Far from being dissuaded by a stagnating TV strategy, Liberty Global has averted the Eye of Sauron to pastures new after scrapping its 17-month long plan to acquire Polish cable operator Multimedia Polska. Liberty has already revealed its next target after reports surfaced last week of a merger with telco Sunrise with its assets in Switzerland, likely with consolidation, further East in Europe a high priority down the line.
Liberty Global’s Horizon TV has been a relative success since its launch in 2011, followed by the Horizon Go TV Everywhere service, doing well to secure TV growth in Switzerland and in its Eastern European territories, where it added 35,200 TV subscribers last year. But everywhere else in Western Europe, with the exception of the UK where Horizon does not ship, video subs dropped. A refreshed TV plan of action is sorely needed – particularly as Liberty is now routinely giving away its Netflix rival, MyPrime.
Aborting Multimedia Polska initially looks surprising, with Poland performing as one of Horizon TV’s strongest growing regions, adding 63,000 additions in Q3 last year, bringing its total base to just over 1.2 million, more than 1.1 million of which have now taken the enhanced offering. However, these quarterly figures are flattering. In reality, UPC Polska reported a net video subscriber loss of 1,900 year on year, as basic subscribers continue to flee.
Going on annual net growth, Romania was Liberty Global’s best performing territory for video during 2017 with 32,500 net subscribers additions – gaining 32,800 enhanced while losing 2,700 basic and 2,400 DTH.
While Liberty gives the impression its Eastern European businesses are strong, the real picture is net video subscriber growth of just 40,000 across UPC’s five territories during 2017. Hungary gained 6,400 net video subscribers and the Czech Republic added 18,500, but Slovakia produced a shock result, losing 2,300 net video subscribers in a year, but gaining 3,200 on the enhanced service.
The pursuit of Multimedia Polska and Ziggo before it, by Liberty Global, suggested the operator was shifting its strategy which has not so much been about aggressively pursuing new subscribers, but gently transitioning them to its higher priced advanced offerings.
And in Switzerland UPC has seen much slower growth even in enhanced video subscribers. UPC Switzerland lost 51,700 video subscribers from Q4 2016 to Q4 2017, with 4,700 enhanced additions falling well short of offsetting basic losses. This is perhaps because Swisscom has a free mobile only offering called TV Air and it is using this to driving new TV subscribers. UPC has yet to match this so far. Discussions with Sunrise are in early stages, but mobile and broadband investments will be key to the deal.
Liberty Global has jumped the Multimedia Polska ship prematurely, pending a decision from Poland’s Office of Competition and Consumer Protection (UOKiK), but the government body has voiced concerns and was expected to block the deal. UOKiK reported previously that the joint activities of UPC and Multimedia Polska would exceed the threshold of a 40% share and extended its inquiry into how the deal will restrict competition in the country.
The question now is will the UOKiK allow DTH operator Cyfrowy Polsat to continue with its aggressive takeover of Poland’s second largest fixed line operator Netia? Faultline Online Reporter felt the move, initiated in early December, was a clear retaliation to Liberty Global, which would have bought access to an additional 1.6 million homes passed by Multimedia Polska’s HFC cable network.
UPC held the largest market share in Poland for cable internet services last year, with 40.2%, followed by Vectra with 20.1%, Multimedia 14.7%, Toya 4% and Inea 3.9%. Orange is the incumbent telco in Poland with a 55.1% share of telco services subscribers in 2015, ahead of UPC in second with 10.4%. Going on these figures, a combined UPC and Multimedia Polska entity would have owned a cable market share of almost 55%.
After shelving the deal, valued at around $876 million, Liberty Global said in a statement, “We have withdrawn from the transaction to acquire Multimedia Polska after failing to agree on revised commercial terms with the sellers that take into account current regulatory and market conditions. We remain confident in the business prospects of our Polish operation and will consider other accretive consolidation opportunities as and when they arise.”