Cable Congress: mobility and scale key to driving value of cable

Investing in mobile is of varying importance and creating scale is increasingly key to driving valuations of cable operators in Europe, according to participants in a panel discussion on cable finance at Cable Congress in Brussels.

While operators need a mobile  play, the key question is how to provide it, said Andrea Salvato, SVP and chief development officer, Liberty Global. “We think mobility is important and a big source of our growth going forwards,” he said.

Salvato said there are opportunities in mergers and acquisitions, but there is still a healthy growth potential in the core business of offering triple-play services. He said the UK market offered the prospect of filling in adjacent areas to existing networks. “There will continue to be a very healthy core business and the rest is really the icing on the cake,” he said.

He said that the industry needs to keep investing, which benefits companies that have scale. “This is a market where scale is important and there are benefits to cable from owning mobile assets,” he said. However, referring to speculation about Vodafone’s interest in the company, he said there is no strong need for Liberty Global to merge with a major mobile player. “For Liberty we have a very healthy future as an organic company. We have a great future as a standalone business.”

Andrew Barron, chairman of Com Hem, said that for his company, working in a market where the quad-play has been less appealing to subscribers, the B2B business is of growing importance, as is expanding off net or creating new network extensions. “Convergence is not just about launching mobile but about the space different cable and telecom operators used to operate in becoming converged,” he said. “We believe we’re a few years behind [in seeing demand for quad-play in Sweden]. We believe we’ve got quite a long way to go.” He said there is a “huge opportunity” in mobile for Com Hem but it is currently investing in other high-growth services.

Barron said the real battle would be between fixed players. He said no operator is now going to be build a new national network in most cases. “At the end of the day the defining characteristic is who owns the fixed networks. We are seeking people run those fixed networks better and leverage that into running adjacent businesses,” he said. “That is really the template for the next five to 10 years.”

Referring to the wave of consolidation in Europe, Barron said independent publicly owned operators like Com Hem were “a threatened species”. he said he believed in scale. He said the scale of telecom operators is “unimaginable” to most cable operators and that regulators should look favourably on further mergers and acquisitions.

Barron said that Com Hem has leverage of about four times EBITDA and “that is about right”. He said the company could generate a lot of cash to invest and deleverage if required while returning cash to shareholders.
Altice said that cable is well managed and some mobile assets could benefit from that experience. He said the mobile industry has also gone through a depression over the last two or three years and the timing of investment is important.

Burkhard Koep, head of strategy and business development, Altice Group, said his company is focused on cost cutting and continued investment at the same time. He said Altice needs to follow up mergers and acquisitions with the right operational decisions. “We want to make sure we strike the right balance,” he said.

Also speaking on the panel, Cliff Marriott, MD, Goldman Sachs International, said that there will be consoldiation towards a single incumbent facing a single combined cable and mobile player in certain markets. “In other markets like Scandinavia the customer is not asking for a converged package and mobile is still an individual decision.”

He said there are “scale advantages across countries” for big operators. “Making an investment in something like Horizon is not something that could be done by every cable company,” he said.