Scale, Organic Growth, Levered Equity Driving Liberty Global

Scale, Organic Growth, Levered Equity Driving Liberty Global by Greg Speicher.

Notes from Liberty Global Annual General Meeting of Shareholders – Thursday, June 26, 2014

• Value creation drivers (all thriving in Europe)
  • 1.) scale in core markets
    • benefiting from fragmented market
    • favorable regulatory environment
    • winning share from larger telco incumbents
    • scale aids technology procurement (set top boxes), content acquisition, leveraging services & human resources
    • Virgin Media and Ziggo acquisitions were based on building scale
      • substantial synergies to be realized
  • 2.) organic growth
    • targeting mid-single digit growth in revenue and operating income
    • Europe has low penetration of advanced services
    • Liberty Global’s bundles are attractively priced and over best-of-breed offerings in video, broadband
    • 1ooMbps broadband speeds anchor bundles and organic growth
    • declining video losses from advanced digital platform
    • growth will require continued innovation
      • Horizon TV
        • Horizon generates 30% more ARPU
        • 20% less churn (vs. avg. digital customer)
      • mobile and B2B businesses
        • expects increased demand for quad plays
        • Wi-Fi hot spots and Wi-Fi calling technology
        • SOHO segment growing over 20% annually
    • content
      • with large video and broadband base makes sense to evaluate how select investments in content can help maintain and grow customers
      • All3Media JV partnership with Discovery Communications
      • 50% stake in De Vijver Media, Belgian free-to-air station
      • More content deal/investments to come, particularly in the OTT space
      • SVOD services, such as MyPrime, designed to get ahead of rising OTT threat (Malone is on record as thinking U.S. cable industry was slow to respond to SVOD threat.)
  • 3.) Committed to growing FCF per share (levered equity capital structure)
    • managing capital intensity
    • optimizing balance sheet
    • using excess cash to repurchase shares
      • asset they know the best (circle of competence)
    • best way to drive equity returns for shareholder