Liberty Exits J:Com

First Taiwan, with the Taiwan Mobile-Kbro deal (see analysis in Media Route 26, Issue 106) and now it's Liberty Global Inc. (LGI), with its recent announcement it would sell its 37.8% direct interest in Japan's leading broadband cable TV MSO Jupiter Telecommunications (J:COM) to telco carrier KDDI for US$4 bil. in gross proceeds, including an attributable dividend due March 2010.
 
The transaction value works out to 140,000 yen per share (US$1,553), or a 65% premium to J:COM's closing share price on Friday, January 22. That's about 8.3x J:COM's trailing EBITDA for the 12 months to end-Sept. 30, 2009. In terms of net proceeds, J:COM will pay US$830 mil. for a credit facility and incur costs and taxes.

J:COM has 2.6 mil. TV subs with 2.3 mil. on DTV (largely HD), along with 1.6 mil. broadband users and 1.8 mil. telephony customers. Competition in Japanese video and broadband continues to intensify as platforms move to next generation systems. Telcos in IPTV and broadband have been improving their offerings of late, with incumbent carrier NTT revamping its video business to grow IPTV subs (VOD + linear channel) to more than 1 mil. over the past 12 months. 
 
The acquisition clearly brings more scale and enhanced competitive dynamics in TV and broadband. KDDI has a decent sized broadband business (2.3 mil. subs) but its video business is small (it acquired Japan Cablenet in 2006) with less than 0.7 mil. subs. The company's loss-making fixed line unit is offset by a profitable mobile business with uneven ARPU. Its enterprise value stands at around US$28 bil. versus J:COM's US$8 bil. 

For more analysis, see Issue 108 of Media Route 26, out on January 29.