Cable operator Serbia Broadband ( SBB ) is reportedly the subject of bids from Telekom Austria as well as private equity funds, for up to EUR1bn, ten times its estimated EBITDA. The other bids are understood to have come from Providence Equity Partners , Cinven Advisers as well as Altice Finco . BMI believes this would be a sound move for Telekom Austria, as SBB's regional pay TV offering would create synergies with Telekom Austria's current markets, presenting significant upside.
|No Serious Threat To SBB|
|Market Share (Inner) & Revenue Share (Outer), 2012 (%)|
SBB is owned by Mid Europa Partners and has an operating unit in Slovenia as well. It offers fixed line, broadband and pay-TV services through cable and DTH technologies. The company faces tough competition in its fixed and broadband segments from state-owned incumbent operator, Telekom Srbija, which has a dominant position in the fixed voice sector. SBB only entered this market in 2012, so we expect its presence to be of little significance, given that BMI forecasts this sector to decline over the next five years as mobile substitution takes effect. The company claimed a leading position in the broadband internet market in June 2012, but figures from regulator RATEL and Telekom Srbija suggest the gap is narrow. At the end of 2012, RATEL reported a total of 1.355mn fixed broadband connections in Serbia, while Telekom Srbija claimed its own broadband subscriber base to be around 640,000, a market share of 47.2%. This implies that SBB has around 700,000 broadband internet subscribers.
The company's real value, however, is derived from its dominant position in the pay-TV market, accounting for 52.5% of subscribers at the end of 2012. However, the operator has been labelled an entity with significant market power (SMP) by RATEL as of December 2012, and restricts the operator from excessive pricing and blocking new entrants to the market in order to limit competition. There were 1.44mn users of pay-TV services in 2012, a penetration rate of 19.9% and 58% of households. As a result of its majority market share, SBB also has a majority share of the revenues, amounting to 57.1% of media content distribution sales in 2012.
However, it is the pan-regional nature of SBB's TV offering that BMI believes is the most attractive aspect of the company, particularly to Telekom Austria. Its Total TV platform is the leading DTH service in the region, with a presence in six countries; Serbia, Slovenia, Montenegro, Bosnia & Herzegovina, Croatia and Macedonia. Of these, Telekom Austria has a presence in four of these markets, and has shown previous interest in entering the remaining two, Montenegro and Bosnia & Herzegovina. The purchase of SBB would therefore be a large boost to Telekom Austria's operations and at EUR1bn, is a more reasonable price when compared to the EUR1.4bn the Serbian government wants for a 51% stake in Telekom Srbija ( see 'Political Intricacies Impede Telekom Srbija Privatisation', May 31) . SBB's strong positioning in the broadband and pay TV markets are much more valuable than a strong position in the declining fixed voice sector.