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Cable Technology Feature Article

February 10, 2014

Vodafone Chasing Additional Cable TV Assets in Europe?

By Gary Kim, Contributing Editor

Vodafone (News - Alert) reportedly wants to buy Spanish cable operator Ono, a potential deal that would follow Vodafone’s acquisition of Kabel Deutschland in Germany. Separately, Liberty Global (News - Alert) bought Virgin Media in the United Kingdom.

Vodafone’s acquisition of cable TV assets represents a sort of second wave of telco interest in cable TV networks, which last erupted in the U.S. market in the 1990s, driven initially by thinking about service “convergence” and later by deregulation that allowed many new players into the U.S. local access market.

Vodafone’s thinking still is driven by the same set of strategic factors as the 1990s U.S. wave of telco acquisitions of cable TV assets. Now that service “convergence” has become a widespread fact, the need for broadband assets to support video services and broadband access has grown.

Also, telcos continue to require new assets for entering new markets. The usefulness of cable TV networks in that regard, which are, by definition, broadband networks, remains.

A couple of decades ago, few large telecom entities would have chosen to invest in cable TV network assets as a way of entering new fixed network markets. Among the early movers were Bell Atlantic and AT&T (News - Alert).

Bell Atlantic tried to buy Tele-Communications Inc. in 1993, but the two parties could not come to complete terms. Observers said at the time that differences over strategy, culture and valuation of TCI became obstacles.

AT&T did purchase Tele-Communications Inc., at that time the largest U.S. cable TV operator, in 1998. But AT&T also sold TCI in late 2001.

AT&T paid about $48 billion for the assets that were intended to "answer a big part of the question about how we will provide local service to U.S. consumers," Michael Armstrong, AT&T CEO said at the time.

Whether AT&T might have been able to make the TCI assets the core of its local access strategy is not clear. But as it turned out, AT&T did not get a chance to fully implement its strategy.

As AT&T's stock price plummeted 70 percent beginning in March 2000, AT&T was unable to avoid pressure to shed the asset, selling to Comcast (News - Alert).

image via shutterstock

As part of the Telecommunications Act of 1996, the formerly separate long distance specialists AT&T, MCI and Sprint were allowed to get into the local communications business. The issue was how to rapidly create the network assets to support such a market entry.

Though all of the contestants looked at fixed wireless, AT&T was first to move with a strategy based on use of cable TV assets.

ONO is one of Europe’s few remaining major cable assets after Vodafone acquired Kabel Deutschland Holding AG and Liberty Global Plc bought Virgin Media (News - Alert) Inc. last year. 

Edited by Ryan Sartor

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