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Liberty Global to Quit Australia

by Zacks Equity Research

April 11, 2012 | Comments : 0 Recommended this article: (0)

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Liberty Global Inc. ( LBTYA - Analyst Report ) , a leading cable operator in Europe, Latin America, and Australia, may finally quit from Australia. The company’s proposed disinvestment of Austar United Communications Ltd. to Foxtel get Australian regulatory approval, at last. Australian Competition and Consumer Commission (ACCC) clears the merger after Foxtel agrees to give up its exclusive rights for Nickelodeon and National Geographic Channel.

In July 2011, Liberty Global decided to divest its operations in Australia. Austar, in which Liberty Global holds 54% stake, entered into a definitive agreement with Foxtel, to sell 100% stake for approximately $2 billion. Liberty Global will get around $1.08 billion. Foxtel is jointly held by Australian telecom giant Telstra, News Ltd., a division of News Corp. ( NWSA - Analyst Report ) , and Consolidated Media Holdings.All these three shareholders agreed upon the deal.

The Australian regulatory authority initially showed its reluctance to clear the deal since it may create a monopoly. Foxtel is the largest pay-TV operator in Australia and Austar is also a leading pay-TV operator. However, both Foxtel and Austar argued that the pay-TV operators in Australia are now facing increasing competition from free-to-air TV stations and online entertainment service providers.

The disinvestment of Austar indicates that Liberty Global will concentrate solely on Europe and some parts of Latin America. From early 2010, Liberty Global is gradually concentrating on strengthening its foothold in Europe through a series of mergers and acquisitions.

In the coming years, we believe Liberty Global’s revenue will continue to benefit from a ‘triple play’ of video, broadband, and telephone, as it signs up more “bundled” customers in Europe and Latin America. The triple play customer base increased 38.1% year over year in 2011.

The company is also concentrating on its double play product, Internet and telephony, which has the potential to expand. Double play customer base penetration increased 10.3% in 2011.

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