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Com Hem embarks on expansion plan with Boxer acquisition and new fibre rollout

June 08, 2016  | Subscribers Only

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Sweden’s largest cable operator Com Hem announced a significant expansion of its multiplay business, unveiling a two-pronged strategy to target homes not reached by its existing cable network.

Moving into the single dwelling unit (SDU) market, Com Hem struck an agreement to acquire pay DTT platform Boxer Sweden from network-infrastructure provider Teracom (via subsidiary Teracom Boxer Group) in a deal with an enterprise value of SEK1.33 billion ($163 million). This is subject to regulatory approval, which if granted should see the transaction completed in the second half of 2016. Com Hem expects the addition of Boxer to its business to contribute around SEK300 million to its annual underlying EBITDA.

In order to provide communications services to Boxer-served TV homes, Com Hem is also embarking on a new fibre network rollout that will reach 800,000 households within several years. This will be achieved via a combination of fibre unbundling, the use of third-party open LAN networks and, to a lesser extent, building out Com Hem’s own fibre coax network. 

Our analysis

As a company seeking growth in a mature market, Com Hem’s move acquire a swathe of new pay TV customers – Boxer Sweden had 540,000 of them at the end of 2015, according IHS – that can in time be targeted with a full bundle of multiplay services is a shrewd one.

With total cable TV customers slowly declining, in spite of digital TV growth, broadband has been the company’s major growth driver in recent years, and its fibre services will likely prove appealing to Boxer customers – as well as non-Boxer homes being passed by the Com Hem network for the first time. The cable operator can leverage these new customer relationships to offer a bundle of TV and communications services to these homes, an attractive proposition for those wanting to receive these from a single provider, likely at a lower price than from two separate ones.

The evolution of Boxer into a multiplay asset provides a greater opportunity for Com Hem than it did for Teracom, which had been seeking a partner to broaden Boxer’s product offering but instead received offers to purchase the business. Boxer has struggled to retain subscribers in Sweden’s mature pay TV market, with its customer base declining by 169,000 since 2008. Com Hem will hope to stabilise this negative growth by adding broadband to the Boxer offering.

Boxer Sweden is the second Nordic pay DTT asset to be offloaded by Teracom, following its sale of Finnish operation PlusTV to DNA, the largest cable operator in that market, in 2013. It leaves the company with one remaining pay DTT platform, Boxer Denmark. Teracom told IHS that it plans to retain control of the asset, which is also losing subscribers – its customer base stood at 287,000 at the end of 2015, down from a peak of 371,000 in 2012. In the event that it is eventually divested, as PlusTV was and now Boxer Sweden is set to be, it will mark Teracom’s exit from the consumer-facing pay TV platform business. Its core focus is on network infrastructure, and Boxer remains a key client for these services.

For Com Hem, the Boxer acquisition cements the operator’s position as Sweden’s largest provider of pay TV services. The addition of 540,000 subscribers to its customer base will give the operator a total of 2.26 million pay TV homes – more than half of them digital – and will increase its share of the pay TV market to 60% of primary homes. Its share of primary digital pay TV homes will increase to 45%.

In order to increase its share of the pay TV market further, Com Hem could use the Boxer acquisition to target the remaining homes that still rely on free-to-air services. The key to doing so could be an entry-level TV product that provides a less premium service than the cable operator’s flagship TiVo offering and is more in line with the flexible, lower-priced packages that Boxer offers. Pay TV penetration may be high in Sweden, at 82%, but this still leaves up to 812,000 homes that Com Hem can attempt to convert to subscription-based services.

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