Liberty Global expects its recently announced takeover of Unitymedia, the second-largest cable operator in germany, will put an end to the quiet period for M&A activity. The company's CEO Mike Fries noted that Liberty Global may pursue acqusisitions in East Europe and Japan. He also announced a new type of set-top box, with improved connections between the computer and TV, and noted that consumers will want increased bandwidth on internet services, even if they don't make full use of the capacity. He expects services with 100 or 200Mbps will be fully used in future.
His comments provide plenty of fodder for speculation. As we noted in our recent research brief ('Liberty Global increases leverage'), the company has plenty of room on its balance sheet for acquisitions, even after the Unitymedia deal and especially if it involves smaller operators. The comments are not likely to signal a bid for its Dutch counterpart Ziggo, given Fries' focus on East Europe and Japan. As for the German market, the CEO was realistic, admitting further consolidation is not to be expected given the three big operators already and likely regulatory opposition. An earlier proposed merger of the numbers one and three on the market, KDG and KBW, was already rejected due to competition concerns. Possible new markets for Liberty Global in Europe include Spain and Sweden. Other big countries are less of a possibility; the UK's Virgin Media is a bit too big for Liberty, UPC France was already sold a few years ago and Italy has no cable infrastructure.
As for the new set-top box, this will likely be less assymetric, with the gap between download and upload capacity reduced. Fries also seemed to suggest plans for a box that not only provides broadcast signals for cable, but also distributes web content via a broadband connection (see our commentary 'Who's going to bring OTT to the TV?'). Amino is a potential partner for UPC.
And finally the comments over the need for more bandwidth are remarkable. By saying that there is a real need for higher speeds and capacity of 200Mbps will be fully utilised, Fries appears to contradict other cable industry sources, although he doesn't say when he expects this demand to materialise. In any event, the comments put upgrading (cable) networks in the vein of 'business as usual'. And for that he already has the right tools at hand. (see our research brief 'The future of cable broadband').
