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Rivals link up to fight cable crisis

Consortium hopes to make joint bid for aging network

BERLIN — Four months after antitrust watchdogs blocked John Malone’s Liberty Media from buying Deutsche Telekom’s aging cable network, Germany’s public and commercial broadcasters are banding together to offer a “Teuton solution” to the crisis.

The consortium, including pubcasters ARD and ZDF plus RTL and ProSiebenSat.1, could make a joint bid for DT’s pipes, which cover 60% of the German cable grid and reach 10 million households.

That’s the plan being touted by industry vet Karl-Ulrich Kuhlo, founder and supervisory board chairman of financial news channel N-TV.

The Assn. of Commercial Television & Radio (VPRT) is backing the idea. “We cannot stand by and watch as the ruins of German cable rot,” says VPRT prexy Juergen Doetz. It wants to hold talks with ARD and ZDF brass as well as local cablers in an attempt to speed up a deal.

Kuhlo, who has already spoken to interested buyers, expects network chiefs and investors to meet within the next two months; a deal could be finalized within 12 months if an investor is found.

Deutsche Bank was considering a bid, but it’s not clear whether it will now join the consortium.

Deutsche Telekom exec Gerd Tenzer said last week at the Cologne media confab that talks with potential buyers would begin in July.

Tenzer said there were many interested parties with the money and technical know-how to upgrade the lines, but declined to name names or a price. Tenzer did say he was cautiously optimistic that Deutsche Telekom could make a sale by the end of the year.

Deutsche Telekom faces an uphill battle to find someone willing to match the 5.5 billion euros ($5.2 billion) that Malone was ready to pay for the regional cable lines.

Kuhlo makes it clear that the broadcasters alone don’t have the money to buy the cable networks. “They most certainly can’t manage it. We are television broadcasters, not cable network operators.”

The broadcasters, which lobbied the Federal Cartel Office with dire warnings of a Malone cable monopoly, were instrumental in routing Liberty in Germany.

The webs complained Liberty couldn’t guarantee that their core programming would be carried in full, an accusation Liberty denied.

There are a growing number of TV channels that no longer fit on the packed and outdated cable lines. “The upgrade of cable is especially vital for the survival of commercial broadcasters,” Kuhlo says.

Germany’s cartel office rejected Liberty because it objected to the company controlling both content and distribution. It might have passed the deal if it generated greater competition in other sectors, such as telecommunications.

But Liberty balked at introducing costly telephony technology, saying it would make more sense to revamp the lines in stages over a longer period.

Liberty had planned to spend $7 billion to upgrade the lines to 510 MHz, rather than the optimal 862 MHz used for full broadband and telephony.

The cartel office’s decision probably has scared off other foreign investors, which makes a piecemeal sale more likely.

Deutsche Telekom might end up selling the six franchises individually to different buyers, although that could be a problem when it comes to upgrading the whole grid.

That’s one of the difficulties facing Ish, the German subsidiary of U.S. cabler Callahan that controls the regional cable system in North Rhine-Westphalia.

Following Liberty’s failed takeover, Ish was forced to slow down its own plans, as it was looking to work with Malone’s firm to carry out a wide-ranging upgrade.

Could be the “Teuton Solution” will be the best all around.

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