Liberty Global 'Reboots' Project Lightning
Three years into its massive UK cable new-build project, Liberty Global has overhauled the management team for the project and is putting its foot squarely on the brake, at least for the short term.
Liberty Global Inc. (Nasdaq: LBTY) CEO Mike Fries discussed these moves to revamp the company's much-ballyhooed Project Lightning initiative during Liberty Global's first-quarter earnings call on Monday. He also revealed that the large international MSO has changed its practices for dealing with private contractors and local public officials because of problems that its Virgin Media unit has encountered with construction in a number of communities.
But Fries said that Liberty Global will only slow down Project Lightning's progress for the short term, not halt or scale back its ambitious £3 billion ($3.9 billion) construction effort. He insisted that the cableco remains firmly committed to extending Virgin's HFC lines to another 4 million UK homes by the end of the decade, although he conceded that the effort may now take about a year longer than originally planned. (See Liberty Global Reveals Next-Gen Plans.)
"This is a bump in the road but by no means a detour or a change in direction," Fries asserted. "This is a massive investment and a massive construction project... So it's more important for us to get it right for the next three years."
Liberty Global is taking these steps after reporting disappointing revenue, earnings and operating cash flow results for the first quarter and cutting its financial targets for the whole year just four months into 2017. The company blamed its lower than expected results on several factors, including aggressive price discounting, declines in mobile sales, construction delays for Project Lightning and cable customer service issues. (See Liberty Global Cuts Targets on UK Weakness.)
On the earnings call yesterday, company officials admitted that it also didn't help that Virgin hit up its customers for two price hikes in the past year. "In hindsight, that was too aggressive," said Virgin Media CEO Tom Mockridge, noting that cable churn rose after the second price increase.
Liberty Global executives stressed that they have taken strong steps to correct the problems that caused the company to overstate its cable subscriber totals by 142,000, an issue that it disclosed to investors in February. For one thing, they have named a new Project Lightning management team, headed by CTO and SVP Balan Nair and SVP and Chief Transformation Officer Dana Strong. For another, they have slowed down the new-build program until the new team can make needed changes. In addition, they are adopting a new set of "best practices" for managing private contractors and working closely with local authorities.
"This was merely a matter of blocking and tackling on a construction project," Fries said, noting that the company is managing 31 construction partners and only discovered the faulty subscriber reporting issue after it accelerated its already aggressive cable new-build program earlier this year. "But we've already course-corrected it… I feel really good about the changes we've made."
Promising better news in the future, Fries said Liberty Global will offer an update on its Project Lightning progress in its second quarter earnings report this summer. "We are now at a new level of execution," he told analysts on the call. "Leave it to us."
Notably, though, following the embarrassing disclosures about its construction and reporting problems, Liberty Global doesn't plan to be as forthcoming about its financial guidance and construction targets in the future. "We're focusing on execution, not conversation," Fries said.
— Alan Breznick, Cable/Video Practice Leader, Light Reading