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Liberty Global ‘looking at possible sale’ of Swiss and Austrian units

Liberty Global is looking at a possible sale of its Swiss and Austrian operations, according to a report in UK newspaper The Telegraph. The move could help pave the way for a £175 billion merger between the cable giant and Vodafone.

According to The Telegraph, citing unnamed sources, Liberty is working on a potential disposal of UPC Austria and UPC Switzerland, which are under a single management structure within the Liberty organization.

Vodafone does not operate in either Switzerland or Austria, so the Swiss and Austrian units make obvious targets for a disposal if Liberty were to merge with the mobile giant.

Potential buyers could include Swiss alternative operators Salt, the former Orange Switzerland, which is controlled by Iliad Telecom/Free owner Xavier Niel, and Sunrise Telecom.

Liberty Global CEO, Mike Fries

Liberty Global CEO, Mike Fries

The Swiss and Austrian units have struggled in the face of competition from incumbent telcos, collectively losing 7,300 revenue-generating units in Q3 this year, with a marked loss of video subscribers. Rebased revenue from the pair grew by 1% to €456 million, trailing other Liberty units, with operating cash flow contracted by a rebased 3% as UPC Switzerland absorbed the cost of its launch of premium sports service MySports.

Following Liberty’s Q3 results, president and CEO Mike Fries told analysts that Switzerland presented a “tough competitive environment” but said that Liberty had “a good plan and also some interesting strategic opportunities” in the Swiss market. When asked to flesh out what he meant by “strategic opportunities”, he declined to be more specific, although he did say that there was “an opportunity to potentially get involved in the mobile business in a more concrete way”.

On-off speculation about some kind of combination of Liberty Global and Vodafone has run for years. The concrete realization to date has been the pair’s VodafoneZiggo JV in The Netherlands, which Fries has characterized as a market-specific case.

Vodafone has in the past been seen as potentially benefiting from a merger with Liberty, which owns Unitymedia in Germany and Virgin Media in the UK, because it lacks the same scale in fixed-line infrastructure as rivals such as Orange and Deutsche Telekom.

However, Vodafone’s last quarterly results saw solid EBITDA growth in Germany and the UK, despite flat or falling sales, and strong growth in convergence. The company has announced extensive fibre build plans in both markets.