IPOs can only be good for us
Source: Euro am Sonntag, October 31, 2009, Edition 44/09, Page 10/11.
- Kabel Germany is considered a hot candidate for an initial public offering in 2010.
- CEO Adrian v. Hammerstein now sees substantially more favourable conditions than in the spring.
- One of the largest media actions in Europe is basically ready to be launched.
The financial investor Providence took over Kabel Germany during the course of privatisation in 2003. Since that time, around a half a billion euros have poured into the expansion of internet capability of the largest European cable network with nine million TV customers. And with success: the number of internet and telephone customers will be topping one million before the year's end. Deutsche Telekom still dominates in the broadband business with a market share of about 50 percent. But cable network operators such as Unity Media, Kabel Baden-Württemberg or KDG are aggressively attacking the market leader. For instance, KDG plans the market launch of its high-speed internet connection in 2010. CEO Adrian v. Hammerstein wants to implement an internal cost reduction program for the Call Center. If the works council doesn't agree to this measure soon, the Board of Management is threatening to outsource the jobs of 580 of the company's 2,700 employees.
€uro am Sonntag: The second largest German cable network operator Unity Media is preparing for an initial public offering in 2010. When will you be ready for this step?
Adrian v. Hammerstein: We would absolutely welcome it if Unity Media were to achieve a successful IPO. That increases the attention focussed on our industry and can only do us good. That way more and more people will learn how attractive our industry is and what tremendous prospects of growth we have in the coming years.
€uro am Sonntag: What are your strategic targets as market leader?
v. Hammerstein: Today Kabel Germany has around nine million TV customers in Germany. Our strategy is to be able to offer these customers additional premium TV products such as subscription TV or in the future Video on Demand, but especially also to expand our telecommunications business with internet and telephony. Here in this broadband sector the cable industry has in the meantime attained a market share of nine percent; Telekom commands around 50 percent as market leader. But on account of our excellent cost/benefit ratio, we are getting 30 percent of new customers in the meantime. Therefore I can easily imagine that we will be able to double our market share in the short term.
€uro am Sonntag: How are the customer numbers developing?
v. Hammerstein: In the growth sectors of internet and telephony we had nearly 900,000 customers as per June 30th. We install up to 2,000 new customers every day. By the end of 2009 we will have topped one million.
€uro am Sonntag: Analysts expect that KDG will go public within the next six months. What does your planning look like?
v. Hammerstein: Our continually good and reliable business development of the past few years show that we are certainly eligible for stock market listing. If and when an IPO actually comes depends on developments in the capital market.
€uro am Sonntag: It has looked pretty good there of late: capital increases are being successfully implemented, IPOs are returning ...
v. Hammerstein: It's true that the capital markets are in better shape now than they were a half a year ago. The basic constraints for an IPO have improved considerably. But at the moment there's nothing concrete to say on the matter.
€uro am Sonntag: The financial investor Providence took over KDG during privatisation in 2003. Wouldn't now be an appropriate time for them to get out?
v. Hammerstein: Providence showed exemplary entrepreneurial engagement by allowing us to invest more than a half a billion euros alone in the expansion of our cable network internet capability in the past years. This way we could contribute to establishing a true infrastructure competition in the German telecom market for the first time. Providence is extremely satisfied with the development of our business and takes a positive view of our future prospects for development. I don't think that Providence is in any great rush to sell its stake in the business since we have even further growth potential.
€uro am Sonntag: Providence wouldn't have to exit completely. There's also the possibility of selling a minority.
v. Hammerstein: In fact that is a possibility that would clearly signal that investors continue to have great confidence in the future of the business model.
€uro am Sonntag: How would you use stock sale proceeds?
v. Hammerstein: At this point in time it would just be idle speculation. Usually a part of the proceeds from stock sales go to the former shareholder and another part to the company, which can then use the funds for further growth or for debt reduction.
€uro am Sonntag: There were speculations that the British telecommunications corporation Vodafone was interested in KDG. Could you actually imagine a strategic investor becoming involved?
v. Hammerstein: A strategic investor taking a stake in our business is definitely conceivable as an alternative to an IPO. Nowadays whoever is seriously interested in getting involved in the German landline business simply cannot avoid cable.
€uro am Sonntag: You yourself have repeatedly signalled an interest in acquiring the cable network operators Unity Media and Kabel Baden-Württemberg. For the time being, the Cartel Office has put an end to that idea. Are you still interested anyway?
v. Hammerstein: The business logic of merging Kabel Germany with Unity Media and Kabel BW hasn't changed. But that's a long-term topic not on our current agenda.
€uro am Sonntag: How are you faring with cable service provider Tele Columbus?
v. Hammerstein: We are fundamentally interested in acquiring further networks, especially in our distribution area. But there are no concrete plans at present.
(...)
€uro am Sonntag: Independently of an IPO, what's the company's further timetable for debt redemption?
v. Hammerstein: To make one thing perfectly clear: we are a proper middle-sized company, not a suicide mission. Our current financial liabilities of about 3.1 billion euros have solid financial backing. An initial prepayment of 1.15 billion euros is only due in 2012. We are generating sufficient cash from our operative business to continually reduce our net financial debt.
€uro am Sonntag: Are further cost-saving measures being planned?
v. Hammerstein: Our company was completely reorganised between 2003 and today. In the process, we have been able to keep our workforce at a constant level of about 2,700. Nevertheless we have to keep our eyes on costs in all areas. At the moment, for instance, regarding the Call Center we are examining whether we can work with employees' representatives to implement internal measures in order to achieve a more competitive cost position. Alternatively, we have the option of achieving our cost-saving targets through outsourcing the Call Center with its total of 580 employees. Negotiations are already in an advanced stage, so that we will reach a decision shortly.
€uro am Sonntag: You were a top manager at Siemens for many years before you came to Kabel Germany in 2007. What's the upshot of that move?
v. Hammerstein: After my years of working in a large-scale corporation, I feel very comfortable at the mid-sized Kabel Germany. Things are done quickly and unbureaucratically, our business can be developed straightforwardly and isn't shaped by political interests. We don't have to concern ourselves with complex corporate concerns, but can concentrate fully on our line of business.
Adrian v. Hammerstein: First at Siemens
Adrian v. Hammerstein (born in 1953) was the CEO of the largest German computer manufacturer Fuiitsu Siemens and was head of the Siemens IT Division SBS before he became CEO of the cable network operator Kabel Deutschland (KDG) in 2007. KDG revenues rose in the last fiscal year by 14 percent to 1.4 billion euros. Earnings before interest, taxes, depreciation, and amortisation increased by a fourth to 571 million euros.
Author of original text: Wolfgang Ehrensberger
Translation by KDG.