Liberty Global Quarterly Loss Widens as Investments Suffer

Liberty Global Plc (LBTYA), the cable company controlled by billionaire John Malone, reported a wider quarterly loss after debt and interest expenses grew.

The net loss widened to $830.1 million, or $2.09 a share, from $22.4 million, or 8 cents, a year earlier, the London-based company said in a statement yesterday. Revenue rose 74 percent to $4.37 billion, missing analysts’ $4.42 billion average estimate, according to data compiled by Bloomberg.

Liberty Global blamed the loss on its investments in derivative instruments, as well as higher expenses from interest and income taxes. Malone said in July that he’s willing to take on debt to expand his European operations because he expects the cost of paying back loans to decline as economies improve and inflation rates rebound from crisis levels. The company generated about 90 percent of its revenue from Europe last year.

Interest expenses increased to $605.7 million from $351.8 million a year earlier while debt and lease obligations more than doubled to $854.1 million from $363.5 million, the company said. Losses from derivative investments, investments that can be used to hedge risk, rose to $675 million from $569.9 million. Earnings last year were helped by a sale of interest in Austar United Communications in the second quarter.

Liberty Global shares fell as much as 1.7 percent to $74.74 in extended trading after the close in New York. The stock had climbed 21 percent this year.

Virgin Media

As part of the company’s expansion, Liberty Global bought the U.K.’s Virgin Media Inc. this year. Dutch pay-TV provider Ziggo NV (ZIGGO) said last month it rejected a takeover offer from Liberty Global, and Malone’s company was outbid for Germany’s Kabel Deutschland Holding AG (KD8) by Vodafone Group Plc (VOD) in June.

Liberty Global maintained its stock-buyback program during the merger campaign, repurchasing $500 million worth of shares last quarter.

“We remain on track to complete our two-year target for $3.5 billion of buybacks by mid-2015,” Chief Executive Officer Mike Fries said in yesterday’s statement.

Liberty Global added 314,000 subscribers last quarter. That beat the 223,000 additions that Vijay Jayant, an analyst with ISI Group, predicted. Customer additions in western Europe are improving as competitive pressures in some markets abate and the company lost fewer analog cable TV customers than expected, Jayant said in a note to investors.

U.K. Subscribers

Higher sales of triple-play packages, which combine phone, TV and Internet service, contributed to customer additions, Liberty Global said.

In the U.K., Virgin Media lost 6,800 customers after BT Group Plc (BT/A) began offering free access to premium sports programs for its broadband customers. TV and phone customers fell by 12,600 and 24,400 respectively, while 30,200 signed up for Internet service, Virgin Media said in a statement on its website. An agreement to offer BT Sport channels to Virgin customers helped mitigate losses.

Liberty Global said it expects to recognize as much as $360 million in cost savings from the deal, double its initial forecast.

Liberty Global agreed on Oct. 28 to sell its Chellomedia international content unit to AMC Networks Inc. (AMCX), the owner of the U.S. cable-TV channel that broadcasts “Breaking Bad” and “Mad Men,” for 750 million euros ($1 billion), as Malone’s company focuses on acquiring rivals in Europe and building out network capacity.

In September, Liberty Global was the first cable company to team up with subscription-video service Netflix Inc. (NFLX), allowing the streaming site to be included on the Virgin Media platform in the U.K. Netflix later signed similar deals with cable operators in Sweden and Denmark.

To contact the reporters on this story: Kristen Schweizer in London at kschweizer1@bloomberg.net; Amy Thomson in London at athomson6@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

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