Author Topic: LBTYA - Liberty Global  (Read 289451 times)

dwy000

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Re: LBTYA - Liberty Global
« Reply #640 on: July 18, 2019, 05:56:06 PM »
I find great operators are what is mostly lacking in Malone companies. All that great talk on capital allocation by the investment community is worth nothing without a great operator. There might be a few on the other side of the Atlantic.

Not sure I agree with that.  You could argue it in Global (and possibly in LILAC) but if I look at Charter, Liberty Media, Sirius, Discovery, QVC, all their cash flow beasts, they are all best in class managements.


scorpioncapital

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Re: LBTYA - Liberty Global
« Reply #641 on: July 19, 2019, 04:44:01 AM »
So the poverty of eu Telecom is inability to have exclusivity and or caps on pricing?
I think they should sell not just Germany and Switzerland but also Netherlands, Belgium, Poland and frankly just move into a new line of business with less government involvement.
« Last Edit: July 20, 2019, 03:30:15 AM by scorpioncapital »

Value92

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Re: LBTYA - Liberty Global
« Reply #642 on: July 19, 2019, 06:33:29 AM »
Quote
Could you explain this part please? I'm not familiar with the Schneider story and I'm trying to see what Malone's options are for Belgium.

Malone came in and bought the junk bonds for 20 cents on the dolar and later fired the son of Gene Schneider. Fun times!

Malone will take advantage of you if you are weak and in dire need. If stocks sell of, he will buy Telenet on the cheap and use the the NOLs of VodafoneZiggo to shield its income for a couple of years.

Link for the full article: http://archive.fortune.com/magazines/fortune/fortune_archive/2002/02/18/318149/index.htm

Excerpt from the article:
Like many cable companies, UGC is a family business. It got into trouble in 1999 when Schneider installed his son, Mark, as head of UGC's European subsidiary, which accounts for the bulk of its assets. The younger Schneider went on a shopping spree, spending more than $5 billion on cable companies in a dozen countries. But revenue from new services failed to materialize, and the European arm found itself overextended. Mark can be "a very disobedient child," an exasperated Gene Schneider told FORTUNE in 2000. "He works very hard, but you can't buy everything that crosses your doorstep." Last August, Mark resigned as CEO of the European subsidiary; he remains a UGC director.

For Malone, UGC's distress was a juicy opportunity. He had already bought 9.4% of the company (and 36% of its voting rights) in 1999 after early investors wanted to sell out. Schneider, worried about an unfriendly predator, had asked Malone to step in. "There was a concern that if someone hostile to Gene bought the stock, they could disrupt Gene's operations," Malone said in October 2000. Over the next 18 months, Liberty increased its stake to 19.7% (with 39.5% of the voting rights), buying at prices ranging from just over $50 a share to just under $2.

When UGC's European woes sent its stock price tumbling, Malone pounced. He lent the European subsidiary $857 million and bought $1.7 billion of its junk bonds at 20 cents on the dollar. He then assigned that debt to the parent company and invested $200 million in cash in return for stock that will boost Liberty's stake to 72.3%, including 94% of the voting rights.

So for only $2 billion, Malone will have won control of a company that at its peak two years ago was worth about $13 billion. And this isn't a hollow Internet company without a business plan, but a real outfit, with cable networks in 17 countries and annual revenues of $1.6 billion. Malone has a standstill agreement to vote his shares with Schneider. People close to the companies, though, say Malone is calling the shots. Neither of the Schneiders was available for comment, but sources in Europe say that both are unhappy with how events have unfolded.

Value92

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Re: LBTYA - Liberty Global
« Reply #643 on: July 19, 2019, 06:43:55 AM »
I find great operators are what is mostly lacking in Malone companies. All that great talk on capital allocation by the investment community is worth nothing without a great operator. There might be a few on the other side of the Atlantic.

Not sure I agree with that.  You could argue it in Global (and possibly in LILAC) but if I look at Charter, Liberty Media, Sirius, Discovery, QVC, all their cash flow beasts, they are all best in class managements.

Charter is solid but even there the compensation is ridiculous. $1 billion? Come on! Even in the good old USA there has to be a limit on CEO compensation. Malone himself got a much tougher job done (creating the biggest cable company in the US and seed financing cable channels) for much less money.

The other ones I'm not 100% certain. Personally I find it too tough to put them in the 10 out of 10 CEO camp (a rather small village with few inhabitans). I have to admit that I don't feel comfortable putting all of those companies in my circle of competence.

All in all there is no one I would let marry my (yet unborn) daughter. Next!

Value92

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Re: LBTYA - Liberty Global
« Reply #644 on: July 19, 2019, 06:51:49 AM »
So the poverty of eu Telecom is inability to have exclusivity and or caps on pricing?
I think they should sell not just Germany and Switzerland but also Netherlands, Belgium, Poland and frankly just move into a new like of business with less government involvement.

In Europe we are not as hardcore capitalist as the people in the US. Don't forget the incumbents are former state-owned companies with lots of employees and political influence. They might be inefficent but are partially also irrational on the returns they need to justify an infrastructure investment.

Cable is not a franchise business as you will suffer, if you are dealing with irrational competition that acts as they are still a state-owned enterprise that has to offer a service no matter the returns.

Value92

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Re: LBTYA - Liberty Global
« Reply #645 on: July 19, 2019, 06:57:58 AM »
I find great operators are what is mostly lacking in Malone companies. All that great talk on capital allocation by the investment community is worth nothing without a great operator.

Yes. That's why I finally reduced my Liberties' holdings a lot even though I planned to never sell. (I still own some DISCK, FWONA, LBRDA, LBTYK, LEXEA, LSXMA, and unfortunately QRTEA. I sold LTRPA, LILA, LGFB, GLIBA. This might have been wrong time to sell - I can't be sure.)

I agree with you that investing into EU cablecos is probably not the way to go. We'll have to see what Liberty Global decides to do.

Even tough I might come off bearish Liberty Global has a lot of cash at the right time in the cycle as everybody else in Europe is suffering (Altice, Vodafone,...). The key question for me to answer is, if the UK will work out from an operational perspective. Has anybody an educated opionion on Lutz Schueler, the new head of Virgin Media?

Long-term EU telco is not the place to be but for a trade (3 to 5 years) it might be alright at the right cheap, cheap price...

Jurgis

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Re: LBTYA - Liberty Global
« Reply #646 on: July 19, 2019, 07:48:49 AM »
I find great operators are what is mostly lacking in Malone companies. All that great talk on capital allocation by the investment community is worth nothing without a great operator. There might be a few on the other side of the Atlantic.

Not sure I agree with that.  You could argue it in Global (and possibly in LILAC) but if I look at Charter, Liberty Media, Sirius, Discovery, QVC, all their cash flow beasts, they are all best in class managements.

Maybe you are right. Maybe the capital deployment (for which Malone was famous...) that went astray more than operations. I.e. perhaps it was a mistake to deploy capital into EU cable (LBTYA), LatAm cable/mobile (LILA), TV shopping (QRTEA), US content (LGFB) rather than these companies having subpar operators. This is ironic since capital deployment was supposed to be the strong suit of Malone and Liberties.

I think the overall result is a mix of operations and capital deployment and it might not be simple to distinguish how much each contributed/detracted.

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Liberty

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Re: LBTYA - Liberty Global
« Reply #647 on: July 19, 2019, 07:51:26 AM »
I find great operators are what is mostly lacking in Malone companies. All that great talk on capital allocation by the investment community is worth nothing without a great operator. There might be a few on the other side of the Atlantic.

Not sure I agree with that.  You could argue it in Global (and possibly in LILAC) but if I look at Charter, Liberty Media, Sirius, Discovery, QVC, all their cash flow beasts, they are all best in class managements.

Maybe you are right. Maybe the capital deployment (for which Malone was famous...) that went astray more than operations. I.e. perhaps it was a mistake to deploy capital into EU cable (LBTYA), LatAm cable/mobile (LILA), TV shopping (QRTEA), US content (LGFB) rather than these companies having subpar operators. This is ironic since capital deployment was supposed to be the strong suit of Malone and Liberties.

I think the overall result is a mix of operations and capital deployment and it might not be simple to distinguish how much each contributed/detracted.

Show me someone with a perfect batting average. I'm pretty sure Malone thinks of his companies as a basket, like a virtual conglomerate. Some are always doing better than others, but overall, I'd say he's been doing pretty well over time. Kind of like how some companies or investments inside BRK might be doing badly or be mistakes, but that doesn't mean the whole has "bad capital allocation".
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Jurgis

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Re: LBTYA - Liberty Global
« Reply #648 on: July 19, 2019, 08:09:22 AM »
I find great operators are what is mostly lacking in Malone companies. All that great talk on capital allocation by the investment community is worth nothing without a great operator. There might be a few on the other side of the Atlantic.

Not sure I agree with that.  You could argue it in Global (and possibly in LILAC) but if I look at Charter, Liberty Media, Sirius, Discovery, QVC, all their cash flow beasts, they are all best in class managements.

Maybe you are right. Maybe the capital deployment (for which Malone was famous...) that went astray more than operations. I.e. perhaps it was a mistake to deploy capital into EU cable (LBTYA), LatAm cable/mobile (LILA), TV shopping (QRTEA), US content (LGFB) rather than these companies having subpar operators. This is ironic since capital deployment was supposed to be the strong suit of Malone and Liberties.

I think the overall result is a mix of operations and capital deployment and it might not be simple to distinguish how much each contributed/detracted.

Show me someone with a perfect batting average. I'm pretty sure Malone thinks of his companies as a basket, like a virtual conglomerate. Some are always doing better than others, but overall, I'd say he's been doing pretty well over time. Kind of like how some companies or investments inside BRK might be doing badly or be mistakes, but that doesn't mean the whole has "bad capital allocation".

There have been people on CoBF who analyzed Liberty universe and picked the good/bad parts couple years ago. So it was rather visible (I ignored it at my own peril) and Malone could have done Buffett and not piled the good money after the bad into companies/areas that were struggling. I'd say LBTYA sales to Vodafone is a good decision. LILA decisions so far were subpar - and CWC was somewhat rightly called Malone dumping his CWC shares at excessive cost to LILA shareholders. QRTEA decisions have been very much dumping the good money after bad. LGFB same. These are pretty large pieces to ignore. IMO, Malone is stuck with things he knows from the past that may not be working anymore like QRTEA, EU cable cos, etc.

It is tough to say whether Liberty universe return was good or bad. It depends very much on which pieces a person owned and when. Same can be said about Malone's return in the last X years. My guess is that his return has not been great, but I did not calculate it. And I might be wrong, since some parts like LBRDA and FWONA have done well.

I might be wrong with my assessment too. LILA/LGFB/QRTEA might turn around and do well. LBTYA may invest its cash in spectacular manner. We'll see.
"Human civilization? It might be a good idea." - Not Gandhi
"Before you can be rich, you must be poor." - Nef Anyo
"Money is an illusion" - Not Karl Marx
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Liberty

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Re: LBTYA - Liberty Global
« Reply #649 on: July 19, 2019, 09:51:05 AM »
Liberty Media complex did pretty well over the past 13-14 years:



I'd say that's most of his fortune.

Liberty Global underperformed, but Malone's cost basis is probably pretty low, pretty sure he beat the SP500 from that base, so it's not like a total disaster. Obviously things didn't turn out as expected, but that happens.
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