Market Insight

Liberty Global completes Ziggo purchase as Dutch cable decline continues

November 06, 2014

Martyn Hannant Martyn Hannant Manager – Research and Analysis, Service Providers & Platforms
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Liberty Global is set to complete its purchase of Dutch cable operator Ziggo this month after meeting minimum acceptance conditions for its offer for the 80% of shares it does not already own. Liberty said it would delist Ziggo shares from Euronext Amsterdam following completion. With Ziggo and its existing UPC Dutch operations, Liberty will control 90.6% of the Dutch cable market, strengthening its position in a country which has suffered a cable downturn in recent quarters.

Today also marked the release of Liberty Global’s Q3 2014 results, which showed an improvement in subscriber levels on the same quarter in 2013. Total customer relationships reached 24,499,000 for Q3 2014, up from 24,471,000 in Q2 2014, which was in contrast to the decline of 200 customers the operator saw in Q3 2013. The improvement stemmed from Western Europe, which accounted for 90.7% of the increase in customer relationships. The UK's Virgin had a particularly strong quarter adding 34,600 new customers in the third quarter. 

There was a 5,700 decline in unique cable homes in Central and Eastern Europe, although even this was a slight improvement on the 7,500 fall in Q3 2013, owing to decreased churn in Czech Republic and Poland.

Liberty Global also saw an increase of 343,700 RGUs last quarter, largely due to a strong quarter for broadband driven by its UK and German operations, and lower TV losses overall compared to Q3 2013. In addition, Liberty’s triple-play customer base exceeded single-play customers for the first time, with total triple-play customers standing at 10,391,700 compared to 10,140,700 subscribers taking one service only.

Total quarterly revenue across all of Liberty Global’s operations was up 5% on 2013, at $4,497.2m (€3,386.2m). Of this, $3,873m (€2,916.2m) was attributable to Western Europe, up 6.5% on Q3 2013, and $279.8m (€210.7m) came from Central and Eastern Europe, which increased 0.3% on the previous year. ARPU also rose for Liberty Global as a whole, from $46.25 (€34.82) in Q3 2013 to $48.58 (€36.58) last quarter.

Our Analysis

The purchase of Ziggo will provide a useful boost to Liberty Global due to its recent challenges in the Dutch market, which was once again a weaker market for the group in Q3 2014. RGUs for UPC Netherlands fell by 4,200 in the last quarter compared to a 7,000 increase in Q3 2013. In addition to this, UPC’s customer relationships continued its downward trend with a fall of 13,200 in the quarter. Liberty has blamed the comparative weakness of the Dutch market on aggressive promotions from competitors, price increases and a decreased demand for telephony. Whilst Ziggo experienced similar declines in its customer base in Q3 2014, the combination of UPC and Ziggo will nonetheless act as a greater defense against incumbent telco KPN and OTT operators active in the region. Based on Q3 figures, the integration process which Liberty will soon begin will increase Liberty’s unique Dutch subscriber base from 1,592,500 to 4,208,500, putting it well ahead of KPN’s 2,024,000 subscribers across its IPTV and DTT services.

The Netherlands aside, the upturn in Liberty Global’s Western European subscriber base in comparison to Q3 2013 is largely thanks to improved quarterly performance of Virgin Media in the UK. The British cable operator saw an increase in RGUs of 69,800, compared to a 6,800 quarterly drop in 2013, which it has attributed to the success of its “Big Bundle” campaigns. Furthermore, Virgin increased its TV subscribers by 5,100 - its first positive net TV addition since Q4 2012. In addition to the UK, Liberty’s other key Western European asset, German operator Unitymedia KabelBW, delivered subscriber results in line with its Q3 2013 performance. These results suggest that Liberty's other two key acquisitions of recent years remain important assets.  

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