Mike Fries, President and CEO of Liberty Global International, has described the fragmentation of the German cable market as not making sense. He also admitted that the cable MSO has “plenty” of money to fund potential acquisitions in Germany.
Speaking in a TV Summit panel session at ANGA COM, Fries confirmed that the company’s investors had voted Monday June 3 in favour of its $23.3 billion acquisition of Virgin Media in the UK, with the deal expected to close Friday June 7. He admitted that Germany remained an important market for LGI, and in response to a question regarding whether it had money left for the German market, quipped: “We have plenty of money left for Germany.”
Fries said that Germany was LGI’s fastest-growing market, and its largest, prior to the Virgin Media deal. “Germany is the engine of growth,” he observed, citing factors such as low broadband penetration and digital TV subscription levels; a willingness from customers to pay for value; low prices and among the fastest broadband speeds in Europe as typifying such potential.
“Deutsche Telekom is investing, we’re investing,” he noted, admitting that LGI would “love to be bigger” in Germany, but was happy with the three states in which it was active. He described it as “interesting” for LGI that Germany didn’t have a national cable platform. “Fragmentation doesn’t make great sense. It only makes sense for our competitors. Consumers would benefit if the industry rationalised and consolidated.”
Dr Adrian von Hammerstein, CEO of Kabel Deutschland, which in February 2013 had its bid for fellow cabler Tele Columbus outlawed by Germany’s competition authority, the Bundeskartellamt, said that such a deal “would have made sense. Now we have to rely on organic growth.” He agreed that consolidation was “a big topic”adding that it had “an industrial logic” with people recognising the economic importance of cable networks.
Dietmar Schikel, CEO of Tele Columbus, said that he was “relaxed” about the Bundeskartellamt’s decision, but admitted that the company’s shareholders might be unhappy. “Now we have a chance to redevelop the business.”
Brian Sullivan, CEO of Sky Deutschland admitted that there were certain benefits and disadvantages to dealing with a lesser number of larger players, but stressed the importance of consumer choice in selection communications providers. “It’s more difficult to switch from cable to satellite [in Germany] than in the UK,” he observed. Fries agreed that it was competition that drove prices, with consumers benefiting when there was healthy, vibrant competition. “It’s easier to see when you have national scale. It’s very difficult to be a small operator in a large market,” he said, saying that LGI was “tiny” compared to Deutsche Telekom and other broadcasters.