Crossroads

At the intersection of technology, finance and the Pacific Rim.

Thursday, October 19, 2006

Buyout Cable TV in Taiwan

MBK Partners announced that they are buying China Network, Taiwan's second largest cable provider for $930MM. MBK is run by Michael B. Kim, formerly of the Carlyle Group. He recently raised a large private equity fund for investments in Asia.

There are several reasons for private equity fund interest in cable TV (current and historical). First, there is steady cash flow based on a relatively stabile customer subscription. This allows for a leveraging of the deal with debt. Second, there is typically well-known operational risks--one has not had to "think" about other technology coming in from left field. Third, there is a substantial opportunity for revenue enhancement based on the internet, digitial TV, and VOIP services that cable companies can offer. It has proven easier for cable companies to implement new services (e.g., VOIP) than telephony companies to offer IPTV. Lastly, in the area of convergence, the competition is usually a well-worn, under-managed Telco. One can beat them to the deployment punch, provided you don't run out of money.

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