Liberty Global Earnings: EBITDA Declines Across the Portfolio; Completes Takeover of Telenet

Narrow-moat Liberty Global saw mixed trends during the third quarter. Its consolidated entities (Switzerland, Belgium, and Ireland) saw EBITDA declines of 3.4%, 2.6%, and 7.8%, respectively, as strong wage indexation is weighing on the company’s profits. VodafoneZiggo, its Dutch joint venture, saw a similar EBITDA decline at 4.1% due to continued wage and energy inflation. Virgin Media O2 was the only division growing, with EBITDA up 2.4% thanks to price increases, cost controls, and synergies. We are maintaining our $28 fair value estimate and see the shares as undervalued. We believe Liberty’s shares are penalized by its overly complicated corporate structure. It is a U.S.-listed entity with a combination of consolidated businesses and joint-ventures that are exposed to different market dynamics and currencies (EUR, GBP, CHF). Any decision that simplifies the corporate structure and highlights the value of Liberty’s assets should be positive, in our view.