The Netherlands' largest cable operator Ziggo finished 2009 with 3.165 million customers, down 2.8 percent from a year earlier. As usual, this was the result of winning digital customers and losing subscribers to competitors. The number of digital TV customers grew 38 percent last year to 1.552 million, the broadband base was up 5.4 percent to 1.449 million, and telephony subscribers increased 23 percent to 999,000. The number of triple-play subscribers jumped by 157 percent to 675,000. The loss of customers to competitors was evident in the ratio of analogue customers (which also includes digital users) and the number of homes passed (up 0.9 percent to 4.075 million). This ratio fell last year from 80.6 percent to 77.7 percent. In total, the number of revenue-generating units increased 9.2 percent to 7.165 million.
The results show a good performance at Ziggo. The company added 30,000 broadband subscribers in the fourth quarter, supported by the success of EuroDocsis 3.0 and the Alles-in-1 triple play. The transition to digital is also proceeding nicely, with 100,000 users added in the quarter. In the short term, that's good for ARPU, and over the long term, Ziggo hopes to end the analogue TV service, which takes a relatively large amount of spectrum.
Ziggo's revenues rose 3.7 percent last year to EUR 1.284 billion, of which 1.20 billion from consumers (up 4.1 percent) and 83 million from business customers (down 1.7 percent). If we calculate the average revenue per customer (based on the average number of customers over the year), we see an increase of 5.5 percent to EUR 400.12 (or EUR 33.34 per month).
Next, the costs. In general, the increase was fractionally higher than for revenues. Adjusted EBITDA, excluding integration costs, rose 2.8 percent to EUR 649 million, but the margin was half a point lower at 54.2 percent. Integration costs fell 7 percent to EUR 47 million, and the financial result improved by 21 percent to a negative EUR 490 million. This leaves a net loss of EUR 247 million, 30 percent smaller than in 2008. Partly due to this, the negative shareholders equity increased 70 percent to EUR 669 million. Ziggo said it expects continued losses, mainly due to (non-cash) writedowns and high interest payments.
Despite a bottom-line loss, Ziggo booked positive cash flow. Operating cash flow was up 14 percent to EUR 688 million, cash flow from investment activies improved 8.8 percent to a negative EUR 254 million and the financing cash flow was a negative EUR 411 million, down 2.4 percent. In the end EUR 22.6 million was added to the cash position. We note that Ziggo has an aagreement with its lenders that it will devote as much cash as possible to debt reduction. Its net debt at year-end was EUR 5.52 billion, up 1.2 percent, while the net debt to EBITDA ratio improved slightly to 7.93 from 8.05 in 2008. Ziggo said cash flow should prove sufficient in the coming years, with no major debt due before 2014.
Our conclusion is that Ziggo is in a weak financial position. The negative shareholders equity is a sign of this, although this is more an accounting issue. With all the extra cash going to debt reduction, the company is left with a small cash position of EUR 65 million. Capex fell 10 percent last year to EUR 255 million, and future network investments, such as the possible build-out of a mobile network, may provide difficult to finance. It looks like Ziggo could better choose to sweat its assets, focusing on the cash-generating possibilities of the triple play, until its financial situation improves.
