Cable Tech

COVID-19 stings Liberty Global financials

Joining the growing list of service providers around the world to feel the impact of COVID-19 on its finances and operations, Liberty Global reported lower operating cash flow and slightly lower revenues for the first quarter as it suffered customer losses in three of its four major markets.

Fresh off sealing its deal to merge its UK operations with those of Telefonica, the European cable giant reported late Wednesday that its total revenue came in at nearly $2.88 billion in Q1, up 0.3% from the year-ago period but down 0.3% on a rebased revenue basis. Revenue declines by its UK/Ireland, Belgium and Switzerland units more than offset a revenue increase by its Central and Eastern European operation (Poland and Slovakia).

More notably, Liberty Global's operating cash flow (OCF) took a hit in Q1, slipping to $1.15 billion, down 3.6% on a rebased revenue basis. The MSO blamed the decline largely on COVID-19 because the virus-induced cancellation of professional sports league seasons in Belgium and Switzerland prompted the company to expense rights fees for those leagues earlier than expected.

But Liberty Global's operating income still jumped to $280.6 million in the winter quarter, up a whopping 166% from the year-ago period. The company credited the huge increase to a decrease in depreciation and amortization expense, lower impairment, restructuring and other operating items, lower OCF and a decrease in share-based compensation expense.

Despite the quarterly revenue and OCF declines, Liberty Global executives said their balance sheet "remains in great shape" with over $10 billion of liquidity. The company also aggressively continued to carry out share buybacks, spending nearly $500 million from mid-February until the end of April to acquire nearly 29 million shares.

As a result, unlike its Liberty Latin America offshoot and some other service providers, Liberty Global is not modifying or withdrawing its earlier financial guidance for the year.

"We are still assessing the medium-term impact from the COVID-19 crisis on our financial guidance and expect to update investors on our second quarter earnings call," Liberty Global CEO Mike Fries wrote in his quarterly note to shareholders. "For now, however, we remain encouraged by our operating prospects and do not currently see the need to change or suspend our full-year guidance."

Turning to customer metrics, Liberty Global reported shedding 18,900 customer relationships in the quarter, markedly more than the 2,000 it shed a year ago, as it lost subscribers in every unit except the Central and Eastern European one. Subscriber losses were heaviest in Switzerland, its weakest market, where it lost 16,000 customer relationships. But that still marked an improvement from the year-ago period, when it lost 24,000 Swiss customer relationships.

These losses came despite a gain of 22,000 broadband subscribers across its territories. Liberty Global dropped 73,900 video subs and 52,800 voice subs during the period, more than offsetting those broadband sub gains and bringing its total loss of revenue generating units (RGUs) to 104,000 for the quarter.

Like its cable counterparts around the globe, Liberty Global has seen the traffic over its networks surge since the pandemic hit three months ago. On the MSO's earnings call this morning, Fries said downstream traffic has climbed more than 20% across the company's footprint while upstream traffic has shot up 50%.

But Fries, like cable executives elsewhere, said Liberty Global's networks have proven to be up to the test so far and have "readily absorbed" the traffic surges. "Our recent investments in infrastructure, gigabit speeds and connectivity products have proven invaluable to our customers," he wrote in his letter.

— Alan Breznick, Cable/Video Practice Leader, Light Reading

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