Liberty Global’s 4Q24 results were fairly weak across the silos, while in the round 2025 guidance was uninspiring as creditors prepare for yet another transition year. Overall, we continue to see signs of increasing operational headwinds for cablecos, while LBTYA continues to pursue various strategic options to “unlock” value from businesses that the equity market continues to price as having negligible equity value. While we still see a number of levers to pull, LBTYA continues to eschew the primary one we are looking for – i.e. to revise down its long-standing leverage targets to better reflect the thinner FCF margins across the silos. Rather, both VMED and ZIGGO will pay out ~100% of expected FCF in 2025 to shareholders, while heavy investment at Telenet means it will burn cash in 2025.

While we had not assigned it a high probability, we had had some small hope that LBTYA would take the opportunity to finally revise down leverage targets at VMED and ZIGGO with these results. Unfortunately, that hope (unsurprisingly) proved unfounded.

On the call, Fries asserted that management expect FCF growth at each of the businesses, once current high levels of capex normalize, but we are unconvinced that this is likely to be the case, particularly as we expect it will be difficult for VMED and TNETBB to maintain their historically premium brand positioning in a more fibre-rich environment (for ZIGGO much of the transition to mid-market has occurred already in our view). With management seemingly kicking the can for at least another year, we see the margin for error as getting meaningfully thinner. Given what we see as reduced defensive credentials and relatively tight spreads across the board, we increasingly view the cablecos as presenting unattractive relative value.