Consolidation sweeping the cable TV market

19 Mar 2004

The composition of the French cable TV market is set to undergo substantial change following reports that the second and third largest service providers, France Télécom Câble (FTC) and NC Numéricâble (part of the Canal Plus Group), are in talks to merge their operations and seek a new majority shareholder for the combined entity. News of the merger follows an announcement two weeks ago that two of the country’s other main players, UnitedGlobalCom (UGC) and Noos (a subsidiary of the Suez Group), are currently in the throes of similar talks. At the end of September 2003 FTC, Numéricâble, UGC and Noos controlled 90% of France’s 3.495 million cable TV subscribers between them.

FTC, which has signed a memorandum of understanding (MoU) with NC Numéricâble over the proposed alliance, has said the move is in line with its plans to ‘progressively reduce its activities in the cable industry’. If the deal goes ahead as planned it will create France’s largest cable operator with approximately 1.6 million analogue TV subscribers, 375,000 digital TV customers and more than 130,000 internet accounts at the end of September 2003. Both FTC and NC Numéricâble have said that they hope to retain a 20% stake in the merged operator.

Among the possible suitors for a majority stake in the new cable company is Liberty Media, the holding company for global cable TV operator UGC. Earlier this month UGC began talks with Suez Group over the possible acquisition of the latter’s cable TV arm Noos. Suez publicly announced its intentions to exit the communications sector in September 2003, whilst UGC has made no secret of its goal to expand its operations in markets with strong growth potential where it already has a presence. The two parties are thought to have agreed on an asking price of around EUR660 million for Noos, which is France’s largest CATV operator, with 1.07 million subscribers at the end of September 2003, around 31% of the market. At the same date UGC France claimed 473,000 customers and a 13.5% market share.

In recent years FTC has been jostling for top spot in the cable league table with Noos, but the France Télécom subsidiary spent 2002 in a state of flux due to its parent’s mounting debt pile. Following a series of expensive acquisitions during the telecoms boom of 2000 and 2001, it emerged that the former monopoly had a debt pile of more than EUR70 billion and its cable networks were listed among the non-strategic assets to be sold. Although a fire sale of shareholdings was undertaken by France Télécom’s management, FCR was spared and remains wholly owned by the operator. FTC serves 241 communities and had a penetration rate of just under 55% of the 1.5 million homes passed by October 2003. It has 15 regional subsidiaries, each one operating a number of local systems, covering areas including Marseille, Bordeaux and Angers.

Should its proposed tie-up with UGC fall through, NC Numéricâble also faces an uncertain future, again due to the economic situation of its parent company Canal Plus, whose troubles stem from the perilous financial state of its owner Vivendi Universal, which remains heavily in debt despite a spate of disposals under its new CEO and a dramatic reduction in its net operating losses in 2003.

France, France Télécom Câble
AFORM, PriMetrica's Media Map Datafile