Could Liberty forge a path to US-LatAm mobile synergies?

Could global communications and entertainment services group Liberty Global be an eventual facilitator of US-Latin America mobile synergies like those enjoyed by AT&T?

In January, Liberty Global chairman John Malone suggested that US cable TV firms Comcast, Cox and Charter could pool resources to buy mobile operator T-Mobile USA.

John Malone, Chairman of Liberty Global

Malone is majority owner (47%) of Liberty Broadband Corporation, which holds a 27% stake in Charter but is entirely separate from Liberty Global. However, his presence on the boards of both Liberty and Charter – and the fact that he is the one quoted with the T-Mobile idea, and has a prominent role in decision-making – means he could be just the person to make some kind of US-LatAm synergy a reality. 

In the event of the US cable firms gaining control of T-Mobile, this could open the door to marketing deals between Liberty's Latin American mobile interests (VTR's MVNO operation in Chile and CWC in the Caribbean) and T-Mobile USA, akin to the benefits AT&T bestows on its clients in the US and Mexico (where it now owns former operators Unefon, Nextel Mexico and Iusacell).


However, trans-continental synergies are more likely between Liberty Global's direct assets in Europe and South America. The European assets include Vodafone Netherlands and Virgin Media in the UK, both of which have sister operations in Latin America, such as VMLA's virtual mobile businesses in Chile, Colombia, Peru and Mexico (plus pending operations in Argentina and Ecuador) and Vodafone's MVNO operation in Brazil (plus recent interest in Chile).

During 2015 Liberty Global came close to increasing its mobile presence in Europe by discussing an asset swap with Vodafone. However, this fell through and resulted only in their sharing control of Vodafone Netherlands. Furthermore, in January 2017 Liberty CEO Mike Fries asserted that similar joint ventures in other parts of Europe were unlikely.


In early 2016 Fries did confirm that Liberty would continue on the lookout for acquisition targets in Latin America, to build on the acquisition of CWC that was underway at the time and eventually concluded in May 2016.


The LiLAC division ended 2016 with liquidity of US$1.6bn, based on US$1bn borrowing capacity and US$600mn operating cash available between LiLAC and the parent group.

Part of these resources are to be consumed in a US$300mn LiLAC share buyback program begun in November 2016 and running through 2020. By end-2016 the group had invested US$21mn in the program.

This would appear to limit Liberty's M&A options in the region, especially considering that the CWC acquisition represents a total outlay of US$7.4bn.

Liberty Global created the LiLAC tracking stock mid-2015 to represent its combined operations in the region and assess market response to that division. The unit combines VTR in Chile, CWC in the Caribbean and Panama, and Liberty Puerto Rico (which lacks mobile).

LiLAC represents a total client base of 3.7mn mobile subscribers (of which 3.5mn are attributable to CWC) and 2.9mn fixed line subscribers (equivalent to 5.4mn individual services billed). This compares to 6.6mn mobile subscribers in Europe, and 21.8mn fixed line customers (equivalent to 44.8mn individual services billed).

European operations generated operating cash flow of US$8.16bn in 2016, up 3% versus 2015 when the component parts are rebased (compared with their prior status before acquisition by Liberty), while LiLAC operating cash flow was US$1bn, up 6% when rebased.

VTR is the strongest LiLAC unit in terms of revenue growth, registering a 6% increase during 2016 while CWC and Liberty Puerto Rico were flat. However, Liberty Puerto Rico is the strongest unit in terms of operational cash flow, registering 27% growth versus 9.7% at VTR and 3.2% at CWC.

Although CWC's bottom line is suffering the effects of strategic investment and integration with the Liberty model, the unit is expected to generate US$150mn of value through 2020 due to synergies.

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