Report
Allan C. Nichols
EUR 850.00 For Business Accounts Only

Morningstar | LBTYA Updated Forecasts and Estimates from 11 Apr 2019

Liberty Global is the largest cable operator in Europe. All else equal, we prefer cable operators to telephone companies because cable companies have fiber deeper into their networks. The fiber and coax cable system used by cable operators to enter customers' homes allows faster broadband connections than copper and is easier to upgrade. Liberty Global has succeeded in using its faster broadband network (often in excess of 200 Mb/second) to gain subscribers. These are often triple-play customers subscribing to pay television, broadband, and fixed-line telephony, which generate higher average revenue per user.Phone companies are fighting back by laying fiber further into their own networks and with copper's increasing ability to handle faster speeds with newer technologies, such as VDSL and vectoring. These are also discrete connections rather than the shared connections of a cable system, which can slow significantly from headline speeds when everyone in the neighborhood uses them. The phone companies also have superior wireless networks--an area Liberty is increasingly entering. While turning an existing customer into a quad-play subscriber should add incremental value, it also makes the subscriber think about which network is the most important.Historically, we were pleased with the firm's acquisitions and think it has built an impressive European network. However, we think the acquisitions of Virgin Media in the United Kingdom, Ziggo in the Netherlands, and Cable & Wireless Communications in the Caribbean (now part of Lilac) were at high multiples that reduced Liberty's ability to earn a good return on investment. However, Ziggo has consolidated the Dutch market, and with the just-completed merger with Vodafone’s Dutch business, it has created a very strong competitor to incumbent KPN. That said, the 50/50 joint venture will not be consolidated by either company. More recently, Liberty has started unwinding its business. First, it spun off Lilac, its Latin American business. Then it sold its Austrian business to Deutsche Telekom. Now it has agreed to sell its German, Romanian, Czech, and Hungarian operations to Vodafone.
Underlying
Liberty Global Plc Class A

Provider
Morningstar
Morningstar

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.

Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.

We have operations in 27 countries.

Analysts
Allan C. Nichols

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