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Liberty Global Poised for Long-Term Growth, Risks Persist

On Nov 23, 2015, we issued an updated research report on U.K. cable TV behemoth Liberty Global plcLBTYA .

The company reported mixed financial results in the third quarter of 2015, wherein the bottom line steered past the Zacks Consensus Estimate, while the top line missed the same.

We believe that the long-term fundamentals of the company are quite intriguing as it is gradually establishing a strong foothold in the European cable MSO market.

Recently, Liberty Global equipped itself with ARRIS Touchstone TG2492 Gateway to support its high-speed broadband internet and streaming services. The device was jointly developed by Liberty Global, ARRIS Group Inc. ARRS and Compal Electronics of Taiwan. The gateway is expected to provide Liberty Global a platform to offer more innovative media and IPTV services.

Moreover, Liberty Global has reached an agreement to buy Caribbean cable operator - Cable & Wireless Communications Plc. - for approximately $8 billion, including debt. Notably, subject to necessary conditions and approvals, Liberty Global expects the deal to close in the second quarter of 2016. We believe the acquisition of Cable & Wireless will allow Liberty Global to offer the much desired quad-play bundled services, thereby broadening its presence in the Caribbean and Latin American region.

In Jul 2015, UPC Ireland, a subsidiary of Liberty Global decided to pay €80 million for the acquisition of free-to-air Irish TV broadcaster TV3 from private equity firm Doughty Hanson. Notably, in recent years, Liberty Global has been extensively investing in the Irish market. We believe that the TV3 acquisition will further help the company put a check on subscriber churn in Ireland.

Liberty Global has been aggressively rolling out Wi-Fi across its entire footprint. Presently, the company has 6 million Wi-Fi spots across 9 of its European markets, and expects to have about 10 million by early next year. Thus, by combining its fixed network with a mobile strategy centered on full MVNOs and Wi-Fi, the company aims to deliver fast, seamless, and superior connectivity to its customers.

However, a failed merger negotiation with Vodafone Group Plc VOD after both the companies failed to reach an agreement on valuations in Sep 2015, is a major setback.

Meanwhile, significant foreign exchange rate risks may further result in volatile top-line and EBITDA growth. Moreover, saturated demand in European markets and a highly leveraged balance sheet remain potent headwinds.

Liberty Global currently carries a Zacks Rank #3 (Hold). A better-ranked stock in the sector is Salem Media Group, Inc. SALM , with a Zacks Rank #1 (Strong Buy).

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ARRIS GROUP INC (ARRS): Free Stock Analysis Report

LIBERTY GLBL-A (LBTYA): Free Stock Analysis Report

VODAFONE GP PLC (VOD): Free Stock Analysis Report

SALEM COMM (SALM): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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