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Kabel Deutschland Profit Misses Estimates on Premium TV

Kabel Deutschland Holding AG, the German cable provider being bought by Vodafone Group Plc, reported fiscal first-quarter earnings that missed analysts’ estimates as premium-television growth was slower than expected.

Adjusted earnings before interest, taxes, depreciation and amortization rose 3.8 percent to 217 million euros ($288 million) for the three months through June, the Unterfoehring-based company said today in a statement. Analysts had projected 226.6 million euros, the average of seven estimates compiled by Bloomberg. Revenue increased 4.6 percent to 464 million euros. Analysts had predicted 471 million euros.

The purchase of Kabel Deutschland is a key tenet of Vodafone’s ambition to expand beyond wireless service. Since the 7.7 billion-euro bid in June, Dutch carrier Royal KPN NV has agreed to combine its German mobile-phone business E-Plus with Telefonica Deutschland Holding AG in an 8.1 billion-euro cash-and-stock deal. That transaction, if approved by investors, would create Germany’s largest wireless carrier by customers.

“The television business seems to be the main reason they missed,” Stefan Borscheid, a Stuttgart, Germany-based analyst at Landesbank Baden-Wuerttemberg who has a hold rating on Kabel Deutschland, said by telephone. “Television was below expectations.”

Antitrust Dispute

Vodafone is combining its northern and southern European units to make it easier to sell packages of phone, Internet and television across the region, a strategy that is embraced by phone carriers and cable providers alike. Today, a court in Dusseldorf, Germany, is scheduled to rule on a bid by Deutsche Telekom AG to topple antitrust clearance of the 2011 takeover of Kabel Baden-Wuerttemberg by John Malone’s Liberty Global Europe Holding.

Kabel Deutschland’s total number of subscribers at the end of June declined 1.6 percent from a year earlier to 8.4 million. Average monthly revenue per subscriber jumped 8.6 percent to 16.71 euros. Net income plunged 55 percent to 29.3 million euros, with management bonuses accounting for about half of that decline, according to Chief Financial Officer Andreas Siemen.

The number of revenue-generating premium-television units increased 18 percent from a year earlier to 2.1 million in the quarter, while Internet links jumped 20 percent to 1.9 million and telephone lines gained 18 percent to 1.9 million. Compared to the three months through March, quarterly premium-television connections rose 1.2 percent. Kabel Deutschland said it’s sticking with group forecasts for the full fiscal year.

Customer Shift

“We experienced relatively limited net growth in premium TV this quarter,” Siemen said on a conference call with journalists. “This is in particular a one-off effect from Kabel Baden-Wuerttemberg moving its customers from our product platform after many years to its own.”

Germany’s cable-TV grid was first deployed in 1982 by the country’s Federal Post Office, which was later sold by the government and split into what became Deutsche Post AG, Deutsche Postbank AG and Deutsche Telekom. Prompted by the European competition authority, the latter broke up the network and sold its components.

Over the last 10 years, Germany’s cable companies have added Internet and phone services and begun grabbing market share from Internet providers. Kabel Deutschland has also started offering wireless services, further trespassing into the domain of traditional carriers.

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