Banks rank cable TV firms less risky than telcos for broadband roll-out

Banks see cable TV companies as better bets than telecommunications companies in the race to deliver national high-speed broadband, it emerged last night.

Jeffrey...

Banks see cable TV companies as better bets than telecommunications companies in the race to deliver national high-speed broadband, it emerged last night.

Jeffrey Krogh, director of media & telecom finance at BNP Paribas, said the cable TV networks were already in the ground and most had already tied up content distribution deals with content providers. Most offered "bigger pipes" than telcos, which were needed to deliver increasingly popular content such as video on demand and streamed video, he said.

Banks have largely steered clear of telcos' network building projects because of their experience with cable TV companies. After providing billions in the 1980s and 1990s to build cable networks, they watched the cable firms default on their loans or restructure their shareholdings and seek to refinance their loans.

Krogh was speaking at the launch of French market analyst firm Idate's DigiWorld yearbook in London during a roundtable debate on who will pay for the next-generation internet.

Despite their reluctance to lend, Krogh said banks would be "more patient" in waiting for the return of their money if telcos built their next-generation networks in optical fibre.

Fibre was the end-point of network build, Krogh said, although there would be some places where it was not economical. These could be served by 200Mbps radio-based Wimax networks, possibly self-funded by the communities they served, provided the regulators made spectrum available, a speaker from the floor said.

Krogh was sceptical of plans to replace 3G mobile networks with LTE technology in densely populated areas. The required density of base station distribution gave the network the same look and feel as a fixed (fibre) network with a mobile "drop-off", he said.

It would be cheaper and more cost-effective to build the fibre network to serve such areas, and to differentiate the products by the services that they delivered, he said.

Representing Ofcom, strategy principal Katya Benyon said the regulator was keen to see a vibrant and competitive communications market. She indicated that Ofcom might look kindly on infrastructure sharing provided it enhanced the speed of network build without compromising competition.

Case study: Virgin Media

The view that banks are looking more kindly on cable network operators is confirmed by Virgin Media's success in rescheduling its £5.726bn debt, which is four times operating cash flow.

Over the past three years, Virgin Media has changed its debt mix from predominantly near-term bank debt to predominantly longer-term bond debt. In January 2007, the company owed £4.8bn due before 2013. Today that is £325m with no single payment over £200m due until 2015. The average maturity is now 6.8 years.

In May ratings agency Standard and Poor's scored Virgin Media BB-. In February S&P downgraded BT's debt to BBB-, one step above junk bond status.

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