16th August 2004
Thursday, September 2nd, 2010
Multimedia broadcasts to the bourse
The country's number two cable TV firm sees IPO as key to expansion.
| From one lot of cables to another |
Marek Szeliga, Multimedia's CEO, believes that an IPO is the best way of raising money for the company, as it returns money to its current shareholders while increasing funds for the company. However, the IPO is to be structured so that 25 percent of the proceeds will go to shareholders. But while analysts say this could reduce oversubscription, it could also limit the amount of revenue raised for the company's coffers.
Moreover, investors might prove wary of an offering structured in this way, given the recent controversy surrounding the IPO of Impel, a security and cleaning services company. When that company was floated on the floor, control remained in the hands of the existing owners, who sold their shares, and this resulted in less money coming into the firm. Furthermore, many investors got their fingers burned as the stock price fell in value.
In addition, some investors have questioned the rationale behind Multimedia's IPO, as rather than requiring more funds to finance expansion, the firm already seems awash with cash. Indeed, it currently plans to spend some zł.100 million on acquisitions and another zł.70 million on extending its infrastructure by the end of this year.
These investments are part of a plan to transform the cable company into a full-blown telecoms operator, leveraging its cable infrastructure to offer phone and broadband Internet access services. While the strategy fits well with global industry trends, it seems clear that the process will not have been finalized by the time of the IPO, meaning investors could be offered what is to some extent an unknown article.
Furthermore, while Multimedia's strength as a potential telecom is that it has last-mile infrastructure in large parts of the country, its reach to 1.5 million households does not extend to businesses. Thus, Multimedia could struggle to enter the most profitable segment of the fixed-line market, focusing instead on the consumer market, where margins are low and revenues are set to decline over the coming years.
Although Multimedia is one of the giants on the market, its competitors have been following its lead in terms of diversifying their offers and launching IPOs. Competitor Vectra, which has also been touted as a potential Multimedia acquisition target, has expressed interest in a float of its own to raise funds for future development.
Tomasz Żurański, Vectra's CEO, says that developing extra telecoms services while "simultaneously offering cable TV" is the central plank of Vectra's strategy. But he also says the company does not rule out future cooperation, which could possibly mean a merger - with Multimedia. Likewise, a spokesperson for TelNet, a telecoms company that has already teamed up with Multimedia to offer Internet access, does not rule out the possibility of the firm being bought out, citing it as a "definite possibility, depending on the price."
From Warsaw Business Journal by Amelia Hill
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