Last week, the Belgian cable operator Telenet signed a final agreement with the municipal cable operators and their joint venture Interkabel to acquire the TV activities of the networks. With this new agreement in place, the long saga of consolidation in Belgian cable, at least in the Dutch speaking side of the country, appears to have come to an end.
Telenet and Interkabel have been fighting for some time over whom was to supply digital interactive TV services over the latter’s networks. This went back to the days when Telenet was formed in 1996 to provide cable telephony and broadband access to all Flemish households. While the various cable companies remained independent and continued to offer analogue television services on their own, Telenet was the service provider for additional services, broadband and telephony.
In 2002, Telenet and 10 so called ‘mixed municipal cable operators’ were consolidated into one single company. The municipalities and utility company Elektrabel jointly owned these mixed municipal operators and were all given a stake in the newly formed company named Telenet Group Holding NV. By contrast, four other ‘pure municipal’ networks remained independent and continued to use telephony and Internet access services from Telenet under a 50-year (sic) contract. Meanwhile, Liberty Global took control of Telenet following a number of ownership changes in the company.
Telenet started to offer its digital TV service, called iDTV, or interactive digital television, in 2002. But at the time the independent cable operators chose not to provide the Telenet digital television service but instead created their own digital offer, called In-Di television.
The four operators – Integan, Interelectra, PNE and WVEM – work under the Interkabel umbrella, with a joint package of basic and various extended digital tiers. In-Di involves a straightforward zapper-box with no interactive capabilities.
Although Telenet and Interkabel had been in talks for some time, they never reached an agreement on integrating their digital offers. In November 2006, the In-Di consortium even announced it would work closely with the VOO triple play platform operated by the Walloon cable operators ALE-Teledis and Brutélé to offer interactive and on-demand video services to their customers. Because of the 50-year contract between Telenet and Interkabel to use Telenet’s telephony and Internet services, Interkabel can only cooperate on (interactive) digital television with VOO.
The operators wanted take their In-Di platform to the next level by introducing interactive services in 2007. Until that time, the platform only offered “’zapper boxes’”.
When In-Di announced these plans, Telenet began legal proceedings, claiming the launch of an interactive version of the digital In-Di platform was illegal. Under a contract between the two operators, Telenet has the exclusive rights to offer point-to-point services on the four Interkabel networks, Integan.
At the time the contract was signed in 1996 – for a period of 50 years – it was supposed to cover cable telephony and broadband internet access. Telenet argued interactive television and VOD could also be considered point-to-point communication.
Interkabel was of the opinion it was free to launch any television service it wanted as this was not covered by the contract. Telenet, on the other hand, claimed interactivity and on-demand services are part of the agreement.
There was no problem after Interkabel launched its In-Di digital platform, but the two companies continued to talk about the possible introduction of the Telenet iDTV services over the Interkabel networks.
Telenet won its court case in July 2007. Interkabel said it would appeal the ruling, but also asked Telenet to come up with a reasonable offer to roll out interactive TV services on its networks.
Last autumn, this led to an agreement in which the Interkabel operators were to sell their analogue and digital TV business to Telenet. Telenet would pay €170 million for the right to run the TV business on the nets for a period of 38 years. On top of that, it would pay an annual fee for the use of the cable networks, which remain owned by the cities.
The dispute seemed to be have finally been settled, though this was not the case. In January 2008, the Belgian incumbent telecom operator Belgacom filed a complaint with the court of first instance in Antwerp about the acquisition of the Interkabel TV activities by Telenet. The company claimed that the sale was illegal because the cable networks making up the Interkabel consortium are owned by a number of municipalities. Under European law, as public companies they should have started an open tender rather than make a deal between closed doors. If anything, the Belgacom move was a perfect delaying tactic: until the case was heard, Telenet and Interkabel were not able to integrate the TV activities of the two companies.
The accord is based on last autumn’s original agreement between the parties and makes the integration between Telenet and the Interkabel networks a reality. The price represents a value of 8.3 times the EBITDA.
This is about €427 million, or €7 million more than an earlier offer by Belgacom, according to Belgian newspaper reports. It is also €70 million higher than the original Telenet offer.
When the take-over is finalised, the Dutch speaking part of Belgium will have a single cable operator and a single digital TV offer. Telenet has already sold broadband access and telephony services over the Interkabel networks and can now offer full triple play services including analogue and digital TV. The deal will add almost 800,000 TV customers, bringing Telenet’s total to about 2.5 million homes served. Earlier, Telenet also acquired the UPC nets in parts of Brussels and Leuven.
Consolidation is also taking place in Wallonia, with Brutélé and ALE-teledis acquiring the other Walloon operators and bringing them into the joint triple play VOO fold.
Following this integration, there will be one single operator for Flanders and one for Wallonia. In most parts of Brussels, Coditel will be the only independent operator.
