Liberty Global faces ‘speed bump’ in UK, but long-term growth prospects good

Liberty Global CEO, Mike Fries

Liberty Global remains committed to the UK market and remains confident about its long-term growth prospects despite hitting a “speed bump” that had contributed to share-price volatility recently, according to president and CEO Mike Fries.

Speaking to investors at the company’s annual shareholders meeting, Fries said that after averaging 20% return on equity for the last eight years, “there has been more volatility in our share price than we’re used to and like you we do not like it”.

Fries said that some of the volatility was related to the UK market. He said Virgin Media had outperformed the sector, but that it had not met expectations for various reasons.

Fries said the conditions that had led to the business delivering a positive return largely continue to exist today “with the exception of Brexit, of course…and movements in inflation and consumer discretionary income”.

He said that shareholders had got “a little skittish” about the UK market. He said that the business continued to grow, and this is what investors should focus on. He said that Liberty Global was a relatively heavily leverged business, which contributed to shares volatility on the downside as well as on the upside.

“We are about creating value over the long term and…nothing has changed our view,” he said. He said he believed the UK remained a healthily competitive and “rational” market.

“I would characterise this as a speed bump,” he said, rather than a major obstacle to growth.

Answering a question on Brexit, Fries said that there had been “no direct impact as such” but that the economic indicators were moving possibly in the wrong direction to some extent, with inflation up and discretionary spending down. He said Liberty wanted to “give people more for more”, increasing prices as it improved its offering.

Fries said that Virgin Media is “not hunkering down or playing defence”. He said it was investing in products and delivering higher speeds, was investing in quad-play through building a substantial mobile play, was focusing on realising efficiency and “most important, expanding our footprint” to reach an additional homes.

Fries said that there had been good results through to the end of Q1 from Project Lightning, the Virgin Media network expansion project, with higher RGUs and new customers.

Fries said that Liberty Global had “retooled” the project following problems that had let to the number of homes connected being overstated at the start of this year, and changed management where necessary, as well as revising the company’s go-to-market approach. He said that penetration in new build areas was meeting expectations.

Fries said that Liberty Global has continued to grow in other European markets.

Referring to Liberty’s plans in the Latin American and Caribbean market, where it has acquired Caribbean operator CWC, Fries said that the company had revamped CWC’s management and turned things around quickly. He said he was still hopeful that the overall Latin American business could be spun off by the end of this year. The company is currently traded via a tracking stock.

Fries said that there would be considerable opportunities to grow in the Latin American and Caribbean region through acquisition, and having a separate stock market listing would enable this. He said that there would nevertheless be close cooperation between the Latin American business and Europe, particularly over things such as procurement.

Answering a question on CWC, Fries said that “the business that was handed over to us” wasn’t quite as promised, and Liberty had to restate some of its accounts. “It is a complicated business. We love the underlying opportunity,” he said, in a region with low broadband penetration.

Fries said that Liberty had always been focused on creating long-term shareholder value, despite short-term issues.

He said that Liberty was capable of innovating at a speed that would keep it ahead of the competition. He said Liberty Global was on track to continue delivering cash after 48 straight quarters of continued cash-flow growth.