Citigroup cable analyst Jason Bazinet issued a report on international MSO Liberty Global last week after a meeting with company management, adding that the Denver-based company may be poised to outpace its own growth estimates this year.
In a research note last week, Bazinet wrote that Liberty Global's 5% to 7% cash-flow-growth estimate for the full year may be conservative, and added that the company's DOCSIS 3.0 initiative could reap even bigger rewards than expected.
Liberty Global has completed the DOCSIS 3.0 upgrade in about 50% of its footprint — it expected to fully roll out the technology by the end of the third quarter. According to Bazinet, early indications suggest that customers are willing to pay more for faster speeds — in the Netherlands, 75% of new data subscribers are taking the higher priced DOCSIS offering. According to Bazinet, management believes the product could lead to big share gains against competitors — he noted that Dutch telco KPN lost digital subscriber line customers for the first time in the second quarter.
Another catalyst for the stock is the potential unwinding of Super Media, Liberty Global's Japanese cable joint venture with Sumitomo. The partnership — which houses Jupiter Communications, the largest cable operator in Japan — is scheduled to expire in February 2010. Bazinet believes Liberty could exit the partnership temporarily, deconsolidate J-Com and either repurchase or tender for J-Com shares on the open market.
“Presumably, Liberty's objective would be to gain 50.1% ownership of J-Com, paving the way for the firm to increase leverage and use some of the proceeds to retire Liberty shares,” Bazinet wrote.