UPDATE 1-Ziggo wins more customers, but spends more to keep them

Fri Oct 18, 2013 3:30am EDT

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

Ziggo, which earlier this week rejected a takeover proposal from top shareholder Liberty Global, said on Friday it more than doubled spending on marketing and sales compared with the third quarter of last year, depressing its core profit margin by 3.3 percentage points.

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

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

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

Ziggo reiterated its revenues in 2013 would grow by 1 percent, 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, making them the strongest performer on the STOXX 600 European Telecom's Index.

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

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

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

He added, however, that the group's internal corporate governance rules did not allow for an outsider to gain control quickly.

"We have a structure that in itself has a defence mechanism in there which makes it less probable that any party does something 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 shareholders will speak," said Dijkhuizen, who will be replaced by former Deutsche Telekom boss Rene Obermann in 2014.

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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