Liberty Global owns 100 per cent of the Netherland’s cable operator UPC, but also owns 18.2 per cent of Holland’s other major cable company Ziggo. UPC has about 2.8 million homes on its nets while Ziggo’s footprint covers 4.2 million homes. Combined, they control around 40 per cent of the Dutch market, with telco KPN taking the rest. KPN’s market share is declining.
Ziggo came about through the linking of Multikabel, Casema and @Home back in 2007, and when they linked up management indicated that operating expenses tumbled from 34-35 per cent of sales to 25 per cent.
A report from Morgan Stanley suggests that while there is no suggestion as yet of a closer relationship between Ziggo and UPC there are potential synergies available to both players. The bank’s report goes as far as saying that it is “theoretically possible that Ziggo and UPC Netherlands – as separate legal entities under shared ownership – could set up a cost-sharing programme, for example to cover marketing campaigns, billing and capex, from which to derive synergies.”
One catalyst for this potential closer relationship was the exiting of Ziggo’s co-investors (Cinven, Warburg Pincus, etc) on April 26th, leaving 81.8 per cent of the business in free float.
Another catalyst is a slew of refinancing needed by Ziggo between this coming November and 2017. Morgan Stanley is firmly ‘Overweight’ as far as Ziggo’s prospects are concerned, with a forecast of 30 per cent growth for the company between 2012 and 2015.