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Europe’s top cableco loses 118k subs, but scores with debt agency

Kabel Deutschland Group (KDG), the single biggest cable TV company in Europe put on a creditable performance for the past three months, turning in rev


Published: 18 November, 2010


Kabel Deutschland Group (KDG), the single biggest cable TV company in Europe put on a creditable performance for the past three months, turning in revenue figures up 7.6% to €396.3 million. And while it increased its margins over 10% and it’s net debt fell by over €200 million, the company, much in the same vein as other European cablecos has lost subscribers.

It continues to feature nonsense numbers like a 1 million plus increase in “premium” cable subscriber RGUs (revenue generating units). Premium is really a simple measure of anyone who has taken an advanced service such as VoD or a DVR, which should drive average revenues, but in this case it has hardly touched them.

So while it is patting itself on the back for gaining 473,500 RGUs, all of these were in broadband subs and a handful of phone customers. What really happened was that basic cable direct subscribers with KDG fell to 7.27 million from 7.36 million a year earlier, a loss of 90,000 subs. KDG also has a further 1.39 million indirect subs, sold wholesale, making a total of 8.66 basic cable subscribers which is a fall of 118,000 from a year earlier.

The company counts another 191,000 homes which don’t take TV but just take either phone or broadband service, and this takes its total reach up to 8,846 homes.

When you compare this with the rampaging Deutsche Telekom, which has now breached the 1 million homes barrier using IPTV and is aggressively adding homes at the rate of 6,000 a week, and with DTH player Sky Deutschland adding at a rate of double that, then KDG no longer looks quite so dominant in Germany pay TV.

Germany has about 35 million TV homes and these two plus Liberty Global’s Unity Media account for around 8 million combined, still less than KDG’s individual total, but definitely they will soon outweigh KDG between them. All four of them together barely breach 16 million, under half the TV homes in Germany. The others either do not take pay TV or have gone with a relatively large number of smaller pay TV operators.

Average Revenue Per User (ARPU) for the TV side of KDG was just €9.49 per month, a rise of 3.8% on the year, which is pretty low then you think about over 1 million of those homes having upgraded to premium services, 127,000 of them during this quarter. We would have expected those numbers to drive the ARPU more than that especially given all the investment the company is putting into its network.

In spite of all this Moody the debt agency (quite wrongly in our view) has raised its rating for KDG by one notch to “Ba2”, and the rating for its corporate bonds to “B1.” The company has immediately reacted to this by requesting better and longer terms for its outstanding debt and says that so far 94% of its lenders have agreed. That will create some considerable relief at KDG.

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