Our take...

The buy gives KDG an extra 1.2m subscribers at network level four (the so-called last mile connection). Gaining control of more customers at the last mile has been an on-going theme of KDG's strategy in recent years. Owning customers through both network level three (trunk network) and the last mile gives the company more control over network upgrades and service roll-outs for digital TV, Internet and telephony. KDG has more than 9m customers at level three, with around 3m also controlled through to level four.

Telecolumbus, has been a key target for all of the large level three cable groups and the subject of repeated horse trading. The company independently built up a significant last-mile subscriber base and had signed long term agreements for content distribution with KDG and others. It became increasingly strategically important as cable groups looked to upgrade networks direct to the customer. Telecolumbus was wholly acquired by level three operator Unity Media back in 2005. Unity then sold 1.2m Telecolumbus subscribers to Orion Cable in March 2007, but kept hold of around 1.4m customers that overlapped with its ish and Iesy operations in Baden-Wuerttemberg. Those customers remain with Unity. Orion has now traded those customers again in exchange for greater control of Primacom, a group with a large level four customer base and a strong presence in Eastern parts of Germany. Primacom fits well with Orion's EWT holdings. The company has a high concentration of customers in the Eastern Berlin/Brandenburg and Sachsen/Thueringen regions.

The transaction is expected to be completed in the first quarter of 2008 ,subject to approval from the federal cartel office.