Group


Display Driver IC Forecast

Liberty Global has agreed to buy Poland's fourth largest cable TV player, Aster, from private equity company Mid Europa Partners (MEP). The agreed purchase price of PLN2.4bn (€601m) includes Aster's net debt of €383m. The acquisition is subject to approval from the Competition Office. Liberty Global owns the market's largest cable TV operator, UPC Polska.

MEP bought Aster in December 2005 for PLN1.6bn (€412m) and officially put the company on the market in June 2010. Apart from UPC, interested parties included cable companies Multimedia Polska and Vectra, incumbent telco, Telekomunikacja Polska, and foreign investment group, EQT. According to MEP, it made a 23 per cent return on its investments in Aster. MEP has recently sold its Bulgarian satellite TV operation, as well as its stake in Czech transmission company Ceske Radiokomunikace.

At the end of June 2010 Aster, providing cable TV in three cities in Poland: Warsaw, Krakow, and Zielona Gora, had 380,000 cable TV (including 92,000 digital), 177,000 internet, and 70,000 fixed telephony subscribers. It also offers mobile telephony (55,000 subscribers mid 2010), and VoD services. At the end of September 2010 UPC Polska had over one million cable TV subscribers, just under half a million broadband internet and about 220,000 telephony subscribers.

Analysis
The deal is the latest in a series of mergers and acquisitions in the region's cable sector, and is not the first time LGI and MEP have done business. UPC acquired the largest Czech cable provider, Karneval, from MEP in 2006, while MEP bought Slovenian operator Telemach from UPC in 2009. Very recently they were both involved in the acquisition of the fourth largest cable TV provider in Hungary, FiberNet, which was initially acquired by MEP-owned IPTV player Invitel, which in its turn sold UPC one third of FiberNet's network.

With the acquisition of Aster, UPC on the one hand gets rid of one of its major competitor, particularly in Warsaw, where Aster has a vast majority of its subscribers and a strong position. The buyout also increases UPC's competitiveness against other large players (also present in Warsaw): Vectra and Multimedia Polska. After the acquisition UPC will hold over 30 per cent of Poland's cable TV market, strengthening its challenge to incumbent telco TP SA).

Poland's cable TV market has gradually consolidated, primarily due to large operators buying smaller players. Mid size player Hyperion recently acquired the seventh largest cable company in the market, Stream TV, and is planning further acquisitions.

The process of consolidation is likely to continue, though there is little scope for further tie-ups between the remaining four to five top players. Neither MEP, nor EQT were able to persuade the major players to merge; and they are more likely to continue growth at the expense of smaller and mid-size players.

After exiting Bulgaria, the Czech Republic, and Poland, MEP could now focus on expanding its satellite platform or buying other cable interests in the region. As well as Telemach and Invitel, MEP controls Serbia Broadband, which is the major cable TV provider in Serbia and operates a satellite TV service across South-Eastern Europe.

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