Liberty Global International (LGI), owner of UPC Netherlands, has acquired 12.65 percent of Ziggo, the largest cable network operator in the Netherlands, from Barclays at EUR 25 per share. Barclays came into possession of the shares after Ziggo's majority shareholders Cinven and Warburg Pincus reduced their joint stake from 37.1 percent to 17.1 percent on 19 March 2013. On 25 March, it emerged that Barclays, as underwriter, only sold 5.8 percent of the 20 percent stake in Ziggo, and now LGI has taken 12.65 percent.
One national cable operator?
This transaction does not need approval from the Dutch cartel authority ACM as LGI will not have control over the daily business at Ziggo, according to LGI’s press release. That won't stop speculation of consolidation and the eventual creation of one big cable operator in the Netherlands. LGI said that the acquisition is financially attractive, with an expected dividend yield of 7.4 percent, but also pointed out that the transaction has a strategic value.Even if LGI was considering acquiring a controlling stake in Ziggo, a merger with UPC is unlikely to happen in the near term. In terms of infrastructure, a merger would have little impact, as KPN (copper/fibre) and UPC/Ziggo (coax) already form a de facto duopoly in the Netherlands. The obstacle would be in terms of customers: a merger would create a company with more than 60 percent of TV connections, 42 percent of consumer broadband lines and almost 47 percent of the consumer fixed telephony market, according to Telecompaper research.
Not yet, maybe later
With such market shares, the ACM is likely to make approval of a controlling stake for LGI in Ziggo conditional on the cable companies opening up their networks for wholesale access to other TV, broadband and fixed telephony providers. This would create a new form of infrastructure competition where service providers could choose coax, copper/fibre or both networks to offer their services. The complexity of establishing procedures and network infrastructure for wholesale cable access would likely take some years, but the growing competition from new services such as LTE and OTT video could help accelerate the process.
