Utilities can be strange businesses. It often takes a lot of money to build up enough infrastructure to be a player, and those years of losses can scare away investors. But once the gear is in place, it can produce robust cash flow. This has been true of power companies, gas companies, cable companies, and cell phone companies. I imagine it's also what we'll see happen at Liberty Global
Right now, though, Liberty Global is still in the building phase. The company recently announced that it had agreed to acquire Cabelcomm, the largest Swiss broadband cable operator. Liberty will buy the company from an investor group for about $2.2 billion in cash, mostly funded by debt. The investors had been planning to take the company public and actually agreed to accept a price lower than the IPO pricing range that had been bandied about.
This deal will add another two million subscribers and give Liberty Global a leading position in 11 of its 14 European markets. On the surface, Liberty would seem to be paying a fair price, with an implied value of $1,100 per subscriber. That's a good deal, since Western European cable subscribers are often valued around $1,500 each.
With properties across Europe, Japan, and Latin America, Liberty Global certainly lives up to its name. Sure, there will be competition. There are satellite providers like SES Global and Eutelsat, broadcast TV companies like Central European Media
Investors should be aware that this is a relatively new company -- formed earlier this year in a merger of Liberty Media International and UnitedGlobalCom, both of which were spun off from parent company Liberty Media
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- Give Me Liberty, Give Me Value!
Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).