Liberty Earnings: Fixed Market Sheds Subscribers While Mobile Shows Resilience; Buybacks Increased

Liberty Global LBTYA has kept executing price increases across its different businesses in the first half of the year to offset inflationary pressures. Like other peers, price increases have held up better in the mobile market than in broadband, where Liberty has lost around 60,000 subscribers. Mobile service revenue has grown by 4% to 5% for both Virgin Media O2 and VodafoneZiggo (Liberty’s two largest subsidiaries) in the first half of the year, while fixed service revenue is showing mixed trends with price increases being offset by customer losses. Video is the market where Liberty is losing more subscribers, having lost 2% and 4% of its subscribers year over year in the Netherlands and Belgium, respectively. Liberty has also increased capital expenditures in the U.K. and the Netherlands, where it is increasing investments in fixed networks to be better positioned for the long term. We are maintaining our $28 fair value estimate but remind investors that Liberty is a complex conglomerate. Its operational cash flows are in EUR, CHF, and GBP, its reporting and trading currency is USD, it contains consolidated divisions mixed with joint ventures, and its markets might experience different dynamics.

In the U.K., we support Virgin Media O2′s decision to reduce its headcount by 2,000 employees or around 10% of its workforce as telecom operators must be conscious of their cost bases given their struggles to grow the top line. Three months ago, BT Group also announced a long-term plan to reduce up to 55,000 roles in the U.K. Liberty maintained its 2023 financial guidance but has increased the allowance for share repurchases from 10% of shares outstanding to 15%, a decision we look favorably upon given the discount in the shares compared with our $25 fair value estimate. Liberty, which intends to take Telenet (Belgium) out of the stock market, has already acquired 93% of the shares, so we expect its tender offer to be successful.