Liberty Global Unconcerned by Dutch Wholesale Video Law
Liberty Global executives aren’t very concerned about a new Dutch law that could require the cable operator to make wholesale access to its analog video network available to competitors, CEO Mike Fries said during a Q1 earnings teleconference Friday. “Whatever occurs will probably take some time,” he said. Last time the Dutch government took similar steps “as you will recall, we had a pretty good economic solution even if it did come about, but we're not too worried about it,” Fries said.
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"It really is a head-scratcher and hard for us to understand,” the law’s justification, Fries said. “I would expect politics are at play here,” he said. “From time to time we are going to have these moments in European national politics and we'll move through them.” Holland’s telecom regulator, the Independent Post and Telecommunications Authority of the Netherlands, or OPTA, found as recently as two years ago that the video market in Holland was competitive and becoming more so, Fries said.
Liberty Global may seek relief from the courts and/or European Commission, Fries said. A similar move by OPTA was tossed by European courts last year due to the level of video competition there, Pivotal Research analyst Jeff Wlodarczak wrote investors. Liberty Global’s UPC Broadband division operates in the Netherlands.
Liberty saw very little interest from competitors who sought access to its analog video network under the previous plan, Fries said. “The market is moving to digital and it’s all about broadband now.” It’s odd that the law would put OPTA, the same regulatory body that concluded there’s plenty of competition, in charge of adjudicating disputes over wholesale video access, he said.
The EC may step in to support of Liberty Global, Fries said. Wlodarczak agreed: “Given the OPTA finding regarding the competitiveness of the market there, there is a reasonable possibility the EC (European Commission) will overrule this new law,” set to take effect later this year. “It wouldn’t be Europe, and the Netherlands in particular, if this kind of regulatory noise did not flare up occasionally,” he said. “I believe this will either be thrown out by the courts/EC or watered down over several years to the point where a wholesale analog [requirement] is a neutral event” for Liberty Global, Wlodarczak said.
Liberty Global Q1 sales increased 12 percent to $2.54 billion from a year earlier on its purchases of KBW, a German pay-TV provider, and Aster, a Polish cable operator. It swung to a $25 million net loss from a $342 million profit on “higher realized and unrealized losses on derivative instruments,” Liberty Global said. The company ended the quarter with 18.4 million video subscribers, 8.5 million broadband subscribers and 6.5 million phone subscribers, it said. Liberty Global added about 445,000 revenue-generating units total on a net basis last quarter from Q4, about 17 percent more than it added in Q1 2011. Liberty Global lost 86,000 video subscribers last quarter, slightly more than the 85,000 it lost a year earlier, though it now has a larger number of potential video subscribers.