Ziggo wins more customers, but spends more to keep them

Reuters

BRUSSELS, Oct 18 (Reuters) - Dutch cable group Ziggo said its core profit fell in the third quarterdespite winning more customers, as it spent more on marketingand promotions to keep up with its rivals.

Ziggo, which earlier this week rejected a takeover proposalfrom top shareholder Liberty Global, said on Friday itmore than doubled spending on marketing and sales compared withthe third quarter of last year, depressing its core profitmargin by 3.3 percentage points.

The group, which competes for telephone, TV and broadbandinternet customers with the likes of KPN, reaped thefruit of its spending, however.

It added more customers for all of its services comparedwith the second quarter apart from analogue TV, which in generalis a business that cable companies are keen to phase out.

Core profit in the third quarter fell 2.9 percent to 220.4million euros ($301.2 million), just below the 222 million eurosexpected in a Reuters poll of five analysts.

Ziggo reiterated its revenues in 2013 would grow by 1percent, with core profit (earnings, before interest, tax,depreciation and amortisation) remaining at last year's levels.

The group's shares rose 1.5 percent in early trading, makingthem the strongest performer on the STOXX 600 European Telecom'sIndex.

"Ziggo posted strong broadband growth, and this could pointto higher growth in the market overall," Bernstein analyst RobinBienenstock wrote in a note to clients.

Ziggo gave no further update on the state of the talks withLiberty Global, after it said on Wednesday that Liberty hadapproached it about a full takeover which it deemed inadequate.

Unlike Dutch telecoms group KPN, which fended off a bid byMexican group America Movil with the help of anindependent foundation, Ziggo had no such structure in place,Chief Executive Bernard Dijkhuizen told a conference call

He added, however, that the group's internal corporategovernance rules did not allow for an outsider to gain controlquickly.

"We have a structure that in itself has a defence mechanismin there which makes it less probable that any party doessomething aggressive which we don't want," Dijkhuizen said.

He said that this would not be able to stop a hostile bid.

"If there would be a hostile takeover then the shareholderswill speak," said Dijkhuizen, who will be replaced by formerDeutsche Telekom boss Rene Obermann in 2014.

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