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Liberty Global aims to boost scale despite asset disposals in Europe

Liberty Global plc dismissed speculation it is dismantling its European operations, despite entering into discussions to divest key assets in Germany and Eastern Europe, and selling its Austrian business to Germany's Deutsche Telekom AG.

Much of the speculation has focused on preliminary negotiations over a sale of assets to Vodafone Group Plc. For now, a deal between Vodafone, which owns a range of mobile and wireless broadband networks across Europe, and Liberty is reportedly centered on Liberty's cable business in Germany, as well as assets across Eastern Europe.

Last year, the two giants completed a joint venture in the Netherlands, creating the country's second-largest mobile and cable operator.

However, Liberty Global CEO Mike Fries stressed during a Feb. 15 earnings call that his company would still be able to compete on both scale and growth by tapping into "strategic options" in markets such as Switzerland, where its broadband network reaches nearly 70% the market. In fact, Liberty Global plans to build national champions in the region.

"In today's competitive world, scale matters more than ever, and we are committed to the core markets we are in, where we see a pathway to becoming a national champion," Fries told investors.

Last year, analysts identified the U.K., Germany and Switzerland as markets where the group, which is controlled by American media mogul John Malone, could see long-term benefits from acquisitions.

Fries acknowledged that the Swiss unit had experienced "pretty intense competition" in both fixed video and broadband but said that investment into areas such as new sport services and smarter bundles had boosted operating cash flow. He stressed that this would lead to "interesting strategic options" going forward.

Describing its German business as a "homerun investment on any economic basis," Fries added the group would also consider its options to consolidate the market but noted that it had far higher reach in Switzerland.

Meanwhile, in the U.K., Liberty Global faces stiff competition from converged players such as BT Group, the U.K.'s largest provider of fixed-line, mobile and broadband services after it completed its £12.5 billion takeover of EE.

Full year revenue grew 2.3% to $15.05 billion, rising 2.9% in the fourth quarter, while operating income for the full year declined 21.6%, due to the deconsolidation of its Dutch business, which formed part of the joint venture with Vodafone.

U.K. and Ireland quarterly revenue hit a two-year high for the final three months of 2017, growing 12.3% to $1.71 billion, but delivered an overall 1.7% decline in full-year revenue to $6.40 billion.

Annual growth across all other markets saw a 6.5% increase in revenue in both Belgium and Germany, and 8.7% rise in earnings in Central and Eastern Europe, while earnings in Switzerland and Austria grew 0.6%.

Liberty Global's B2B business, which includes small and home office subscribers, as well as non-subscription revenue, was a bright spot for the company, growing 13% year over year to $500 million in the fourth quarter, and up 12% for the full-year total.