Tele Columbus progresses IPO plans

Tele Columbus AG, the third-largest German cable network operator, is moving ahead with its plans for an Initial Public Offering (IPO). Tele Columbus intends to list its shares on the regulated market (Prime Standard) of the Frankfurt Stock Exchange in the first half of 2015, market conditions permitting.

The IPO will consist of new shares from a capital increase as well as shares from existing shareholders through a holding company. Tele Columbus expects the primary proceeds from the offering to be around €300 million excluding potential greenshoe proceeds of up to 10 per cent of primary base offering. The Company intends to use the major part of the proceeds to reduce its current financial indebtedness and provide more financial flexibility to continue executing its growth strategy.

Tele Columbus provides a variety of attractive television and telecommunication services to its customers including basic cable television, premium television packages as well as Internet and Telephony services. With c.1.7 million connected households, Tele Columbus is the third largest cable network operator in Germany, Europe’s largest cable market.

The Company has leading market positions in its core regions in Eastern Germany, with market shares of c.66 per cent in Saxony-Anhalt and c.40 per cent in Berlin-Brandenburg in 2013. The Company also operates successfully in selected regions in Western Germany, primarily in North-Rhine Westphalia and Hesse.

Tele Columbus has a stable and attractive customer base that ensures reliable income streams and additional selling opportunities through up- and cross-selling. A considerable part of the customer relationships is based on long-term contracts with a diversified base of large and small housing associations.

Tele Columbus has built one of the top performing cable networks in the German market with an ability to deliver speeds in upgraded Docsis 3.0 homes of up to 150 Mbit/s. The Company plans to continue investing to further migrate networks from third-party Level 3 operators and thereby increase the share of homes connected to its own networks as well as drive margin expansion. The Company also aims to further advance the number of homes connected over and beyond the existing footprint.

Revenues grew by 3.8 per cent to €159.3 million in the nine months ended 30 September 2014 compared to the same period in 2013. Normalised EBITDA reached €72.9 million during the first nine months of the year, equivalent to 10.0 per cent year on year growth. The normalised EBITDA margin (as a per centage of revenues) increased to 45.8 per cent for the nine months ended 30 September 2014, from 43.2 per cent in 2013.

The growth of the Company is primarily driven by Tele Columbus’s increasing success in selling additional products beyond its traditional cable TV service to existing clients (up-selling and cross-selling). In particular, the high-speed Internet access and telephony business has demonstrated strong momentum. As of 30 September 2014, the number of customer contracts grew by approximately 21 per cent and 22 per cent year on year to 197,000 (internet) and 166,000 (telephony), respectively. The average number of products per customer (RGU per customer) increased further to 1.43 (30 September 2013: 1.38), and the monthly average revenue per user (total blended ARPU) reached €14.0 (30 September 2013: €13.30) as of 30 September 2014.

“Our positive business development in the first nine months of 2014 confirms that we have made the right choices to drive growth and further increase our operating profitability. With a very attractive customer base, we are convinced that we are well positioned to continue to expand our market position in one of Europe’s most attractive cable markets over the coming years,” says Ronny Verhelst, CEO of Tele Columbus AG.

As already announced on 30 September, the planned IPO will be combined with a comprehensive refinancing of its existing debt to align its capital structure with the Company’s new profile and to reduce interest costs. In the medium term, Tele Columbus intends to maintain a target leverage of 3.0 to 4.0 times Normalised EBITDA, although leverage may temporarily increase in case of accelerated investments or acquisitions.

Goldman Sachs International and J.P. Morgan Securities plc are acting as Joint Global Coordinators and together with BofA Merrill Lynch and Berenberg as Joint Bookrunners for the planned IPO. Rothschild is a financial advisor to the Company.

Tele Columbus highlights:

Single-country exposure to highly attractive German cable market with strong macro backdrop

• Germany has sound macro fundamentals and secular cable market growth

• Significant upside potential for fixed broadband penetration – with cable winning market share mainly at the expense of DSL – and strong growth outlook for the Pay TV market

• Tele Columbus provides a unique opportunity to invest in ‘pure’ German cable

#3 German cable operator with strong presence in regional markets

• Tele Columbus has market leading positions in core regions of Eastern Germany, where fixed broadband penetration upside is even more pronounced

• Attractive expansion strategy in selected Western German regions

Stable, long-term customer relationships supported by housing association business model

• German housing market characterized by high share of housing associations

• Strong and stable long-term relationships characterising current housing association contract portfolio, ensuring reliable income streams and additional selling opportunities

• Proximity as key differentiator, Tele Columbus is perceived as a trusted partner

State-of-the-art, integrated and flexible network providing competitive advantage

• Tele Columbus has built one of the top performing cable networks in the German market

• Ability to deliver speeds in upgraded Docsis 3.0 homes of up to 150 Mbit/s – with significant further upside potential

• Flexible network readily adaptable to growing customer demand and geographic expansion

Clearly defined network investment plans driving proven cable growth strategy

• Majority of future Capex purely success-driven, due to advanced, high capacity network

• Investment focus on migration away from third party Level 3 operators to increase share of homes connected to its own networks and driving mechanical margin expansion

• Continued migration and network upgrades increase the base for up- and cross-selling

Strategic option value providing further upside

• Potential upside from further German telecom and cable market consolidation

Highly experienced management team with strong track record

• Resolution of legacy issues constraining the growth strategy in the past

• Stable management team since 2011 has successfully realigned the Company and turned the focus to growth

• Clear growth strategy implemented – and already showing early success

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