Liberty Global to spin off 100% of Swiss Sunrise to shareholders

Source: Sunrise

Liberty Global is to spin off 100% of Swiss operating company Sunrise to shareholders.

The company says the spin-off “aims to maximize shareholder value by unlocking the fully distributed value of Sunrise over time, supported by Sunrise’s fully integrated FMC challenger position, attractive growth outlook, excellent expected cash generation and experienced management team”.

The international cable company said the move will leverage Sunrise’s potential as a locally listed fixed mobile-convergence challenger brand.

Liberty said it would invest up to CHF1.5 billion (US$1.7 billion) in te operation to reduce debt.

Sunrise will be listed on the SIX Swiss Exchange with two classes of shares. This is expected to happen in the second half of this year.

Liberty Global CEO Mike Fries said: “The proposed spin-off of Sunrise to Liberty Global shareholders is aligned with our strategy of unlocking value by allowing our shareholders to directly participate in the future performance of Sunrise. Liberty is fully committed to listing Sunrise with a strong capital structure which, alongside its future cash generation potential, will underpin Sunrise’s attractive equity story and scope for dividends.”

Sunrise CEO André Krause said: “We are excited at the prospect of being listed in Switzerland once again and providing local and international investors with access to our scaled FMC challenger position in the market. Following the successful integration and synergy delivery of the UPC combination, Sunrise has a very strong FCF profile and plans to offer an attractive shareholder remuneration framework. We will present more detail at a Capital Markets Day later this year.”

Fries had hinted at this outcome when speaking at the Morgan Stanley’s European Technology, Media & Telecom Conference in Barcelona in November.

He said at that event that Liberty was “open-minded” about listings and spin-offs for example for the Swiss market.

News of the Sunrise spin-off has been followed by a spate of announcements from Liberty as Fries provided a strategy update.

These include plans to create a new netco from Virgin Media O2’s infrastructure assets, including its legacy cable network, that will be intended as a national competitor to Openreach. Liberty also plans to create a new holding company for its Belgian asset Telenet and its half of the VodafoneZiggo JV in the Netherlands – something that may presage at a later date a move in ownership of the latter, although no announcement has been made regarding that.

Finally, Liberty has announced the sale of production outfit All3Media to private equity outfit Red Bird.

Increasing customer losses for Liberty Global

The announcements followed Liberty Global turning in fourth quarter results in line with analyst expectations, with shares rising by 3.5% in early trading. However, customer losses increased significantly in the last three months of the year.

Overall, Liberty Global lost 29,600 net customers from non-joint venture operating companies in the fourth quarter, up from losses of 6,700 for the same period in 2022, contributing to annual losses of 114,500.

All operating companies except Virgin Media O2 saw customer losses in the fourth quarter, including Switzerland’s Sunrise, which lost 12,200 in the three months to December.

Telenet lost 12,600 net customers, while Virgin Media Ireland lost 3,900 and UPC Slovakia lost 900.

VodafoneZiggo, Liberty Dutch JV with Vodafone lost a whopping 47,200 customers in the quarter, a third of its annual total losses of 62,600.

Challenging environment

Fries said the company had “managed through a challenging environment, including cost of living and inflationary pressures and an increasingly competitive landscape for broadband, mobile and video services” last year but had nevertheless delivered strong Q4 and full-year results “with continued postpaid momentum and an improved performance in broadband across most markets”.

Liberty Global saw its Q4 revenues drop by 1.8% on a rebased basis (and rise 4.3% on a reported basis) to US$1.92 billion. The company posted a loss from continuing operations of US$$3.47 billion, and adjusted EBITDA of US$546 million, down 8.6%.

Among its consolidated operating units, Switzerland’s Sunrise saw Q4 revenues rise by 2.5%, while Belgium’s Telenet was up 1.8%.

Dutch Joint venture VodafoneZiggo revenues were up 10.1% to US$1.15 billion, while Virgin Media O2, the company’s JV with Telefónica in the UK, was down 1% to US$3.52 billion.