On Oct 8, we issued an updated research report on Liberty Global plc (LBTYA). Liberty Global reported weak second-quarter 2014 financial results, wherein both its top and bottom line missed the Zacks Consensus Estimate.
In the coming years, we believe, Liberty Global’s revenues will continue to benefit from a ‘triple play’ of video, broadband, and telephone, as it signs up more “bundled” customers in Europe and Latin America. Liberty Global currently offers download speeds between 100 Mbps and 150 Mbps across most of its markets. The company plans to enhance download speed further by deploying the DOCSIS 3.1 technology in the upcoming quarters.
According to recent reports, Liberty Global is on the verge of receiving the European Union’s (EU) regulatory approval to acquire full control of Ziggo N.V. – the largest cable multi service operator (MSO) in the Netherlands. In Jan 2014, Liberty Global had reached an agreement to acquire a 100% stake in the company. At present, Liberty Global holds a 28.5% stake in Ziggo. Liberty Global will pay approximately $13.7 billion to acquire the remaining 71.5% stake of Ziggo, including its outstanding debt. The deal will be completed by the end of 2014 through a stock and cash transaction.
In Sep 2014, after receiving regulatory approval, Liberty Global and Discovery Inc. (DISCA) together sealed the acquisition of TV content producer All3Media for $1 billion. In May 2014, Liberty Global partnered with Discovery Communications to buy All3Media entirely.
Comcast Corporation (CMCSA) and Liberty Global plc – leading cable MSOs in the U.S. and Europe respectively – have formed an agreement to offer the industry’s first international WiFi roaming connectivity to their subscribers. The service will start on a trial basis in late 2014 and will be offered commercially from 2015. Comcast has more than 3 million WiFi hotspots across the U.S. while Liberty Global has installed over 2.5 million WiFi home spots in various European countries like Belgium, the Netherlands, Ireland, Poland and Switzerland.
On the flip side, Liberty Global continues to lose customers for its basic video offerings. In the second quarter of 2014, the company lost 72,000 video customers. Several European broadband service providers are gradually deploying high-speed DSL and Fiber-to-the-Home networks, making the industry extremely competitive. Further, we expect more cash-strapped consumers to downsize existing services, resulting in churn in the company’s subscriber base.
Liberty Global currently carries a Zacks Rank #4 (Sell).
Stock that Warrant a Look
A better-ranked stock worth reckoning in the sector is Cablevision Systems Corporation (CVC), with a Zacks Rank #2 (Buy).
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