Cord-cutting comes with “pros and cons” for fixed line operators such as Liberty Global as the industry moves to apps and aggregates streaming services such as Netflix, according to CEO Mike Fries, speaking to CNBC at the World Economic Forum in Davos.
Fries said that streaming consumers still need a great broadband connection even if they don’t subscribe to pay TV services.
“Broadband is the killer app for us,” he said, with margins for broadband connectivity much higher than for video.
Fries said cord-cutting was in any case not as urgent a concern for operators in Europe as in the US. He admitted that Liberty Global was losing video subscribers and that came with costs, but added that the company was successfully defending its video business to some extent by providing an advanced box with great features and functionality. He said that “consumers in Europe actually don’t want to work that hard” with 80% still preferring to watch content on the TV screen.
Fries said that Liberty Global was also “leaning into fixed-mobile convergence” with 5G combined with 1Gbps broadband being “a killer combination – the dream team”. However, he said that the business case for 5G still had to be proven and “will never replace fixed in my opinion”.
Asked about what Liberty Global plans to do with the cash pile it has accumulated from the sale of its German and central European assets to Vodafone, Fries said that LG would “be patient” and continue to use the cash to buy back stock. Asked about potential acquisition opportunities, he said that Europe was no longer in “a rush” for consolidation as it was 10 years ago.
Challenged on the relatively low value placed on Liberty Global’s stock by investors, Fries said perceptions about Liberty Global’s business were “all about the UK”. He said that investors in the company today effectively “get Virgin Media for free”, given the low price of the stock. He said that there had been concerns about the impact of Brexit which “I think is behind us”, and added that the company had “great strategic options in the UK” because of the strength and scale of its broadband network.
“For us there is lots of optionality in that market,” he said. In relation specifically to Sky, he said that all UK operators were “figuring out what the future looks like in the UK. It’s sort of musical chairs. We’re figuring out when the music is going to stop and who’s standing.”
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1st April 2020