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Liberty to buy back shares and invest in UK as subscriber numbers drop

Liberty Global is following up on its promise to return value to shareholders following its sale of its German and central European units to Vodafone by using the proceeds from the sale for cash tender offers for its shares of up to US$2.5 billion (€2.2 billion), along with a promise of investing in Virgin Media, the crown jewel of its remaining assets.

CEO Mike Fries announced the buyback and investment plan as Liberty Global posted mixed Q2 numbers, with a net reduction in revenue-generating units of 28,000, lower revenue and operating income.

Liberty Global is launching cash tender offers of up to US$625 million for its class A ordinary shares and up to US$1.875 billion for class C ordinary shares, to be purchased at a price range expected to be between US$25.25-US$29 for the class A shares and US$24.75-US$28.50 for the class C shares.

Fries said that Liberty would also use proceeds from the sale to further invest in Virgin Media, which he said was the “most advanced broadband and fixed/mobile provider in the UK” with “substantial opportunities for expansion and growth”.

The promise of a return to shareholders came as Liberty Global posted disappointing operational numbers, with a big jump in video subscribers losses of 54,900 in the quarter more than offsetting gains of 9,600 broadband and 16,500 voice customers.

Overall, Liberty Global lost 28,800 revenue-generating units, against a gain of 41,000 in the prior year. While the bulk of RGU losses came from Switzerland, where UPC lost 28,000 RGUs, and Belgium, where Telenet lost 20,000, these numbers actually represented improvements. Virgin Media however disappointed with 4,900 RGU losses. The overall losses were offset to some extent by gains in Poland and Slovakia.

The company posted rebased revenues of US$2.85 billion for the quarter, down 0.9%. Operating income dropped by 43.7% to US$148.7 million, pushed down by lower operating cash-flow – which was impacted by tax increases and redundancy costs in the UK and Ireland – and increased share-based compensation expenses.