Liberty Global Inc. (LBTYA), a leading global cable TV and diversified broadband services provider, recently received the regulatory approval to acquire 100% stake of Aster Sp. Z.o.o from the London-based private equity firm Mid Europa Partners LLP. Aster is the fourth largest cable TV operator in Poland. Liberty Global already has a very strong foothold in the Polish broadband market. The company owns Poland’s largest cable TV and broadband service provider UPC Polska.
The Polish regulatory authority UOKiK has approved the deal subject to the condition that Liberty Global will partially sell-off the operations of Aster. Aster mainly operates in Warsaw and Krakow regions of Poland. However, UPC Polska also enjoys strong footprint in these areas and the merged entity may control 50%-60% market share in these regions. UOKiK ruled out that Liberty Global must reduce its combined market share to not more than 40% within the next 18 months.
According to the agreement, Liberty Global will pay approximately $295 million to Mid Europa Partners and will assume another $519 million of outstanding debt of Aster. UPC Polska currently has around 1.1 million subscribers. Aster currently has 368,000 video subscribers, including 92,000 digital video subscribers. Additionally, Aster’s subscriber base includes 177,000 Internet and 70,000 fixed telephony subscribers. The merged entity, after the required sell-off, will have around 1.4 million video subscribers and will control nearly 30% of the total cable TV market of Poland.
The cable TV market of Poland is highly fragmented, and therefore Liberty Global is trying to consolidate its position for a meaningful pricing leverage.Libert Global’s closest rivals are BT Group Plc. (BT), Eutelsat Communications, SES S.A. and CATV Systems. We maintain our long-term Neutral recommendation for Liberty Global. Currently, it has a short-term Zacks #3 (Hold) Rank on the stock.
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