Germany's cable market appears to be undergoing significant activity. Liberty Global's recently bought Germany's second largest cable operator Unity Media and independent operators Telecolumbus and Primacom are both thought to be for sale.

Screen Digest had previously written about the possibilities about a potential KDG IPO, and indicated that it could achieve a valuation of around Euro 4.8bn, based on the price paid by Liberty Global when acquiring Unity Media. Providence's acquisition of KDG in 2006 saw it pay out Euro 231 per subscriber, while current valuations of Euro 5bn (including debt) give it a per subscriber value of Euro 470, a 103 per cent premium over the price Providence paid. The deal places a value per RGU of 3.4 times annual ARPU in line with the price paid for Unity Media, which was sold to Liberty Global earlier this year for Euro 3.5bn (including debt).

However, KDG is the largest cable operator in the country with over 10.6m RGUs, and when compared to Unity Media's 6m RGUs, KDG's valuation appears to be in the lower end of the scale-unsurprising considering that KDG's RGU growth from digital TV, broadband and telephony subscribers in the five year period (2005-2009) has been dwarfed by Unity Media. We estimate that roughly 17 per cent of the KDG's subscribers take digital TV services, in line with German cable industry averages, while Unity Media has outperformed the sector with around a 30 per cent penetration of digital TV services. KDG also has less of its network integrated between Level Three and the last mile Level Four, a crucial factor in the German market. On a positive note, we forecast KDG's digital TV, broadband and telephony subscriber base to grow 14.8 per cent CAGR by 2014, while Unity Media is expected to see growth in the range of 16.1 per cent.