Higher Prices Drive Liberty Global PLC's Growth

Liberty Global PLC (NASDAQ: LBTYK) reported fourth-quarter 2017 earnings this week and showed continued progress growing its business. Improving technologies are driving adoption in Europe and a price increase has helped drive higher operating cash flow.

Below are the raw numbers Liberty Global reported, but they were negatively impacted by currency fluctuations, so investors should keep in mind the rebased numbers (provided below) as well.

Liberty Global: The raw numbers

MetricQ4 2017Q4 2016Year-Over-Year ChangeSales$3.99 billion$4.22 billion(5.4%)Operating cash flow$1.91 billion$2.04 billion(6.1%)Free cash flow$844 million$1.01 billion(16.4%)

What happened with Liberty Global this quarter?

Trends that have been in place for years continued in the fourth quarter. Data and mobile subscriptions were up and cable subscriptions fell, which shouldn't shock anyone. Here's a look at the details of the business last quarter.

  • Currency fluctuations can make comparable numbers look better or worse depending on the quarter, and they negatively impacted the fourth quarter. On a rebased basis, revenue was up 2.9% versus a year ago and operating cash flow was up 4.3%.
  • Organic revenue generating units (RGUs) were up 149,200 in the quarter, driven by 116,000 data additions, 87,700 voice additions, and the loss of 54,500 video customers.
  • Central and Eastern Europe were the strongest markets, adding 117,300 RGUs in the quarter. Belgium and Switzerland/Austria lost 11,800 and 19,100, respectively.
  • Next generation video, which Liberty Global has been building out for a couple of years, added 210,000 subscribers and reached 7.7 million, or 43%, of the video cable base.
  • Fully swapped borrowing costs were down 500 basis points to 4.2%, and net leverage (net debt divided by annualized operating cash flow) was 4.9 times at the end of the year.
  • The spinoff of Liberty Global's Latin America business was also completed at the end of the year, creating two more regionally focused companies and a slightly easier to understand corporate structure.

What management had to say

CEO Mike Fries said price increases implemented in November improved cash flow and new products for Wi-Fi and video are helping drive growth. He sees a strong 2018, too:

Looking forward

Slow and steady growth is the name of the game in telecommunications today and Liberty Global is executing well. The fact that data and voice activations are much higher than lost video customers is a positive sign and I think new video products will stem the losses as well.

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Travis Hoium has no position in any of the stocks mentioned. The Motley Fool recommends Liberty Global. The Motley Fool has a disclosure policy.