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Liberty Global Revenue Slump Deepens

Alan Breznick
11/7/2019

Dragged down by much higher video subscriber losses, especially in its UK home market, Liberty Global suffered cable revenue declines across the board in a lackluster third quarter.

The European cable giant reported late Wednesday that its total revenue fell to $2.84 billion in the summer quarter, down 3.0% from the year-ago period, or 0.6% on a rebased revenue basis. Both residential cable services and business services contributed to the overall revenue dropoff.

In one bright spot, Liberty Global's operating income from continuing operations rose 1.8% a year-over-year basis to $208.8 million. But its operating cash flow slid 5.7%, or 4.1% on a rebased basis, to $1.2 billion.

The MSO's performance was particularly poor in its UK home market, which had been a shining star for the company until earlier this year. In the UK and Ireland, Liberty's Virgin Media unit shed 52,700 revenue generating units (RGUs) during the third quarter, reversing a gain of 105,300 RGUs in the year-earlier period, as video subscriber losses piled up. In the UK alone, the cableco lost 57,100 video customers, which accounted for the vast bulk of its video sub losses across all regions.

Liberty Global executives attributed the higher video sub losses in their home market to a "disciplined approach to customer acquisitions and retentions and a shift in focus to higher-value TV bundles." In contrast to the heavy video sub decline, Virgin Media's broadband business added a modest 5,000 RGUs, while its dwindling telephony operation lost another 9,000 RGUs.

"While, like everyone in the sector, there are challenges to navigate in the short-term, we have the vision, strategy and tools to strengthen our position as a competitive force in the marketplace and will continue to offer consumers the very best connectivity and TV," said Virgin Media CEO Lutz Schüler in a prepared statement.

Liberty Global's losses were not limited to the British Isles, though. The company also lost 36,000 RGUs in Belgium and 14,100 RGUs in Switzerland as its video subscriber losses continued to mount in both countries. But, in a hopeful sign for the future, both countries sustained smaller sub losses than in the year-ago period.

Liberty Global saw particular progress in Switzerland, where the company slashed its subscriber losses from 41,500 RGUs a year ago. Company executives did not indicate any renewed plans to sell their Swiss unit after an earlier deal with Sunrise fell through because of opposition from both key investors and regulators.

"While we are disappointed that Sunrise was unable to obtain approval for the financing of their acquisition of our Swiss operation, we are excited with the progress we continue to make in that market," said Liberty Global CEO Mike Fries. "Like the rest of Europe, Switzerland is rapidly converging around fixed-mobile services, and our gigabit broadband networks and superior TV platform are the fulcrum assets in that market."

In one other bright spot, Liberty Global continued to rack up subscriber gains in its Central European region. Building on similar gains last year, the MSO's Polish and Slovakian systems combined to net 26,500 RGUs, with the Polish unit accounting for the bulk of them.

In response to the earnings report, Liberty Global's share price was down nearly 2.5% to $24.42 in early afternoon trading today on the Nasdaq Exchange.

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

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