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Liberty Global Inc. ( LBTYA - Analyst Report ) continues to perform well supported by strong demand for its digital TV services, faster-speed of broadband networks, and triple-play bundled services. The triple play customer base increased 16.1% year over year in the second quarter of 2011. The company is also concentrating on double play product, Internet and telephony, which have the potential to expand. Double play customer base penetration increased 3.4% in the previous quarter.
Liberty Global is expected to launch a hybrid IP video gateway called “Horizon” in the first quarter of 2012. This innovative IP gateway will combine a cable operator’s video services with web-based content through an integrated cable modem. Horizon will run on Atom CE processor of Intel Corp. ( INTC - Analyst Report ) . The new web-based hybrid modem is expected to include an open software developer platform and application store.
We believe that the long-term potential of Liberty Global is much more visible now after its decision to acquire the third largest cable operator in Germany, Kabel Baden and disinvestment of its Australian operation, Austar. Western Europe has become an extremely lucrative segment for cable operators.
These markets are witnessing a growing demand for pay-TV services coupled with triple-play bundled services that combine video, Internet, and telephony. Liberty Global already purchased the second largest German cable MSO, UnityMedia. The enlarged entity is expected to take over the market share from the incumbent Kabel Deutschland.
However, the regulatory delays are major concerns. In August 2011, the Cartel Office postponed its decision regarding this deal by three more months to November 11, 2011.
Furthermore, the proposed disinvestment of Austar by Liberty Global is delayed once again. Recently, the Australian Foreign Investment Review Board extended the review of the proposed takeover of Austar by Foxtel by another 3 months. We therefore, reiterate our long-term Neutral recommendation on Liberty Global.
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