ii view: Liberty Global results match expectations

by Keith Bowman from interactive investor |

The telecoms giant is returning up to $2.5 billion to shareholders. But what about the rest?

Second-quarter results

  • Operating income down 43.7% to $148.7 million 
  • Confirmed all 2019 guidance targets

Chief executive Mike Fries said:

"Earlier this year we laid out our strategic and operating priorities for 2019, and I'm pleased to report that we are making substantial progress across the board. In July, we completed the sale of our operations in Germany, Hungary, Romania and the Czech Republic to Vodafone for $21.3 billion, and our transaction to sell our Swiss business for $6.3 billion remains on track for the end of this year. With the net proceeds from these deals, all valued at double-digit OCF multiples, our pro forma cash balance will be over $14 billion."

ii round-up:

Liberty Global (NASDAQ:LBTYA) is a major European cable network operator with operations in the UK, Ireland, Germany and the Netherlands. Its consumer brands are Virgin Media, Telenet and UPC.

Its networks connect 11 million customers subscribing to 25 million TV, broadband internet and telephony services. Liberty also serves 6 million mobile subscribers. 

In late July, Liberty sold its operations in Germany, the Czech Republic, Hungary and Romania to Vodafone (LSE:VOD) for $21.3 billion. Plans to sell its Swiss business for $6.3 billion remain on track.

The broadband provider's second-quarter results materialised in line with analyst forecasts. 

Liberty intends to spend up to $2.5 billion, or 20% of its of Vodafone deal proceeds, on an upcoming tender offer.

ii view:

Following its business disposals, a cash balance of over $14 billion is about three-quarters of Liberty's market capitalisation, and there'll be plenty left even after the planned tender offer.

Working in what is a highly competitive and capital intensive industry, selling a chunk of its European operations is a huge achievement and leaves management free to concentrate on developing the remaining business. But for investors, the focus now will be on how Liberty spends its windfall. It must put that money to work in the right way and avoid making any value destroying acquisitions. Most likely it will bide its time and eventually return further cash to shareholders.

Positives: 

  • Highly recognised Virgin Media brand
  • Returning cash to shareholders

Negatives:

  • Reduced geographical diversification 
  • It might make a value destroying acquisition

The average rating of stock market analysts:

Buy

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