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Liberty Global mulls UK fibre JV and wholesale options to ‘crystallise value’ of network

Liberty Global is looking to “continue crystallising value” in its core markets through fixed-mobile combinations and potential restructuring of its networks through the entry of new capital or a wholesale model, according to CEO Mike Fries.

Liberty Global CEO, Mike Fries

Speaking to analysts after the company posted its latest quarterly results, Fries said that “fixed-mobile combinations are materially accretive operationally and financially to our core cable platforms”, citing the VodafoneZiggo JV with Vodafone as well as the sale of Liberty’s German and CEE operations to Vodafone.

He said that the company would look to “explore strategic options in the [UK] market”, where Virgin Media faces declines in pay TV subscriptions and a flattening broadband market, in particular.

Fries acknowledged that the expansion of Virgin Media’s network in the UK to a further seven to 10 million homes, to give it truly national scale, would inevitably involve bringing in outside ownership. “If we were to look at expanding to an additional seven to 10 million homes, we would almost assuredly see to do so off-balance sheet and with third-party partners or financing sources,” he said.

Virgin Media created a new fibre venture to build out fibre to underserved areas last year, and there has been speculation that it could forge a JV with Sky following a report in the Financial Times in September that the pair were in talks. The FT also reported that Sky was in separate talks about a wholesale deal to use Virgin Media’s existing cable network to offer broadband services.

On the earnings call, Fries said the wholesale option for the exiting cable network was “trickier” than seeking JV partners to build out fibre because it carried the risk of cannibalising the company’s existing subscriber base, but he said that Virgin Media today was “only utilising about 40% of our network”.

He said that there are “pros and cons” to the wholesale model, but added that “it’s something we ought to look at constructively to see it there is a value creation opportunity”.

Fries also admitted that Liberty’s UK operation, Virgin Media, faces “unavoidable headwinds” for the year ahead, including Ofcom’s ruling on out-of-contract notifications, increases in broadband taxes and programming cost increases.