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Ziggo ticks all the financial boxes in preparation for IPO

By all the measures that European cable suppliers use to quantify their performance, the latest numbers from Ziggo in the Netherlands was exemplary

By PETER WHITE

Published: 21 April, 2011

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By all the measures that European cable suppliers use to quantify their performance, the latest numbers from Ziggo in the Netherlands was exemplary. Revenues up 6.5% on the quarter, TV subscribers down, but at a controlled 2.5%, debt halved and renegotiated on better terms, profits instead of losses and more and more revenue from broadband and triple play.

It is the sort of performance that speaks volumes for its coming IPO or for hard bitten negotiations with UPC about the company being bought – something we have argued is a complete no-no under anti-trust provisions.

Ziggo ended the first quarter with TV subscribers at 3,063,000, losing some 24,000 from last quarter and 77,000 from a year ago. Cable TV companies of late have focused not on keeping every single customer but measure themselves on how many service units they acquire (Revenue Generating Units RGUs) and want to kill churn by moving as many subscribers as possible to triple and double plays – voice, broadband and TV. Ziggo loses less subscribers per quarter in pursuit of this than almost any other major cable operator in Europe, except perhaps Virgin in the UK.

It says that its total triple play homes have now reached 1.14 million up from 957,000 a year ago, a rise of 19% and for each triple play home it has added, that’s at least one extra service, or possible two. It has raised its ARPU this quarter, but much of this is through arbitrary price rises in TV and triple play bundles, and its blended ARPU has reached €35.20, an increase of €2.65 up 8.1%. When we last looked it was €32.92 last quarter and just €32.55 a year ago, so that’s quite a leap in one quarter and we suspect that this is price rises to impress investors. We hope it doesn’t bite them with increased churn going forward.

Ziggo’s operating income jumped to €86.4 million from €72.5 million, a rise of 19.2% which led to the company posting a profit of €37.5 million, a strong improvement from a net loss of €3.9 million in Q1 2010.

The net profit includes an amortization charge of €44.1 million on intangible assets from merging its three predecessor businesses – Ziggo was made up of cable companies, @home, Essent Kabelcom and Multikabel into Casema , in a deal which harks back to 2006. Without this amortization Ziggo would have reported a net profit of around €70 million.

Interestingly, Ziggo now has TV revenues for the quarter of €156 million but its broadband revenues are almost as strong at €101 million, a rise of 9% over the year while its loans from financial institutions have fallen from €3.7 billion to just €1.5 billion.

Ziggo CEO Bernard Dijkhuizen said, “Ziggo continued its growth in the first quarter of 2011, demonstrating the strength of our strategy and operations. With new innovations for our television offering, increased internet speeds for our customers and our continued focus on further improving our customer service, we are convinced we will strengthen our position in the consumer market and exploit its considerable further growth potential in the year ahead.”

All of which reads like a prospectus for an IPO, rather than a come on for a merger bid. Ziggo right now is not a company that needs buying, it is a company shown in its best light and should IPO for a decent price during the next quarter or so.

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