Despite its continued retreat from the European continent, Liberty Global is investing more heavily in faster data speeds and next-gen broadband products and services to combat its recent revenue slump.
After striking deals to sell its German and Eastern European cable assets to Vodafone and its Swiss cable system to Sunrise by the end of the year, Liberty Global is looking to re-stoke revenue growth in its remaining European systems by introducing a slate of new broadband, video and mobile products, services and features. Among other moves, Europe's largest MSO is upgrading to 500 Mbit/s speeds and a cloud-based WiFi service in the UK, launching 1 Gig and multi-gig speed trials across several markets, adding Amazon Prime Video to its video lineup in the UK, deploying next-gen digital set-top boxes throughout its markets, bringing next-gen wireless gateways to more broadband homes and rolling out new fixed-mobile convergence bundles in the UK and Belgium.
"There's no substitute for being first or being best in all of these particular products and services," stated Liberty Global Vice Chair & CEO Mike Fries, speaking on the company's first-quarter earnings call last week. He claimed that the company is especially "pushing the envelope" on "the innovation front" in its UK home market, where Liberty's Virgin Media unit is also extending its HFC network to 400,000 to 500,000 new homes each year under its ongoing Project Lightning upgrade program.
More than anything, Liberty Global, like many of its cable counterparts on both sides of the Atlantic, is betting big on beefier broadband. With the introduction of 500 Mbit/s maximum broadband speeds throughout the UK and the launch of 1 Gig speeds in pilot markets in both Germany and the UK, the MSO is seeking to foster that growth by hiking its speed edge over all other network architectures except for FTTH.
"The fiber in the market today is 3% or 4% of homes and we're going to 1 Gig as quickly as we can, and as you say, ultimately to 10 Gig," said Fries referring specifically to the UK market. "So I don't want to say the race is over, but Virgin is running at a different race than the rest of the UK broadband providers."
This stronger emphasis on broadband appears to be paying dividends. In the first quarter, Liberty added 42,400 data subs, up from 35,500 a year earlier, despite losing 14,100 broadband subs in Switzerland. The UK market accounted for most of the gain, contributing 35,000 new data subs. But the Polish market stood out too, contributing another 17,100 new subs.
On the mobile front, Liberty Global added a total of 26,800 subs despite losses in the UK/Ireland market as it picked up more postpaid subs than it lost prepaid subs overall. Belgium and Switzerland led the way there.
This fresh product push comes as Liberty Global reported last week that its revenue from continuing operations slid 0.6% to $2.87 billion in the first quarter. In addition, the company's operating income slipped from $117.6 million in the year-ago period to $105.5 million in the first three months of this year.
The biggest revenue and operating income dropoffs came in Switzerland, a fiercely competitive market that Liberty Global aims to leave after years of uphill battles against mounting subscriber losses. The company saw its Swiss Q1 revenue dip to $316 million, down 3.7% on a rebased basis, as it continued to shed more than 40,000 video, broadband and voice subs for at least the fifth consecutive quarter.
But, probably more troublingly for Europe's biggest cable provider, it also suffered revenue reversals in Belgium (down 0.6% on a rebased basis to $712 million) and even its home UK/Ireland market (down 0.1% on a rebased basis to $1.66 billion), both of which are still key to the company's future. Only its remaining central European holdings (Poland and Slovakia) posted revenue increases.
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