Our take...
We reiterate the view we expressed when Liberty announced the deal to buy Unity back in November (2009) that this is a positive move for the company. We believe the German cable market has reached a tipping point where digital and broadband uptake should finally begin to take-off. The impact on top-line revenue will be particularly strong because of the shear number of subscribers involved. Unity has 3.4m basic TV customers with an additional 1.9m contracts for broadband, telephony and premium TV. Much of the investment necessary to seed this growth has already been made. Liberty's move back into Germany appears to have re-ignited interest in the country's cable sector which has a history of rewarding international investors by leaving them with severely burnt fingers. Earlier this week, local press reports suggested that KDG was putting a plan in place for an IPO later in 2010 but was also talking to potential buyers. KDG is majority owned by private equity investor Providence. Based on the multiple achieved by Unity, KDG could be worth as much as Euro4.8bn. Providence paid about Euro1.4bn for a 95 per cent stake in KDG back in 2005. Although Liberty Media remains a possible buyer, we believe regulatory pressure would most likely prevent the combination of Unity with KDG.