Malone's Liberty Global pares growth target

[LONDON] Liberty Global Plc lowered its growth target for Europe this year as billionaire John Malone's cable carrier reported a weaker-than-expected start in the UK.

Liberty now forecasts operating cash flow growth of 5 per cent for 2017, down from February's outlook of 6 per cent to 7 per cent, the London-based company said on Sunday. The operator lost more customers than expected in the UK in the first quarter, following two price increases last year and challenges with the launch of a new video product. Mobile revenue also declined.

"The UK is our biggest market, so it has a big impact," Chief Executive Officer Mike Fries said in an interview. He cast the new target as conservative. The reduction is "more of a bump in the road." Malone's Europe-focused carrier is working to improve execution of a £3 billion ($5.46 billion) expansion of its Virgin Media footprint in the UK, known as Project Lightning, after revealing in March that it had overstated construction progress. Management changes will probably delay the project this year, with a ramp-up now expected over 12 to 24 months, the company said. The impact of the Project Lightning slowdown isn't material to company targets, Fries said.

Excluding the Netherlands where the company began a joint venture with Vodafone Group Plc in December, first-quarter operating cash flow rose 4 per cent from a year earlier to US$1.6 billion. That was down from 7.5 per cent growth in the fourth quarter. The company forecasts higher growth in the second half of the year, just as in 2016.

"Numbers for the quarter were rather disappointing," said Dhananjay Mirchandani, an analyst at Bernstein, in a note. "Organic revenue growth for the quarter in Europe was the slowest in four quarters." Price Competition Liberty faces the threat of escalating price competition for broadband in the UK, where the communications regulator proposed in March to lower some wholesale rates charged by BT Group Plc for other operators to access its network. Liberty's expansion project in the country is the company's biggest, aimed at boosting coverage by almost a third, to another 4 million homes.

While that has led to speculation that Liberty might find UK expansion less attractive and in turn scale back its plans, Fries said the project is on track.

"At this point, we are not seeing anything in the market that would reduce our appetite to continue building out to 4 million homes," Fries said. "The demand is good." Highlights: Adjusted revenue rose 2.1 per cent to US$3.52 billion for the quarter, matching the average of analysts' estimates compiled by Bloomberg.

Net loss narrowed to US$293 million from US$334 million.

The company added 244,300 net accounts in Europe, including video, phone and internet.

In the UK and Ireland, 158,000 net customers joined. Mobile revenue fell 9 per cent and average revenue per unit increased 1 per cent.

Sales for the Latin America and Caribbean unit, including the Cable & Wireless Communications business purchased last May, were US$911 million.

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