The recent acquisition of a major stake in Tele Columbus by United Internet is likely to be followed by further strategic moves in Germany’s vibrant cable market, expects Dietmar Schickel, former long-time managing director of cable operator Tele Columbus.
He has been expecting United Internet to invest in Tele Columbus as the company lacks fixed-line broadband infrastructure, Schickel told Broadband TV News. United Internet therefore has to pay line rental fees to incumbent operator Deutsche Telekom for a large portion of the ADSL subscriptions it sells. This issue has also been one of the main reasons behind the Vodafone/Kabel Deutschland deal, he said.
Schickel expects federal anti-trust authority Bundeskartellamt to approve the transaction through which United Internet becomes the largest shareholder in Germany’s third-largest cable operator with a 25.11% stake as it would strengthen competition with Vodafone and Unitymedia in the broadband market. “With a new shareholder like United Internet, Tele Columbus certainly has better chances to be perceived as a competitor against these large players,” he stressed.
The new shareholder is “absolutely positive” for Tele Columbus, said Schickel, adding that United Internet which stands behind successful mass market internet brands like 1&1, GMX and web.de resembles a “marketing machine”, in particular for internet access subscriptions. “Tele Columbus, however, is still trying to catch up with the other large cable operators in the broadband internet business because of its previous financial problems and late start of network upgrades.” 1&1 could, for example, provide support by offering marketing and sales collaborations, he suggests.
Regarding the next steps of consolidation, full takeover of Tele Columbus by United Internet would “make sense” in Schickel’s view, but he pointed to the fact that the company’s investment has deliberately remained below the 30% threshold to avoid having to make a purchase offer to all other shareholders at this stage. “They are probably waiting for the developments taking place between Vodafone and Unitymedia’s parent company Liberty Global,” said Schickel.
If Vodafone and Liberty Global decide to merge their German activities like it was recently the case in the Netherlands, it would be very unlikely for the remaining major players in the German market to gain anti-trust approval for the acquisition Tele Columbus as the company would then constitute the independent, second or third largest force in the market, estimates Schickel. In such a scenario, not many possibilities would remain for selling or buying Tele Columbus. “This would certainly be a horror scenario for most institutional investors and shareholders in the cable company,” said Schickel. It could, in return, put pressure on its stock market value – and provide a good opportunity for United Internet to fully acquire Tele Columbus. “It’s all very exciting and it will certainly stay like this,” concludes Schickel.
Dietmar Schickel has been managing director of Tele Columbus from 1990 to 2013. Following successful restructuration, he left the cable operator and founded consultancy DSC Consulting. The focus areas are the real estate industry, telecommunications and media provision and the energy industry.
