Global Insight Perspective | |
Significance | The merger between Bulgaria's two largest cable operators, Eurocom and CableTEL, has been postponed as the buyer's access to credit has dried up. |
Implications | Although the companies stress that the merger plan itself has not been cancelled, the credit drought means that it is effectively on hold for the time being. |
Outlook | The deal was scrutinised by the Bulgarian anti-trust authority, which concluded that the emergence of another strong ISP with no reliance on the incumbent's local loop would offset the negative effects that its dominant position would have on the pay-TV market. |
Eurocom and CableTEL—the largest cable TV operators of Bulgaria—have postponed their planned merger for an indefinite period of time as the buyer, investment fund Warburg Pincus, has failed to secure the funding for its acquisition because of the global financial crisis, reports the Dnevnik newspaper. Petyo Staykov, the chairman of the Eurocom management board, confirmed the delay, but denied that it had been cancelled altogether, saying that talks between the companies will continue next year. CableTEL's executive director, Dimitar Radev, commented that the deal is unlikely to be completed by the end of this year, but reiterated that the two parties have not shelved their plans. IHS Global Insight expects the merger to stay on hold at least until the second quarter of 2009.
Outlook and Implications
- Foreign Investors: Eurocom—owned by FN Cable Holdings, a Dutch holding company controlled by Warburg Pincus—and CableTEL—owned by Ramford Alliance, a U.K. investment fund—have disclosed little on the financial details of the agreement, but Dnevnik's sources estimate the price tag as close to 100 million euro (US$128.3 million). Views on the operational implications of the merger vary. Eurocom's Staykov said in October 2008 that the new operator would hold about 25% of the Bulgarian pay-TV market, whereas the country's anti-trust authority has said that the real share would be in excess of 35%, which is probably closer to the truth. Both companies have also been eyeing options for international expansion, with CableTEL focusing on neighbouring South-East European countries (see Bulgaria – FYR Macedonia: 5 September 2008: CableTEL Acquires 13 FYR Macedonian Cable Operators for 13 mil. Euro; Plans Further SEE Expansion).
- Merger Bad for Pay-TV Market; Good for Internet Market: When the merger plan was revealed in July 2008, the competition watchdog launched a two-month probe to investigate its impact, finally delivering its findings in October 2008. The authority acknowledged that although consolidation on such a scale would give the market leader a dominant position over other pay-TV providers, its positive effects would exceed the negative, namely how the acquisition would bring a new, nationwide broadband and fixed-line telephony carrier to the marketplace, thereby posing stronger competition to Bulgarian Telecommunications Company (BTC), the local fixed-line incumbent. This demonstrates how convergence of the telecoms sector is changing the dynamics of competition, requiring a new approach from regulators, with on one hand traditional ISPs being able to deliver video in the form of IP TV and, on the other hand, cable operators being able to challenge fixed-line operators with their voice and internet offerings (see Germany: 27 November 2008: Kabel Deutschland Eyes Acquisitions as Broadband Subs Reach 500,000).