Shrugging off concerns about Brexit and its heavy debt load, Liberty Global is adding more broadband subscribers and cutting its video customer losses as it expands its European reach, boosts data speeds and rolls out more advanced video products.
In its second-quarter earnings release late last week, Liberty Global Inc. (Nasdaq: LBTY) reported adding 277,000 overall customers excluding acquisitions in the spring period, up 80% from its Q1 results and just about double the amount it added in the year-earlier period. Most of that gain came in Europe, where it picked up 231,000 customers through such "organic" growth.
Liberty Global also reported that it activated or upgraded more than 500,000 additional homes in the second quarter as its Project Lightning initiative in the UK continues to ramp up. Under that ambitious capital upgrade program, the big international MSO aims to activate or upgrade a total of 1.5 million British households this year and 7 million by the end of 2018.
Not surprisingly, then, Virgin Media Inc. (Nasdaq: VMED) is leading the way for Liberty Global right now. As we reported on Friday, Virgin gained 56,000 overall customers in the second quarter, including 24,000 video subs, and connected 31,000 new homes, racking up its best spring results in eight years. (See Eurobites: Virgin Adds 24K Customers in Q2.)
"While Project Lightening is in full swing, I just want to point out that half of those customers came from our legacy footprint," Liberty Global CEO Mike Fries noted on the earnings call Friday, according to a transcript supplied by Seeking Alpha. "So, really, the best is yet to come from our new-build program."
Like most cable operators, Liberty Global continues to perform best in the broadband space. For example, in Europe, by far its biggest area, the company netted 160,300 data subscribers from organic growth, up 45% from a year ago. Those improved results were largely driven by big sub increases in the UK and the Netherlands, where the company just gained EU approval of its merger with Vodafone Netherlands . As a result, the MSO now boasts more than 17 million broadband subscribers across a dozen European nations, including 4.8 million in the UK and 3.1 million in the Netherlands. (See Eurobites: Nokia Plans More Cost Savings.)
With a strong focus on broadband growth, Liberty Global is now boosting its max speeds across its territories as it prepares for the rollout of DOCSIS 3.1, which will easily enable download speeds of 1 Gbit/s or greater. Using the older DOCSIS 3.0 standard, the MSO is now offering speeds as high as 500 Mbit/s in some markets, much faster than telco DSL speeds although still not as fast as fiber-enabled data rates.
In contrast with broadband, video remains a much tougher market, due to stiffer telco and satellite TV competition and continued consumer cord-cutting. But, in a victory of sorts, Liberty Global did manage to cut its video sub losses in the second quarter. Taking Europe as an example again, the MSO shed 72,000 basic video customers, an improvement over the 111,000 it shed a year ago, as nine out of its 12 markets reported better results.
Perhaps more notably, Liberty Global expanded its next-gen video subscriber base in the quarter, adding 304,000 TiVo, Horizon TV and Yelo TV subscribers to boost its grand total to more than 7 million. In particular, Virgin Media continued to score with its TiVo product, adding 66,000 subscribers to scale the 3 million mark. Thanks to these gains, an impressive 82% of Virgin's video customer base now subscribes to the TiVo service.
The company is counting on further next-gen video gains later this year as it keeps rolling out its TV Everywhere service, Liberty Go, and starts to deploy its new universal Eos set-top box across Europe. That new set-top will enable the MSO to offer 4K/UHD service.
In a regulatory filing late last week, Liberty Global warned that the UK's recent vote to leave the European Union could hurt its business. But, on the earnings call with analysts, Fries mostly shrugged off those concerns.
"While we favor stability and regulatory certainty, we're not actually that worried at all about the future here," Fries said. "We've seen no slowdown in our sales levels in the UK. Consumers are the ones that matter. Actually we're up year-over-year."
Nevertheless, Liberty Global, which is now weighed down with more than $50 billion in debt from its continuing acquisition spree, lowered its financial guidance for operating cash flow and other key metrics in Europe for the rest of the year. However, the company kept its longer-term targets intact. "We have always indicated that the first half of 2016 was really an investment period where we'd be laying groundwork for next year and 2018," Fries said.
— Alan Breznick, Cable/Video Practice Leader, Light Reading