Liberty: losses widen as Horizon/TiVo growth continues

November 6, 2013 08.29 Europe/London By Chris Dziadul

horizon_screen_appsLiberty Global ended October with over 365,000 Horizon TV subscribers in the four markets the service was present in.

The Netherlands, where it was originally launched, accounted for over half of the total (200,000), followed by Switzerland (110,000), Ireland (30,000) and Germany (25,000). At the same time, TiVo, available through Virgin Media in the UK, is now firmly established among its subscribers: as of the end of Q3, it had over 1.8 million customers – 165,000 more than three months earlier and now approaching a penetration rate of 50%.

Looking at its West European operations, Liberty Global says it performed particularly well in the Netherlands and UK in the third quarter.

In the former, in gained an additional 8,000 RGUs, its best result since Q2 2012, helped by the enhancement of its triple play offers.

In the latter, the RGU loss of 7,000 in Q3 compared to the loss of over 30,000 in Q2, while superfast broadband penetration rose to 70%. RGU additions were also up in CEE in Q3 (+49,000), compared to 9,000 the previous quarter, driven by 29,000 in both Hungary and Romania.

Liberty Global now offers internet access of 100 Mbps or higher in most of its 12 European markets and expects this will help it grow its broadband penetration from the current level of 31%.

Overall, Liberty Global gained 314,000 RGUs in Q3 and 878,000 in the first nine months of the year.

The company’s revenues in the three and nine months ending September 30 were up by 74% to $4.4 billion (€3.26 billion) and 36% to $10.3 billion respectively compared to the same period a year earlier, driven principally by the acquisition of Virgin Media, completed officially on June 7.

Operating income rose by 3% to $522 million and 1% to $1.5 billion respectively over the same periods, while net losses attributable to shareholders were $830 million (three months) and $843 million (nine months respectively).

This compared to a net loss of $22 million (three months) and net earnings of $654 million (nine months) for the corresponding periods last year.

Commenting on the company’s latest set of results, Mike Fries, the company’s president and CEO, said: These results were driven by the continued appeal of our market-leading bundles, featuring the most advanced video and broadband services available. We’ve added over 870,000 subscribers YTD, with Q3 additions of 314,000 representing a 64% sequential increase over our second quarter RGU additions. In the U.K., penetration of our TiVo product is approaching 50%, while Horizon TV has been launched in four European markets, most recently in Germany and Ireland. On the broadband front, we’ve been substantially increasing maximum download speeds above 200 Mbps in many markets, and at the same time refocusing the feature bundles in most of our fall campaigns to include broadband tiers of at least 100 Mbps.”

“M&A highlights for Q3 include substantial progress on our Virgin Media synergy plans, and the recently announced sale of substantially all of Chellomedia’s assets (the “Chellomedia Sale”). With respect to Virgin Media, we now expect to achieve up to double our initial $180 million estimate of combined synergies for OCF and capital expenditures once the integration process is substantially complete. In addition, the Chellomedia Sale is expected to close in Q1 2014 and the resulting €750 million ($1.0 billion) in proceeds will provide us with increased flexibility to invest in more strategic content going forward.”

“Our balance sheet remains strong with long-dated, fixed maturities and $5.5 billion of consolidated liquidity before considering the $1.0 billion of proceeds to be received from the Chellomedia Sale. With an average long-term debt tenor of seven years, we have demonstrated strong and reliable access to the capital markets while lowering the average cost of our debt by 80 basis points over the last twelve months to 6.7%. We’ve also been actively returning capital to shareholders through stock buybacks with approximately $1.0 billion spent this year, including nearly $500 million in Q3 alone. As a result, we remain on track to complete our two-year target for $3.5 billion of buybacks by mid-2015.”

Commenting directly on the company’s net earnings/loss, Liberty Global says:“For the comparable three-month period, our net loss in 2013 is higher largely as a result of increased losses on derivative instruments, as well as higher interest and income tax expense. Our Net Earnings for the 2012 nine-month period are primarily a function of a $924 million gain on the disposition of our Austar interest in Q2 2012. Excluding this gain, the increase in our Net Loss during the 2013 nine- month period is largely due to higher interest and income tax expense, partially offset by realized and unrealized gains due to changes in fair values of certain investments.”