Liberty Global sees ‘some logic’ in Benelux combination but major challenges stand in way

Liberty Global sees “some compelling logic” in a combination of Belgian operator Telenet and its Dutch JV VodafoneZiggo, according to CEO Mike Fries, although such a combination is probably too complex to happen any time soon.

Speaking online for a Bank of America Securies Telecom & Media Conference, Fries said there was “some compelling logic to a Benelux rollup” joining VodafoneZiggo with Telenet. However, “there are a lot of moving parts” and it is “difficult to speculate” on that currently.

Fries said that he had recently had a conversation with EC EVOP and digital commissioner Margarethe Vestager had said “she would love to see more cross-border mergers” in the EU which was “an interesting observation” although she hadn’t specified whether this could apply to the telecom sector.

On Liberty Global’s JV with Vodafone in the Netherlands specifically, Fries said that VodafoneZiggo was now performing well and was now the largest retail player in the market. “It’s a great business and we would love to own more of it; we are happy to own half of it,” he said. He said that “over time” there could be a transaction one way or the other.

Turning to Switzerland, Fries said that this was taking up a lot of Liberty’s attention currently. He said that as a standalone business, UPC Switzerland could delvier free cash growth, which is now very important for public companies.

“There are going to be ups and downs between competitors,” he said.

Fries said neither Salt nor Sunrise were “particularly anxious” to kick off negotiations about consolidation currently “and why would they be?”.

The ownership of Belgium’s Telenet and the Netherlands’ VodafoneZiggo combined with the forthcoming combination of Virgin Media with Telefónica’s O2 means that Liberty’s three biggest assets will be no longer wholly owned. “We have to find a way to crystallise value for our investors,” said Fries. Having a portfolio of publicly listed entities – even at the expense of Liberty Global’s own share value – could bring benefits because individual countries “love to see national champions”, he said.

“If we end up down the road with some listed vehicles, that is not a bad thing,” he said. A discount on Liberty Global as a holding company, which is undervalued, would not be a compelling reason to reject that idea, he said.