T-Mobile buys cable operator UPC Austria from Liberty Global for $2.2 bn

T-Mobile AustriaLiberty Global has sold its cable business UPC Austria to T-Mobile Austria for $2.2 billion due to tough competition from A1 Telekom Austria.

The combined company will offer integrated services such as mobile and fixed line broadband internet, IoT (Internet of Things), mobile and fixed line telephony as well as TV- and entertainment products in Austria — as part of the strategy to offer quadruple play services.

“With this acquisition Deutsche Telekom is taking another major step to realize our strategy to become a fully converged operator in our European footprint,” said Srini Gopalan, board member Deutsche Telekom for Europe.

The enlarged company will have approximately 6.7 million subscribers including some 5.2 million T-Mobile Austria mobile customers. UPC Austria is the largest cable operator in Austria with coverage of 36 percent of the households in the market, mostly in urban areas.

With 1.5 million RGU’s UPC Austria is the #2 in the Austrian broadband market with more than 0.5 million customers and #1 in the Premium-TV market with a customer base of some 0.4 million. The combined revenue of both companies in 2017 is expected at EUR 1.2 billion based on pro-forma calculations.

Cost and Capex efficiencies are expected to deliver 80 percent of the synergies, e.g. in areas like IT and network operations. Deutsche Telekom expects the transaction to be accretive to group Free cashflow and EPS from year one onwards.

“It is our ambition to provide our customers, whoever and wherever they are, with the best possible seamless broadband experience for all of their needs through LTE, digital cable, fiber and future technologies like 5G,” said Andreas Bierwirth, CEO T-Mobile Austria.

The new T-Mobile Austria will be a strong competitor in both consumer and businesses segments of the broadband market with the combination of fast digital cable and fiber as well as LTE in urban areas.

T-Mobile Austria will continue its significant investment in the buildout of LTE to ensure broadband connectivity in rural areas.

Together with the dense urban fiber infrastructure of UPC Austria, the fiber core network owned and operated by T-Mobile Austria will form a strong backbone for high speed mobile broadband access and for next generation network 5G.

UPC Austria’s network passed 1.4 million homes and served 654,000 customers who subscribed to 513,000 broadband, 450,000 voice and 468,000 video services.

Mike Fries, chief executive officer of Liberty Global said this transaction highlights the strategic and financial value of its fiber-rich networks in a rapidly converging world and the significant synergies inherent in fixed-mobile mergers.

Liberty Global will use the proceeds from the sale for corporate purposes including leverage reduction for the remaining UPC bank group, re-investment into existing business, and support for the company’s share repurchase program.

Liberty Global will provide certain transitional services including network and information technology-related functions for up to four years. Liberty Global will also allow T-Mobile Austria to use the UPC brand for up to three years.