Liberty Global is selling its stake in Japanese cable operator J:Com for USD 4 billion to KDDI. The transaction follows the deal announced in November for Liberty to buy German operator Unitymedia for EUR 3.5 billion. Since then various rumours have surfaced of possible additional takeovers in Germany and Poland. The company has said itself that it's interested in further consolidating its markets. The question is whether there's a pattern in Liberty Global's portfolio strategy.
Liberty Global has shown itself to be an excellent portfolio manager. While Unitymedia was bought at 7.4 times estimated EBITDA, J:Com was sold at 8.3 times its reported EBITDA, plus at a 65 percent premium to the share price. Given Liberty Global's balance sheet (see our research brief 'Liberty Global increases leverage for Unitymedia') it's important that the company doesn't just pursue acquisitions. If the company plans on leading consolidation in Germany, the Netherlands or Poland, it will also have to make divestments in order to keep its balance sheet healthy. If the company is looking to maintain a cohesive portfolio, then VTR (Chile), Austar (Australia) and Liberty Puerto Rico may also be on the 'for sale' list. A 20 percent stake in VTR was recently bought the Chilean investor Saieh, which could be interested in also buying out Liberty.
In addition to managing the portfolio and balance sheet, FTTH may also be driving the cable operator's strategy. With the J:Com exit, Liberty is again leaving a country where FTTH has moved beyond being a marginal technology. Past divestments have included selling its operations in France, Sweden and Slovenia, and Japan fits this trend. This can also be connected to the state of the local network. In France UPC was at the start of a major upgrade plan - which is now interestingly being marketed by the current owners Numericable as a move to FTTH. While J:Com is already completely converted to Docsis 3.0, Japan is among the top three FTTH markets in the world, led by the competitive offerings from incumbent operator NTT. Liberty also shows no signs of moving into wireless; UPC Netherlands abandoned its MVNO last year, while UPC Ireland recently shelved plans to start an MVNO.
In short, Liberty Global is actively managing its portfolio, in line with other international players such as Tele2 and Vodafone. The choice of markets is driven by growth opportunities and strong market positions. As Liberty Global is no stranger to opportunism, predicting the next takeover or divestment won't be easy.
