Liberty Global Reports Mixed 1Q

Liberty Global Inc. ( LBTYA - Analyst Report ) declared mixed financial results for the first quarter of 2012. In the previous quarter, the company added a net 445,000 organic revenue generating units (RGU), up 71% year over year.

Quarterly GAAP net loss from continuing operation was $25.2 million or a loss of 9 cents per share compared with a net income of $342.4 million or $1.22 per share in the prior-year quarter. However, first-quarter 2012 adjusted (excluding special items) earnings per share of 17 cents fell below the Zacks Consensus Estimate of 20 cents.

Quarterly total revenue of $2,537 million was an improvement of 12.4% year over year, beating the Zacks Consensus Estimate of $2,492 million. Year-over-year growth of the top line was primarily attributable to the consolidation of German operations.

Quarterly cost of operation was $897.7 million, up 10.6% year over year. Selling, General and Administrative expenses were $471.4 million, up 12.8% year over year. In the first quarter of 2012, operating income was $494.3 million, up 14.2% year over year.

During the first quarter of 2012, Liberty Global generated $805.8 million of cash from operations compared with $734.9 million in the year-ago quarter. Free cash flow (cash flow from operations less capital expenditures) in the reported quarter was $284.5 million compared with $245.3 million in the prior-year quarter.

At the end of the first quarter of 2012, Liberty Global had $2,703.1 million of cash & marketable securities and $24,966.3 million of outstanding debt on its balance sheet compared with $2,626.4 million of cash & marketable securities and $24,757.9 million of outstanding debt on its balance sheet at the end of 2011. At the end of the first quarter of 2012, debt-to-capitalization ratio was 0.90 compared with 0.87 at the end of 2011.

Subscriber Statistics

As on March 31, 2012, Liberty Global had 19.5869 million customers in 14 countries. UPC Broadband customer was 16.1746 million. Telnet customer was 2.1801 million. VTR customer was 1.1089 million. Puerto Rico customer was 122,700. Total Single-Play customer was 11.2316 million, up 9.4% year over year. Total Double-Play customer was 2.9207 million, up 9.8% year over year. Total Triple-Play customer was 5.4346 million, up 39.6% year over year.

During the reported quarter, Liberty Global added 445,000 net RGUs including net gains of 254,000 and 277,000 subscribers, respectively, for broadband Internet and telephony services and a net loss of 86,000 subscribers for video services. In the first quarter, the company added 279,000 digital video subscribers. At the end of the first quarter of 2012, Liberty Global had 8.4 million digital cable subscribers with a penetration rate of 47%. Importantly, 52% of total digital cable subscribers are now using HD/DVR services.

Segment wise Results

Revenue from total UPC Broadband division was $1,705.7 million, up 17.1% year over year. Within this segment, revenue from Western Europe was $1,396.6 million, up 20.2% year over year. Revenue from Central and Eastern Europe was $280.6 million, up 6% year over year. Revenue from Central and other operation was $28.2 million, down 6.3% year over year.

Telenet revenue was $477.5 million, up 5.1% year over year. VTR revenue was $224.5 million, up 4.9% year over year. Corporate and other revenue was $151.4 million, down 1.6% year over year.

Businesses Restructuring Update

Liberty Global’s proposed disinvestment of its Australian outfit Austar United Communications Ltd. to Foxtel get Australian regulatory approval in last month. In July 2011, 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.

Recommendation

We maintain our long-term Neutral recommendation on Liberty Global. Currently, it holds a short-term Zacks #3 Rank (Hold) on the stock.