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Cable TV and broadband market consolidation in Lithuania 2007 - 2013 Case Study: Cgates.

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Presentation on theme: "Cable TV and broadband market consolidation in Lithuania 2007 - 2013 Case Study: Cgates."— Presentation transcript:

1 Cable TV and broadband market consolidation in Lithuania Case Study: Cgates

2 Cgates 5 years journey CAGR, Subscibers, total31'700190' % Sales, mEUR % EBITDA, mEUR % FTE's % Coverage1 city7 cities Pay-TV market share4.2%17.8%33.5% Ranking in TV marketNo 8No 1 Fixed broadband internet share2.6%7.6%23.9% Ranking in fixed broadband marketNo 6 No 1

3 A bit of history , the Baltics Cable TV and internet market 2007, Lithuania No of operators: 50 cablecos and more than 200 ISPs.. Total market is 470k TV subscribers and 500k internet subscribers The biggest player is Init group with 22% of TV market. Viginta (now – Cgates) is No 8 with 4% Irrational competition, especially in Vilnius – 6 operators, incl. Tele2 Cable TV bills are twice lower vs Latvia & Estonia New player in pay-TV market – TEO LT Cable TV and internet market 2007, Latvia Consolidated TV market with 2 major operators – Baltcom and Izzi Izzi sale process Lattelecom real / rumored sale process with big names (e.g. Blackstone) Cable TV and internet market 2007, Estonia Consolidated TV market with 2 major operators – Starman and STV Starman is just taken private by consortium of PE funds

4 A bit of history , CEE and Western Europe Central and Eastern Europe: on-going consolidation of regional operators in Poland – Aster City, Multimedia Polska, Vectra. All backed by PE funds and institutional investors very active Liberty Global in Czech Republic, Hungary, Slovenia Western Europe: active consolidation processes in Netherlands (Casema, Ziggo), Belgium (Telenet), Germany (UnityMedia, KBW, Kabel Deutschland), UK (Virgin Media), Sweden (ComHem) and again, all are backed by major PE funds

5 Investment Rationale in 2007, SEB Venture Capital Growing markets in terms of revenues and subscribers, both TV and internet Strong cash flows generating and cycle resistant business Potential to build No1 operator in the country – as market is very fragmented Good examples of already consolidated markets in Latvia and Estonia On-going consolidation in CEE and Western Europe Baltic tigers situation as we were called those days. Everybody was looking at our region Capital availability, both equity and senior/leverage financing

6 Investment Target in 2007, SEB Venture Capital Potential Targets cablecos and ISPs So, who to deal with? VDNET (Viginta) But, why them? EBITDA is not a Chinese word Transparent Acquired 3 companies Have the same vision Both TV and internet services In Vilnius (capital)

7 Consolidation Process: Acquisitions Investment tranche Investment tranche 2 Investment tranche 3 Investment tranche 4. New shareholder 5 major acquisitions. 30m EUR of capital, incl. bank loans, invested Lehman collapse 2x in size

8 Consolidation Process: Integration Start of new CRM project Launch of Digital TV New CEO New management team One brand Cgates One call centre New HQ Transfer of finan&admin functions One brand VDNET New Sales and marketing department Transfer of finan&admin functions Launch of IP-telephony Outsourced telemarketing

9 Consolidation Process: Challenges and Achievements Challenges: 10 different brands 60 different products and services 7 in-house built primitive CRM and billing systems Different financial accounting principles Different cultures Need for professional management team Achievements: Centralized functions, unified products and services Unification of networks and technologies One CRM and call centre for 7 cities Change in TV service pricing Launch of new digital TV and IP-telephony services Professional and ambitious management team is a mix of experiences from mobile, fixed line, cable TV and IT industries EBITDA profitability of company grew from 30% to 45% +

10 My key takeaways from pay-TV market consolidation consolidation strategy – or set of simple questions, like, why you need it? Why not to expand naturally? Is it scale you need or market share? Timing/good momentum, eliminating competitors or something else. You will need a clear rational answers acquisition targets – who are they? Who are your primary targets and how will landscape of the market change during consolidation process? Are they for sale? team – if you plan to do multiple acquisitions you will need 2 teams, one as in-house M&A boutique to structure and make acquisitions and another team – to integrate and realize synergies integration – start integration early, even before you make acquisitions. Develop your First 100 days plan dont be afraid to make mistakes because you will


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