Add Liberty Global to the list of major pay-TV providers in the western world that chalked up a third quarter they would much sooner forget.
Liberty Global Inc. (Nasdaq: LBTY), the world's largest international pay-TV and broadband provider with operations in 30 countries, reported lower operating income for both its European and Latin American and Caribbean operations on a year-over-year basis in the summer quarter. For Liberty Global Group, the company's European division, operating income fell $227 million, or 23.7%, to $537 million. And for LILAC, the company's Latin American and Caribbean unit, operating income plunged $340 million to a loss of $202 million.
Liberty Global registered the lackluster operating income numbers despite eking out small total revenue increases in Europe and flat results in Latin America and the Caribbean. Operating cash flow declined for both divisions, due largely to unfavorable foreign exchange rates, Liberty's new joint venture with Vodafone Netherlands in the Netherlands and hurricane damage in Puerto Rico and elsewhere in the Caribbean that is still being toted.
With Hurricanes Irma and Maria combining to wreak at least $22 million worth of damage on Liberty Global facilities in the Caribbean, and likely much more once the final reckoning is done, the company lowered its financial guidance for the unit for the year. It now expects to report operating cash flow of $1.35 billion for LILAC, down from its earlier guidance, as well as negative adjusted free cash flow for the year.
Despite these setbacks, Liberty Global CEO Mike Fries stressed that the company still expects to go ahead with its planned spinoff of the LILAC division around the end of the year. He also played up the company's announcement earlier this week that CTO Balan Nair will take over the LILAC Group as president and CEO. "He will add tremendous value and focus, especially as we manage through the damage from Hurricanes Maria and Irma," Fries said.
Like its counterparts in the US, Liberty Global also saw higher video subscriber losses and lower broadband subscriber gains overall in the third quarter. The European unit lost 30,800 video customers, up from 19,300 a year earlier, and added 132,900 broadband subs, down from 163,700 a year earlier. The Latin American unit shed 3,900 video subs, reversing a gain of 4,600 a year ago, but added 34,700 data customers, up from 29,500 a year earlier.
However, Liberty Global did report some bright spots as well. Most notably, the MSO extended its HFC plant to 310,000 homes in Western Europe, including 147,000 premises in the UK as part of Virgin Media's reinvigorated Project Lightning initiative there. Over the first nine months of the year, Liberty Global has now added more than 800,000 homes passed to its European footprint, with the lion's share coming in the UK courtesy of Project Lightning. (See Liberty Global Claims UK Turnaround.)
Thanks in large part to this ambitious new-build program, Liberty Global added 204.400 revenue generating units (RGUs) in Europe during the summer quarter, boosting its year-to-date total to more than 600,000 new RGUs. But this RGU gain still represents nearly a 24% drop from the 267,800 RGUs that the company netted a year earlier. The company blamed the decline on lower subscriber additions in Belgium, Germany and Central and Eastern Europe.
— Alan Breznick, Cable/Video Practice Leader, Light Reading