NEWSMAKER-With Virgin deal, Malone set to be European cable king

* Virgin Media deal largest and latest for Liberty Global

* Liberty Global already ranks as largest cable operator in

Europe

* Replicating Malone's past strategy with TCI in United

States

* Liberty Global has more than $10 billion in annual revenue

Feb 6 (Reuters) - For more than three decades, John Malone

has been known as America's King of Cable. Now, he is gaining

that title in Europe as well.

Malone, through his Liberty Global Inc unit, has

made his most audacious bet yet on the burgeoning European cable

market, striking a deal for about $15.75 billion to acquire

Virgin Media Inc, the cable group in which fellow

billionaire Sir Richard Branson holds a 3 percent stake. The

deal is Malone's biggest ever in Europe and puts him in direct

competition with Rupert Murdoch, the News Corp chairman

who controls Britain's BSkyB.

Liberty Global, which Malone controls with a roughly 40

percent voting stake despite only owning 4 percent of its

equity, already ranks as the largest cable operator in Europe

with 18.4 million subscribers. It also has 1.2 million

subscribers in Chile and Puerto Rico for a total of 19.6

million.

The company's position is the result of a decade-long

acquisition spree spanning 11 countries from Germany and the

Netherlands to Switzerland and Belgium that helped grow Liberty

Global into a company with $7.6 billion in revenue and $3.6

billion in operating cash flow from continuing operations in the

nine months ended Sept. 30.

Virgin Media was created by the merger of cable operators

NTL, Telewest and Virgin Mobile in 2006. It will be not only

Malone's largest European acquisition to date, but also one he

has been trying to seal for more than a decade. Malone began

buying up stock in Telewest and tried several times to acquire

NTL at the turn of the century when they were still separate

companies. His plan even back then was to merge them.

Virgin Media's 4.9 million subscribers significantly trails

BSkyB, the UK market leader, which has 10.7 million subscribers.

Indeed, battles with BSkyB over access to channels and content,

coupled with heavy losses from a network upgrade, forced Virgin

Media into a precarious financial situation that prompted a debt

restructuring to help it stabilize. The company posted its first

annual profit in 2011.

DEALS AND MORE DEALS

Malone timed his European buying spree to the exit plans of

private equity firms that have rolled up smaller regional cable

operators in Britain and Germany in recent years.

For example, Liberty Global in 2011 bought Kabel BW, the

third-biggest cable operator in Germany, from private equity

firm EQT for 3.16 billion euros ($4.30 billion). A few years

earlier, Liberty Global acquired Germany's second-largest cable

operator, Unitymedia GmbH, from private equity firms

BC Capital Partners and Apollo for $5.2 billion,

including assumed debt.

In Belgium, Liberty in September made a tender offer for the

49.6 percent of Telenet Group Holding NV it didn't

already own. The bid failed after the group's management deemed

it too low. Liberty currently owns 58.3 percent of Telenet.

Liberty Global also reportedly looked at buying Dutch cable

operator Ziggo in 2011, but private equity firms Cinven

and Warburg Pincus eventually pursued an

initial public offering instead.

Liberty Global CEO Michael Fries recently told a Citigroup

Inc investment conference that the group would be looking

for acquisitions in Europe to both bolster existing markets and

enter new ones.

"He sees the importance of scale in the business," said

Evercore Partners analyst Bryan Kraft of the rationale behind

Malone's European acquisitions. "He's been trying to build scale

within these markets and also leverage the scale that they bring

as a company across all these markets."

The Kabel BW and Unitymedia deals marked Malone's return to

the German market, which ranks as the second-largest cable

market in the world behind the United States. In 2001, he tried

to acquire cable assets from Deutsche Telekom and Deutsche Bank,

but the deals were eventually blocked by German regulators,

forcing Malone into a temporary retreat.

Malone's M&A activity suggests that he is trying to make

Liberty Global a Western European cable play. Prior to his

buying in Germany and the UK, he sold out of Scandinavia,

France, Japan and Australia.

ISI analyst Vijay Jayant said expanding in Western Europe

gives Malone a more focused strategy in a market with high

disposable income.

A EUROPEAN TCI

The strategy Malone is pursuing in Europe is essentially the

same strategy he used in the United States; take a patchwork of

disparate and technologically outdated cable systems, stitch

them together and upgrade their networks to leverage their

combined power to reduce internal costs and reduced external

costs such as programming. That is the model he used to found

Tele-Communications Inc, or TCI, which Malone grew into the

largest cable operator in the United States before selling it to

AT&T Inc.

Malone is using that blueprint in Germany, which ranks as

Liberty Global's largest and fastest-growing market. There,

Malone is offering TV, phone and Internet bundles with faster

speeds and cheaper rates in a bid to steal market share from

incumbent Deutsche Telekom.

The rationale for the Virgin Media deal appears to be

grounded in the TCI model as well. Cable only passes through

about half the homes in Britain, so more investment in

infrastructure to provide faster Internet speeds could help grow

adoption rates.

The aggressive tactics Malone used to build TCI prompted

former U.S. Vice President Al Gore to label him the cable

industry's "Darth Vader," a reference to the popular head of the

Evil Empire in the "Star Wars" film saga. The nickname

referenced Malone's power at TCI, which he used to demand equity

stakes in cable networks, particularly start-ups, in return for

distribution.

Malone also fought vigorously against must-carry laws that

require cable operators to carry free-to-air broadcast networks

like NBC and ABC and, as a matter of course, structures deals to

help him pay very low taxes and has a rather well documented

loathing of big government.

Indeed, Jayant said Malone is likely to leverage Liberty

Global to get stakes in channels in Europe in return for

carrying them. The company already has programming partnerships

with CBS and MGM overseas. Liberty Global also owns Chellomedia,

a European producer and distributor of 66 TV channels, including

movies, sports, lifestyle and entertainment programming.

Malone, the largest private landowner in the United States

with about 2.2 million acres to his name, is no stranger to

battles with media titans.

The reclusive billionaire has faced off with Murdoch

numerous times on U.S. soil, at one point acquiring a big slice

of Murdoch's voting position in News Corp that came onto the

market unbeknownst to the newspaper baron. Malone eventually

leveraged that stake to pry satellite TV company DirecTV

from Murdoch.

Loading...

Editor’s note:Yahoo Philippines encourages responsible comments that add dimension to the discussion. No bashing or hate speech, please. You can express your opinion without slamming others or making derogatory remarks.

  • US ambassador recovers from knife attack praised by N. Korea
    US ambassador recovers from knife attack praised by N. Korea

    The US ambassador to South Korea, Mark Lippert, was recovering from surgery Thursday after having his face and arm slashed by a knife-wielding activist in an attack applauded by North Korean state media. The United States condemned the "act of violence" which saw the ambassador rushed to hospital where his condition was described as stable after two-and-a-half hours of surgery that included 80 stitches to a deep gash on his right cheek. During the assault, Kim screamed a slogan in favour of …

  • New Moro rebel group emerges
    New Moro rebel group emerges

    A radical Muslim cleric trained in the Middle East and considered one of the leaders of the Bangsamoro Islamic Freedom Fighters (BIFF) has broken away from the terror group to form his own band of jihadists who are now reportedly providing sanctuary to bomb expert Basit Usman and at least five foreign militants, the military said yesterday. Armed Forces of the Philippines (AFP) spokesman Col. Restituto Padilla, citing reports from the field, said the Justice for Islamic Movement (JIM) was …

  • Sy moves up, Villar enters Forbes list of billionaires
    Sy moves up, Villar enters Forbes list of billionaires

    Eleven Filipinos are included in Forbes’ 2015 list of richest people in the world. Filipino-Chinese tycoon Henry Sy Sr. continues to be the wealthiest man in the Philippines. The 90-year-old SM supermalls, banking and property tycoon ranked 73rd among the world’s richest with an increased net worth of $14.2 billion from $11.4 billion last year. Sy’s net worth was attributed to the continued growth of his SM Investments Corp. and his more recent venture, the City of Dreams Manila resort and …

  • US billionaire says WWII Japanese ship found in Philippines
    US billionaire says WWII Japanese ship found in Philippines

    Microsoft co-founder Paul Allen said Wednesday he had found one of Japan's biggest and most famous battleships on a Philippine seabed, some 70 years after American forces sank it during World War II. Excited historians likened the discovery, if verified, to finding the Titanic, as they hailed the American billionaire for his high-tech mission that apparently succeeded after so many failed search attempts by others. Allen posted photos and video online of parts of what he said was the …

  • World's oldest person wonders about secret to longevity too
    World's oldest person wonders about secret to longevity too

    TOKYO (AP) — The world's oldest person says 117 years doesn't seem like such a long time. …

  • Billionaire finds wreck of WWII ship in Phl
    Billionaire finds wreck of WWII ship in Phl

    Microsoft co-founder Paul Allen says he has found the Japanese Navy’s biggest warship at the bottom of the sea in the Philippines, 70 years after US forces sank it. Allen posted a photo on Twitter on Tuesday of the World War II battleship Musashi’s rusty bow, which bore the Japanese empire’s Chrysanthemum seal. The American billionaire, who has also pursued space exploration, said his luxury yacht and exploration ship, the M/Y Octopus, found the Musashi one kilometer (1.6 miles) deep on the …

  • Ohio mom, boyfriend guilty; child emailed teacher for help

    PORTSMOUTH, Ohio (AP) — A woman and her boyfriend pleaded guilty to raping her young children and were sentenced to prison on Wednesday, a year after one of her daughters emailed a teacher for help and said she and her siblings were being chained to their beds, deprived of food and sexually assaulted. …

  • Australian drug smugglers being taken to Indonesian island for execution - media
    Australian drug smugglers being taken to Indonesian island for execution - media

    By Jane Wardell and Beawiharta SYDNEY/DENPASAR, Indonesia (Reuters) - Two convicted Australian drug smugglers were removed from a prison in Bali on Wednesday to be taken to an Indonesian island where they will be shot by firing squad, Australian media reported. The planned executions of Myuran Sukumaran, 33, and Andrew Chan, 31, have ratcheted up diplomatic tensions amid repeated pleas of mercy for the pair from Australia and thrown a spotlight on Indonesia's increasing use of the death …

POLL

Should Aquino be held accountable over the Mamasapano operations?

Loading...
Poll Choice Options