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LBTYA - Liberty Global


Liberty

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Depends on which prices you use.

 

For each LBTYA you got ~0.125 LILA today. This is ~4.35. If you use most of today's LBTYA prices vs most yesterday's prices, it's a wash. If you look at today's lows, LBTYA was cheaper today, if you look at the highs, it was cheaper yesterday.

 

But yeah, LILA dropped more.

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Have Malone or Maffei commented on Brazil mobile or fixed broadband/cable market before?  Noticed that Oi is in bankruptcy and recession in Brazil could present opportunities.  Seems like Telefonica, DTV and AMX have the largest systems in Brazil.  Wonder if Telefonica is having second thoughts on GVT?

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I think the regulatory framework in non-US markets can add a constant but grinding friction to results. This is not to say they will not make money but that there will be opposing forces that are somewhat stronger than in US cable, this might be reflected in higher debt required to service customer "improvements" similar to the airline industry that are a net positive to consumers but may not be so hot for operators.

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Off more than 10% on Brexit. Fries has said additional capex in UK Virgin Media was predicated on EU.

 

What's the brexit impact on Liberty Global? Virgin Media seems to be Liberty's primary growth driver. What will happen now?  ::)

 

People will still need internet.  I think the business effect will be negligible long-term.  There's definitely a currency effect though.  If the pound eventually declines by 20% like Soros suggested, Virgin Media is worth 20% less to US investors... 

 

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See this article - http://seekingalpha.com/article/3348995-a-british-cable-behemoth-worthy-of-your-watch-list

I'm not sure about his graph. He shows FCFF at about 4-5 billion which seems to include deduction for interest expense (2.5 billion). But if you look up the definition of FCFF it excludes interest expense. And when I look at Liberty's presentations it appears the 4-5 billion is before debt servicing cost. So not sure if we're yielding 10% or 20% at the current price.

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  • 4 weeks later...

http://www.reuters.com/article/us-vodafone-group-m-a-liberty-global-eu-idUSKCN10921A

 

U.S. cable group Liberty Global and UK telecoms firm Vodafone are set to win EU antitrust approval for their plan to merge their Dutch operations after offering minor concessions, two people familiar with the matter said on Friday. [...] The merged company will be the second-largest telecoms company in the Netherlands. Liberty's Ziggo is the largest cable TV operator in the country, while Vodafone is the second-biggest mobile network operator.
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http://www.reuters.com/article/us-vodafone-group-m-a-liberty-global-eu-idUSKCN10921A

 

U.S. cable group Liberty Global and UK telecoms firm Vodafone are set to win EU antitrust approval for their plan to merge their Dutch operations after offering minor concessions, two people familiar with the matter said on Friday. [...] The merged company will be the second-largest telecoms company in the Netherlands. Liberty's Ziggo is the largest cable TV operator in the country, while Vodafone is the second-biggest mobile network operator.

 

 

I find it unusual that the EU regulators approve things much faster than the US regulator.

Compare the timeline for CHTR, TWC merger, with this one, and with CWC and Liberty Global.

 

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http://www.reuters.com/article/us-vodafone-group-m-a-liberty-global-eu-idUSKCN10921A

 

U.S. cable group Liberty Global and UK telecoms firm Vodafone are set to win EU antitrust approval for their plan to merge their Dutch operations after offering minor concessions, two people familiar with the matter said on Friday. [...] The merged company will be the second-largest telecoms company in the Netherlands. Liberty's Ziggo is the largest cable TV operator in the country, while Vodafone is the second-biggest mobile network operator.

 

 

I find it unusual that the EU regulators approve things much faster than the US regulator.

Compare the timeline for CHTR, TWC merger, with this one, and with CWC and Liberty Global.

 

Regulatory environment for cable is actually much better in Europe than in the USA.

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Liberty, could you upload the VIC write up here please? You can use Chrome and it will let you print and save it as PDF file. Thank you.

 

I don't want to do something that might be against the terms of use of my VIC account. (check your PMs, though)

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Regulatory environment for cable is actually much better in Europe than in the USA.

 

... because US cable is a regional monopoly while in Europe it's an infrastructure operator competing with national incumbents (and often fiber overbuilders such as in Portugal, Scandinavia).

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Off more than 10% on Brexit. Fries has said additional capex in UK Virgin Media was predicated on EU.

 

I'm quite sure this is incorrect.

 

I've met with the company post-Brexit and they have confirmed that the Virgin buildout ("Project Lightning") that takes UK footprint from 50% of households to 70% of households through 2020 is still going ahead. They claim they are expecting 20% unlevered IRR on this rollout so it's a no-brainer. The EU decision has no obvious impact on this.

 

The UK government is pushing the incumbent operator, BT, to roll out more fiber across the country (specifically pushing for more FTTH over the current FTTC rollout) and having Virgin and other operators (such as Cityfibre, a small fiber network that is running a trial FTTH rollout with broadband providers Sky and Talk Talk) push BT with their own rollouts of high speed broadband, will in turn stand these companies (such as Virgin) in good stead with the regulator when something is needed down the road.

 

So in a nutshell, Project Lightning makes financial and political / regulatory sense.

 

IMHO - Liberty Global has sold off due to:

 

1) The general hit that all leveraged names have taken (Altice, "safer" specialty pharma, hospital operators and care homes, other Liberty names)

 

2) The likelihood that a deal with Vodafone in the short term is now unlikely post Netherlands deal (I think both parties will take a "wait and see" approach and see how NL plays out over the next 18-36 months)

 

3) The broader LG transition from exciting growth story to mature, low growth business (which has happened over the past 3 quarters)

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This might prove to be a big deal. LGI is dilluting its most troubled market (Netherlands). They will receive approximately 2.5 bn Euro (1bn payment from Vodafone to adjust for valuation differential and 1.5bn from releveraging to 4.5x). Besides, Ziggo should become a stronger player as they now offer a full quad play. This should help reduce churn and mitigate some of the losses experienced past few Qs. Finally, I think if the JV is a success, it will push Vodafone to go for the jugular and take out LBTYA at a premium.

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Growth seems subpar. They said they expected acceleration in the second half of the year. Let's see if that happens.  ::)

 

On the plus side, looks like they bought back more than 1% of the company in the week following Brexit...

 

They used to file a report everyday on how much stock they repurchased. Since CWC acquisition they no longer did that, so I thought they stopped repurchasing.

I think if they became a no growth stock, then repurchasing helps to return 8-10% a year to shareholders. If they can grow at 5% a year OCF, the shareholder return would be better.

 

Regarding LILAC, I remember they used to say without CWC, the growth of OCF would be 5-7% but with CWC, the growth would be in the low double digits.

Now they are saying LiLAC Group 2016 rebased OCF guidance, now including CWC: remains 5-7%?  ::)

 

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