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Liberty Global supposed deal with Ziggo is all smoke and mirrors

The Netherlands authorities are never going to allow Liberty Global to buy rival cableco Ziggo, in the process tying up around 72% of the Dutch pay TV

By PETER WHITE

Published: 7 April, 2011

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The Netherlands authorities are never going to allow Liberty Global to buy rival cableco Ziggo, in the process tying up around 72% of the Dutch pay TV market by number of homes, and way more than that by revenues. Ziggo is known to have the highest ARPU of any of the Netherlands pay TV players. Rivals such as Canal Digitaal, the satellite TV operation owned by M7, are thought to have far lower ARPU, as does KPN with its IPTV service – so the combined entity might have as much as an 80% market share by revenue.

The share of pay TV in Netherlands would fall to around 64% if you include the 900,000 pay DTT homes which take Digitenne, although this has an ARPU of around €9, about 25% of that of Ziggo, so whatever way you look at this deal, it creates a top heavy monopoly. The two companies represent 97% of the cable industry, with them expected to mop up the remaining leading lights CAIW and Delta KabelComfort and other minnows over the next few years and take 100% between them

Ziggo knows that, and Liberty Global knows that, so what are these two companies really about? Do they actually think they can make a case to the Netherlands Competition Authority that a unified cable company is required to put up competition to KPN? There are numerous precedents in that the UK and France each have a single dominant cable entity – but in the UK the pay TV leader is a satellite company in the form of BSkyB, and in France there are four viable IPTV players and the dominant CanalSat with 11 million homes on its books – in other words pay TV remains balanced in those countries. The other territory where a single large cable operator exists is Spain, but this is also like the situation in the UK and France, in that not only is Ono a single large cableco, which makes up less than 25% of pay TV in the country, but it has under 1 million customers while a further 400,000 or so are seeded across a handful of smaller players, so a roll-up could happen into a second cable rival there.

In Germany where the competition authorities have frowned on a merger between Kabel Deutschland (KDG) and its once Deutsche Telekom owned siblings, but has presumably been happy to split cable down the middle between Liberty Global and KDG, primarily because satellite is nowhere near as dominant there, with just 2.4 million homes and Deutsche’s IPTV T-Entertain efforts are only just passing the 1 million mark.

Cable in Germany is closer to the shape of the Netherlands business with one important difference, TV ARPU is generally far lower and the best paying German customers are with satellite at Sky Deutschland. In Germany pay TV is made up of 19.8 million cable homes out of 23 million pay TV homes, an 84% market share, and there are now 6.8 million of these held by Liberty Global and 8.5 million by KDG – with the only other major being Orion Cable with just over 3 million. Then there are around 1,000 small to tiny cablecos, many of them mere apartment blocks, reaching a further 1.2 million or so homes. Other forms of pay TV are as yet tiny, collectively taking up 16% of the market by homes and in this way it is a close match for the Netherlands. So if competition authorities couldn’t let a merger happen there, they can’t in the Netherlands.

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