Media companies seem to be coming under siege in the U.S. as consumers cut the cord and rely more and more on broadband Internet and mobile services. For companies like Liberty Global (NASDAQ:LBTYK), that presents both a threat and an opportunity in its home bases in Europe and Latin America.

On Thursday, the company reported third quarter results, and while the revenue growth won't knock your socks off, the company's transition to a new era of media should keep it generating cash flow for many years to come.  

Liberty Global results: the raw numbers

 

Q3 2015

Q3 2014

YoY Growth

Sales

$4.60 billion

$4.50 billion

2.2%

Operating Income

$545.5 million

$703.7 million

(22.5%)

Free Cash Flow

$770.3 million

$309.8 million

148.6%

Source: Company earnings release

What happened with Liberty Global this quarter?
Given Liberty Global's complex structure, it's important to look at some of the highlights that drove the quarter's numbers.

  • Total organic revenue generating units (RGU) grew 320,000 in the quarter and have grown 526,000 year-to-date. Broadband led the growth with 222,000 net additions in the quarter, and telephony added another 159,100 customers for the group.
  • Video attrition continues, with 64,000 net lost RGUs in the quarter, although that was the slowest pace of losses this year.
  • Wireless continues to be a strength, with 450,000 postpaid subscribers added in the last twelve months and rebased revenue up 18% year-over-year.
  • Germany and the U.S. have driven subscriber growth, which may show some long-term stability in the up and down European economy.
  • Free cash flow of $1.7 billion in the first nine months of the year is up 24% from a year ago and shows the strong leverage Liberty Global has built into its business.

What management had to say
Liberty Global's key European market continues to slowly improve. This won't be a high growth region, but given the entrenched nature of the infrastructure the company offers, it will be a consistent cash generator for years.

Surprisingly, Latin America and the Caribbean continue to be strong as well, despite some turbulent economic times. Rebased revenue was up 7%, and operating cash flow grew 10% in the quarter with LiLAC in Chile and Puerto Rico.

LiLAC Group is still a small business for Liberty Global, but it's the company's biggest growth opportunity with just 3.5 million subscriptions compared to 53.2 million in Europe. Businesses like mobile are also highly competitive, with a number of regional players in the market, so owning the space may not be as easy as it is in Europe.

Looking forward
For the full year, management is expecting mid-single digit growth on a rebased basis for Liberty Global Group and LiLAC Group. The slow growth in Latin America can primarily be explained by a strong dollar, overshadowing subscriber growth. Investors will want to keep an eye on how an unstable economy in the region affects results, however, because macro conditions may play a bigger role than they do in more established economies.

In Europe, the strong subscriber additions in broadband should continue with blazing Internet speeds of up to 500 Mbps across Europe. What will be worth watching is the Horizon TV offering, allowing customers to watch TV online. Unlike U.S. offerings, this could replace cable and keep customers in the Liberty Global family. New subscribers of nearly 250,000 shows some solid traction there, and if that continues the future could be bright -- even for the TV side of the business.

Travis Hoium has no position in any stocks mentioned. The Motley Fool recommends Liberty Global. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.