Kabel Deutschland accelerates investment after failed Tele Columbus deal

20 Feb 2013

German cable network operator Kabel Deutschland has reported its consolidated financial results for the third quarter and first nine months of its 2012/2013 fiscal year, at the same time announcing its intention to pull forward investments to further accelerate growth. The company, which is reportedly the target of a potential bid by UK-based Vodafone Group, said that revenue for the third quarter ended 31 December 2012 rose 8.8% year-on-year to EUR465 million (USD621 million), with growth primarily driven by an 18.4% increase in ‘Internet and Phone’ revenues to EUR163 million, while TV turnover increased 4.2% year-on-year to EUR302 million. Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) for the three-month period grew 10.2% to EUR220 million, compared to EUR200 million in the year-ago quarter, while net profit totalled EUR73 million, up from EUR55 million twelve months earlier. Kabel Deutschland reported revenue of EUR1.362 billion in the first nine months of its 2012/13 fiscal year, an increase of 8.3% year-on-year, while EBITDA grew 9% to EUR643 million. Net profit for the nine-month period was EUR200 million, compared to EUR100 million a year earlier. Last week it was reported that Vodafone Group is considering a potential acquisition of Kabel Deutschland, in a move that would give the UK-based company access to around 8.5 million paying households and potential customers for combined fixed line, mobile and TV services.

Kabel Deutschland reported a total of 14.1 million revenue generating units (RGUs) at 31 December 2012, up 6.3% year-on-year, with growth driven by strong demand for new premium TV, internet and telephony services. The number of internet RGUs reached 1.741 million at the end of December 2012 (an increase of 20.4% year-on-year), while premium TV RGUs totalled 1.97 million at the end of Q3 2012/13 (up 27.3%). In order to enable accelerated growth, Kabel Deutschland has announced that it intends to pull forward network investments of EUR300 million to be spent over the course of the next two fiscal years in addition to the company’s existing investment plans. The additional funds will provide for earlier network upgrades for high speed internet, video on demand and Wi-Fi products as well as a significant expansion of network capacity, to help strengthen the firm’s ability to benefit from the large growth potential in the German broadband and TV market. The move follows an announcement earlier this week that the Federal Cartel Office (FCO) had informed Kabel Deutschland that a remedy package offered by the cableco for its proposed acquisition of smaller rival Tele Columbus is not sufficient enough to overcome its concerns about the deal. Kabel Deutschland says it now expects the official prohibition of the transaction.

Germany, Kabel Deutschland, Tele Columbus Group (PYUR)