Author Topic: LBTYA - Liberty Global  (Read 213988 times)

scorpioncapital

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Re: LBTYA - Liberty Global
« Reply #600 on: March 28, 2019, 01:43:52 AM »
 ;D

Indeed! I remember Rick Rule who I really like to listen to when someone asked him about the safety of investing in a mine in BC Canada versus in Africa. His answer was killer. Paraphrasing but apparently the BC mine was expropriated in various sneaky ways in the 70s and 80s while the African mine ran smoothly and went on to earn a great return.
« Last Edit: March 28, 2019, 02:28:53 AM by scorpioncapital »


Spekulatius

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Re: LBTYA - Liberty Global
« Reply #601 on: March 28, 2019, 04:05:29 AM »
FWIW, I believe the sale will be approved with some caveats. What you are seeing is that a deal like this is more complex and all the stakeholders (employees, regulators, customers etc.) have an input and will be heard. You can call it socialism (which it isnít) but itís just how the sausage is made.
To be a realist, one has to believe in miracles.

scorpioncapital

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Re: LBTYA - Liberty Global
« Reply #602 on: March 28, 2019, 05:30:06 AM »
It depends on what remedies and if Vodafone accepts. Perhaps Global also has a say in it, perhaps it can separate the sales package. In other countries remedies have been no price increases for a fixed period of time. Or divesting another division. Or not combining x & y. I agree there is much room for negotiation. if the commission is worried that Vodafone's mobile business will provide synergies with the cable - a big reason Vodafone wanted to buy and Global sell, then if the EU suggests dis-synergies, it might not go down too well. If it is time limited, that may be easier to swallow. If it is permanent, then Vodafone may get cold feet.

scorpioncapital

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Re: LBTYA - Liberty Global
« Reply #603 on: March 29, 2019, 04:41:03 AM »

ander

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Re: LBTYA - Liberty Global
« Reply #604 on: April 02, 2019, 07:50:24 AM »
LONDON/BRUSSELS, April 2 (Reuters) - Vodafone(VOD) still expects to secure EU antitrust approval for its $22 billion purchase of Liberty Global's(LBTYA) assets in Germany and eastern Europe by the middle of the year, it said on Tuesday.

The world's second-largest mobile operator expressed its confidence after receiving the European Commission's statement of objections, which set out the watchdog's concerns about the deal.

Reuters reported on March 20 that the EU competition enforcer would warn the company about possible anti-competitive effects from the proposed deal. The Commission had previously voiced worries about the impact in Germany, the Czech Republic, Hungary and Romania.

"The Commission's statement of objections is an expected part of the review process. We will review the statement and continue our constructive dialogue with the Commission," Vodafone(VOD) said in a statement.

"We still expect to receive final approval in the middle of this year." (Reporting by Paul Sandle in London and Foo Yun Chee in Brussels Editing by David Goodman)


ander

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Re: LBTYA - Liberty Global
« Reply #605 on: May 21, 2019, 07:41:06 AM »
I have followed the company for a few years and have been a shareholder since last year. I spent the past couple of weeks re-doing my research on the company. I continue to like it and believe there is substantial upside, but I'd like to get feedback or be challenged or debate certain topics related to the company. It is of course not the most straightforward given the number of markets they are involved in - and maybe that's partially why the opportunity exists.

CapEx: the company uses OFCF which takes out the full amount of capex, but there are some puts and takes. IR has said maybe maintenance capex is 20-40%. They also look at % of revenue for capex spent. What do you assume is maintenance capex? What is the respective growth if you are excluding growth capex? What do you define as growth capex - passing new homes, upgrading the infrastructure (is upgrading growth capex or just maintenance)? Do you adjust your growth numbers downward? I am trying to get to a run-rate FCF number. They tout EV / OCF since that is what the market has done.

Project Lightning: Q4 '18 call they gave us a breakout of Project Lightning versus Rest of Business which is how they look at it internally and we can calculate what the Rate of Return on Capital for Lightning should be which is substantially above cost of capital. That's great and when fully up and running that could be additional $500 million or $600 million of OCF. But that would be incremental OCF of 25% or so to Virgin Media. What rate of return on capital are you calculating for Lightning?

Questions for thought (I don't expect any concrete answers): What do you think the end-game is here for Malone / Fries to realize the value (private market seems to value the assets substantially higher - likely because of synergies as well)? To exit Europe completely eventually with a sale - he hates paying taxes, so maybe some kind of tax efficient merger with Sky (Comcast) if that's allowed? Will he first finish Project Lightning? Maybe buy a UK MVNO?
« Last Edit: May 21, 2019, 07:49:27 AM by ander »

scorpioncapital

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Re: LBTYA - Liberty Global
« Reply #606 on: May 21, 2019, 11:40:37 AM »
I hope whatever they do, it will not be in the cable business unless it's in a strong relatively unregulated jurisdiction. Hard to find anywhere. An intelligent investor is one that can reallocate capital in new areas , not always what it did before.

ander

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Re: LBTYA - Liberty Global
« Reply #607 on: May 21, 2019, 01:41:33 PM »
I hope whatever they do, it will not be in the cable business unless it's in a strong relatively unregulated jurisdiction. Hard to find anywhere. An intelligent investor is one that can reallocate capital in new areas , not always what it did before.

I would assign low odds to anything that's substantial in size outside of the cable business or related areas.

WayWardCloud

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Re: LBTYA - Liberty Global
« Reply #608 on: May 21, 2019, 02:59:14 PM »
The original plan for Global was to capitalize on the growing integration of European countries which was back then thought as ineluctable.
Step 1 : They would buy cable systems here and there and get to compete with inefficient former state monopolies with an inferior product (copper), overweight complacent bureaucratic managements and paying a high dividend (because the country is often still a major shareholder and demands it).
Step 2 : Eventually unify them all together and crush competition through their sheer scale, quickly acquiring the dozens of sub-scale regional systems left around, once something like the United States of Europe would form.
They basically tried to replicate the US cable system history.

What actually happened
- It proved harder than expected to succeed operationally because management from incubants acted irrationally and started a race to the bottom. Mike Fries also couldn't handle it all at the same time / didn't hire the right managers and several businesses turned into a operational nightmare (Romania, Netherlands, Switzerland).
- M&A and fair competition have often been blocked by the country/the EU commission (Germany, Poland).
- Some countries even forced cable to wholesale its bandwidth (Belgium).
- Thankfully their M&A excellence (buy low, sell high, take advantage of public/private markets differences) and a couple of successful "flips" (Germany) have allowed them to achieve pretty satisfying returns overall despise all of those headwinds.

And at a macro level
Europeans didn't pursue more integration. Instead, a bad economic downturn and fear of uncontrolled immigration is leading them to vote more and more for populist nationalist parties.
Malone and co are of course Fox "News" people. So just listen to the description of Europe that's being spread on there for 5 minutes : one big communist war zone invaded by Muslim terrorists.
So of course they're backtracking like crazy.
(Not saying they're necessarily wrong to do so, I do think there's more pain ahead and the disintegration is likely to happen and to hurt)

Virgin in the UK
Their only fully owned business.
Around 60% of the value post-transaction

Not part of the Euro currency. Plus getting out first is probably the best move if you believe the collapse of the Union is inevitable.
They keep investing in new builds although the pace is sluggish, this makes me believe they're here to stay.

Plus Malone has developed a fondness for Ireland in his old age. He's of Irish descent and he's been buying several palaces and golf courses there. Knowing the guy, I wouldn't be surprised if there was not a tax implication there too. He could become Irish, renounce US citizenship and dodge the estate tax for his family when he dies. He highly regards Murdoch and he's praised the way he simplified his business by selling to Disney before passing it on to his children in one last buyout at a very high price plus taking stocks to avoid taxation.

I am pretty bullish on Virgin. They have much higher speeds and offer them at a slightly lower price than their only at-scale competition, BT. Plus the new German guy running it is super annoying (he reminds me of T-Mobile's CEO) but he seems good at what he does (Germany has been LBTYA's single best return on investment).

Telenet in Belgium
Literally the capital of the European Union (well, Bruxelles).
Around 20% of the value post-transaction.

They recently forced them to wholesale bandwidth.
Malone's reaction: revenues trends slightly down and cash flows are extremely high: they're not investing another euro in the business, just milking it to a slow death.

They only own 60% and the rest of Telenet is trading publicly at a very low EV/EBITDA valuation. The fact that they don't buy out the rest is telling. I think they're stuck here. Usually they'd try to do a private deal but i'd be hard to convince a buyer to pay >10XEbitda given the low trading valuation of the 40% they don't own. I don't know how they're going to do it but I'm sure they want out of there.

Vodafone-Ziggo in the Netherlands
Kind of a blackbox.
Rich country with low debt that should do OK in the event of a Union collapse or a new 2012-like debt crisis, so less rush to get out.
Around 20% of the value post-transaction.

The Netherlands business started as one of the operational nightmares described above but they seem to have stopped the hemorrhage with the merger. I think one company eventually buys out the other one's 50% but it's going to be complicated because Vodafone is already taking on a huge amount of debt to buy out Germany++ and they might not even be able to pay up for one more. My guess is Liberty plays a game of "I can wait forever" while Vodafone struggles with their balance sheet until they finally get desperate enough to sell their half to Liberty at a low price.

What will they do with the money?
My guess is nothing. Just pay down debt and buy back shares. This is Malone doing a beautiful deleveraging/descaling of a failed business attempt (unify European cable).
« Last Edit: May 21, 2019, 03:20:34 PM by WayWardCloud »

Spekulatius

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Re: LBTYA - Liberty Global
« Reply #609 on: May 21, 2019, 04:36:31 PM »
^ Pretty good  summary from Waywardcloud. Once you look around it is clear that the telecom industry economics in the US a better than almost anywhere else in the world. Thatís why Malone canít duplicate anywhere else what he has done in the US. Just look at LILA, which is worse than LBTYA.
To be a realist, one has to believe in miracles.