UnitedGlobalCom, part of John Malone's Liberty Media, has confirmed that it is to buy the 50.1% controlling stake in leading French cable network Noos that is currently owned by the Suez group. The move could be the first step towards a major rationalisation of the still fragmented French cable sector.
Separately, Liberty today said that it will spin off all its non-US businesses into a separate holding company with its own stock market listing by mid-summer. Including UnitedGlobalCom, Jupiter Telecommunications, Jupiter Programming and Liberty Cablevision subsidiaries which have operations in Europe, Japan and Latin America, the new outfit will be called Liberty Media International.
Details of the Noos deal have still to be finalised, but the purchase price is set at Euros508m-Euros660m, dependent on the level of Noos' 2004 free cash flow. Suez will also become a 20% shareholder in UnitedGlobalCom's French holding company, if it is approved by media regulators.
Noos is expected to be combined with UnitedGlobalCom's UPC France, currently the country's number four cable group with 550,000 subscribers. "The acquisition of Noos fits nicely into our strategic plans. Based largely in Paris, Noos has successfully penetrated the digital television and high-speed Internet market and is poised for continued growth in these products. When combined with our existing French operations, we expect to realise significant scale, network and operating benefits," said Mike Fries, president and chief executive officer of UnitedGlobalCom.
On a combined basis, UGC's French holding company would have approximately 1.8 million service subscribers and revenue of approximately Euros400m based on the results for the fiscal year-ended 2003.
The Noos acquisition could spark further restructuring of the French cable sector, which in the 20 years since the Mitterrand government launched a heavily-subsidised network building plan has struggled to repay investors faith and financial commitments. France Telecom has announced its intention to withdraw from the cable sector, while NC Numericable, part of Canal Plus, has been up for sale for several months as part of the Vivendi-Universal corporate downsizing.
Some industry analysts suggest that France Telecom Cable and Numericable will themselves merge or both be acquired by a single buyer - likely to be foreign and possibly privately owned. Others predict that Liberty would have no problem scooping up both networks. This may give it the economies of scale to make acceptable profits from cable, while also providing the muscle to crank up broadband internet services, an area in which the cable companies currently lag other high-speed providers.
The path was cleared for a four-way merger last October when the Senate amended a law that limited each cable operator to a ceiling of eight million homes passed.