Market Insight

Swedish cable operator Com Hem announces Initial Public Offering

May 23, 2014

Martyn Hannant Martyn Hannant Manager – Research and Analysis, Service Providers & Platforms
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Swedish cable operator Com Hem is to launch an Initial Public Offering on the Stockholm stock exchange. The offering will largely consist of new ordinary shares, with the potential sale of existing shares by holding company NorCell, through which private equity group and principal Com Hem shareholder BC Partners manages its funds. Com Hem expects to raise a total of SKr5.5 billion (€551 million) through the IPO, and intends to use the net proceeds to improve its debt standing. 

The company recently reported it had 1,829,970 homes connected at the end of Q1 2014, an increase of 52,780 on Q1 2013. This was largely due to its long term contracts with landlords of housing associations, as well as service provider agreements with communication operators. The company also announced its entry into the B2B (business-to-business) sector via the acquisition of the corporate operations of Phonera Företag, which completed in March 2014.

Our take

Com Hem’s decision to increase its funds through an IPO follows significant investments made by the company in digital TV and broadband, as well as its entry into B2B. The company is largely focusing its current strategy on digital TV and broadband, and it is these areas in which the company has the most room for growth when seeking to maximise its value for future shareholders. While Com Hem’s Q1 2014 blended ARPU stood at the same level as the first quarter of 2013 at Skr359 (€41), the last two quarters saw an improvement following three quarters of downturn, suggesting that the operator is beginning to see signs of its investments paying off.

Com Hem has particularly been investing in developing its digital TV product in recent quarters. This has been via its TiVo platform – a strategic move made to address the slowdown in digital TV RGUs the operator has experienced over the past two years. Since the October 2013 launch of TiVo, Com Hem claimed that TiVo reached 12.4% of the digital TV customer base by the end of Q1 2014. Compared to Com Hem’s British and Spanish peers Virgin Media and Ono, this take-up is encouraging. In the second quarter following Virgin Media’s initial TiVo launch, 4% of its digital subscribers took TiVo, whereas in Spain this figure stood at 1% for Ono. While this relatively good start for TiVo in Sweden has not yet resulted in digital TV subscriber growth, there has been evidence of ARPU uplift; in Q1 2014 pay TV ARPU was up 3% on the previous quarter to Skr243 (€28).

Com Hem has seen an upward trend in its broadband subscriber base in recent quarters. The operator added 11,776 internet subscribers in Q1 2014 – an improvement compared to the net loss of 798 it experienced in Q1 2013. Com Hem’s activity in broadband in recent quarters has included an investment into its broadband products via speed upgrades. This suggests further room for revenue and ARPU growth via upselling the increased subscriber base to higher broadband speeds. The previous two years have seen a modest upward trend in broadband ARPU. Most recently, the figure was up 1% on Q1 2013 to Skr204 (€23).

Com Hem has undoubtedly faced some challenges in growing its digital subscriber base over recent years, owing to competition from both IPTV and OTT (over-the-top) services present in Sweden. It has also seen a decline in fixed telephony RGUs, which has resulted in a downward trend in triple-play subscribers. Despite these recent setbacks however, Com Hem remains the clear market leader in Sweden, which is particularly helped by its fairly stable landlord subscriber base. It is this position, together with its recent investment activity, that has likely driven its decision to launch its IPO.

Com Hem
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