Liberty Global: European Telecoms Assets On Sale

Core Viewpoint - Liberty Global's shares have underperformed in the past year, losing approximately 10% of their value, but are currently seen as a good bargain for value investors with a Strong Buy rating due to a modest valuation for its core telecom businesses [3][12]. Company Overview - Liberty Global is a holding company with various telecom businesses in Europe, including wholly-owned subsidiaries like Sunrise (Switzerland), Telenet (Belgium), and Virgin Media Ireland, as well as joint ventures in the Netherlands and the UK [4]. Financial Performance - The company has faced challenges such as cost inflation and declining fixed subscribers, leading to a loss of nearly 50,000 video subscribers in Q3 2023, with a total of around 25,000 internet subscribers lost across its consolidated businesses [7][8]. - Consolidated revenue for fixed services was $2.25 billion through Q3 2023, reflecting a 1.3% year-on-year decline on an organic basis, while mobile services showed resilience with positive subscriber growth [8][9]. - EBITDA has been negatively impacted by inflation, with a decline in margins, but VMO2 has shown accelerating EBITDA growth in Q3 [9][11]. Valuation Insights - Liberty Global's Class A shares are trading at $19.37, with significant cash and investments at the holding company level, implying a low valuation for its telecom businesses [12][14]. - The market is valuing Liberty's telecom businesses at an implied EV/EBITDA of approximately 5.7x, which is significantly lower than peers like Comcast and KPN, suggesting potential upside [15][17]. - Applying a conservative multiple of 6.5x to Liberty's telecom assets indicates a fair value of around $30.55 per share, representing nearly 60% upside from the current price [18]. Strategic Actions - Liberty Global is actively engaging in stock repurchases, having retired 15% of its shares outstanding in 2023, with plans to extend this to nearly 20% by year-end, as a means to close the valuation gap [19][20].