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Liberty Global Has Second-Quarter Loss on Virgin Media Costs

Liberty Global Plc, the international cable company controlled by John Malone, reported a second-quarter loss on higher expenses from its deal to acquire Virgin Media Inc.

The net loss for the period was $12 million, compared with net income of $702 million a year earlier, Englewood, Colorado-based Liberty Global said yesterday. Revenue for the period rose 25 percent to $3.16 billion, beating an average analyst estimate of $3.09 billion, according to data compiled by Bloomberg.

Liberty Global, which bought U.K. pay-TV provider Virgin Media for $16 billion this year, said the deal increased costs for depreciation, amortization, share-based compensation and restructuring. The company, which added 149,000 Internet subscribers in the quarter, has been amassing European cable operators, taking advantage of low interest rates and central bank efforts to boost the economy.

“We’ve come a long way from five or six years ago,” Chief Executive Officer Mike Fries said on a conference call today. There is “good organic growth” still to come in countries such as Germany, he said. The company offers Internet, TV and phone services separately or as a bundled package.

The shares fell 1.7 percent to $79.59 at 11:24 a.m. in New York, giving the company a market value of $29.6 billion.

Virgin Media

Liberty Global operates in 14 countries, and gets 80 percent of its revenue from Germany, Belgium, Holland, the U.K. and Switzerland, Fries said. The company had 24.5 million customers at the end of the second quarter.

In a separate statement, Virgin Media said its second-quarter revenue was little changed at 1.03 billion pounds ($1.56 billion). The company had 4.9 million customers and average monthly revenue per user rose about 3 percent to 48.80 pounds after a price increase in February.

Virgin Media said growth in its cable business was partly countered by a 6 percent revenue drop in its mobile-phone unit.

Fries confirmed Liberty Global is in talks to offer BT Group Plc (BT/A)’s sports channels on the Virgin Media platform. It currently offers an array of TV channels from satellite pay-TV provider British Sky Broadcasting Group Plc.

Sports Content

BT and BSkyB have been battling over sports rights to lure customers from each other, as well as from Virgin Media, which doesn’t hold the rights to sports content. BT began offering three new sports channels to broadband customers at no extra charge yesterday.

At a Liberty Global board meeting in London last week, the CEOs of Sky and BT were invited to meet board members, Fries said. “BT Sport is a defensive move targeting Sky” and “not so much about us,” Fries said. “We are in the middle” of the Sky and BT competition.

Elsewhere in Europe, Fries said the company is “constantly looking at opportunities.” Last week, Liberty Global increased its stake in Dutch cable provider Ziggo NV (ZIGGO) to 28.5 percent, as “part of a hedging structure on our existing stake that allowed us to acquire more.”

Liberty Global recently lost a race to add to its German operations when it was outbid for Germany’s largest cable company, Kabel Deutschland Holding AG (KD8), by Vodafone Group Plc. (VOD) Malone, who serves as chairman of Liberty Global, said in an interview last month he’ll start to look to southern Europe for opportunities when the economy there starts improving.

Fries said the company has no plans to enter the U.S. market.

To contact the reporters on this story: Alex Sherman in New York at asherman6@bloomberg.net; Kristen Schweizer in London at kschweizer1@bloomberg.net.

To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net; Kenneth Wong at kwong11@bloomberg.net.

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