Market Insight

Liberty Global wins regulatory approval for Ziggo buy

October 10, 2014

Martyn Hannant Martyn Hannant Manager – Research and Analysis, Service Providers & Platforms
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Liberty Global has obtained regulatory approval from the European Commission (EC) for its agreement to purchase the shares in Dutch cable operator Ziggo that it does not already own. The US-based cable company has made concessions at the request of the EC in order to address its competition concerns, which particularly related to Liberty’s activity within the premium film space and its relationship with Dutch broadcasters. The remedies offered by Liberty involve the divestment of its Film1 channel business, and behavioural commitments in relation to its contracts with broadcasters.

At the time of its announcement of its intention to purchase Ziggo in January 2014, Liberty Global’s stake in the Dutch operator stood at 28.5%. Liberty now only needs acceptance from Ziggo shareholders to complete its acquisition of the remainder. The company has most recently stated that it is willing to accept 80% or above of the Ziggo share capital it currently does own. However, in accordance with US regulatory requirements, the cable giant has said it may reduce its minimum acceptance level to 65%. The closing date for shareholder acceptance of Liberty Global’s offer for Ziggo is 4 November 2014.

Our Analysis

The acceptance of regulatory approval from the EC is a significant win for Liberty in its ongoing pursuit of Ziggo. If it is successful in gaining acceptance from Ziggo’s current shareholders, the combination of Ziggo and Liberty’s UPC service will create the largest pay TV group in the Netherlands. At Q2 2014, UPC and Ziggo’s combined cable TV subscriber base stood at 4.24m. The acquisition of Ziggo would therefore put Liberty ahead of nearest rival KPN, which most recently reported 2m subscribers for its IPTV and pay DTT services. The approval is also particularly timely for Liberty due to the recent announcement of Vodafone’s decision to roll out a competing TV service across the Netherlands via DSL networks.

In terms of subscriber numbers, the acquisition of Ziggo will allow Liberty to compete more effectively with OTT (over-the-top) streaming service Netflix, which launched into the Dutch market in September 2013. Liberty may however face more of a challenge within the premium film playing field with the sale of its Film1 channels, which it strategically retained when the operator sold its interest in the Chellomedia channel business in February 2014. This said however, the willingness to make concessions here show Liberty’s full commitment to what is a key cable asset.

The EC’s decision to complete the investigation itself was at odds with Dutch competition authority ACM’s desire to examine the case in the domestic market. The Dutch regulator has previously cast its eye on the cable sector, however called off plans for regulation with the growth of digital TV in 2011. The increased level of market concentration in the cable sector that would follow from a merger between UPC and Ziggo may lead to renewed interest in this area. At present however, Liberty can content itself with the EC’s acknowledgement of sufficient levels of competition in the media and telecommunications markets in which it is active.


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