Market Insight

Netia to buy cable TV networks

March 06, 2013

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Netia, an alternative telco listed on the Warsaw stock exchange, is to buy part of the Aster cable TV network from UPC. Selling part of Aster's infrastructure was one of the conditions which the Competition Office made when giving the green light for the acquisition of Aster by UPC at the end of 2010.

Netia will take over Aster's networks in Warsaw and Krakow which pass 446,000 homes, increasing its own network coverage to 2.8m households. The agreement is now subject of approval from the Competition Office. If the deal is approved, subscribers from the acquired network will have the right to change their provider. UPC bought Aster at the end of 2010 from Mid Europa Partners, paying PLN2.4b (€600m).

Netia is currently the largest alternative telecommunications company in Poland, with 1.644m fixed telephony, 875,000 broadband internet, 91,000 mobile telephony and 79,000 IPTV subscribers at the end of 2012. In 2011, it acquired a competitor telco group, Telefonia Dialog, for PLN944m (€235m), and an ISP serving the business sector, Crowley Data Poland, for about PLN100 (€25m). Netia's major shareholders are currently Third Avenue Management (17.87 per cent of shares), and ING OFE (15.29 per cent).

With penetration exceeding 30 per cent of homes, the cable TV market in Poland in terms of TV subscribers has been flat for several years. Currently, in spite of an on-going consolidation, there are in total about 600 operators, with the top five holding about 70 per cent of cable TV subscribers. Even the largest cable TV players are now little interested in rolling out networks in any new areas due to the high costs and low expected profits. In areas covered by cable networks, competition has increased. It happens quite often, especially in big cities, that there is more than one cable TV operator present in a number of blocks of flats.

This competition is reflected in Netia's 2012 TV segment results. Although at the end of 2012 Netia's IPTV services were available to about two million homes, the company had only 79,000 IPTV subscribers. In the telecommunications market, competition is also fierce. Alternative telcos have to compete with incumbent telco, Orange (former TP SA) and also with cable TV players, which typically give voice services for free to their triple-play subscribers, and in most cases provide very attractive internet offers.

Under these conditions, the acquisition of Aster's cable TV networks is not that surprising. As well as extending its service portfolio and strengthening its position in Warsaw and Krakow, Netia is now able to compete with cable TV operators as a big cable TV player itself. It may also launch a mixed IPTV/cable TV offer, allowing its subscribers to choose the technology, which should also increase its competitiveness on the telecoms market. In the pay TV market, however, due to a high competition and the market being close to saturation, Netia's prospects are similar to other cable TV players, which are trying now to increase their ARPU figures primarily by upgrading analogue subscribers to digital TV services, and rolling out triple-play. A big growth in terms of TV subscribers is very unlikely, other than via further acquisitions.

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