You know something is wrong when you have to put lots of index marks in your first paragraph to explain your results, and Liberty Global did its usual, citing rebased Operating Cash flow and excluding Ziggo from its numbers to gloss over a poor 2016 that left many questions. However, you have to have some sympathy with a company that reports in dollars, and has much of its revenue in other currencies, and a big chunk of it in the UK where Brexit has made a joke out of the British Pound.
One answer that Liberty Global definitively found was to merge its underperforming Netherlands subsidiary Ziggo with Vodafone and drop it out of the headline figures. Ziggo proved a problem deal for the company, and it needed the Vodafone cellular services to provide a pick-me-up that may hit its numbers by this time next year.
But rebased growth, means picking your own comparisons, and we continue to be concerned with a company that did $12.6 million less revenue than last year and still wants to describe it as revenue growth.
Down among the subscriber numbers we see the Netherlands has fallen 96,000 video subscribers from the year ago figures, to 3.99 million, down 16,900 from last quarter; while broadband is up just 31,000 from the year ago figure, but mysteriously recorded as up 55,800 from last quarter – perhaps it went down in between. The Netherlands is best hid, and especially in a transaction that threw off $3 billion of cash for Liberty Global in the process making its net debt figure much healthier.
In total, across Europe it ended 2016 with 18.5 million video homes and 14.33 million broadband homes, so it has millions of homes to push broadband at, and will continue to drive RGU growth for a while yet, especially since it has built out more cable in some countries, notably in the UK, so it has some greenfield areas. There are another 1.7 million video homes in the LiLac countries in Latin America and the Caribbean, and another 2 million broadband lines, with roughly half of each in Chile.
However, video was down in Western Europe (about 35,900) with the exception of the UK and Switzerland, and up in the Eastern European countries (around 35,200) and up everywhere in broadband with the anomaly of Ireland. It netted out the video figures as down 24,400 video subs in the quarter after taking away the Netherlands.
When Liberty Global took out its ailing Netherlands operation and unraveled currency effects, it claimed this was its best quarterly result in two years with 7.5% growth. Investors liked the story and stayed in the stock for a small lift in share price. Much was made of the sale of the Netherlands and the acquisition of Multimedia Polska, and the earlier deal buying Cable and Wireless and we have to agree, they were all very good deals. We expect to see more of the same – merging with cellular where it can in older territories and buying up small additions in cable in emerging markets.
The company promised to buy into DOCSIS 3.1 towards the end of 2017, which is sure to make investors wince on the capex front, but it is a move that needs doing sometime. The company also said that its next-generation TV platforms (which include Horizon TV, Horizon-Lite, TiVo and Yelo TV) organically added 1.2 million subscribers in 2016 and it ended the year with 6.7 million next-generation subscribers, around 38% of its video base. Funnily enough that was pretty much the precise prediction Faultline Online Reporter made in our 2011 OTT report, when we forecast Horizon class set tops in Europe, which are advanced hybrid OTT set tops.