In a year of eye-catching telecoms deals across Europe, Liberty Global’s acquisition of
Virgin Media certainly stood out. The move, along with
several other strategic stake increases, has seen the company
emerge as a major player on the continent’s
wholesale scene.
"I find it fascinating," says Liberty Global’s
director of enterprise and wholesale David Jan Aris, reflecting
on the huge level of M&A activity in the European market in
2013. "On one hand you have Vodafone, which is a hunter on the
lookout for acquisitions, but on the other hand, the company is
still the prey, as it is being watched by AT&T."
Aris has witnessed first-hand how a fast and effective M&A
strategy can significantly transform a company’s
wholesale operations, helping to both strengthen service
capabilities and extend market reach.
Liberty Global has acted fast in 2013. After securing Virgin
Media for approximately $24 billion, the company also increased its stake in Dutch cable firm
Ziggo from 15% to 28.5%, and increased its stake in Belgium’s
Telenet from 50.2% to 58.4%.
Its name has also been linked to other companies, and
it narrowly missed out to Vodafone in its attempt to acquire
Kabel Deutschland. All of this activity has significantly
raised Liberty Global’s profile in the
region.
"We have entered a large eye-catching market via acquisitions,
and people recognise that," says Aris. "We have made large
investments compared to previous years and that has
specifically helped us in the wholesale market."
According to Aris, the company now owns over 1 million km of
fibre across Europe, with 122,000 business locations connected
to its extensive network. "The other interesting metric is we
have over 110 account managers across our footprint, which is
the kind of size that makes us comparable with the big players
in Europe," he says.
Focus on fibre
Liberty Global is one of the world’s largest cable
companies, and was formed in 2005 as a result of a merger
between the international arm of Liberty Media and UGC. In
Europe, its wholesale services have traditionally operated
under UPC Wholesale, which Aris has led since 2010.
Aligning all of its wholesale operations under the Liberty
Global brand has seen the focus of the unit’s
operations shift from eastern Europe to the west.
"The majority of our wholesale revenues are now from western
Europe and it’s been quite fascinating to bring
all these cultures and companies together," says Aris. "The
western European market is very dynamic, particularly compared
to some eastern markets, where in some cases the competition is
only coming from the incumbent."
Aris also feels that operating under the Liberty Global brand
has given the company greater visibility in Europe, where it is
recognised as one of the largest cable operators.
"I think that in the past we were strongly concentrated around
the UPC brand in a lot of the markets, but that
doesn’t fit anymore with our acquisition of Virgin
Media, our increased stake in Telenet and our various German
entities. So in that sense, we clearly see that a new brand was
needed," he says. "It also relates back to our strong financial
background. People recognise we’ve performed
strongly in the stock market."
Local hero
So now that Liberty Global has officially arrived in the
European wholesale market, what can it offer the carrier
community?
"We have a very compelling offer to other carriers through our
investment in fibre. That is ultimately our USP," says Aris.
"If you look at the international carriers, many of them have
invested in cross-border connectivity. We have used our
strength in local networks and local expertise, which is why we
are a good fit with international carriers – because
we can deliver on the last mile to their networks," he
adds.
On the enterprise side, the acquisition of Virgin Media has
given Liberty Global a solid business network to help carriers
serve multinational customers.
"We can easily help be part of the solution on the global
access side and the acquisition of Virgin has given us
credibility. The UK is a big market, so it is nice to have that
included in our total European footprint," says Aris.
"I think our story is all about European reach with local
expertise. Instead of promoting our global scale, we have
focussed on developing our local touch. We want to continue
doing that and not lose sight on the big numbers – if
you are not providing a good local service, then in my view you
don’t have a service at all."
The evolution of cable operators in
Europe
In the US, cable operators have played an important role in the
wholesale market, tapping effectively into quad-play
opportunities. The emergence of Liberty Global could signal
that this trend is coming to Europe, and the market is about to
witness a deeper involvement from cable companies.
In order for a cable company to truly compete in the wholesale
segment, it must have scale, believes Aris.
"Cable companies can create a successful local business, but I
think in order to press on the international side, they need
scale and publicity," he says.
The role of cable companies could be an interesting development
in Europe, where they are arguably in a stronger position to
tap into new opportunities with over-the-top (OTT)
players.
Aris is enthusiastic about future collaboration between
carriers and OTT players, viewing it as a new wave of business
for the industry.
"The OTT players are coming much more into our market and I
think they will look for ways to optimise their networks. At
the moment they are still heavily looking at ways to be a
success on the consumer side, but over time I think they will
look harder at their own business model and how they can
optimise it," he says. "I think that will be a very interesting
segment to be involved with, particularly in terms of providing
cloud solutions."
Aris is equally enthused about the role of software-defined
networking (SDN), describing it as a "beautiful" technology: "I
think you can do a lot with SDN, but the economies of scale
will only make sense with the access-based Ethernet
technology," he says. "Ethernet is a strong growth area for us
and we are presently looking at Metro Ethernet Forum (MEF)
certification."
Supporting this, the company earlier this year rolled out its
Ethernet services portfolio in Switzerland. Based on the
Carrier Ethernet 2.0 standard, the company claims to be the
first provider of next-generation Ethernet services in the
country and plans to take the services portfolio to other
countries across Europe in 2014.
"It fulfils the needs of our customers and we see a strong
direction," says Aris.
Quad-play in 2014
2014 will see the wider Liberty Global organisation pushing deeper into quad-play services in
order to meet the growing demand for TV, broadband, mobile and
fixed-line services across Europe.
In November the company announced that Graeme Oxby had been
appointed MD for its European mobile operations, a newly
created position that highlighted its growing focus on
developing additional mobile services.
The company operates an MVNO model in Europe, in markets
including the UK, Belgium and Germany, and is expected to
launch its new services in the latter. On the wholesale side,
however, Aris believes 2014 will be about leveraging the
company’s M&A strategy from 2013.
"There are 2 elements: cost savings and new revenue
opportunities. I think that the next thing will be to develop
new products and services, and that is what the market is
really looking for," says Aris.
"I think we are coming out of five years of recession, during
which the carrier market was driven into optimising. Now we are
looking at ways to implement new services and products and
discover ways to enhance our business."
Liberty Global’s 2013 M&A
timeline
January: Increases ownership in Telenet to 58%
February: Announces move to acquire Virgin
Media
March: Acquires a 12.65% stake in Ziggo
May: Announces additional senior management
changes,
with Tom Mockridge becoming CEO of Virgin Media, Robert
Dunn becoming CFO of Virgin Media and Baptiest Coopmans
becoming MD of UPC Netherlands
June: Completes acquisition of Virgin
Media
September: Loses out on bid for Kabel
Deutschland to
Vodafone
October: Agrees to sell Chellomedia for $1
billion
November: Linked with bid for
Intel’s online pay-TV service