A leading cable operator in Europe, Latin America and
Liberty Global Inc.
) plans to bid for UK's leading pay-TV service provider
Virgin Media Inc.
) in the upcoming days as reported by the Financial Times.
The UK telecom market is extremely competitive with low
barriers to entry. Since its inception, Virgin Media incurred
annual losses until till 2010. Precipitous losses may create
severe problems for the company going forward. The UK government
raised the value added tax (VAT) in January 2011. Virgin Media
may not be able to pass the full amount of the increased VAT to
its customers as it may affect the company's ARPU in the near
Liberty Global initiated its business restructuring process
back in 2010. The company is currently concentrating primarily in
Europe and Latin America while divesting operations in other
parts of the world. Germany is one of the major growth areas for
Liberty Global, where it has completed two major acquisitions.
The company acquired UnityMedia GmbH and Kabel Baden-Wuerttemberg
GmbH & Co KG, the second and the third largest cable TV
companies in Germany, respectively.
Few days back, Liberty Global also raised its stake in its
integrated telecom Belgian subsidiary, Telenet to 58.4% from its
existing 50.2% stake.
Western Europehas emerged as a lucrative market for the cable
operators. These markets are witnessing growing demand for pay-TV
services together with triple-play bundled services, which
combine basic cable TV, Internet, and telephony. In the coming
years, we believe Liberty Global's revenue will continue to
benefit from a 'triple play' of video, broadband, and telephone,
as it signs up more "bundled" customers in Europe.
Moreover, deployment of high-speed DOCSIS 3.0 network has
facilitated the company to narrow the gap between two hugely
dominated UK's pay-TV markets Virgin Media and
BT Group plc.
).Furthermore, Liberty Global has recently launched a hybrid IP
video gateway called "Horizon TV" in the Netherlands. This
innovative IP gateway will combine the cable operator's video
services with web-based content through an integrated cable
modem. Horizon runs on
) Atom CE processor.
However, we remain concerned about the company's highly
leveraged balance sheet. With more than $26 billion debt
appearing on its balance sheet at the end of the third quarter of
2012, may act as a bottle neck for its future acquisition
Currently, Liberty Global has a Zacks Rank #3 (Hold).
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