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European Venture for LBTYA Moves on

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Liberty Global Inc. (LBTYA - Analyst Report), a leading cable operator in Europe, Latin America, and Australia, is all set to further consolidate its foothold in the core European market. Recently, Financial Times reported that the company may bid for Ziggo, the market leading cable operator in The Netherlands.

Ziggo, which is currently owned by private equity firms Cinven and Warburg Pincus, is considering its initial public offer. Several industry researchers estimated that Ziggo could be valued at around $9.95 billion.

Since early 2010, Liberty Global has been restructuring its business. The company is concentrating primarily on Europe and Latin America while divesting operations in other parts of the world.

Germany has become the major growth area for Liberty Global where it completed two major acquisitions. UnityMedia GmbH and Kabel Baden-Wuerttemberg GmbH & Co KG, the second and third largest cable TV companies in Germany are now owned by Liberty Global.

Besides Germany, Liberty Global already enjoys a strong foothold in Europe with operations in Austria, the Czech Republic, Hungary, Ireland, The Netherlands, Poland, Romania, Slovakia and Switzerland, and Belgium. Liberty Global has also entered an agreement with private equity firm Mid Europa Partners LLP to acquire 100% stake in Aster Sp. Z.o.o.

Aster is the fourth largest cable TV operator in Poland. In Netherlands, Liberty Global is the second largest cable operators, second to Ziggo. Therefore, acquisition of Ziggo will virtually create a monopoly in the Dutch cable TV market.

However, Liberty Global has expressed confidence that Dutch regulator may not obstruct the formation of a cable monopoly. During the last couple of years, cable TV companies in The Netherlands are upgrading their networks to offer a triple-play bundled service of TV, high-speed Internet and telephony. Importantly, in 2010, Ziggo had won a Dutch mobile spectrum auction.

With this airwave, Ziggo may deploy mobile broadband network in 2012. We believe this precious wireless spectrum is another reason that Liberty Global is opting for Ziggo.

Recently, the industry circle has been rife with speculation that Liberty Global will divest its 54% stake in Austar United Communications Ltd. of Australia for around $1.08 billion. Austar has denied the rumor. If this rumor comes true then it will be a clear indication that Liberty Global will concentrate solely on Europe and some parts of Latin America. In 2010, the company divested its operations in Japan.

Deployment of high-speed DOCSIS 3.0 network has helped Liberty Global  differentiate its offerings in the industry. With DOCSIS 3.0, the company can now offer download speeds compared with other large European cable operators, such as, Virgin Media Inc. and BT Group plc. (BT - Snapshot Report).

Management has decided to deploy DOCSIS 3.0 in 80%-90% of all UPC broadband divisions in Western, Central and Eastern Europe. The company is also conducting DOCSIS 3.0 trial runs in Belgium.

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