German Cable-TV: Second Largest Market in the World

Implications: The two largest cable firms in Germany, the world's largest cable-TV market, are currently coming to the market.  Kabel Deutschland, operating in 13 out of 16 German States, is a 1 bn € company.  With an operating EBITDA margin of less than 40%, the firm is going to be able to perform better with new management.  The current holding structure also have to be altered, to provide for a more regional and localized sales approach for Internet and Telephony, the operator's key growth products. UnityMedia, operating in 2 of Germany's most attractive States, is currently available for bidders also.  The key inhibitor to a sale, the wind-down of its content provider - Arena - is expected to happen within the next couple of weeks.  Potential is there to combine with another regional operator, Kabel BW, as well as purchase NetCologne operating in one of the two States UnityMedia is active in.

Analysis: The next wave of buyouts is expected to bring new management into cable operators in Germany, as well as a potential reorientation to a more regional and local sales approach.  This is strongly needed as corporate performance - in particular at the larger cable-TV firms - is often coming in below budget. 

A strengthening of the larger Level 3 groups will also mean a very likely squeeze-out of the weaker Level 4 companies in Germany cable-TV - who have limited means only to survive in the increasingly tough market climate.

This in turn will mean higher prices for end-customers, more opportunity to roll-out new growth products such as Internet and Telephony, thus, increasing earnings for cable-TV firms.