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

2. Cgates 5 years journey 2007 2012 CAGR, 2007-2012 Subscibers, total
31'700
190'000
43.1%
Sales, mEUR
2.5
15.1
43.2%
EBITDA, mEUR
0.8
5.9
50.1%
FTE's 60
190
25.9%
Coverage
1 city
7 cities
Pay-TV market share
4.2%
17.8%
33.5%
Ranking in TV market
No 8
No 1
Fixed broadband internet share
2.6%
7.6%
23.9%
Ranking in fixed broadband market
No 6

3. A bit of history.. 2007, 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.. 2007, 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. EBITDA is not a Chinese word Both TV and internet services
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. Investment tranche 4. New shareholder
Consolidation Process: Acquisitions
32 000
9 600
18 500
41 000
71 500
Investment tranche 1
4 500
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. Start of new CRM project
Consolidation Process: Integration
32 000
9 600
18 500
41 000
71 500
4 500
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
Launch of IP-telephony
Outsourced telemarketing

9. Consolidation Process: Challenges and Achievements
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”
don’t be afraid to make mistakes because you will 

11. THANK YOU!