Insight Analysis: Deutsche Telekom Sells Cable Franchises To Liberty Media

Deutsche Telekom is disposing of six of its nine cable areas in order to finance the reduction of the group’s debt. The deal will give Liberty a strong foothold in Europe’s largest cable television market, with more than ten million homes connected to the six franchises.

The definitive terms of the Deutsche Telekom deal are expected to be announced next month.

Liberty Media’s presence in the US is much stronger than in Europe and this deal will be strategically important for the group. Liberty already has a majority stake in UK cable operator Telewest Communications, in a holding which also involves Microsoft and MediaOne (see Liberty Regains Majority Holding In Telewest).

The Western European cable market is expected to reach almost 60 million homes by 2005, according to projections by Merrill Lynch. The potential for broadband television services far outstrips the market potential of the digital satellite and terrestrial platforms.

Cable Penetration In Western Europe (homes ‘000s)
Year	Cable	Satellite	Terrestrial Analogue	Digtal Terrestrial	Digital Satellite
1996	40,600	6,249	6,955	0	273
1997	43,313	7,937	6,519	0	2,027
1998	44,297	9,783	6,225	19	4,405
1999	46,203	12,140	5,970	532	8,350
2000	48,060	15,598	5,488	1,110	13,569
2001	50,867	18,671	5,192	1,816	17,026
2002	52,939	21,670	4,880	2,989	20,016
2003	54,994	24,683	4,569	4,359	22,855
2004	57,030	27,339	4,281	5,910	25,297
2005	58,901	29,829	4,057	7,792	27,612
Source: Merrill Lynch