Liberty Global Plc. (LBTYA - Free Report) is reportedly considering sale of Swiss and Austrian cable businesses.
The leading European quad-play cable multi service operator (MSO) is currently engaged in initial talks with buyers to divest UPC Austria and UPC Switzerland units. While UPC Austria is the largest cable television operator in Austria, UPC Switzerland LLC is the largest broadband cable operator in Switzerland.
Why the Sale?
The reported sale has been caused by declining revenues and subscriber counts from the respective business units. In the last reported quarter, the company’s Swiss subscriber base declined and revenues fell 2%, due to increased competition from Swisscom. Swisscom is a major telecommunications provider in Switzerland, which has aggressively reduced broadband prices.
Moreover, UPC Switzerland’s heavy investments in its recently launched sports channel and marketing schemes for television packages have reduced cash flow. Revenues of $1.36 billion came from around 1.3 million customers.
Notably, Swiss mobile operators — Sunrise Communications AG and Salt Mobile SA — might be interested in purchasing UPC Switzerland to boost market shares and revamp their mobile and fixed line convergence.
UPC Austria is a smaller business with most of its cable network in Vienna and revenues of only $342 million. It is unclear whether Liberty Global plans to sell it separately or as a package with its Swiss arm.
The Expected Outcome
Several analysts opine that the sale of UPC Austria and UPC Switzerland goes through, then it might pave the way for a $175 billion merger of Liberty Global with Vodafone Group plc (VOD - Free Report) . The companies have already merged their Dutch operations (in December 2016) by forming a 50-50 joint venture (JV) in Netherlands. Rumors related to a possible deal between the above two in Germany, also persist.
Apart from the joint venture with Vodafone, launch of DOCSIS 3.1 network services, the long-term agreement with Netflix Inc. (NFLX - Free Report) and the takeover of Cable & Wireless are anticipated to drive growth in the future.
Zacks Rank and Price Performance
Currently, Liberty Global carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
With such positives, Liberty Global portrays an impressive price performance. In the past month, the stock gained 4.6% against the industry’s decline of 0.2%.
A better-ranked stock to consider in the Consumer Discretionary sector, which houses Liberty Global, is Cable One Inc (CABO - Free Report) .
Cable One currently sports a Zacks Rank #1 (Strong Buy). The company’s sales and earnings estimates for fourth-quarter 2017 are estimated to increase 23.6% and 38.9%, respectively.
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