20 December 2005

FB Business, Technology

The purchase is split between Macquarie Media Group and Macquarie Bank, with the Australian media fund taking 60 per cent and the investment bank 40 per cent of Carlyle's stake.

TBC chief executive David Dea will remain in his current post.

Foreign investment regulations limit Macquarie to owning less than 60 per cent of TBC. According to Macquarie executives, more than 40 per cent of equity will be held by an unidentified Taiwanese investor in the form of preferred stock.

Macquarie Media owns and operates Australia's largest network of radio stations with 85 licences covering more than 60 per cent of the non-urban population. By buying TBC, Macquarie now has control of Taiwan's third-largest cable-television provider with 650,000 cable subscribers and 90,000 internet subscribers.

It is the sole cable-television provider in each of its Taiwan licence regions with 850,000 homes passed. TBC reported 2004 revenue of US$166 million with earnings before interest, tax, depreciation and amortisation of US$91 million.

The purchase price values TBC at 9.4 times annualised earnings, a figure considered high for the industry. By comparison, Hong Kong's i-Cable Communications is priced at about six times earnings.

Taiwan is one of the most saturated cable-television markets in Asia with more than 85 per cent penetration. United States-based Carlyle Group bought TBC in 1999 for about US$200 million, according to media reports, with the sale yesterday netting the company a 400 per cent gain over six years.

High penetration and heavy regulation limit the growth prospects for Taiwan cable-television companies, leading to speculation that market consolidation is around the corner. Government rules limit the monthly subscription price of cable-television to NT$600 ($140), which includes a full package of channels. That means that the only outlets for growth are the roll-out of digital television or the provision of value-added services such as voice over internet protocol and cable internet.

"If you want significant growth potential, then look elsewhere. But if you want a nice predictable cash-flow generating utility, then it's a good bet," said Vivek Couto, an executive director of media research firm Media Partners Asia.

Mr Couto estimates that the Taiwan cable-television market will see annual compound growth in the decade ending 2010 of just 6 per cent, compared with 15 per cent in South Korea.

"Digital is the real growth possibility, but they would have to get premium content," Mr Couto said.

To date, Taiwan authorities limit the roll-out of digital cable-television through licensing and restrictions on channel packaging.

Cable-television companies are able to provide voice services, but rules on provision of telephony services force them to hook up with licensed fixed-line players which requires them to share telephony revenue.

TBC has signed a telephony deal with Eastern Broadband Telecommunications, giving TBC a commission on each new subscriber.