UPC not interested in buying Aster City cable

Contrary to earlier media reports, Amsterdam-based United Pan-Europe Communications (UPC), owner of Poland's largest cable TV network UPC Telewizja Kablowa, is not participating in a tender opened earlier this month to buy Aster City, a domestic cable TV company, sources told the WBJ last week. The news should come as a welcomed surprise to trade and financial investors interested in buying Aster City, which has 386,000 subscribers in Warsaw, Kraków, Szczecin, Bydgoszcz, Gorzów and Zielona Góra. Earlier they had feared that UPC, Poland's leading cable TV company with 1 million subscribers, would offer an unbeatable price for the company. "If (UPC) has corporate reasons not to submit a bid, it will simply boost the chances of the others bidders," said an analyst familiar with the tender. UPC refused to comment on a possible acquisition of Aster City. "Since we're undergoing restructuring, we cannot comment on such matters," said Bert Holtcamp, UPC's director of corporate communications. But according to a reliable source, who asked not to be named, UPC didn't submit a bid for the cable company. "UPC is not among those making offers," the source said. "If UPC participated in the tender, the transaction would take longer. UPC is Poland's largest cable TV company, and it's likely that it wouldn't get approval from the UOKiK (the Office for Competition and Consumer Protection). But I wouldn't rule out that one of the tender's winners would sell its assets to a third party later." Advent International was rumored to be participating in the tender on UPC's assignment, but sources close to UPC denied such a possibility.

Time is of the essence Aster City is operated by El-Viv, which is in turn owned by Elektrim Telekomunikacja (ET). Telecom and power group Elektrim, which is on the verge of bankruptcy, owns 49% of ET, while the remaining 51% is owned by France's Vivendi Universal, the ailing media giant that is desperate to sell some of its international assets to pay off debt. Earlier this month, the business daily Puls Biznesu reported that four groups were interested in Aster City - a consortium of Advent International and UPC; a consortium of venture capital funds, including Innova Capital, Enterprise Investors and AIG CET; a consortium of TK Vectra and BRE Private Equity; and a consortium of the Multimedia cable network and EMPE, a private equity fund joint venture. The only group that would confirm its participation in the tender was TK Vectra, a Gdynia-based cable TV network, operated by cable.com, in which four funds managed by BRE Private Equity hold 26%. "We did submit an offer to buy El-Viv," said Krzysztof Stefaniak, the spokesman of TK Vectra, which has 408,000 subscribers. One of the firm's main goals is to provide new services through its cable network, including Internet access and video on demand. Through a series of mergers and acquisitions over the past few years, the company has created a cable company network operating in 85 cities. The purchase of Aster City, according to Stefaniak, could be another step in TK Vectra's expansion plans. "Aster City is operating in the most promising part of the cable market, in Warsaw and Kraków, where subscribers are more likely to pay for new kinds of services, including broadband access to the Internet," Stefaniak said. "Our ambition is to become a telecom operator, so we are not only after Aster City's customer base." According to Marcin J. Duszyński, TK Vectra's adviser in the deal and the former general director of Advent International, the consortium of TK Vectra and BRE Private Equity could attract yet another player.

"It's not out of question that cable.com will start working with a financial investor to get additional funding and operating support," he said. "According to financial investors, Aster City's price should range from $60 million-$80 million. The transaction will be finalized by the end of this year, and if Elektrim declares insolvency, it may speed up the whole thing since selling Aster City would provide additional funds." But according to industry insiders, the battle for Aster City could be fierce. "The cable TV market is an attractive one because it means steady cash flow and has good growth opportunities in Internet, telephony and interactive TV," said a market analyst who asked not to be named. "El-Viv has been poorly run so there's much room for improvement." According to Duszyński, TK Vectra's adviser, financial investors are particularly interested in reaching a deal for control of the cable operator. "There is a lot pressure to do this because they're hoping to buy a company during the downward trend of the market, when (its) evaluation is lower, and then they'll sell it for a decent return when the market gets better," he said. "But the truth is that you never know how this cycle evolves." Other sources said that venture capital funds, not only trade investors, were set on growing the company after buying it. "Obviously, (ven caps) would like to grow it and improve it as it will make them more money once they sell it after three to five years," said a source close to a financial institution.