Liberty Global Inc. (LBTYA), a leading cable operator in Europe, Latin America, and Australia, continues to suffer setback regarding its ongoing business restructuring strategy. During the last couple of years, Liberty Global was reorganizing its operations through acquisitions of new businesses and disinvestments of its existing set ups. However, things turned out to be little difficult in the last two months.
In March 2011, the company won the auction to purchase Kabel Baden Wuerttemberg GmbH & Co KG, the third largest cable operator in Germany, for around $4.5 billion. The deal was expected to be closed in the second half of 2011, subject to the regulatory approval. However, in June 2011, the European Union regulators decided to refer the case to the German antitrust authority (Cartel Office) for properly investigating the possible harmful effects of the deal. Today, a Bloomberg report stated that Germany’s Cartel office has postponed its decision regarding this deal by three more months till November 11, 2011.
The German antitrust authority already described the merger of large cable operators to be detrimental to the competition in the national cable TV market. It believes that the marger of large cable operators may keep rivals out of the market for providing free-Tv services to the housing associations. The housing associations of Germany negotiates contracts collectively with tenants and these contracts are generally long term (for e.g. 5 years) in nature. Furthermore, the TV channels, which develops contents, may have to pay more to air for their respective programs over the cable networks.
In January 2010, Liberty Global acquired UnityMedia GmbH, the second largest cable operator of Germany. Germany is the fastest growing economy in Europe and its cable TV market is highly lucrative. If Liberty Global gets regulatory approval for Kabel Baden acquisition, then it will become a formidable player in the German cable TV market, offering triple play video, voice and Internet services. The enlarged Liberty Global will manage around 7 million subscribers coming second to Kabel Deutschland GmbH, which manages approximately 9 million subscribers. However, with respect to both revenue and profit, Liberty Global may outpace Kabel Deutschland.
In July 2011, Liberty Global decided to divest its operations in Australia. Austar United Communications Ltd., in which Liberty Global holds 54% stake, entered into a definitive agreement with Foxtel, to sell 100% stake of Auster for approximately $2.1 billion. Liberty Global will get around $1.1 billion. Foxtel is jointly held by Australian telecom giant Telstra, News Ltd., a division of News Corp. (NWSA), and Consolidated Media Holdings.
However, several industry sources predicted that the Australian regulatory authority initially showed its reluctance to clear the deal since it may create a monopoly. Foxtel is the largest pay-TV operator in Australia and Austar is also a leading pay-TV operator.
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