Ziggo BV, the Dutch cable company seeking as much as 1.5 billion euros ($2.1 billion) in a share sale, is working on a mobile-phone service that may stoke a price war in one of Europe’s most competitive markets.
The company must start offering customers before January 2012 the 100,000 mobile-phone numbers it received from the Opta regulator this year, Harriet Garvelink, a spokeswoman for the agency, said in an interview. Ziggo may begin service by leasing network capacity from another operator such as Royal KPN NV, said Wolfgang Specht, an analyst at WestLB AG.
“Building a network on their own requires time and large investments,” said Specht, who has an “add” rating on KPN shares and “reduce” on Vodafone Group Plc. (VOD) “To enter this game it is quite difficult.”
As demand for high-definition content and broadband Internet soars, cable companies are stepping up combined offers of television, Internet and phone services to increase revenue from each customer. Ziggo’s planned entry into the wireless market would add pressure to leader KPN, which in April cut its profit forecast and announced as many as 5,000 job cuts.
Utrecht-based Ziggo, owned by buyout firms Cinven Ltd. and Warburg Pincus LLC, has a venture with UPC Nederland, a unit of John Malone’s Liberty Global Inc. (LBTYA) The Ziggo 4 venture last year obtained space on the 2.6 gigahertz radio frequency for mobile broadband applications.
“If we’re going to enter the mobile market, it would be step by step,” said Martijn Jonker, a Ziggo spokesman. Ziggo will give more details on its wireless plan this year, he said.
KPN rose 0.5 percent to 10.17 euros as of 09.45 a.m. in Amsterdam trading. The stock has dropped 6.9 percent this year.
Mobile-phone revenues in the Netherlands may drop as much as 3 percent this year to 6 billion euros as consumers spend less on text messages and voice calls, according to researcher TelecomPaper. At the end of 2010, the country had 20.6 million connections, Opta says. In addition to network operators KPN, Vodafone and Deutsche Telekom AG (DTE)’s T-Mobile, there are also service providers such as Sweden’s Tele2 AB (TEL2B) using the three operators’ networks.
The Dutch government has said that it expects Ziggo to take part in an auction of the 800 megahertz frequency band which may take place next year.
Dutch wireless companies also face regulatory hurdles. The government said it is working on a plan to prevent phone companies from charging clients extra for using applications such as Skype that allow making free calls over the Web.
Com Hem, Kabel BW
Cinven and Warburg Pincus may sell 25 percent to 50 percent of Ziggo in a share sale, two people with knowledge of the matter said last month. Ziggo had revenue of 1.38 billion euros in 2010 and earnings before interest, taxes, depreciation and amortization of 783.4 million euros. Net debt stood at 3.4 billion euros at the end of the first quarter.
Com Hem, the Swedish cable company owned by Carlyle Group and Providence Equity Partners, has also been put up for sale, with Blackstone Group, CVC Capital Partners and BC Partners Ltd. among potential bidders, people familiar with the matter said this month.
Liberty Global agreed in March to acquire Germany’s Kabel Baden-Wuerttemberg GmbH for about 3.16 billion euros.
Eelco Blok, KPN’s CEO, said on May 10 that he aims to defend the Dutch company’s market share even if a fourth player enters the mobile-phone market. KPN is targeting more than 45 percent of Dutch wireless service revenue in 2015, compared with about 47 percent now.
Ziggo has 1.5 million broadband customers, 1.8 million digital television clients and 1.2 million telephone subscribers. Warburg Pincus and Cinven formed the company after acquiring cable companies Multikabel, Essent Kabel and Casema in 2005 and 2006.
To contact the reporter on this story: Maaike Noordhuis in Amsterdam firstname.lastname@example.org