Speaking to analysts after Liberty posted strong year-end results, Fries said that Liberty’s “FMC champions” – its part-owned operating companies in the UK, the Netherlands, Belgium and Switzerland – are “the foundation and bedrock for value creation” for the parent company.
“We had to get smaller to get bigger, divesting half our markets and putting our attention and capital into a handful of operating platforms that now reach over 85 million fixed-to-mobile subs and are either number one or number two in every country,” said Fries.
Fries said that convergence delivered organic growth in revenue and free cash flow, which was up almost 40% for 2021, and also “delivers great strategic optionality to consolidate horizontally or even vertically, to monetize hidden assets like towers and to control the future of networks in an accretive way”.
He said that demand for connectivity, a more favourable regulatory environment and interest from private equity capital was driving growth in the telecom sector.
On the back of that, Liberty is pushing ahead with plans to create a new fibre “NetCo” with financial partners to build up to seven million greenfield homes outside UK JV Virgin Media O2’s existing footprint.
Fries said the development would increase the size of the company’s fibre footprint to 23 million homes, or almost the whole of the UK addressable market.
VMO2 will commit to be the anchor tenant of the new company’s network, but the company itself will likely be a joint venture between Liberty Global itself, VMO2 JV partner Telefónica and financial partners.
Fries told analysts that a partnership between Liberty and Telefónica would create “a fair amount of flexibility for all parties”, with the capital for the venture coming from the parent companies rather than from VMO2. However, he added that VMO2 “will essentially be the builder and operator” and the actual infrastructure company “will be a very light NetCo” with low start-up costs attached to it.
Liberty Global’s operating companies lost 5,200 customers in Q4, driven by losses in Belgium and Ireland. The company’s Q4 revenues were up 1.9% in like-for-like terms to US$1.9 billion, while adjusted EBITDA was down 4.4% to US$690 million.