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4-Traders Homepage  >  Equities  >  Nasdaq  >  Liberty Global PLC    LBTYA   GB00B8W67662

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Liberty Global : America's 'Cable Cowboy' Lays the Groundwork for Internet Dominance Beyond the U.S.

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08/13/2017 | 01:15pm CEST
By Stu Woo 

LONDON -- Decades after earning the nickname the "Cable Cowboy" for building an American cable-TV empire, John Malone is at it again. This time, he has set his sights on internet delivery overseas.

Mr. Malone's investments have been making plenty of headlines in the U.S. recently. He owns a nearly one-third voting stake in Discovery Communications Inc., the television-programming company that agreed on July 31 to buy rival Scripps Networks Interactive Inc. for $11.9 billion. Another big Malone investment, Charter Communications Inc., last month rejected a one-on-one tie-up with Sprint Corp.

But he and his lieutenants have also been building, more quietly, a cable colossus far from American shores that has the potential to be the backbone for 5G, the next generation of wireless communications that promises to turbocharge mobile download and upload speeds. Liberty Global PLC, which is incorporated in London but run out of Mr. Malone's hometown of Denver, is currently the world's biggest international cable company. Currently, it has 25 million subscribers across 30 countries in Europe and Latin America. The company said Monday it planned to spin off the Latin American business later this year.

The company's ambition when it started in 2005 was to be a cable-TV and broadband-internet provider, but its focus has shifted to include wireless networks, too.

Liberty Global and its investors believe it has positioned its networks to take advantage of 5G technology if and when it gains traction. The strategy echoes Mr. Malone's moves in the U.S. in the 1990s, when he transformed cable into high-speed pipes for the internet.

Currently, Liberty Global's focus is selling customers its "quad play," a bundle of cable, internet, fixed-line telephone and mobile services, all for one price. Liberty mostly rents the use of cellular towers and other wireless infrastructure from carriers for its mobile offerings. But for the other three products, it owns the infrastructure -- miles of coaxial copper and fiber-optic cables.

It is those cables where more value potentially can be unlocked.

The telecom industry's vision of 5G, which is expected to go live in 2019 or 2020, is to connect the cables to small cellular antennas to transmit the gobs of data required for top-quality videos, self-driving cars, virtual reality and other technologies of the near future. Those antennas would be close to the ground, or atop buildings and streetlights, in contrast to the tall ones now that sit along highways. These smaller antennas would send that data on its final journey -- to customers in a radius as short as 300 feet. The process is similar to how a Wi-Fi router transmits data from a landline connection.

"There are two things that are going great for us," said Balan Nair, Liberty Global's chief technology and innovation officer. "We have fiber to many neighborhoods" and power, he said. The company has utility cabinets in neighborhoods already connected to power, which would allow the company -- or a mobile-carrier partner -- to quickly set up a 5G cellular site there.

Liberty Global's fiber-optic landlines could make the company an acquisition target for a mobile carrier that wants to buy 5G infrastructure, said Citi analyst Simon Weeden. "There's obviously going to be demand for this stuff," he said.

But one potential downside: Many wireless carriers are already building out their own fiber-optic networks for their own 5G services. If that happens, customers might just use their existing wireless carrier's 5G and skip Liberty Global's offerings altogether. "5G may not be good news" for Liberty Global, Mr. Weeden said.

Mr. Nair said it would be difficult for mobile carriers to invest in laying the landlines for their own 5G network. "The economics of building that infrastructure are high," he said, referring to costs. He said Liberty Global would decide whether to partner with a mobile carrier for 5G or whether to become a 5G carrier on its own on a case-by-case basis in each market.

Liberty Global Chief Executive Mike Fries struck a note of caution at a conference in February, saying that 5G wouldn't become a reality soon, at least in Europe. European mobile carriers don't have enough money to invest in 5G upgrades, and many are still in the process of adopting 4G, the current generation of wireless technology, Mr. Fries said.

The challenges extend to building out the infrastructure. Liberty Global's effort to install fiber-optic lines in the U.K., called "Project Lightning," has been delayed. Mr. Fries in May said the company had discovered irregularities in reporting the completion status of some fiber-optic plans by a small group of local managers. This week, he said management changes were helping to remedy the problem.

Mr. Malone, 76 years old, is Liberty Global's chairman, but he delegates responsibilities to the 54-year-old Mr. Fries, who is also based in Denver and occasionally fronts a rock 'n' roll cover band called "The Moderators." Liberty Global declined to make Mr. Malone available for an interview.

Liberty Global's fast growth has been somewhat overshadowed, especially lately, by Mr. Malone's other interests in the U.S.

In 1999, Mr. Malone sold cable-powerhouse Tele-Communications Inc. to what was then known as AT&T Corp. for $46 billion. In 2005, he merged two of his overseas interests, cable-operator UnitedGlobalCom and the international arm of media-investment company Liberty Media Corp., to create Liberty Global. Mr. Malone remains Liberty Media's chairman.

Mr. Malone is also chairman of Liberty Broadband Corp., the largest investor in Charter. Mr. Malone had been trying for a year to get Charter and rival Comcast Corp. to jointly invest in or partner with a mobile carrier, The Wall Street Journal reported in June. Charter on last month, however, rejected an informal offer for a merger with Sprint.

Liberty Global now operates eight brands, the most notable being Virgin Media in the U.K. and Ireland. Since 2005, it has snapped up more than 250 companies, spending $93 billion, and sold about 30, for $11 billion. It bought Virgin Media in 2013 for $24 billion.

Mr. Fries has kept the company's various businesses for the most part independent, counting on local brand recognition and manager expertise. But the parent company saves on research and development costs by rolling out the same set-top box across all of its markets. Liberty Global also has a stable of cable-industry veterans it can dispatch to its companies to help with technological and regulatory issues. "We are delivering people, we are delivering expertise," Mr. Fries said in a recent interview.

Write to Stu Woo at Stu.Woo@wsj.com

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Financials ($)
Sales 2017 14 780 M
EBIT 2017 2 325 M
Net income 2017 -90,1 M
Debt 2017 32 360 M
Yield 2017 -
P/E ratio 2017 -
P/E ratio 2018 61,87
EV / Sales 2017 4,39x
EV / Sales 2018 4,58x
Capitalization 32 527 M
Chart LIBERTY GLOBAL PLC
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Liberty Global PLC Technical Analysis Chart | LBTYA | GB00B8W67662 | 4-Traders
Technical analysis trends LIBERTY GLOBAL PLC
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TrendsBullishNeutralNeutral
Income Statement Evolution
Consensus
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Mean consensus OUTPERFORM
Number of Analysts 16
Average target price 37,9 $
Spread / Average Target 13%
EPS Revisions
Managers
NameTitle
Michael Thomas Fries Vice Chairman, President & Chief Executive Officer
John C. Malone Chairman
Charles Henry Rowland Bracken Chief Financial Officer & Executive Vice President
Balan Nair EVP, Chief Technology & Innovation Officer
Paul Alan Gould Independent Director
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