Valuation of cable operators – decision tree and synthetic measure of development method (SMR) for market comparison

In the case of operators working in small markets, a common problem is finding comparable data for valuation. The objective of the investigations presented in this paper is the recognition and classification of similarities and differences between European countries related to the telecommunication market. For this purpose, multivariate comparative statistical analysis methods were used. These methods are a necessary tool in quantitative analysis involving many variables.

The authors presented a model for comparison of the markets based on cluster analysis. This method can be used for comparing markets in cases of enterprise valuations in the telecommunication sector.

The overview of the cable market in European countries shows great differences in the number of operators, which varies from 1 up to 1 500. However, cable operators all around Europe went through a far-reaching consolidation phase and the level of consolidation is still increasing.

Cable operators should be considered as companies using the so-called subscription-based business model, where the customer pays a fixed subscription fee for access to a product or service. The level of monthly ARPU (average revenues per user) from basic TV via cable is rather low in most of the EU countries. Moreover, there is a large dispersion between Western and Central-Eastern Europe; specific for the Central-Eastern European countries is the quite low nominal ARPU.

Results of the telecommunication market analysis may be very useful in the case of valuation of small cable operators operating in the Central-Eastern Europe. In some countries, there is a lack of data related to comparable companies and international comparisons must be made.