Liberty Global Inc. ALBTYA

Morningstar Rating

Stock Research and Analysis

by Allan C. Nichols, CFA

Liberty Global remains the largest cable television operator in Europe, with additional holdings elsewhere. However, the tightening credit markets and a heavy debt load have added lots of risk to this interesting story.

Liberty Global was spun out of Liberty Media, the firm that holds the majority of media investor John Malone's assets, and is controlled by John Malone, one of the industry's most successful investors. Read more

Bulls Say

Liberty Global provides diversified exposure to international cable assets. Many of the systems it owns enjoy penetration rates that are among the best in the world. Other less-penetrated markets offer growth potential.

Over the past few years, the firm has sold assets in Sweden, France, and Norway; increased its stakes in Belgium and Australia; and acquired Swiss, Irish, and Romanian operations. It also made some smaller acquisitions in existing markets. Management's deep experience, coupled with its desire to wheel and deal, should add value for shareholders over time.

Liberty bought back $1.75 billion worth of stock in 2006 and spent another $1.9 billion in 2007. Through the first nine months of 2008, it had acquired another $1.96 billion worth.

The firm continues to roll out higher speeds for Internet access with offerings of up to 120 Mb/s in the Netherlands and 160 Mb/s in Japan. Read more

Bears Say

Liberty has $17.7 billion in net debt. Its UGC division previously went bankrupt after taking on too much debt. With the current credit environment, additional debt will have high interest payments.

This is John Malone's company, and his interests may not be aligned with minority shareholders'.

Although some of the firm's networks are state-of-the-art, many need significant upgrading to offer the latest digital cable and Internet access services, which will keep capital expenditures high into the foreseeable future.

Several of Liberty's assets are located in emerging markets and are subject to volatile economics, currencies, and politics. Read more

Strategy

The firm's strategy is to increase the penetration of services sold to homes passed, especially by selling more services to existing customers. Liberty is upgrading its networks to offer digital cable and Internet access services, and it is combining services in bundles at lower rates than what is available individually. Read more

Management

Chairman John Malone is a legend in the cable television industry. He became CEO of TCI in 1973 and more recently was CEO of Liberty Media. Liberty Global was spun out of Liberty Media in 2004 and merged with United Globalcom in 2005, shortly after UGC came out of bankruptcy. Read more

Profile

Liberty Global owns cable networks and a couple of small satellite operations in the Netherlands, Switzerland, Austria, Belgium, Ireland, Hungary, Romania, Poland, Czech Republic, Slovakia, Slovenia, Japan, Australia, Chile, Puerto Rico, Brazil, and Peru. Read more

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