John Malone’s Liberty Global made a big push into Belgium’s wireless business with its agreement to buy that country’s third-largest carrier — Base Co. — in an all-cash deal valued at $1.4 billion, a move that some believe could mark a shift in strategy for the European cable behemoth.
Liberty Global’s Belgian subsidiary Telenet agreed to acquire Base at a time when the wireless market in Europe is heating up considerably, with BT Group’s $19.1 billion purchase of U.K wireless company EE Ltd. and Telefonica S.A.’s $15.3 billion sale of its British unit Telefonica U.K. to Hong Kong-based Hutchison Whampoa dominating headlines for the past several months. The Base deal, which would basically quadruple Telenet’s wireless subscribers from under 1 million to more than 4 million customers, also marks what seems like a change of strategy by the parent company, which in the past has said it would concentrate its efforts on MVNO deals, which are basically agreements to lease capacity on other providers’ networks.
In Belgium, Telenet primarily buys wholesale capacity from Mobistar, a unit of France wireless giant Orange and the country’s second largest mobile service provider. That relationship likely will change, especially as Telenet said it would spend about $258 million to upgrade Base’s mobile network and integrate its operations over the next few years.
Liberty specifically said in a statement that the Base deal does not signal a departure from that strategy — it said it would concentrate on its MVNO and WiFi wireless strategies elsewhere in Europe. But according to reports, European analysts who follow the company aren’t buying it.
According to a Reuters report, most analysts that follow the company across the pond expect Liberty to make its next move in the Netherlands — it owns the largest cable company in that country too, UPC Netherlands, with about 9.9 million subscribers. And in one report, Allan Nichols, a Morningstar analyst in Amsterdam, noted that Malone and Liberty Global have a habit of testing out strategies in a single market before applying them across the business, pointing to its Chilean cable company VTR, which in 2013 inked a deal to resell wireless service in that country. By year-end 2014, Liberty Global had 4.5 million wireless customers in nine countries (80% in postpaid agreements) generating about $1.3 billion in revenue.
According to its press release announcing the deal, about 2.2 million of Base’s mobile subscribers are less profitable pre-paid customers. In a conference call to discuss the deal, Liberty Global CEO Mike Fries said that Telenet should be able to convince many of those subscribers to switch to the more lucrative plans.