Value Investing

Liberty Global At Morgan Stanley TMT Conference Notes $LBTYK, $LBTYA

  • 2017 outlook calls for accelerated OCF growth of 6-7%
  • Topline drivers: New builds such as Project Lightning in UK, B2B growth, expanding mobile business
  • They are working to accelerate growth to 7-8%
  • Goal is to keep costs as flat as possible over next two years
  • Project Lightning is on track with regards to penetration and ARPU

Liberty Global

  • Looking for 30% unlevered returns on new builds
  • Targeting 40% penetration after 3 years in new builds
  • Quad play: still early days but ahead of U.S.; fueled by an incumbent in every market. Liberty has mobile launched in every market; the economic benefit is churn reduction. Each market is treated differently.
  • Preference is a full MVNO that maximizes control over customer relationship. They want to own the SIM card.
  • They have invested in making the WiFi experience in the home very good. This is very important to the customer.
  • 5G will take a while to be market ready. Not a priority for Liberty.
  • Video: Invested to make a multi-screen, beautiful interface available. Churn rate on Horizon is lower. Provides replay TV back seven days on TV and mobile devices. Apps like YouTube and Netflix run on the device.
  • No home runs in content in Europe. They look for smaller incremental content investments.
  • Guiding to $1.5 billion of FCF in 2017; this is the trough. More vendor financing in 2017. They expect FCF will grow in 2018 and beyond.
  • They have a lot of flexibility to scale back new builds if returns do not materialize making it low risk.
  • Project Lightning has not seen much of a response from BT.
  • There is recent progress in turning around Ziggo.

Article by Greg Speicher