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Liberty Global turns to acquisitions, management changes to halt Swiss losses


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Liberty Global turns to acquisitions, management changes to halt Swiss losses

Cable giant Liberty Global PLC reported second-quarter customer losses at UPC Switzerland Holding BV and said it sees acquisitions, as well as management changes, as a way back to growth in the Swiss market.

The company, which is controlled by American media mogul John Malone, lost 53,800 revenue generating units in Switzerland for the three months ended June 30.

"We're currently in the midst of a pretty tough competitive environment there," Liberty Global President and CEO Mike Fries said during an Aug. 9 earnings call.

Fries added that the Swiss market would eventually require M&A consolidation and that the "extremely attractive" operating free cash flow margins of its Swiss operations would support expansion.

Improvements to its TV product, as well as management changes, such as the recent promotion of former UPC Switzerland COO Severina Pascu to CEO, would bolster its turnaround plan for the market, he said.

"[This will] provide us with some strategic optionality as the market looks to consolidate and rationalize," Fries told analysts.

Last year, Liberty Global embarked on an asset disposal program to help the company focus on building scale in its core markets, such as the United Kingdom and Ireland, as well as Switzerland.

Only recently, the company completed the sale of its Austrian operations to Deutsche Telekom AG's T-Mobile Austria GmbH for an enterprise value of €1.9 billion.

Furthermore, Liberty Global announced earlier this year it had agreed to sell its operations in Germany, Hungary, Romania and the Czech Republic to Vodafone Group PLC in an €18.4 billion deal. Fries said this transaction is "right on track" to secure regulatory approval and that he expected a mid-2019 close.

"The M&A deals we've done make total sense for us and are highly accretive ... they all demonstrate the premium value of our cable businesses in a consolidating European landscape," he added.

Despite the subscriber losses in Switzerland, Liberty Global added 42,900 revenue-generating units, or RGUs, across the group in the second quarter, representing a 14.4% improvement on a year-over-year basis. This was largely on the back of the U.K. and Ireland's record additions of 112,200 RGUs during the second quarter as a result of the group's focus on triple-play bundles.

Liberty Global's second-quarter revenues from continuing operations increased 2.7% to $3.05 billion from $2.77 billion a year ago, driven by a strong Virgin Media rebased revenue growth and subscriber additions. Revenues from the company's U.K. and Ireland operations jumped 10.9% year over year to $1.73 billion.

The company's quarterly net earnings were $912.6 million, compared to a net loss of $683.2 million for the prior-year period. The company narrowed its year-to-date net loss to $273.9 million, down from $1.01 billion during the same period in 2017.

Overall, the group's year-to-date operating income, excluding discontinued operations, fell 6.7% year over year to $384.3 million, despite a year-over-year operating income increase of 31% during the second quarter of this year, to $263.9 million.