SG European Cable Sector initiation (Alejandro Nunez 201104)

Macro Commodities Forex Rates Equity Credit Derivatives
21April 2011
Credit
Initiating Coverage
www.sgresearch.com
Europe
DIVERSIFIED TELECOM SERVICES
European Cable’s gilded age: pipe dreams no longer
Positive  Event: In this report we initiate coverage of the European cable sector with an analysis
of the sector and its principal players, Kabel Deutschland, ONO, Telenet, Unitymedia
and Virgin Media, as well as providing an update on UPC Holding.
 Analysis: A confluence of favourable secular and sector cycle factors support a
positive operational and financial outlook for the European cable sector. The secular
trends supporting positive operating momentum in the near to medium term are: rising
Internet usage, higher bandwidth requirements for video and other data-intensive
applications, growth in Internet-connected devices, and convergence in fixed-mobile
media and communications. These trends coincide with operators' deployment of higher
speed next-generation networks, an increasing focus on communications services
bundles, capital expenditure focused on customer acquisitions, and even benign neglect
from incumbents in terms of fibre network rollouts. Financially, European cable operators
look well placed to reap a long-awaited cash flow harvest, in our view, driven by
declining proportional and increasingly flexible capital expenditures, EBITDA and
operating cash flow increases due to high operational leverage, and moderately
declining leverage. We don’t envision any dramatic releveraging risk for most players in
the sector, and we note that the sector’s more geared companies clearly articulate their
higher leverage policies. M&A risk is on the rise, however, although we consider it to be
manageable for most operators.
 SG Sector opinion: We are initiating coverage with a Positive opinion. From a
fundamental perspective, we are most positive on Kabel Deutschland, Virgin Media,
ONO and Telenet. From a relative value perspective, we most favour ONO and Nara
bonds, Unitymedia 2019s, and the UPC € 9.75% 2018 and 8.375% 2020s. Although
VMED is now approaching investment-grade territory, we also see value in VMED £
2019s and $ 2016s on the back of its solid execution and good operating momentum.
(Initiating coverage)
Credit Spread Evolution
Source: Markit
Analyst
Alejandro Núñez
(+44) 20 7676 7136
alejandro.nunez@sgcib.com
Societe Generale (‚SG‛) does and seeks to do business with companies covered in its research reports. As a result, investors should be
aware that SG may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a
single factor in making their investment decision. PLEASE SEE APPENDIX AT THE END OF THIS REPORT FOR THE
ANALYST(S) CERTIFICATION(S), IMPORTANT DISCLOSURES AND DISCLAIMERS
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iBox x HY Media iBox x HY Telec oms
This document is being provided for the exclusive use of ALEJANDRO NUNEZ at SOCIETE GENERALE

Diversified Telecom Services
21April 20112

21April 2011 3
Contents
4 European cable’s gilded age: pipe dreams no longer
15 KABEL DEUTSCHLAND
16 Network
16 Strategy
18 Competition and consolidation
20 Debt summary
22 ONO
23 Network and markets
29 IPO and refinancing
32 TELENET
33 Network and market
36 Strategy
42 UNITYMEDIA
45 Strategy
51 UPC HOLDING
54 Strategy
59 Debt summary
61 VIRGIN MEDIA
62 Network and markets

21April 20114
European cable’s gilded age: pipe dreams no
longer
We are constructive on the European cable sector in the near to medium term as we believe
the sector’s business model is now coming into its own after years of network investments,
tough competition and the recent credit crisis. The sector is benefitting from structural, market
and financial trends which position the sector very favourably vis-a-vis the competition –
incumbent telecoms, satellite pay-TV, alternative telecoms, and free-to-air broadcasting
operators. The structural trends are driven by a constant, secular rise in bandwidth demand in
order to facilitate a myriad of data-hungry applications (High-Definition TV, high-speed
broadband, high definition internet video, smartphones and PC tablets, amongst others).
Although the majority of today’s European broadband customer base’s bandwidth demand
requirements to date have largely been satisfied by the bandwidth provided by operators’
products in the 2-25 Mbps range, the proliferation of data-intensive and video-centric devices
in the home drawing on the same bandwidth source are raising the bar for required
bandwidth. The technological superiority of hybrid fibre-coaxial cable networks compared to
copper-based infrastructure is significant, indisputable and plays well into this structural trend
for ‚fatter pipes‛. This technological advantage can only be matched by fibre optic cable (and,
specifically, FTTH or Fibre To The Home) which most European telecom incumbents have
been slow to embrace and reluctantly at that. The rollout of DOCSIS 3.0 across the majority of
European cable networks in 2010-11 has accentuated cable networks’ speed and functionality
advantages over copper-based xDSL networks which support their marketing and growth
efforts. On the basis of estimated negative or low return payback for incumbents’ fibre
network development and their own announcements of moderate buildout plans, we don’t
foresee an accelerated fibre network rollout in the next few years. Thanks to this technological
edge, cable networks’ marketing campaigns have been able to lead with high-speed
broadband offers, often as part of value-priced bundles, at price points lower compared to
incumbents’ xDSL offers. And, contrasted with the incumbents’ and unbundlers’ advertised
speeds, cable networks’ actual realized speeds are often close to, if not higher than, their
advertised speeds due to their lines’ higher quality, reliability and lower signal loss despite
distance from the local exchange.
European (and global) cable networks’ advantages underscore their push for service bundles
which can increasingly maximize their networks’ robust capabilities, not only for high-speed
broadband but also for interactive pay-TV accessed through advanced set-top boxes (such as
TiVo) and Voice-over-IP (VoIP) telephony. Multi-play services penetration growth, coupled with
conversion to digital (digitalization) of basic analog cable TV customers, have helped drive
total revenue, Average Revenue Per User (ARPU), operating margins and free cash flow
growth over the last three years. As cross-selling and up-selling services, and especially
higher margin high-speed broadband and telephony services, generally have higher gross and
operating margins for cable operators than pay-TV services, there is a clear rationale
underlying bundle offerings. And, as trends in non-linear, open-sourced video content,
distributed through Over-The-Top (OTT) channels, increasingly transform the way video is
sourced, transmitted and consumed we believe cable’s position as the medium which offers
the widest, most multi-functional pipes will become even more entrenched. In this vein, we
don’t see OTT as a near-term or even medium-term threat to cable operators as we believe
most will find a way to incorporate it into their pay-TV platforms as a defensive response to
third-party OTT content providers.

21April 2011 5
Financially, operating leverage – which was the sector’s Achilles heel a decade ago amidst
debt-financed network overbuild - is ironically today its strength. This is especially true for
products, such as broadband and telephony, where there are no significant marginal
operating costs (such as programming costs for pay-TV) and gross margins can therefore be
in excess of 80%. As most European cable operators have completed the majority of their
network expansion and improvement investments, their capex budgets are now largely
focused on success-based capex, or spending related to customer acquisitions (such as for
set-top boxes). This not only reinforces capex discipline but more importantly grants
operators a degree of cash flow flexibility. How European cable operators choose to distribute
that cash flow is another matter.
The relevant credit risks that we foresee for the European cable sector are shareholder-
oriented event risk, especially in the form of releveraging for increased dividends and share
repurchases, M&A, and, to a lesser extent, regulatory risks and the potential for accelerated
fibre rollout by telecom incumbents. While we believe European cable networks are well
placed to face their competitive challenges and will continue to generate significant cash flow
in the medium term, we view their financial and investment policies as being the key drivers of
credit quality during at least the next two years.
The network edge
Although the speed, reliability and overall quality of European cable operators’ DOCSIS 3.0
networks has been often been touted, it should nevertheless not be underestimated. Without
overstating the topic, we’ll highlight two main points: 1) not only are European cable networks’
current speeds and reliability superior to those of their xDSL based competitors but their
infrastructure can also be scaled flexibly and economically to provide speeds of at least 5x
current speeds, and 2) European cable operators are poised to maintain this competitive edge
for the foreseeable medium-term future as their main competitors, European incumbent
telecom operators, will continue to slowly and selectively implement fibre networks where they
see the potential for at least marginal or breakeven returns on investment. To highlight the first
point, we refer to the table below outlining illustrative bundle offers and pricing from various
major European cable operators. Compared to incumbents’ xDSL, copper-based broadband
services, which are typically advertised at speeds of 20-40 Mbps, the cable networks’ mid-tier
broadband services offer 20-50 Mbps while their higher speed broadband services offer
speeds of 100-120 Mbps (typically at a €10-25/month premium).
Selected European cable bundle package prices (as of 01 March 2011)
Source: Company data (as of 1 March 2011)
Company Country
Cost (€/sub. per
month) Package description Comments
Kabel Deutschland Germany € 12.90 6 MB/s + phone line Plus analog TV fee; + €7/mo after 1st yr.
€ 17.90 6 MB/s + phone line + flat-rate phone Plus analog TV fee; + €10/mo after 1st yr.
€ 19.90 32 MB/s + line + flat-rate phone Plus analog TV fee; + €10/mo after 1st yr.
Unitymedia Germany € 25.00 32 MB/s + basic digital TV + flat-rate phone Plus €17.90 for analog TV; + €5/mo after 1st yr.
€ 30.00 32 MB/s + premium digital TV (HDTV) + flat-rate phone Plus €17.90 for analog TV; + €5/mo after 1st yr.
€ 40.00 64 MB/s + 53 digital channels+ flat-rate phone Plus €17.90 for analog TV; + €10/mo after 1st yr.
UPC Netherlands € 40.00 25 MB/s + phone + 50 TV channels + €5/mo. after 1st 4 months
€ 45.00 60 MB/s + phone + 50 TV channels + off-peak calls + €10/mo. after 1st 4 months
€ 55.00 60 MB/s + 90 TV channels + off-peak calls + €10/mo. after 1st 4 months
Ziggo Netherlands € 42.00 2 MB/s + 30 analog + 65 digital channels + phone line
€ 52.00 22 MB/s + 30 analog + 65 TV channels + phone line
€ 67.00 120 MB/s + 30 analog + 65 TV channels + phone line
Zon Portugal € 31.00 6 MB/s + 15 TV channels + off-peak calls
€ 42.60 12 MB/s + HD TV + off-peak calls
€ 52.80 30 MB/s + HD TV + off-peak calls
ONO Spain € 24.90 6 MB/s + unlimited national calls €35.90 after 1st year; + €16.52 for line rental
€ 29.90 30 MB/s + 70 digital channels + unlimited national calls €45.90 after 1st year; + €16.52 for line rental
€ 29.90 50 MB/s + 70 digital channels + unlimited national calls €50.90 after 1st year; + €16.52 for line rental
Virgin Media U.K. £20.00 (€23.40) 10 MB/s + 65 TV channels + off-peak calls +£13 for phone line; half-price for 1st 6 months
£31.50 (€37.00) 50 MB/s + 65 TV channels + off-peak calls +£13 for phone line; half-price for 1st 6 months
£47.56 (€55.50) 30 MB/s + 160 TV channels + off-peak calls +£13 for phone line; half-price for 1st 6 months

21April 20116
Operators such as Kabel Deutschland (KD) have launched aggressive broadband promotions
offering their 100 Mbps service, for example, at a comparatively low €19.99/month for the
initial promotional year in the hopes that the services’ inertia will see customers roll the service
into at least a second year during which it would be charged at double the rate of
€39.99/month. In fact, given that most operators have completed or are close completing their
DOCSIS 3.0 network upgrades, at least 75% of their network footprints are capable of offering
speeds of at least 100 Mbps.
European cable operators DOCSIS 3.0 network development
Cable operator Network status
Kabel Deutschland 45% of network on DOCSIS 3.0 offering 100 Mbps; 100% rollout targeted for
summer 2012
ONO 73% of footprint DOCSIS 3.0 enabled offering at least 50 Mbps; 100% coverage
target for mid-2011
Telenet 100% of network upgraded to DOCSIS 3.0 offering speeds of up to 100 Mbps
Unitymedia 81% DOCSIS 3.0 footprint coverage offering speeds of 128 Mbps; 90-100%
coverage target by end-2011
UPC Europe 90% of footprint has access to 60-120 Mbps DOCSIS 3.0 speeds
Virgin Media DOCSIS 3.0 rollout nearly fully complete, offering 100 Mbps; 100% footprint
coverage by end-2011
Ziggo 100% of network DOCSIS 3.0 enabled offering speeds up to 120 Mbps
Source: Company data, SG Cross Asset Research
Furthermore, we highlight that cable operators’ actual speeds delivered typically are close to,
if not equal to, those advertised whereas the same is not generally the case for incumbents’
and alternative operators’ DSL-based services. We highlight the U.K. regulator’s 2010 data
demonstrating that BT’s ADSL broadband speeds typically achieved approximately 50% or
less of their advertised speeds (of 10–20 Mbps) whereas Virgin Media’s comparably
advertised broadband services typically achieved over 90% of their advertised speeds. In the
absence of similar data from other European markets, we would nevertheless note that as the
underlying DSL and cable technologies are essentially the same in other European markets,
we believe the BT/Virgin Media example above is illustrative of advertised vs. actual
broadband download speeds for other European DSL and cable operators.
The incumbents’ counter-attack has been reluctant and sluggish, in part due to economic
considerations and partly due to protracted discussions regarding regulatory frameworks.
Most have opted for a compromise route implementing some variation of xDSL technology
which could be described as ‚DSL plus‛. Most of these network upgrades offer speeds 3-5x
faster than ordinary ADSL speeds (i.e., 25-40 Mbps) and so satisfy current and near-term
bandwidth demand levels without incurring capex into the billions of euros. Albeit an
improvement over regular ADSL and useful for inclusion in bundles and perhaps some level of
IPTV, these technologies go only halfway toward meeting cable’s DOCSIS 3.0 speed
challenge. Their main drawbacks are that they are not future-proofed against rising bandwidth
demand and their actual delivered speeds are inversely proportional to the distance between
customer premises’ distance from the local cabinet typically tapering significantly beyond 1
km. Only FTTH is genuinely on the same (or better) technological level as DOCSIS 3.0 speeds.
Without significant government subsidization of fibre network deployment, as there has been
in Japan and Korea, we believe the cable networks’ competitive threat has goaded
incumbents into formulating some sort of strategic response. In this respect, most
incumbents’ fibre network plans are and have not been proactive. Although the take-up of
European cable networks’ higher speed broadband services to-date has been modest, at
around 10% of the addressable market within the first 6-12 months post-launch, we believe it
is still early days to gauge whether there will be a broader mass-market appeal for these types
of services. What we can observe, however, is that directionally the trend certainly is toward

21April 2011 7
higher bandwidth needs, such as HD video, for an increasing number of data-intensive
devices, both in the home and for mobile. So, the upshot is that cable networks are well-
invested and prepared for that inevitable rise in bandwidth demand to come over the next two
to three years.
W. European broadband penetration (2009) W. European pay-TV penetration (2009)
Sources: Screen Digest Source: Screen Digest
Western European average broadband download and upload speeds
Source: Speedtest.net, SG Cross Asset Research
24
32
23
30
14
7 10
63
53
57 40
53
56 44
87 85
80
70
67
63
54
0
20
40
60
80
100
%
Cable DSL/Other
58
52
49
45
26 25
18
0
10
20
30
40
50
60
70
%
% of TV households
23.7
23.3
18.8
18.3
18.0
16.6
15.9
15.0
14.7
14.4
13.9
13.3
12.6
11.6
11.4
10.2
9.5
8.3
6.6
6.4
5.8
4.6
9.49
5.16
2.28
2.17
1.56
8.36
7.52
1.42
3.13
6.97
2.42
3.1
5.09
1.33
1.67
1.33
1.21
1.41
0.96
0.63
0.76
0.81
0.0
5.0
10.0
15.0
20.0
25.0
Broadbandspeeds(Mb/s)
Download Speed (Mb/s) Upload Speed (Mb/s)

21April 20118
European telecom incumbents’ fibre deployment plans (as of April 2011)
Notes: FTTH: Fibre-To-The-Home; FTTC: Fibre-To-The-Cabinet; VDSL: Very-high-bitrate Digital Subscriber Line;
FTTH Homes Passed and Penetration Rates
Source: FTTH European Rankin, FTTH Council Europe (Sep 2010)
Comparative fibre and cable network speeds
Source: Company data, Screen Digest, Solon, Cable Europe, FTTH Council
Operator Country Coverage program FTTH (%) VDSL/FTTC (%) Combined (%)
Swisscom Switzerland
FTTH to 1m homes by 2015 (€1.4bn cost);
70% VDSL coverage already 33 70 70
Portugal Telecom Portugal FTTH to 1m homes (completed 2009-10) 33 0 33
KPN Netherlands
FTTH to 1.1-1.3m homes by 2012;
FTTC/VDSL to 0.6-0.8m homes by 2012 18 6 24
TeliaSonera Finland FTTH to 0.4m homes by 2012 18 0 18
France Telecom France FTTH to 7-8m homes by 2015 13 0 13
TeliaSonera Sweden €260m for 0.5m homes by 2010 11 0 11
Deutsche Telekom Germany FTTH 10%, 31% VDSL/FTTC 10 31 41
British Telecom U.K.
£2.5bn cost to pass 67% homes, w/20%
FTTH & 80% FTTC, by Dec-15 10 30 40
Telecom Italia Italy FTTH to 1.3m by 2012 6 4 10
Belgacom Belgium Currently 73% FFTC/VDSL; no FTTH plans 0 73 73
Telefonica Spain
FTTH/FTTC trials; no announced buildout
or plan 0 0 0
0% 20% 40% 60% 80% 100%
Lithuania
Slovenia
Portugal
Bulgaria
Sw eden
Denmark
Latvia
France
Finland
Estonia
Norw ay
Russia
Italy
Netherlands
Sw itzerland
Hungary
Czech Rep.
Spain
Germany
Turkey
UK
FTTH/B + LAN Subscriber Penetration FTTH/B Homes Passed
0
50
100
150
200
0km 1km 2km 3km 4km 5km
SpeedinMbit/s
Distance betweenDSLAM and CPE
Cable Docsis3.0
Cable Docsis2.0
VDSL2
VDSL
ADSL2+
ADSL
FTTH/100M
FTTH/1G ~€1,500
~€1,000
~€300
~€120~€100
FTTHFTTBVDSLEuro
DOCSIS 3.0
ADSL2+

21April 2011 9
The operating momentum
As previously mentioned, European cable operators have built up a good deal of momentum
over the last few years, both operationally and financially. Operationally, 2010 was principally
the year for DOCSIS 3.0 rollouts and we expect European cable companies to capitalize on
the DOCSIS 3.0 marketing buzz for at least the next year or two while they enjoy their network
head-start. This, along with value-priced bundles propositions, helped to drive increasing
double- and triple-play penetration along with consistent ARPU gains. As multi-play
penetration has risen steadily for most operators, not only do their ARPU’s tend to rise but
their churn levels also tend to be positively affected by increased customer ‚stickiness‛. A
greater number of revenue generating units (RGU’s), or services, per customer also afford
operators the opportunity to up-sell variable services across a wider range of categories. As
up-selling and cross-selling additional services to a captive customer base is a lower-cost
(both in terms of opex and capex), and therefore a higher-margin, method of raising revenues
and earnings, operators are clearly motivated to capitalize on these opportunities within their
existing customer base. Although network growth, either through organic network extensions
in markets such as the U.K. or through bolt-on acquisitions in markets such as Germany, is
still viable and planned where economically attractive it comes at a higher capex and
customer acquisition cost so will be moderate for most European cable operators.
We anticipate 2011 will be more the year of leveraging the upgraded networks to take
advantage of their interactive capabilities and functionalities in other service areas, such as
pay-TV, mobile and small business/corporate (B2B) services. In pay-TV, certain cable
operators, such as Virgin Media and ONO, have struck agreements with TiVo in order to offer
customers a wider array of content source options via the advanced TiVo media gateway.
Such gateways incorporate more user-friendly interfaces with Internet connectivity via home
network connections in order to seamlessly dovetail over-the-top content (e.g., YouTube,
Lovefilm) with their other premium video service content such as Digital Video Recorder (DVR),
Pay-Per-View (PPV), Video-On-Demand (VOD), and HD and 3D content. In addition, in-home
network connectivity will offer the opportunity to display content on screens beyond the TV
and PC. For example, Telenet in Dec-10 launched its Yelo multi-screen service which offers its
pay-TV video content on mobile and tablet screens as part of its subscription packages. Other
European operators are likely to introduce similar services in 2011. Operators also continue to
explore a measured expansion of their mobile offerings, mostly through MVNO platforms,
which they see as additional revenue stream sources. Mobile is also a way for operators to
capitalize on increasing fixed-mobile convergence by using their traditional strength in fixed-
line networks. They can leverage their robust backhaul networks, customer-end bandwidth
and network infrastructure to extend the reach of their hitherto fixed presence. Adding an
additional service category is yet another ‚hook‛ into the customer which can also help to
further reduce churn levels, as Virgin Media has touted in its strategy to expand its emphasize
its mobile offering to its customer base. Finally, further optimizing their fixed-line networks’
utilization rates by offering network capacity and associated services to SME’s and the
corporate segment (B2B services) is another way for cable operators to augment their revenue
and earnings growth opportunities.

21April 201110
The cash flow machine
With much of their core network growth spend complete, European cable operators now have
more flexibility in the type and level of their capital expenditures. On average, more than 75%
of the operators’ capex spend is now success-based, that is, tied to customer acquisition
growth. Such expenditure includes customer hardware (CPE) such as set-top boxes (STB’s).
This is a positive aspect of operators’ capex profiles today, as spend is now more closely
aligned with visible revenues and cash flow streams than it had been during the operators’
growth phase a decade earlier. In addition, the European cable sector’s aggregate capex
levels as a proportion of sales (but not in absolute terms) have also declined by about 20%
over the last few years to c20% of sales. Given the cable operators’ high operating leverage,
this reduction and additional flexibility in capex coincides with the growth trends discussed
earlier to translate into steadily increasing EBITDA margins and operating free cash flow.
Over the last two years, European cable operators have addressed their debt profiles through
amend-and-extend exercises, debt refinancing in the capital markets, overall debt reduction
largely from free cash flow generated, and have also sought lower cost debt relative to that
raised in 2008-2009. As a result, a moderate reduction in finance charges is also contributing
toward free cash flow generation. Overall, 2011-12 now sees these operators at a positive
operational inflection point which gives rise to important financial policy decisions. Aside from
differences in the maturity levels of the various European cable markets, divergences in these
financial policies are also driving distinctions in credit quality amongst the cable operators. We
explore those differences as they relate to specific issuers throughout this review.

21April 2011 11
European Cable sector - operating and financial summary
European Cable sector – Operating Key Performance Indicators (31-Dec-2010)
KD ONO Telenet Unitymedia UPC Virgin Media Ziggo
RGUs - Video (000s) 10,152 953 2,215 4,488 9,148 3,779 3,087
RGUs - Internet (000s) 1,153 1,380 1,227 780 4,319 4,302 1,549
RGUs - Telephony (000s) 1,190 1,686 1,014 779 2,968 7,356 1,167
RGUs - Total (000s) 12,495 4,019 4,456 6,047 16,435 15,437 5,803
ARPU (blended) (€/month) 13.32 51.50 40.00 15.07 27.51 47.51 34.39
RGUs / Customer (x) 1.42 2.22 1.90 1.33 1.66 2.49 1.88
Triple-play penetration (%) 14.5 44.3 31.6 15.0 23.1 63.0 18.9
Source: Company data, SG Cross Asset Research; NOTE: Figures are as of 31-Dec-10; ARPU is in € for all except VMED which is in £
European Cable sector – Financial summary (31-Dec-2010)
KD ONO Telenet Unitymedia UPC Virgin Media Ziggo
Revenues 1,502 1,472 1,299 935 3,740 3,858 1,376
EBITDA 659 725 669 521 1,776 1,510 783
Capex 327 244 246 261 803 628 202
Operating FCF (OpFCF) 150 164 258 28 280 429 310
Free Cash Flow (FCF) 178 289 8 28 280 395 302
Revenue growth 9.6% -2.7% 8.5% 6.4% 8.3% 5.3% 7.1%
EBITDA growth 15.5% -0.6% 10.0% 10.5% 6.8% 12.0% 12.6%
EBITDA margin 43.9% 49.3% 51.5% 55.7% 47.5% 39.1% 56.9%
Capex / Sales 21.8% 16.6% 18.9% 27.9% 21.5% 16.3% 14.7%
Total debt 3,137 3,652 2,530 2,753 7,998 6,020 3,591
Net debt 2,865 3,593 1,890 2,694 7,875 5,541 3,532
Total debt / EBITDA (x) 4.8 5.0 3.8 5.3 4.5 4.0 4.6
Net debt / EBITDA (x) 4.3 5.0 2.8 5.2 4.4 3.7 4.5
Source: Company data, SG Cross Asset Research; NOTE: Figures are as of 31-Dec-10; Absolute amounts, in €m for all except VMED which is in £m

21April 2011
Relative value
European cable sector bonds
Issuer
Coupon
(%) Maturity Security
Curre
ncy
Amount
Issued (m)
S&P issue
rating
Moody's
issue
rating
Fitch
issue
rating
Next Call
Date
Next Call
Price Bid price Ask price
YTW (Ask)
(%)
STW (Ask)
(bp)
Z-spread
(Ask) (bp)
Total Debt
/ EBITDA
(x)
Net Debt /
EBITDA
(x)
Z-spread
/Total Lev.
(bp)
UNITYMEDIA GMBH 9.625 01/12/2019 SR SUBORDINATED EUR 665 B- B3 NR 01/12/2014 104.813 108.92 109.80 7.78 455 486 5.4 5.3 90
UNITYMEDIA HESSEN / NRW 8.125 01/12/2017 SR SECURED EUR 1430 BB- B1 NR 01/12/2012 108.125 104.72 105.41 6.85 385 376 4.1 4.0 92
UNITYMEDIA HESSEN / NRW 8.125 01/12/2017 SR SECURED USD 845 BB- B1 NR 01/12/2012 108.125 105.46 106.38 6.49 439 446 4.1 4.0 109
UPC HOLDING BV 8.000 01/11/2016 SECURED EUR 300 B- B2 NR 20/05/2011 106.000 103.98 104.89 6.05 490 426 4.5 4.4 95
UPC HOLDING BV 9.750 15/04/2018 SECURED EUR 400 B- B2 NR 15/04/2013 104.875 107.03 107.94 7.54 447 455 4.5 4.4 101
UPC HOLDING BV 8.375 15/08/2020 SR SECURED EUR 640 B- B2 NR 15/08/2015 104.188 102.42 103.19 7.94 466 448 4.5 4.4 100
UPCB FINANCE II LTD 6.375 01/07/2020 SR SECURED EUR 750 B+ Ba3 NR 01/07/2015 103.188 95.52 96.36 7.04 375 343 3.6 3.5 95
UPCB FINANCE III LTD 6.625 01/07/2020 SR SECURED USD 1000 B+ Ba3 NR 01/07/2015 103.313 97.88 97.88 6.94 415 372 3.6 3.5 103
UPCB FINANCE LTD 7.625 15/01/2020 SR SECURED EUR 500 B+ Ba3 NR 15/01/2015 103.813 103.08 103.88 7.01 378 363 3.6 3.5 101
NARA CABLE FUNDING 8.875 01/12/2018 SR SECURED EUR 700 B B2 BB- 01/12/2013 108.875 102.60 103.41 8.26 589 499 4.4 4.3 113
ONO FINANCE II PLC 11.125 15/07/2019 SR UNSECURED EUR 295 CCC+ Caa2 CCC 15/07/2014 111.125 107.80 108.67 9.47 629 609 5.0 5.0 122
ONO FINANCE II PLC 10.875 15/07/2019 SR UNSECURED USD 225 CCC+ Caa2 CCC 15/01/2014 110.875 107.50 109.50 8.73 662 635 5.0 5.0 127
TELENET FINANCE III LUX 6.625 15/02/2021 SR SECURED EUR 300 NR Ba3 BB+ 15/02/2016 103.313 97.55 98.40 6.97 365 332 3.8 2.8 87
TELENET FINANCE LUX 6.375 15/11/2020 SR SECURED EUR 500 NR Ba3 BB+ 15/11/2015 103.188 97.32 98.19 6.74 348 311 3.8 2.8 82
VIRGIN MEDIA FINANCE PLC 9.500 15/08/2016 SR UNSECURED EUR 180 BB- Ba2 BB+ 15/08/2013 104.750 112.14 113.05 5.43 268 290 3.5 3.2 83
VIRGIN MEDIA FINANCE PLC 8.875 15/10/2019 SR UNSECURED GBP 350 BB- Ba2 BB+ 15/10/2014 104.438 111.14 111.91 6.17 357 388 3.5 3.2 111
VIRGIN MEDIA FINANCE PLC 9.125 15/08/2016 SR UNSECURED USD 550 BB- Ba2 BB+ 15/08/2011 104.563 106.13 106.13 3.67 157 341 3.5 3.2 97
VIRGIN MEDIA SECURED FIN 7.000 15/01/2018 SR SECURED GBP 867 BBB- Baa3 BBB- 15/01/2014 103.500 106.47 107.09 5.28 227 257 2.1 1.8 122
VIRGIN MEDIA SECURED FIN 5.500 15/01/2021 SR SECURED GBP 650 BBB- Baa3 BBB- n.a. n.a. 97.54 98.43 5.71 222 207 2.1 1.8 99
VIRGIN MEDIA SECURED FIN 6.500 15/01/2018 SR SECURED USD 999 BBB- Baa3 BBB- 15/01/2014 103.250 109.25 109.25 4.02 62 280 2.1 1.8 133
VIRGIN MEDIA SECURED FIN 5.250 15/01/2021 SR SECURED USD 500 BBB- Baa3 BBB- n.a. n.a. 100.97 100.97 5.12 173 176 2.1 1.8 84
ZIGGO BOND CO 8.000 15/05/2018 SENIOR NOTES EUR 1209 B B2 NR 15/05/2014 104.000 104.77 105.39 6.84 384 368 - - -
ZIGGO FINANCE BV 6.125 15/11/2017 SR SECURED EUR 750 BB Ba2 NR 15/11/2013 103.063 100.94 101.64 5.79 295 273 - - -
Source: Company data, Moody’s, S&P, Fitch, SG Cross Asset Research

21April 2011 13
Z-spread/Leverage (bps)
Source: SG Cross Asset Research
Z-spread by rating
LBTYA 9.625 19
LBTYA 8.125 17
LBTYA 8.125 17
LBTYA 8 16
LBTYA 9.75 18
LBTYA 8.375 20
LBTYA 6.375 20
LBTYA 6.625 20
LBTYA 7.625 20
ONOSM 8.875 18
ONOSM 11.125 19
ONOSM 10.875 19
TNETBB 6.625 21
TNETBB 6.375 20
VMED 9.5 16
VMED 8.875 19
VMED 9.125 16
VMED 9.5 16
VMED 8.375 19
VMED 7 18
VMED 5.5 21
VMED 6.5 18
VMED 5.25 21
75
85
95
105
115
125
135
2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0
Z-spreadperxofTotalDebt/EBITDA
Total Debt / EBITDA (x)
LBTYA 8 16
LBTYA 8.125 17
LBTYA 9.75 18
LBTYA 9.625 19
LBTYA 7.625 20
LBTYA 6.375 20
LBTYA 8.375 20
LBTYA 8.125 17
LBTYA 6.625 20
ONOSM 8.875 18
ONOSM 11.125 19
ONOSM 10.875 19
TNETBB 6.625 21
TNETBB 6.375 20
VMED 9.5 16
VMED 7 18
VMED 8.875 19
VMED 5.5 21
VMED 9.125 16
VMED 9.5 16
VMED 6.5 18
VMED 8.375 19
VMED 5.25 21
150
250
350
450
550
650
Z-spread(bps)
Bond issue credit ratings
BBB-
Baa3
BB
Ba2
BB+
Ba1
BB-
Ba3
B+
B1
B
B2
B-
B3
CCC+
Caa1
CCC
Caa2
CCC-
Caa3
CC
Ca
C
C
D
D

21April 201114
European Cable sector 5-year CDS
100
200
300
400
500
600
700
800
Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11
5-yearCDS(bps)
TLNET KABEGR VMED LBTYA LBTYA ONOSM iTraxxEurope

Kabel Deutschland
21April 2011 15
Diversified Telecom Services / Initiation of coverage
KABEL DEUTSCHLAND
Good growth and balance sheet makeover; Initiate with a Hold on PIK loan
Positive We believe KD’s good growth prospects, deleveraging profile and above-average
valuations are more than captured at current prices. We also initiate coverage on KD
with a Hold recommendation on the 2014 PIK loan.
 Event: We initiate coverage on Kabel Deutschland (KD). The company is the largest
cable operator in Germany and one of Europe’s largest cable companies. It provides
analogue and digital TV, broadband internet and telephony services to nearly 9m of
15.3m marketable households in 13 of 16 German federal states, representing a 58%
penetration rate within its footprint. KDG was formed in 2003 through the consolidation
of six of the nine regional cable systems previously developed and owned by Deutsche
Telekom. Following a sale of secondary shares by its main shareholders in March 2010,
43.7% of KD is currently owned by a consortium comprising Providence Equity, Ontario
Teachers Pension Plan and KD management while the remaining 56.3% is free float.
 SG Credit Opinion: We initiate coverage with a Positive credit opinion as we believe:
KD is well positioned continue its growth path through continued momentum in upselling
premium digital TV and Internet & Phone customer base expansion; and, that it should
achieve its objective of deleveraging toward its net leverage target range of 3.5-4.0x
within the next 12 months. Through its higher-speed DOCSIS 3.0 cable network, which
KD aims to offer to 45% of its footprint by March 2011, KD is able to offer innovative and
attractive products and services. Packaged into bundles, these products are not only
favoured by households looking to enjoy TV, internet and fixed line telephony services at
a cost-effective bundled price but they also afford KD higher Average Revenue Per User
(ARPU), higher margins, reduced churn and greater opportunities for upselling and
cross-selling higher value premium services such as HD and Video-on-Demand TV.
Importantly, much of the capex required for these network improvements is scalable, as
it is largely success-driven, and comes at a fraction of the cost of competing
technologies’ (e.g. fibre) investment requirements for the same bandwidth. As a result,
we expect KD to continue generating a healthy free cash flow stream over FY 2011/12.
We expect a drop in leverage from 4.3x at March 2010 to under 3.5x by March 2012.
 SG Bond Recommendation: We initiate coverage with a Hold recommendation on KD’s
2014 PIK loan given its high running yield at over 8.3% balanced by limited capital gain
upside. The PIK’s terms preclude dividend upstreaming to shareholders so, in light of
the Nov/Dec 2010 Amend & Extend exercise allowing repayment of junior debt ahead of
senior secured debt, we anticipate KD will further prepay its PIK loan during late 2011 in
order to enable dividend payments in FY 2012. The PIK loan has been callable at par (+
accrued & unpaid interest) since May-09 and KD announced on 31-Mar-11 a
prepayment of €200m of the PIK. In 5-year CDS, we consider current levels of 255/270
to be tight particularly when compared with higher rated, crossover Virgin Media 5y CDS
currently at 281/291.
 Next calendar events: KD will report Q4 and FY 2010/11 results on 8 June 2011.
Market value
Benchmark €+700 11 2014
Price 104 Hold
Rating
LT ST Outlook
MDY Ba2 NR Stable
S&P BB- NR Stable
Fitch BB- NR Positive
Key financials
(€m) 2010A 2011E
Revenues 1,502 1,601
EBITDA 659 725
FFO 477 507
Net debt (w/PIK) 2,865 2,746
Key Ratios
2010A 2011E
EBITDA margin (%) 43.9 45.3
EBITDA/net int. (x) 3.8 3.9
FFO/ Adj. net debt
(%)
22.0 27.3
Net debt/EBITDA (x) 4.3 3.8
5-year CDS Evolution
Inser
t
grap
h
here
Analyst
Alejandro Núñez
(+44) 20 7676 7136
0.0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
200
300
400
500
600
700
5-yearCDS/5-yearXOCDS(x)
5-yearCDS(bps)
KABEGR CDS EUR SR 5Y Corp
XOVER CDSI GENERIC 5Y Curncy
KABEGR / XO CDS (RHS)

Kabel Deutschland
21April 201116
Network
KD’s network covers all but three – Hesse, North-Rhine Westphalia and Baden-Wuerttemberg
- of Germany’s 16 federal states. It is a Level-3 cable network operator distributing analogue
and digital cable signals directly to end-customer households and, indirectly, to housing
association residences via Level-4 operator networks. Its network is now fully upgraded to bi-
directional capability with spectrum bandwidth capacity of 614 MHz (862 MHz in some areas).
In January 2011, KD recently launched its higher speed DOCSIS 3.0 enabled serviced in
Dresden, Potsdam and Wuerzburg and aims to cover 100% of its footprint with DOCSIS 3.0
upgrades by Summer 2012. This allows KD to offer reliable analogue and digital video,
sophisticated interactive television services and higher broadband internet speeds than its
DSL-based competitors such as Deutsche Telekom. KD is rolling out its DOCSIS 3.0 initiative
with attractive promotional pricing of €19.90/month during the first year ( + connection fee of
€29.90 and monthly fee doubling after year 1) for its market leading Internet & Phone 100Mb/s
broadband speed and fixed flat rate telephony bundle. Competitors such as DT will likely need
to make considerably larger investments than KD has made over the next few years in order to
provide comparable broadband speeds and services array.
Strategy
KD bases its strategy on four pillars: 1) maintaining and increasing penetration of its Basic
Cable TV business; 2) growing revenue by upselling customers to bundled offerings including
Internet & Phone services; 3) expanding premium services such as HD, DVR and Video-on-
Demand; and 4) optimizing its capital structure.
Upselling to “triple-play” products to drive revenue growth
By converting cable customers to the double- and triple-play offerings as well as selling
additional pay-TV services, the company should be able to increase its revenues in the
coming years. In order to do so, KD intends to aggressively promote its products line to
existing and future customers. Bundling products represent good value for money for
consumers as the company is able to provide very high quality products at a lower price than
when taken individually. Furthermore, the fastest speeds are only available through the
bundled packages, providing further incentive for customers to switch to bundled offers. By
the end of FY 2010 (Mar 2011), 45% of KD’s network will be upgraded to DOCSIS 3.0
technology offering those upgraded areas’ customers broadband speeds of up to 100Mbps,
representing the fastest broadband speed in Germany. Thanks to the digital set-top box, TV
content and interactive options are constantly being improved. Some options are free of
charge (such as HD TV) while the most interesting and innovative ones are charged to
customers, i.e. Video-On-Demand (VOD) services or 3D movies.
KD network footprint
Source: SG Cross Asset Research + Company
data

Kabel Deutschland
21April 2011 17
Revenue Generating Units (RGUs) Revenues (ARPU)
Source: SG Cross Asset Research, Company data Source: SG Cross Asset Research, Company data
Maintaining a high level of operating margins
With its differentiated products and strong value proposition versus competitors, we believe
pricing pressure going forward will be relatively limited, allowing KD to protect its profit
margins. The company has a low churn rate, which we think reflects the significant
investments in customer care over the past few years. Low churn has contributed to the
company’s operational efficiency and also enables KD to invest more in sales and marketing
as it focuses on upselling its customer base. With a certain portion of its cost base fixed, e.g.
network operations and billing, KD also benefits from good operational deleveraging.
Cash generation and rapid deleveraging
With its network 45% upgraded to higher speed DOCSIS 3.0 technology, we believe KD can
limit its level of its network investment to incremental success-based upgrades required by
new customer subscriptions and increased usage. We expect low capex and high operating
margins to enable KD to allot FCF toward its medium-term leverage target of 3.5x by FY2011.
Capex / Sales (%), 2008-2011 Strong Free Cash Flow conversion rate
Source: SG Cross Asset Research, Company data
9,184 9,111 9,045 9,002 8,969 8,966 8,930
982 1,008 1,039 1,073 1,108 1,135 1,222
787 851 906 966 1,029 1,089 1,153
797 871 938 1,007 1,067 1,124 1,190
1.30
1.31
1.33
1.35
1.37
1.39
1.42
1.20
1.25
1.30
1.35
1.40
1.45
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10
RGUs/Subscriber
RGUs(000s)
Basic Cable (incl. TKS) Premium TV (KD+, KD Home & KD Int.)
Internet Phone
Total RGUs / Subscriber
11,750 11,841 11,928 12,048 12,173 12,314
12,495
257 250 253 256 254 256 258
75 82 90 95 100 104 112
35 36 36 36 36 36 35
0.3%
3.0%
2.1%
0.8%
1.5%
2.3%
9.3%
9.8%
5.6% 5.3%
4.0%
7.7%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
0
100
200
300
400
500
Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10
€m
Television Internet and phone
Other Total Revenue growth (%)
Internet and phone revenue growth (%)
367 368 379 387 390 396 405
316
373
327
345
26 27
22 22
0
5
10
15
20
25
30
280
290
300
310
320
330
340
350
360
370
380
2008 2009 2010 2011
%
Capex(€m)
Capex (€m) Capex/Sales (%)
457
571
659
720
-62
85
178 160
-14
27
22 22
-20
-15
-10
-5
0
5
10
15
20
25
30
-100
0
100
200
300
400
500
600
700
800
2008 2009 2010 2011
%
€m
EBITDA (€m) FCF (€m) FCF/EBITDA (%)

Kabel Deutschland
21April 201118
Competition and consolidation
Cable’s penetration rate is comparatively low in Germany by European standards given its
later development relative to other European markets. Although Deutsche Bundespost (and
later Deutsche Telekom) began developing Germany’s national cable network in the early
1980s, more rapid expansion and upgrades of the network have occurred during the last
decade by the current regional network operators. The cable network in Germany is divided
into four network levels. Network Levels 1 and 2 transport signals from broadcasters to
regional distribution networks. Network Level 3 reaches to the transfer points outside of the
subscriber`s home. Network Level 4 is the portion of the network from the transfer point to the
cable jack in the subscriber`s home. Level 4 cable networks, in particular, typically benefit
from multi-year contracts directly with residential housing associations providing them a
degree of utility-like revenue and cash flow stability. Roughly one-third of KDG’s customers
are supplied directly on Level-4 networks and two-thirds indirectly via Level-3 networks.
Despite its later development compared to other European markets, German cable networks
nevertheless have a majority of German TV platform market share. Their main competition in
TV distribution is Satellite (including Free-to-Air, FTA) but cable’s medium offers greater two-
way functionality, speeds, flexibility (e.g., for multi-room access) and opportunities for
interactivity. The main satellite TV provider in Germany, Sky Deutschland, has struggled to
gain subscriber traction versus German cable over the last four years. However, DT is now in
talks to resell Sky Deutschland services aside its own IPTV offering which could bolster the
appeal of DT’s TV packages. Although competitive headwinds for the cable TV segment will
gradually increase over the next two years, more from satellite competitors and increasingly
from DT’s IPTV offering, we believe KD’s large installed basic cable TV customer base, the
fact that it does not compete directly with other regional Level-3 operators (Unitymedia, KBW)
nor with Level-4 operators, along with low churn levels (~11%) support KD’s cash flow
visibility and quality.
In terms of broadband products, cable again holds the technological upper hand with regard
to speeds, especially where DOCSIS 3.0 upgrades have been completed, relative to
incumbents’ DSL technologies. Although competition in this segment is higher than in cable
TV, we believe the German cable networks’ structural advantages (in terms of direct and
indirect contracts with housing associations), low but growing penetration, inherent
technological superiority over DSL and its customer value proposition as part of a product
bundle position KD’s Internet & Phone products well vis-a-vis competitors.
In terms of consolidation and M&A risk, KD has demonstrated acquisition discipline by
sticking more to tuck-in acquisitions of Level-4 subscriber bases. Given its relatively low
(12%) broadband penetration of marketable homes, KD has ample organic growth runway to
support its broadband growth rates of 5-6%. We suspect KD was absent from the latest
round of bids in February 2011 for Kabel Baden-Wuerttemberg (KBW), one of Germany’s two
other Level-4 cable networks, underscoring not only its preference for Level-4 consolidation
but also its willingness to refrain from overpaying for acquisitions particularly in situations
carrying substantial regulatory risk (i.e. anti-trust) such as in the case of KBW.

Kabel Deutschland
21April 2011 19
European pay-TV penetration (%) Market share of German TV platforms (%)
Source: Screen Digest Source: SG Cross Asset Research, Company data
German broadband market evolution German broadband market shares (%)
KD – Corporate structure
58
52
49
45
25
18
0
10
20
30
40
50
60
70
NL UK DK BE CH D
%
% of TV Households
Cable
48%
Satellite
40%
Digital Terrestrial
(DTT)
10%
Internet-Protocol
(IPTV)
2%
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
0
100
200
300
400
500
600
700
800
Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10
Netsubscriberadditions(000s)
German BB market net adds (000s) KD share of net adds1
DT
46%
DSL Resellers
43%
Cable
11%

Kabel Deutschland
21April 201120
Debt summary
Estimated gross debt profile as of end-Jan 2011 – (pro forma for refinancing)
Debt maturity profile
Debt instrument Obligor Guarantor Currency Size (m)
Out-
standing (m)
Interest
Rate Base Maturity
Margin
(bps) Rate (%)
Revolver B KDVS KDVS, KDG € 101.0 0.0 E+225 31-Mar-12 225 3.283%
Revolver B1 KDVS KDVS, KDG € 224.0 80.0 E+350 31-Mar-14 350 4.533%
Term Loan A KDVS KDVS, KDG € 140.8 136.4 E+225 31-Mar-12 225 3.283%
Term Loan A1/A2 KDVS KDVS, KDG € 1,009.2 988.6 E+350 31-Mar-14 350 4.533%
Term Loan C KDVS KDVS, KDG € 38.5 38.5 E+325 31-Mar-13 325 4.283%
Term Loan C1 KDVS KDVS, KDG € 497.0 497.0 E+350 31-Mar-14 350 4.533%
Term Loan D KDVS KDVS, KDG € 400.0 400.0 E+400 31-Dec-16 400 5.033%
Senior Bank Debt 2,140.5
Sr. Unsecured Notes KDG € 250.0 0.0 10.75 01-Jul-14 10.750% 10.750%
Sr. Unsecured Notes KDG $ 610.0 0.0 10.625 01-Jul-14 10.625% 10.625%
Sr. Unsecured Notes 0.0
PIK Notes KDH € 480.0 715.0 6ME+700 19-Nov-14 700 8.288%
Subordinated Debt 715.0
Total Debt 2,855.5
Liquidity
Obligor Guarantor Currency Size (m)
Interest
Rate Maturity
Drawn
(m)
Available
(m)
Revolver Facility B KDVS KDVS, KDG € 101.0 E+225 31-Mar-12 0.0 101.0
Revolver Facility B1 KDVS KDVS, KDG € 224.0 E+350 31-Mar-14 80.0 144.0
Revolvers TOTAL 325.0 80.0 245.0
Cash 226.6 226.6
TOTAL Available Liquidity 471.6
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
Liquidity 2011 2012 2013 2014 2015 2016 2017
€m
Cash Revolver B (undraw n) Revolver B1 (undraw n) Revolver B (draw n) Revolver B1 (draw n)
Term Loan A Term Loan A1/A2 Term Loan C Term Loan C1 Term Loan D
Sr. Unsec. Nts (€) 2014 Sr. Unsec. Nts ($) 2014 PIK

Kabel Deutschland
21April 2011 21
Kabel Deutschland Financial Summary
€m 2008A 2009A 2010A 2011E 2012E
Total revenues 1,197.0 1,370.1 1,502.0 1,601.1 1,705.2
Normalised EBITDA 457.5 570.7 659.3 724.6 777.1
Revenue growth 9.4% 14.5% 9.6% 6.6% 6.5%
EBITDA growth -19.8% 24.8% 15.5% 9.9% 7.3%
EBITDA margin 38.2% 41.7% 43.9% 45.3% 45.6%
Cash interest, net -175.1 -203.4 -174.6 -185.2 -157.0
Cash taxes -2.5 -3.6 -2.6 -8.0 -62.0
Other -22.0 25.9 -4.9 -25.0 0.0
Change in provisions 0.0 0.0 0.0 0.0 0.0
Working capital 11.0 76.9 -0.2 2.0 -5.0
Restructuring cash costs, other 0.0 0.0 0.0 0.0 0.0
Cash Flow from Operations 268.9 466.6 477.0 508.4 553.1
Capital expenditures -316.4 -373.0 -327.2 -345.0 -385.0
Acquisitions / Divestitures 8.6 -513.7 54.9 0.0 0.0
Other Investing 0.0 0.0 0.0 0.0 0.0
Cash Flow from Investing -307.8 -886.7 -272.3 -345.0 -385.0
Dividends / Shareholder returns -14.3 -8.1 28.4 0.0 0.0
Debt issuance 391.0 785.0 199.0 240.0 700.0
Debt redemption -331.1 -310.2 -199.1 -470.0 -922.0
Other Financing -7.2 -8.3 -9.1 0.0 0.0
Cash Flow from Financing 38.4 458.4 19.2 -230.0 -222.0
Change in Cash -0.5 38.2 224.0 -66.6 -53.9
Cash 15.5 52.1 271.3 204.7 150.8
Revolver (drawn) 0.0 0.0 0.0 190.0 185.0
Senior Bank debt 1,210.0 1,685.0 1,685.0 2,060.0 2,060.0
Senior Secured notes 0.0 0.0 0.0 0.0 550.0
Senior Unsecured notes 755.6 755.6 755.6 0.0 0.0
Sr. Subordinated debt 0.0 0.0 0.0 0.0 0.0
PIK Loan 587.0 656.0 696.0 724.9 0.0
Total debt w/o PIK 1,966 2,441 2,441 2,060 2,610
Total debt w/PIK 2,553 3,097 3,137 2,975 2,795
Net debt w/o PIK 1,950 2,389 2,169 1,855 2,459
Net debt w/PIK 2,537 3,045 2,865 2,770 2,644
Financial summary (€m) 2008A 2009A 2010e 2011e 2012e
Revenues 1,197.0 1,370.1 1,502.0 1,601.1 1,705.2
Adj. EBITDA 457.5 570.7 659.3 724.6 777.1
EBITDA margin 38.2% 41.7% 43.9% 45.3% 45.6%
Funds From Operations (FFO) 257.9 389.7 477.2 506.4 558.1
FFO - Capex -58.5 16.6 150.1 161.4 173.1
Free Cash Flow (FCF) -61.8 85.4 178.3 163.4 168.1
EBITDA / net interest 2.6x 2.8x 3.8x 3.9x 4.9x
FFO / Net debt (w/ PIK) 13.2% 16.3% 22.0% 27.3% 22.7%
FFO - Capex / Net debt (w/ PIK) -2.3% 0.5% 5.2% 5.8% 6.5%
FCF / Net Debt (w/ PIK) -2.4% 2.8% 6.2% 5.9% 6.4%
Capex / Sales 26.4% 27.2% 21.8% 21.5% 22.6%
Net Senior Debt / EBITDA 2.6x 2.9x 2.1x 2.8x 2.5x
Net Senior Notes / EBITDA 4.3x 4.2x 3.3x 2.8x 3.2x
Net debt (w/ PIK) / EBITDA 5.5x 5.3x 4.3x 3.8x 3.4x
Cash 15.5 52.1 271.3 204.7 150.8
Revolver Availability 325.0 325.0 325.0 135.0 140.0
Liquidity 340.5 377.1 596.3 339.7 290.8

ONO
21April 201122
ONO
Resilience and refinancing: sun after the rain in Spain
Positive We initiate coverage on ONO Group (ONOSM) with a Buy recommendation on its
€700m 2018 Sr. Secured notes, €295m 2019 notes and a Sell on 5-year CDS.
 Event: We initiate coverage on ONO. ONO is Spain’s largest cable operator and the
only cable operator with national coverage. ONO offers analog and digital TV,
broadband Internet, fixed and mobile telephony services.
 SG Credit Opinion: We have a Positive credit opinion on ONO as we believe its
operational and financial positive momentum will continue in the near to medium term.
We anticipate ONO will refinance over the coming year at least a portion of its
substantial €2.25bn (62% of total debt) senior bank facilities maturing in 2013. The
alleviation of this refinancing risk overhang along with expected continued operational
cash flow improvement and deleveraging should further support ONO’s improving credit
story. Operationally, despite evidence that the subdued Spanish macroeconomic
environment continues to dampen Spanish consumer sentiment and spending overall,
including ONO’s customers’ spending on variable discretionary products (e.g., variable
phone charges, Video-on-Demand, Pay-Per-View), ONO has done well to maintain, and
even slightly grow, its fixed monthly subscription fee base, Average Revenue Per User
(ARPU), gross and EBITDA margins, and Free Cash Flow. We believe ONO will resume
top-line and EBITDA growth from H2 2011 as its bundling strategy, underpinned by its
differentiated high-speed internet services and a host of new developments in its digital
pay-TV offering, continues to perform well. In conjunction with this stabilization in its
growth trends, we see ONO continuing in 2011-12 its cost containment and capital
expenditure discipline such that its operating earnings and free cash flow can continue
to allow for gradual deleveraging. We expect ONO to continue generating operating FCF
in the range of €170-210m p.a. over 2011-12 and apply a good part of that toward debt
reduction such that YE2011 and YE2012 net leverage fall to 4.75x and 4.4x, respectively.
 SG Bond Recommendation: We initiate with a Buy recommendation on ONO € 8.875%
2018 Senior Secured notes (@ 103.5 price, YTW 8.2%, STW 589bps, Z-sp. 499bps) and
€ 11.125% 2019 Subordinated notes (@ 108.25 price, YTW 9.6%, STW 640bps, Z-sp.
620bps). The subordinated notes in particular offer an attractive current yield for what is
an improving credit story, as ONO modestly grows its operational cash flow and
addresses its 2013 maturities, and in our view there’s a potential further tightening of
30bp through year-end 2011. Giving up 120bp and 0.6x leverage, the structurally and
contractually senior secured notes also offer good yield and spread/leverage of 113bp
for those who may still consider the credit as speculative. At 6.5/7.5 points up-front
(675/705bps equivalent) with potential tightening to 600bps we recommend a Sell on
ONOFII 5-year CDS.
 Next calendar events: ONO’s Q1 2011 earnings results will be announced by end-May.
Market value
Benchmark 11.125% 07 2019
Price 108.25 Buy
Rating
LT ST Outlook
Moodys B3 NR Positive
S&P B NR Stable
Fitch B NR Stable
Key financials
(€m) 2010A 2011E
EBITDA 725 722
FFO 433 500
Net debt 3,593 3,423
Key Ratios
2010A 2011E
EBITDA margin (%) 49.3% 49.6%
EBITDA/net int. 2.5x 3.3x
FFO/ Adj. Net debt
(%)
12.1% 14.6%
Net debt/EBITDA (x) 5.0x 4.7x
Inser
t
grap
h
here
Analyst
Alejandro Núñez
(+44) 20 7676 7136
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
200
400
600
800
1,000
1,200
1,400
1,600
1,800
5-yearCDS(bps)
ONOFII CDS EUR SR 5Y Corp
ONO / XO CDS (RHS)

ONO
21April 2011 23
Network and markets
ONO is the only cable operator in Spain with national coverage with 2m unique customers and
offering its services to 7 million Spanish homes. ONO offers analog and digital cable pay-TV,
broadband, fixed telephony, mobile telephony, and business services throughout most of
Spain’s regions (excluding Extremadura and the Basque regions). ONO is the main triple-play
telecoms competitor in Spain to the incumbent Telefónica and to its pay-TV operators. Aside
from the residential market, in which ONO has 1.9m fibre and ADSL customers, ONO offers
voice, Internet, data solutions and telecommunications equipment to large corporations as
well as to approximately 72,000 SMEs.
ONO’s fibre network spans a broad geographic area encompassing most Spanish regions
with ADSL network coverage in Galicia and Asturias (and no coverage in Extremadura and the
Basque regions). ONO’s fibre network alone covers 84% (14.7m) of Spain’s 17.5m homes, of
which slightly less than half have been released to ONO’s marketing. Within its marketing
footprint, ONO serves 1.8m residential fibre customers (26% penetration), an additional
88,000 residential ADSL customers and 72,000 SME customers. Nearly 78% of ONO’s
FY2010 revenues derived from residential fibre and ADSL services while another 21% were
from services to large corporations and small and medium enterprises (SMEs).
Through the end of 2010 ONO had deployed DOCSIS 3.0 technology, capable of reliably
delivering high-speed broadband of at least 50 Mbps, to 5.1m homes within its fibre network
footprint which represents a 73% coverage level. Through upgrades, DOCSIS 3.0 network
speeds can reach at least 200 Mbps and ONO trialled in Q4 2010 speeds of 100 Mbps. ONO
expects the upgrade of its entire fibre network to be complete by the end of Q2 2011. One of
the key operational trends underpinning ONO’s operational resilience in 2010, which we
expect should continue into 2011-12, has been customers subscribing to higher Internet
speeds and premium TV packages resulting in higher net monthly fee revenues which offset
declines in variable revenues from discretionary call charges, pay-per-view TV (‚PPV‛) and
pay Video-On-Demand (‚VOD‛). We note that as of YE2010 85% (€43.70/month) of ONO’s
monthly ARPU derives from fixed monthly subscription fees. For instance, in 2010 ONO’s
broadband product offered double the speed at a €2/month subscription fee increase and
ONO’s pay-TV offering began including GOL TV and premium-content Canal+. Given that
coverage and penetration rates are yet modest, ONO’s broadband speeds are high relative to
the national and European averages, ONO’s innovative new pay-TV offers are compelling
particularly when combined into bundles, and that ONO is focussing on higher-ARPU
customers we see scope for modest earnings growth from H2 2011 into 2012.

ONO
21April 201124
ONO network footprint
Source: Company data
ONO network coverage and penetration (31-Dec-10)
Residential (000s)
Homes in Spain 17,545
Homes in areas covered by
ONO's fibre network 14,741
% of Homes in Spain 84%
Homes released to marketing 7,030
% of Homes in areas covered
by ONO's fibre network 48%
Residential Fibre customers 1,811
Fibre penetration 26%
Residential ADSL customers 88
Total residential customers 1,898
Business
SME customers 72
Source: Company Data
ONO Group revenue split (2009-2010)
(€m) 31-Dec-10 % of total 31-Dec-09 % of total % chg
Residential - Fibre 1,120 76.1% 1,124 74.3% -0.4%
Residential - ADSL 39 2.6% 34 2.2% 14.7%
Business - SMEs 72 4.9% 70 4.6% 2.9%
Business - Corporations 142 9.6% 166 11.0% -14.5%
Business - Wholesale / Other 88 6.0% 98 6.5% -10.2%
Indirect access 8 0.5% 10 0.7% -20.0%
Disc. ops (Teuve) 3 0.2% 11 0.7% -72.7%
Total revenues 1,472 100.0% 1,512 100.0% -2.6%
Across all its markets – analog and digital pay-TV, broadband Internet, fixed and mobile
telephony services – ONO competes primarily against the Spanish telecoms incumbent
Telefónica (TEF). Given ONO’s redirected focus on margins and cash flow, contrasted with its
previous aims of network buildout, geographic expansion and revenue increases, ONO now
prefers to not compete with TEF on the basis of price but instead on value by touting the
benefits of its higher-speed broadband, more interactive and multi-functional pay-TV platform,
and bundled services. For example, TEF and Vodafone have recently pitched low-speed
broadband services at low price points hoping to attract straitened Spanish customers (TEF:
€13.45/month, ex-VAT, during first 3 months and €26.90/mo for the following 9 months +

ONO
21April 2011 25
€14/month line rental for 10 Mbps broadband + national calls and a monthly quota of fixed-to-
mobile calls; Vodafone: €4.90/month, ex-VAT, during first 6 months and €9.90/mo afterwards
without a tied contract + €15/month line rental for up to 20 Mbps broadband + national calls
and a monthly quota of fixed-to-mobile calls; ONO: €19.90/month during 1 year, rising to
€35.90/mo after first year + €14/mo line rental for 12 Mbps broadband + national calls and a
monthly quota of fixed-to-mobile calls). ONO, however, is focusing its efforts on attracting
customers to its bundled services - especially its core trio of broadband, pay-TV and fixed
telephony - where value to customers is higher and ARPU and churn levels to ONO are more
attractive. ONO points out that new subscribers are joining at an average of 2.45 Revenue
Generating Units (RGUs) per customer. In line with this strategy, ONO has eschewed pursuit
of all customers at all costs and instead focusing on higher-ARPU customers while actively
pruning its customer portfolio in order to remove low-margin and delinquent customers.
Further adding value to its bundles by rounding out a ‚quad-play‛ offering, ONO has begun
offering to its existing customers mobile telephony and mobile broadband services. ONO is
providing these services as a capex-light Mobile Virtual Network Operator (‚MVNO‛) and the
fact that it is initially providing these services only to its existing customer base should limit
the bulk of its mobile services cost base to handset subsidies. Although in its early stages,
mobile services can allow ONO to leverage its fibre network by offering fixed-mobile
convergence services while also adding additional revenue streams and reducing churn levels.
Customer base evolution Revenue Generating Units (RGUs) per customer
Source: Company data Source: Company data
Fibre Services subscription trends Average Revenue Per User (ARPU) trends
Source: Company data Company data
1,646 1,647 1,648 1,666 1,675 1,682 1,679 1,686
1,295 1,302 1,303 1,326 1,343 1,356 1,361 1,380
1,016 991 977 975 970 966 948 953
3,958 3,940 3,929 3,967 3,987 4,004 3,988 4,019
Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10
RevenueGeneratingUnits(000s)
Telephony Internet TV TOTAL
2.15 2.15
2.16
2.17
2.19
2.20 2.20
2.22
Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10
RGUs/Customer(x)
51.90
51.20
50.20
51.00
51.50
51.60
50.80
51.50
26.5 26.2 26.0 26.1 26.0 25.9 25.7 25.8
15.7 15.9
17.3
13.9 14.2
13.4
15.1 15.5
0
5
10
15
20
25
30
49.00
49.50
50.00
50.50
51.00
51.50
52.00
52.50
Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10
%
€/month
ARPU (€) Penetration (%) Net Churn (%)
43.6 43.8 43.8 43.5 43.7
5.3 5.2 5.1 4.8 4.6
2.1 2.6 2.7
2.5 3.1
51.0 51.5 51.6 50.8 51.5
30
35
40
45
50
Q4 09 Q1 10 Q2 10 Q3 10 Q4 10
ARPU(€/monthpersubscriber)
Monthly subscription Variable Tel./TV
Other variable-revenue Total

ONO
21April 201126
ONO’s Fibre Services segment (formerly labelled Residential Cable) generates revenues from
connection, activation and fixed subscription fees as well as variable charges for its
broadband, telephony and TV bundled and individual services. ONO is moving away from
offering these services on an individual basis and is pushing two-, three- and four-play
bundles instead. The success of these efforts can be seen in ONO’s bundled services (defined
as a combination of at least 2 services per customer) take-up rate of 83% at Dec 2010. In
addition, ONO’s overall Revenue Generating Units (RGUs) per customer stood at 2.22x at 31-
Dec-10 which compares favourably to other European cable operators. This bundle strategy is
beneficial for a number of reasons, ranging from higher ARPU, greater potential for additional
value-added revenues, ‚stickier‛ customer relationships resulting in reduced churn rates, and
higher operating margins.
In its Internet Services segment, ONO has been offering increasingly higher broadband
speeds at marginally higher rates in order to provide greater bundle value. In late Q3 2010 it
launched a 50 Mbps service to all homes in its footprint. As of YE2010 ONO registered good
traction in its higher speed broadband services take-up with 126k subscribers representing
9% of its broadband customer base. Year-over-year (yoy) growth in Residential Fibre Services
Internet RGUs in 2010 was 4.0% aided by higher speeds offered and inclusion of these
services in bundles. In 2011, ONO will begin to roll out 100 Mbps and begin trialling 200 Mbps
services and will also complete DOCSIS 3.0 rollout across its network footprint.
In its Television segment, ONO has suffered customer attrition throughout most of 2009 and
2010. However, in Q4 2010 ONO managed to add 5k RGUs in its TV segment which can be
attributed to the marketing emphasis on bundles and could represent a bottoming out in the
customer attrition trend. ONO ascribes the improvement in its television subscribers growth
trend to both bundling and to the success of its new channel offers GOL TV (127k subs at
YE2010) and premium-content channels Canal+ (19k subs at YE2010). In late 2010 ONO also
struck a new strategic agreement with TiVo in order to offer a more advanced TV service
integrating broadcast and digital content with enhanced interactive functionality. This service
will include an interactive Personal Video Recorder (PVR), higher bandwidth High-Definition TV
(HDTV), as well as numerous options (such as pay-per-view, VOD, over-the-top (OTT) internet
content) for digital and broadcast content sourcing. ONO intends to include these innovative
services into bundles targeting higher ARPU customers by H2 2011. We see ONO’s strategic
agreement with TiVo as a defensive reply to the risk from OTT content. While the full
functionality and interface experience for customers remains to be seen, we believe this offer
should provide ONO with a complementary platform for integrating multiple content source
streams as opposed to allowing its content and TV subscriptions to be cannibalized or even
cancelled. On the upside, it should also provide additional upsell opportunities for incremental
value-add variable pay-TV revenues. More importantly, it will also reinforce the essential
nature of the bundled high-speed broadband connection in order to facilitate full multimedia
use of the TiVo set-top box as an Internet-connected residential multimedia hub. Furthermore,
we note that ONO expects overall programming costs will rise marginally in 2011 as ONO
selectively adds content and programming suited to its new pay-TV platform.

ONO
21April 2011 27
W. European broadband penetration (2009) W. European pay-TV penetration (2009)
Sources: Screen Digest Source: Screen Digest
Western European average broadband download and upload speeds
Source: Speedtest.net, SG Cross Asset Research
ONO bundled services Spanish broadband market share
Source: Company data Source: CMT
24
32
23
30
14
7 10
63
53
57 40
53
56 44
87 85
80
70
67
63
54
0
20
40
60
80
100
%
Cable DSL/Other
58
52
49
45
26 25
18
0
10
20
30
40
50
60
70
%
% of TV households
23.7
23.3
18.8
18.3
18.0
16.6
15.9
15.0
14.7
14.4
13.9
13.3
12.6
11.6
11.4
10.2
9.5
8.3
6.6
6.4
5.8
4.6
9.49
5.16
2.28
2.17
1.56
8.36
7.52
1.42
3.13
6.97
2.42
3.1
5.09
1.33
1.67
1.33
1.21
1.41
0.96
0.63
0.76
0.81
0.0
5.0
10.0
15.0
20.0
25.0
Broadbandspeeds(Mb/s)
Download Speed (Mb/s) Upload Speed (Mb/s)
29.3
20.8 18.5 17.1
31.1
34.1 35.6 38.6
39.6 45.1 46.0 44.3
FY 07 FY 08 FY 09 FY 10
Bundle/TotalCustomers(%)
Single-play Double-play Triple-play
1,859 1,8981,853 1,825
57 56 56 55 54 53 52 51
20 21 21 22 22 23 23 23
23 24 23 23 24 25 25 26
0
10
20
30
40
50
60
70
80
90
100
Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10
%
Telef onica Cable Other xDSL

ONO
21April 201128
ONO also provides voice, data and Internet communications services to SMEs, large
corporations and Spanish government agencies. Services to SMEs can be offered individually
or as bundles while services to larger institutions are often more tailored to specific client
needs. In 2010 ONO stepped up its focus on the competitive SME market allowing it to return
to positive subscriber and growth trends. In the SME segment in 2010, ONO served 72k
customers, 132k RGUs (1.78 RGUs/customer) and generated €72m of revenues. In contrast,
the more challenging Large Accounts and Corporations segment experienced a 14% yoy
revenue decline attributable to lower variable revenues as well as renegotiated contract price
reductions. As these business segments have higher capex requirements, higher customer
turnover, are more economically sensitive and price competitive than the Residential segment,
ONO will focus selectively on growing this segment.
Improving FCF generation and gradual deleveraging
ONO’s FY2010 improvement of 73% in Operating Free Cash Flow (OpFCF) to €164m was
driven primarily by an improvement in its working capital position. We don’t expect ONO to
benefit from the same level of reduction in working capital in 2011 yet expect a reduction in
cash interest charges to €222m such that OpFCF increases slightly to €170m. We also expect
ONO to maintain its capex levels in the €250m p.a. range (equivalent to 17% Capex/Sales) as
expenses for network growth continue to be contained and subscriber-growth based capex
comprise a larger proportion of capex spending and TiVo set-top box subsidies are not
expected to result in an expansion in overall capex spending. We anticipate ONO will apply a
good proportion of its free cash flow toward debt reduction reducing 2011 leverage to 4.7x.
Capex and FCF Capex breakdown (31-Dec-10)
Leverage EBITDA / net interest
441
466
433
-140
95
164
23%
15%
17%
-3.5%
2.4%
4.6%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
-150
-50
50
150
250
350
450
550
2008 2009 2010
€m
FFO (€m) OpFCF (€m)
Capex / Sales (%) OpFCF / Net debt (%)
Buildout
3%
Installation
28%
CPE
16%
Network
24%
Projects and
other
20%
Commissions
9%
5.0
4.8
3.4
3.1
1.8
5.7
5.4
4.3
4.1
3.8
5.7
5.4
5.0
4.7
4.4
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
2008A 2009A 2010A 2011E 2012E
Net Sr. Debt / EBITDA (x) Net Senior Notes / EBITDA
Net Debt / EBITDA (x)
2.0
2.5
3.0
3.5
4.0
2008A 2009A 2010A 2011E 2012E
x

ONO
21April 2011 29
IPO and refinancing
ONO has publicly announced its interest in pursuing an IPO over the coming one to two years.
Given ONO’s current leverage of 5.0x and its need to first focus on refinancing its substantial
2013 maturities, we see this as more of a 2012 event. We also note the favourable valuation
multiples that have been associated with other European cable flotations, either executed
(e.g., KDG at 9.25x EV/EBITDA) or planned (e.g., Kabel BW 9.0x EV/EBITDA). Given ONO’s
improved operating prospects, its size and implicitly improved valuation we consider the risk
that ONO would be either an M&A target or an acquirer as low. We believe company
management will be more focused over the coming year on the final steps of extending its
maturity profile by refinancing its senior credit facilities maturing in 2013. ONO made
considerable headway over the last year in its refinancing and maturity extension exercises
and we believe the final steps to address the 2013 maturities should be consummated within
the coming year. In the meantime, we consider the c.20% headroom in ONO’s Senior Bank
Facility financial covenants to be adequate and sustainable throughout 2011-12. These
include Total debt to LTM EBITDA of 6.25x (YE10 at 5.0x), Senior debt to LTM EBITDA of 5.5x
(YE10 at 4.3x), EBITDA Interest cover of 2.5x (YE10 at 3.5x), and a capital expenditure limit of
€290m (YE10 actual spend of €244m).
ONO corporate structure
NOTES:
(1) Shows amount drawn under theSenior Bank Facilityas of31 December 2010; Totalcommitments of €3.5bn.
(2) Other creditfacilities and Statesubsidies of €4millionand €21 million respectively.
(3) Cash and cashequivalents of €59 million.

ONO
21April 201130
ONO debt profile (at 31-Dec-10)
31-Dec-10 LTM EBITDA (x) Rate base Margin Rate Maturity Maturity (Years)
Senior credit facilities 2,491 3.4 EUR 3M 1.43% 2.69% 3.3
Sr. Secured Notes 700 1.0 8.88% 01-Dec-18 7.6
Sr. Subordinated Notes 461 0.6 11.03% 15-Jul-19 8.3
TOTAL 3,652 5.0 4.8
Cash 59 5.0
Revolver, other credit available 280
Total liquidity 339
Floating-rate debt (%) 68
Fixed-rate debt (%) 32
Secured debt (%) 87
Unsecured debt (%) 13
Wtd. avg. debt maturity (yrs) 4.77
Debt maturity profile (at 31-Dec-10)
339 330
129
450104
360 700
-188
-654
842
43
150
200
-39
-135
174
700
295
166
-1,000
-500
0
500
1,000
1,500
2,000
2,500
Liquidity 2011 2012 2013 2014 2015 2016 2017 2018 2019
€m
RCF (Tranche C) (undrawn) RCF (Tranche C) (drawn) Tranche A TL Tranche B TL
Tranche D Tranche E (Forward Start Fac.) Tranche I TL Tranche I (FSF)
Senior Secured Notes Other sr. credit f acilities State subsidies & other € Sr. Sub. Notes
US$ Sr. Sub. Notes
339 61
181
702
461
2,248

ONO
21April 2011 31
ONO financial summary
€m 2008A 2009A 2010A 2011E 2012E
Total revenues 1,602.0 1,512.0 1,471.9 1,457.2 1,479.0
Revenue growth -5.6% -2.7% -1.0% 1.5%
EBITDA growth 3.8% -0.6% -0.4% 1.3%
EBITDA margin 43.9% 48.3% 49.3% 49.6% 49.5%
Cash interest, net -262.0 -264.0 -292.0 -222.0 -215.0
Cash taxes 0.0 0.0 0.0 0.0 0.0
Other 0.0 0.0 0.0 0.0 0.0
Change in provisions -15.0 0.0 0.0 0.0 0.0
Working capital -146.7 -66.0 0.0 -35.0 -25.0
Restructuring cash costs, other -60.0 -85.0 -25.0 -40.0 -30.0
Cash Flow from Operations 219.3 315.0 408.3 425.4 461.4
Capital expenditures -374.0 -220.0 -244.0 -255.0 -247.7
Acquisitions / Divestitures 16.6 0.0 0.0 0.0 0.0
Other Investing 0.0 0.0 0.0 0.0 0.0
Cash Flow from Investing -357.4 -220.0 -244.0 -255.0 -247.7
Dividends / Shareholder returns -2.8 0.0 125.0 0.0 0.0
Debt issuance 574.8 0.0 725.0 200.0 750.0
Debt redemption -97.8 -184.6 -1,165.5 -241.5 -1,016.0
Other Financing 0.0 -14.0 -27.0 0.0 0.0
Cash Flow from Financing 474.2 -198.6 -342.5 -41.5 -266.0
Change in Cash 336.1 -103.6 -178.2 128.9 -52.3
Cash 342.0 238.0 59.0 187.9 135.6
Revolver (drawn) 0.0 0.0 0.0 0.0 0.0
Senior Bank debt 3,883.0 3,712.0 2,491.0 2,449.5 1,433.5
Senior Secured notes 0.0 0.0 700.0 700.0 1,450.0
Senior Unsecured notes 500.0 460.0 0.0 0.0 0.0
Sr. Subordinated debt 0.0 0.0 461.0 461.0 461.0
Total debt 4,383 4,172 3,652 3,611 3,345
Net debt 4,041 3,934 3,593 3,423 3,209
Financial summary (€m) 2008A 2009A 2010A 2011E 2012E
Revenues 1,602.0 1,512.0 1,471.9 1,457.2 1,479.0
Adj. EBITDA 703.0 730.0 725.3 722.4 731.4
EBITDA margin 43.9% 48.3% 49.3% 49.6% 49.5%
Funds From Operations (FFO) 441.0 466.0 433.3 500.4 516.4
FFO - Capex - W/C Chg. (OpFCF) -139.7 95.0 164.3 170.4 213.7
Free Cash Flow (FCF) -157.5 95.0 289.3 170.4 213.7
EBITDA / net interest 2.7x 2.8x 2.5x 3.3x 3.4x
FFO / Net debt 10.9% 11.8% 12.1% 14.6% 16.1%
FFO - Capex / Net debt 1.7% 6.3% 5.3% 7.2% 8.4%
FCF / Net Debt -3.9% 2.4% 8.1% 5.0% 6.7%
Capex / Sales 23.3% 14.6% 16.6% 17.5% 16.8%
Net Senior Debt / EBITDA 5.0x 4.8x 3.4x 3.1x 1.8x
Net Senior Notes / EBITDA 5.7x 5.4x 4.3x 4.1x 3.8x
Net debt / EBITDA 5.7x 5.4x 5.0x 4.7x 4.4x
Cash 342.0 238.0 59.0 187.9 135.6
Revolver Availability 0.0 0.0 280.0 280.0 280.0
Liquidity 342.0 238.0 339.0 467.9 415.6

Telenet
21April 201132
TELENET
Mature cable operator with limited M&A and regulatory risk
Stable We initiate coverage on Telenet (TNETBB) with a Hold recommendation on its €500m
2020 and €300m 2021 senior secured notes and Neutral on 5-year CDS.
 Event: We initiate coverage on Telenet, a Belgian cable system operator 50.2% owned
by Liberty Global Inc. (LGI), the largest cable company outside the U.S. and which
operates in 14 countries with 17.7m customers. Telenet is Belgium’s second-largest
cable operator with 2.3m unique customers in Flanders and Brussels. Telenet offers
analog and digital TV, broadband Internet, fixed and mobile telephony services.
 SG Credit Opinion: We have a Stable credit opinion on Telenet as we believe it is a
relatively mature European cable operator positioned for moderate revenue and earnings
growth through increasing conversion of analog video subscribers to video services,
upselling of premium digital TV services (such as HD and DVRs), in addition to growth in
mobile telephony and business services. However, Telenet’s shareholder returns policy
will limit FCF generation and debt reduction maintaining total leverage instead in the 3.5x
area. Importantly, we underscore the fact that this leverage policy also allows debt-
financed acquisitions to push leverage, albeit temporarily, beyond this range. Currently,
Telenet is considering the acquisition of Numericable for a purchase consideration of
approximately €300m which should be manageable within Telenet’s target leverage
range. Otherwise, we see M&A risk as manageable and limited to small and mid-sized
targets given Telenet’s intention to focus its M&A on the Belgian market. Over the
medium term we also see a limited degree of regulatory risk given that Belgium’s
telecoms and media regulatory bodies have recently issued proposals to open access to
Belgium’s cable networks. In summary, we believe Telenet has good counter-arguments
to the regulators’ proposals and also highlight the defeat of similar proposals last year in
the Netherlands.
 SG Recommendation: We initiate with a Hold recommendation on Telenet € 6.625%
2021 Senior Secured notes (@ 98 price: YTW 7.0%, STW 372bps, Z-sp. 339bps). They
offer a fair yield in light of Telenet’s credit profile but we’d also highlight Telenet’s
financial leverage policy as well as moderate M&A risk and limited regulatory risk. In
addition, we initiate with a Neutral on 5-year CDS within a range of 200-275bps.
 Next calendar events: Telenet’s Q1 2011 earnings results are scheduled for 3 May. EC
comments on Belgian regulatory proposals by end-Q2 2011.
Market value
Benchmark 6.625% 02 2021
Price 98 Hold
Rating
LT ST Outlook
MDY Ba3 NR Stable
S&P NR NR NR
Fitch BB NR Stable
Key financials
(€m) 2010A 2011E
EBITDA 669 709
FFO 521 555
Net debt 1,890 2,396
Key Ratios
2010A 2011E
EBITDA margin (%) 51.5% 51.5%
EBITDA/net int. 4.9x 4.6x
FFO/ Adj. net debt
(%)
27.6% 23.1%
Net debt/EBITDA (x) 2.8x 3.4x
Inser
t
grap
h
here
Analyst
Alejandro Núñez
(+44) 20 7676 7136
0.00
0.10
0.20
0.30
0.40
0.50
(600)
(400)
(200)
0
200
400
600
800
5-yearCDS(bps)
TLNET CDS EUR SR 5Y Corp
TNET - XO
TNET / XO (RHS)

Telenet
21April 2011 33
Network and market
Telenet operates primarily in the region of Flanders in Belgium and in parts of Brussels,
offering analog and digital cable pay-TV, broadband, fixed (Voice-Over-IP, VoIP) telephony,
mobile telephony, and business services in Belgium and parts of Luxembourg. At 31-Dec-10
Telenet had 2.3m analog and digital cable TV Revenue Generating Units (RGUs), 1.3m
broadband RGUs, 0.8m fixed telephony RGUs and 0.2m mobile telephony RGUs. As there is
no cable overbuild in Belgium Telenet’s network does not overlap with nor competes directly
with that of Voo, which operates in Wallonia, Belgium’s southern region. They do compete,
however, against the telecom incumbent, Belgacom, but their respective products and
services are based on hybrid fibre-coaxial cable technologies as opposed to copper-line
based (e.g., DSL) technologies. Cable network coverage in Belgium is virtually ubiquitous
largely due to its relatively early deployment over 35 years ago by local governments and
utilities. In addition, historically basic cable TV in Belgium has been provided at low price
points much as in other European markets like Germany, for example. As a result, cable TV
has developed to be and remains the dominant TV distribution medium with Satellite TV,
Digital Terrestrial Television (DTT) and, more recently, Belgacom’s Internet-Protocol TV (IPTV)
being secondary distribution alternatives. Satellite-TV and DTT comprise just over 2% and
less than 1%, respectively, of all TV usage in Belgium. Telenet’s market position and share in
pay-TV services in its Flanders footprint is 54% whereas it has #2 market positions in its other
service streams – broadband, fixed-line and mobile telephony.
Telenet’s cable network is fully upgraded to DOCSIS 3.0 (at 600 MHz bandwidth) allowing it to
currently offer its residential and business customers broadband speeds of up to 100 MB/s
(through its ‚FiberNet 100‛ service). In addition, it has initiated a further network upgrade plan
to ‚future-proof‛ its network, termed ‚Digital Wave 2015‛, in order to be able to offer speeds
of up to 200 MB/s within a few years’ time. Although fibre (FTTH) networks that could
potentially be developed by Belgacom would compete with these speeds, to-date Belgacom
hasn’t announced any such plans. Instead, Belgacom intends to cover 73% of the Belgium
with a higher-speed DSL technology (VDSL) capable of offering theoretical speeds of up to
50MB/s. In reality, however, broadband speeds using VDSL diminish in proportion to the
distance between the end-user and the operator’s local loop, typically tapering off more at a
distance beyond 1km. Telenet’s current network and ‚Digital Wave 2015‛ program will afford
it a medium-term technological competitive advantage over the incumbent’s network.
In mobile telephony, Telenet does not own or operate its own full-scale mobile network but
instead opts for a more asset-light option of a full Mobile Virtual Network Operator (MVNO)
contract with Mobistar (53% owned by France Telecom). Telenet’s full-MVNO mobile platform
became operational in October 2010 and is so far attracting higher-quality post-paid and
higher-usage new customers. Through this arrangement, Telenet is able to manage marketing
(including subscriber acquisitions costs, SACs, and handsets offered) and billing for its mobile
customers. In this way, Telenet is still able to append mobile telephony as a fourth service
completing a ‚quad-play‛ bundle offering without the significant capital expenditure entailed in
building and upgrading a mobile network. At a time when most mobile network operators are
investing in network upgrades and expansion in order to deal with rapidly increasing mobile
data traffic, Telenet is still able to offer services that connect mobile telephony customers to
its fixed-line network (convergence) thereby capitalizing on its fixed-line network’s strength.
We also highlight that Telenet has reiterated that at the current time it is not interested in
building and owning its own mobile network. This is not only sensible in light of the cost of
building the current generation of mobile networks (LTE) capable of handling higher data

Telenet
21April 201134
traffic but it is also consistent with LGI’s approach to mobile telephony services in most of its
other markets.
Telenet network footprint
Belgian communications market summary
Telenet Belgacom Mobistar BASE TV Vlaanderen
Services
Internet, Phone,
CATV, Mobile
Internet, Phone,
IPTV, Mobile
Internet, Phone,
CATV, Mobile Mobile Satellite TV
Footprint Flanders National National National Flanders
Core Technology Cable DSL / 3G DSL / DTH / 3G 2G / 3G
Market share
(National)
TV: 54% (#1)
Fixed-line Tel.: 25%
(#2)
BB Internet: 36%
(#2)
Mobile: 2% (#4)
Fixed-line Tel.: 65%
(#1)
Mobile: 45% (#1)
BB Internet: 50%
(#1)
TV: 17% (#2)
Fixed-line Tel.: 4%
(#3)
Mobile: 35% (#2) Mobile: 18% (#3) TV: 3% (Flanders only)
Competitiveness
● ● ◓ ◔ ◔
Source: Company Data, SG Cross Asset Research
European broadband penetration (2009) European pay-TV penetration (2009)
Sources: Screen Digest, Euromonitor Source: Screen Digest
24
32
23
30
14
7
63
53
57 40
53
56
0
10
20
30
40
50
60
70
80
90
100
DK NL CH BE UK D
%
Cable Other
87
85
80
70
67
63
58
52
49
45
25
18
0
10
20
30
40
50
60
70
NL UK DK BE CH D
%
% of TV Households

Telenet
21April 2011 35
Belgian broadband penetration Telenet subscribers evolution
Telenet revenues (2010) Telenet revenues (2009)
65.0
67.0
68.0
70.0
71.0
73.0
74.0
76.0
54.0
55.0
56.0
57.0 57.0 57.0
58.0
59.0
60.0
62.0
63.0
64.0
66.0
67.0
68.0
69.0
50.0
55.0
60.0
65.0
70.0
75.0
80.0
2008 Q1 2008 Q2 2008 Q3 2008 Q4 2009 Q1 2009 Q2 2009 Q3 2009 Q4
%
Flanders Wallonia Belgium
1085 1116 1150 1174 1197 1227
857
938
1003
1056
1109
1183
715 741 763
780 795 815
104 129 152 170 182 199
2.9 3.0
2.1 1.9 2.5
9.5
6.9
5.3 5.0
6.7
3.6
3.0 2.2 1.9 2.5
24.0
17.8
11.8
7.1
9.1
0
5
10
15
20
25
0
200
400
600
800
1,000
1,200
1,400
2009 Q3 2009 Q4 2010 Q1 2010 Q2 2010 Q3 2010 Q4
%
Subscribers(000s)
Internet Digital TV
Telephony Mobile
Internet Subs growth (%) TV Subs growth (%)
Tel. Subs growth (%) Mobile Subs growth (%)
Basic Cable TV,
€325.1m, 25%
Premium Cable
TV, €150.7m,
12%
Dist. / Other,
€55.7m, 4%
Residential
Broadband,
€426.7m, 33%
Residential
Telephony,
€255.9m, 20%
Business
Services,
€84.9m, 6%
Basic Cable TV,
€322.3m, 27%
Premium Cable
TV, €115.4m,
10%
Dist. / Other,
€56.5m, 5%
Residential
Broadband,
€402.0m, 33%
Residential
Telephony,
€224.3m, 19%
Business
Services,
€76.9m, 6%

Telenet
21April 201136
Strategy
Telenet has a clear four-pronged approach to its growth strategy, generally centred on a
continuation of gradual expansion and penetration in established segments such as Internet
and Digital TV complemented with growth from a lower base in newer segments such as
Mobile and Business Services (B2B). In broadband, Telenet’s main growth objective is
premised upon expanding its footprint to reach at least 90% coverage by the end of FY 2013
and on prominently marketing the fact that its network’s DOCSIS 3.0 speeds outperform
competitors’ DSL-based alternatives. In Digital TV, Telenet’s aim is to continue converting
analog cable TV (basic cable TV) subscribers to digital cable TV customers who exhibit
approximately double the ARPU levels of analog cable TV customers. Telenet targets an
annual 10% increase in its analog-to-digital conversion rate (digitalization rate). We note
Telenet increased its digitalization rate from 42.7% at the end of 2009 to 54.6 % at year-end
2010, an increase of nearly 12 percentage points. In Mobile, Telenet seeks to offer mobile
telephony as a complement to its fixed-line platform through, for instance, combined access
to Telenet’s 1,200 WiFi points in Belgium. Through its full-MVNO agreement with Mobistar,
Telenet is focussing on higher-tier smartphone users and targeting post-paid customers
through selective handsets subsidization. In light of the capital intensity of building and
maintaining a competitive mobile network, especially amidst growing data traffic demands on
current mobile networks, we view Telenet’s full MVNO strategy as sensible while it assesses
synergy opportunities with its fixed-line and B2B segments. In this context, we note that
Telenet will not bid for Belgium’s fourth 3G mobile license on 6 June 2011 although it has
piloted gradual investments in LTE (4G) in certain Belgian cities in 2010. In terms of its
strategy of targeting smartphone users, we also see this as a judicious choice given that
smartphones are projected to account for nearly half of the global mobile handset in the next
five years (according to Ovum) and can generate additional data-based ancillary ARPU for
operators. We also highlight that Telenet is set to offer the iPhone 4 in 2011 as part of its
mobile strategy. In B2B, through which Telenet offers connectivity, security and hosting
solutions to Small and Medium Enterprises (SMEs), Telenet is targeting 8-10% top-line growth
by leveraging its DOCSIS 3.0 speed advantage and integrating security and hosting solutions.
Subscriber net adds Churn levels
30 31
34
24 23
30
64
81
65
53 52
74
21
26
22
17 15
20
4
24 23
18
13
16
0
10
20
30
40
50
60
70
80
90
2009 Q3 2009 Q4 2010 Q1 2010 Q2 2010 Q3 2010 Q4
Subscribernetadditions(000s)
Internet Digital TV Fixed Telephony Mobile Telephony
7.4 7.4
6.9
6.5
7.8
7.6
6.5
9.1
10.3
8.5 8.6
8.8
6.4
6.8 6.9
6.1
6.9
7.2
5.5
6.0
6.5
7.0
7.5
8.0
8.5
9.0
9.5
10.0
10.5
2009 Q3 2009 Q4 2010 Q1 2010 Q2 2010 Q3 2010 Q4
%
Internet Basic Cable TV Telephony

Telenet
21April 2011 37
Average Revenue Per User (ARPU) Revenue Generating Units (RGUs) / Subscriber
Service penetration rates Multi-play penetration and digitalization
Low FCF generation, deleveraging from EBITDA growth
Telenet’s FY2010 improvement of 55% in Free Cash Flow (FCF) to €258m (prior to
shareholder disbursements) was driven primarily by EBITDA growth, stable interest expenses
and lower capex. We project Telenet in 2011 will grow EBITDA at c6%, maintain its capex
levels in the €280-290m p.a. range (equivalent to 20-21% Capex/Sales) and interest expenses
in the €150-155m range over 2011-12. As a result, its FCF (prior to shareholder
disbursements) should be in the range of €250-260m in 2011 and c.€300m in 2012. In keeping
with its 3.5x leverage target we anticipate Telenet will relever to that 3.5x level by returning
excess FCF to its shareholders and so project net leverage to remain in the 3.25-3.5x band
during 2011-12.
35.3
36.8
37.7
38.4
39.0
40.0
4.2
2.4
1.9
1.6
2.6
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
32.0
33.0
34.0
35.0
36.0
37.0
38.0
39.0
40.0
41.0
2009 Q3 2009 Q4 2010 Q1 2010 Q2 2010 Q3 2010 Q4
%
€/monthpersubscriber
ARPU (€/month) ARPU growth (%)
1.76
1.79
1.83
1.85
1.87
1.90
1.7
2.2
1.1 1.1
1.6
1.0
1.2
1.4
1.6
1.8
2.0
2.2
2.4
1.75
1.77
1.79
1.81
1.83
1.85
1.87
1.89
1.91
2009 Q3 2009 Q4 2010 Q1 2010 Q2 2010 Q3 2010 Q4
%
RGUs/Subscriber(x)
RGUs/Sub RGUs/Sub. growth (%)
84.8 83.8 82.8 82.1 81.4
80.7
38.9 39.9 41.1 41.8 42.6 43.5
25.6 26.5 27.2 27.8 28.3 28.9
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
2009 Q3 2009 Q4 2010 Q1 2010 Q2 2010 Q3 2010 Q4
Servicepenetrationrates(%)
Cable TV Broadband Fixed Tel.
50.4
48.5
46.5
45.1
43.4
41.9
23.1 23.7 24.4 25.0
26.1 26.5
26.5
27.8
29.0 29.9 30.5
31.6
38.8
42.7
45.9
48.5
51.1
54.6
20.0
25.0
30.0
35.0
40.0
45.0
50.0
55.0
60.0
2009 Q3 2009 Q4 2010 Q1 2010 Q2 2010 Q3 2010 Q4
Penetrationanddigitalizationrates(%)
Single-play subs (%) Double-play subs (%)
Triple-play subs (%) Digitalization (%)

Telenet
21April 201138
Capex Capex breakdown (31-Dec-10)
EBITDA and Operating Cash Flow generation Free Cash Flow from Operations (OpFCF)
M&A
Recent Reuters reports state that Telenet has been to be interested in bidding c.€300m for
Numericable. Potential buyers had until 24 February to submit their indicative bids.
Numericable is one of the last Belgian regional cable companies to not be owned by either
Telenet or Voo and is active in Brussels and in two nearby municipalities (Wemmel and
Drogenbos). At year-end 2010, Numericable had 120,000 to 150,000 customers, generated
revenues of €70m and EBITDA of €40m. Although recent reports have stated Telenet may no
longer be actively bidding in the auction for Numericable, should Telenet decide to bid for
Numericable we believe a €300m acquisition price should be manageable within Telenet’s
target leverage range. Otherwise, we see M&A risk as contained to small and mid-sized
targets given Telenet’s stated intention to focus its M&A on the Belgian market.
Regulation
On 21 December 2010, the Belgian national telecom regulator (BIPT) along with the three
Belgian regional media authorities (CSA, Medienrat and VRM) announced proposals to open
Belgium’s cable networks with regards to analog cable TV, digital cable TV and broadband
access. In Belgium, BIPT’s remit covers telecommunications regulation while the regional
media authorities are responsible for regulating Belgium’s broadcast markets. Key to the
regulators’ arguments is that their market analyses assessing significant market power (SMP)
231
274
246
289 282
22.7% 22.9%
18.9%
21.0%
19.5%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
0
50
100
150
200
250
300
350
2008A 2009A 2010A 2011E 2012E
Capex/Sales(%)
Capex(€m)
Capex (€m) Capex / Sales (%)
Customer
Installations,
€63m, 20%
Set-Top Box
Rental, €52m,
16%
Network growth,
€95m, 30%
Maintenance /
Other, €75m,
24%
DTT License,
€31m, 10%
506
608
669
709
748
352
486
521
555
591
121
167
258 260
299
0
100
200
300
400
500
600
700
800
2008A 2009A 2010A 2011E 2012E
€m
Adj. EBITDA Funds From Operations (FFO) FFO - Capex - W/C Chg. (OpFCF)
121
167
258 260
299
23.9
27.5
38.6
36.7
40.0
6.6
11.4
13.6
10.9
12.5
0
5
10
15
20
25
30
35
40
45
0
50
100
150
200
250
300
350
2008A 2009A 2010A 2011E 2012E
%
€m
FCF (€m) FCF / EBITDA (%) FCF / Net debt (%)

Telenet
21April 2011 39
treat each cable operator’s respective coverage areas (i.e., footprint) – Flanders, Wallonia and
Brussels - as the addressable market rather than the national territory. The regulators’ key
findings are:
 Belgacom only is dominant in the provision of broadband on a national level.
 Each individual cable company is found to hold SMP on the relevant market corresponding
to its geographic footprint, on the basis of a) high and persistent entry barriers; b) tendency to
inhibit effective competition behind those entry barriers; and c) insufficiency of competition
law.
The key remedies proposed include:
 Analog TV resale
 Open wholesale access to the digital TV platform of cable operators and Belgacom
 Resale of broadband internet access, in conjunction with digital cable TV access
 Resale rates would be regulated using a ‚retail price-minus‛ (e.g., RPI-x) framework
In their scope these proposals are unprecedented in the EU and similar attempts at opening
cable access networks have only been attempted in the Netherlands in 2010, where they were
defeated by the Dutch trade tribunal. In essence the proposals are contrary to the EC norm for
such market analyses and, in fact, push or even exceed the regulatory powers of these
authorities. Of particular concern is the regulators’ joint attempt to regulate as bundles
analog/digital cable TV and broadband internet access, which fall under distinct regulatory
remits and whose market dominance needs to be separately assessed by the relevant
regulatory authority. Telenet has quickly and vehemently contested these proposals, on the
justified grounds that Belgium’s cable operators represent the main competitive counterweight
to the incumbent telecom operator Belgacom, that 1) cable TV services are already regulated
with Belgium’s basic analog cable TV prices already amongst the lowest in Europe; 2) that
there are multiple distribution platforms (cable, IPTV, DTT, satellite) currently available to
Flemish consumers; 3) that in broadband internet Telenet still only has a 36% market share; 4)
that the TV market is not an area subject to regulation by the European Commission (EC); 5)
and, that regulation of broadband internet has been tacked on based on the authorities’
determination that cable operators’ hold SMP in regional TV markets. In terms of the process,
interested parties’ initial comments were due by 18 February, after which the proposals will go
through rounds of advice at the European Competition Commission and European
Commission in Phase I discussions though Q2 2011, then iterative Phase II discussions with
Belgian regulators through Q3-Q4 2011. We share Telenet’s opposition to the regulators’
proposals which we see as largely unfounded. Moreover, we deem the proposals and their
associated remedies to lack sufficient merit in order to be enacted as proposed. The
proposals mooted will likely face stiff opposition at the EC level and we expect the EC to find
‚serious doubts‛ with the proposals requiring at least lengthier Phase II review into the end of
2011. In a downside case, should the EC side with BIPT and the Belgian regional regulatory
authorities, Telenet would likely appeal the decision in Belgian (and potentially EU) courts
thereby further delaying any eventual implementation of wholesale cable access resale until
mid-2013 at the earliest. A plausible but not dramatically adverse scenario could see open
access to the cable operators’ (including Telenet’s) analog cable TV offerings, which would
represent a compromise of sorts but still not be overly disadvantageous to Telenet.

SG European Cable Sector initiation (Alejandro Nunez 201104)

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