Cable Takeover

Tele Columbus Buys Rival Pepcom

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Tele Columbus is expanding its grip on the German cable TV market.
  • Why it matters

    Why it matters

    The continued expansion of cable operator Tele Columbus could hit the profitability of  Vodafone-owned Kabel Deutschland, Liberty Global’s Unitymedia and Deutsche Telekom.

  • Facts

    Facts

    • Tele Columbus and pepcom provide cable TV, internet and phone services and jointly have about 3.7 million connected homes.
    • Tele Columbus, which listed on the Frankfurt Exchange in January, will fund the takeover by cash and a planned €240-million capital hike.
    • Unitymedia has more than 7.1 million customers in Germany and Kabel Deutschland 8.3 million.
  • Audio

    Audio

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Tele Columbus, Germany’s third-largest cable TV operator, is on a buying spree.

The Berlin-based firm on Sunday said it will buy smaller rival cable operator Pepcom for €608 million, or $689 million, marking the second major acquisition in two months.

Tele Columbus, which agreed to buy rival Primacom in July for €711 million, will increase its number of customers by about 0.6 million to 3.7 million connected homes, the firm said in a statement.

“The company has operations nationwide with a strong presence in economically-attractive cities such as Munich, Nuremberg, Leipzig and Frankfurt,” Tele Columbus said about Pepcom.

Even including the takeover of Primacom and Pepcom, Tele Columbus would have recorded sales of €471 million in 2014. That’s still a far cry from the €2.05 billion realized by Germany’s market leader Unitymedia, which is owned by Nasdaq-listed U.S. firm Liberty Global, and the €2.02 billion of Kabel Deutschland, which is owned by British mobile phone operator Vodafone.

Tele Columbus, which only went public in January, offers television, phone and Internet services. That also pits it against former phone network monopolist Deutsche Telekom, as well as Internet operators Frankfurt-listed United Internet, Swedish Tele2 and others.

The Pepcom takeover is subject to Tele Columbus’ shareholder approval of a €240-million capital increase, which will help fund the acquisition. Shareholders will vote later Monday on the share issue, which the company had already announced last month.

Tele Columbus shares were up 2.4 percent by 11:13 Central European Time at €12.29. The firm sold its shares on the Frankfurt stock exchange in January at €10 a piece and raised €367 million. It currently has a market value of about €700 million.

London-based investor Star bought Pepcom, currently Germany’s fourth-largest cable network operator, in 2010. The cable operator based near Munich expanded in 2013 by buying a telecommunications firm based in Leipzig.

The purchase price of €608 million is based on a cash and debt free basis, known as ‘enterprise value’. The acquisition is worth €505 million based on equity value, which excludes net debt, debt-like items and a 30-percent stake in broadband cable firm KMS. Pepcom owns 70 percent of KMS, while Vodafone Kabel Deutschland owns the remaining 30 percent.

 

Gilbert Kreijger is an editor at Handelsblatt Global Edition in Berlin, focusing on companies and markets. To contact the author: kreijger@handelsblatt.com

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