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9 May 2019

Cracks emerge in Liberty pillars as TV escape plan lingers

Even the usually stalwart Virgin Media suffered hefty video subscriber losses in Q1 2019, as the state of flux at parent company Liberty Global threatens to further dislodge the European cable industry.

Liberty Global’s total video footprint suffered a decline of 52,800 subscribers during the quarter, with Virgin Media incurring a 24,300 decline across the UK and Ireland, dropping to a total base of just over 4.1 million. Indeed, the cord cutting saga in Europe seems minimal in comparison to recent pay TV losses at the US heavyweights but, as always, Europe eventually follows suit and Liberty Global looks to be playing its cards right by getting out of cable TV hard and fast.

Unitymedia saw declines of 15,400 video subs in the first quarter, falling to 6.27 million, while the UPC business in Central Europe experienced a loss of 13,100 video subscribers, dropping to 2.46 million.

Liberty Global is currently in the throngs of dispatching certain European cable assets, notably with the ongoing sale of the Unitymedia operations in Germany, plus UPC assets in Hungary and the Czech Republic to Vodafone, as well as reports of selling UPC Switzerland to local telco Sunrise.

It suggests Liberty Global’s Polish and Slovakian operations could soon be put up for sale and in turn implies it plans to inject most of its efforts into taking on the Comcast-led Sky business in broadband in the UK, hoping to maintain a tight ship in cable TV as the streaming prowess of Now TV gets a boost of US money. But with little in the way of OTT video, the Virgin Media TV business is in for a shock.

So, Liberty Global, the great cable superpower, could soon offload something close to 10 million video subscribers to Vodafone, along with a similar number of internet subscribers. We have continued to view the Unitymedia deal as highly unlikely to receive regulatory approval but that could all be about to change as Vodafone threw a spanner in the works this week (see separate story in this issue).

From Liberty Global’s nine territories, just three filed positive video subscriber data, with Poland leading the pack with 8,400 gains, while Slovakia added 1,300 and Ireland just 1,000. A drop in the ocean really, so the sale of these assets might also be on the cards as we mentioned.

After Virgin Media, UPC in Switzerland come in worst by region with losses of 22,800 in the quarter. Strangely, Switzerland was the only country where internet subscribers declined, waving goodbye to 14,100, while Virgin Media balanced the scales by performing best in broadband with 37,400 gains. Now 79% of Virgin Media’s broadband base subscribes to 100+ Mbps speed packages and, in March, Virgin Media launched Intelligent WiFi, a smart cloud-based, adaptive system designed to improve customers’ in-home WiFi experience.

CEO Mike Fries stated, “A year ago we announced the sale of our operations in Germany, Hungary, Romania and the Czech Republic to Vodafone, which represents the largest divestiture in company history. Since deal announcement we have crossed a number of key milestones and the European Commission is currently in the final stages of its review. We are confident that we remain on track for a successful completion of this transaction during the summer. With respect to the sale of UPC Switzerland to Sunrise, the Swiss Competition Authority is now reviewing the case,  having received formal notification and we anticipate regulatory approval in the fourth quarter. And finally, we are pleased to announce that the sale of our Eastern European DTH business was completed in early May. We will provide updates in due course regarding our capital allocation decisions with the total proceeds from these transactions.”