Fiber Upgrades And Digital Convergence Will Fuel Secular Demand

Key Takeaways

• Spin-outs, asset separations, and innovative structures are set to rapidly unlock hidden value and drive substantial upside in valuation and cash flow.
  
• Early digital infrastructure investments, advanced technology upgrades, and proactive retention strategies position Liberty for higher revenue growth, margin expansion, and industry leadership.
  
• Persistent subscriber losses, asset sales, high leverage, regulatory burdens, and slow network upgrades threaten Liberty Global's revenue growth, profitability, and long-term competitive position.

Catalysts

Provides broadband internet, video, fixed-line telephony, and mobile communications services to residential and business customers.

• Analyst consensus sees the separation and spin-out of Liberty assets reducing the conglomerate discount, but the management's plan to aggressively pursue multiple structures (spins, tracking stocks, IPOs) across all core geographies within 12 to 24 months-with built-in legal and tax advantages-suggests far larger, faster multiple re-rating and rapid realization of hidden value, unlocking immediate upside in both NAV and free cash flow that could dwarf consensus expectations.
  
• While analysts broadly agree that fixed NetCo and fiber upgrades in the UK can secure better positioning and access to infrastructure capital, Virgin Media O2's accelerating spectrum expansion, 5G coverage, proprietary DOCSIS 4.0 upgrades delivering gigabit-plus speeds at a fraction of the cost of fiber, and a credible path to national fixed-line coverage provide much greater scope for margin uplift, ARPU expansion, and long-term revenue growth than peers or consensus forecasts.
  
• The convergence of fixed and mobile networks, along with Liberty's early investments in digital infrastructure and cloud/data platforms like AtlasEdge and EdgeConneX, uniquely position the company to capture outsized share of data center, edge computing, and enterprise digitalization spend as European economies digitize, creating a high-growth, high-margin layer of B2B and infrastructure revenues that the market is currently undervaluing.
  
• Liberty's aggressive use of advanced AI-driven retention tools, loyalty programs, and agile operating models across multiple markets is already sharply reducing churn and customer complaints, which, combined with premium gigabit offerings and sticky bundled products, will accelerate premium subscriber growth and drive meaningful incremental net margin expansion ahead of sector averages.
  
• The optionality for further industry consolidation and targeted M&A-combined with impending falls in capex intensity after 2025 in both Belgium and Ireland-means free cash flow and earnings growth will inflect sharply upwards, creating a large structural opportunity for capital returns and further multiple expansion as regulatory conditions and industry consolidation trends remain highly favorable for scaled digital infrastructure operators.

Liberty Global Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Liberty Global compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Liberty Global's revenue will grow by 3.2% annually over the next 3 years.
• Even the bullish analysts are not forecasting that Liberty Global will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Liberty Global's profit margin will increase from -70.2% to the average US Telecom industry of 12.8% in 3 years.
• If Liberty Global's profit margin were to converge on the industry average, you could expect earnings to reach $650.1 million (and earnings per share of $2.21) by about September 2028, up from $-3.3 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 16.1x on those 2028 earnings, up from -1.2x today. This future PE is greater than the current PE for the US Telecom industry at 15.2x.
• Analysts expect the number of shares outstanding to decline by 4.7% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.49%, as per the Simply Wall St company report.

Liberty Global Future Earnings Per Share Growth

Risks

• The continued high churn and persistent broadband subscriber declines in key markets like the UK and the Netherlands, driven by fierce price competition from low-cost rivals and Altnets, are likely to exert sustained downward pressure on Liberty Global's top-line revenue and limit their ability to grow ARPU over the long term.
  
• Asset divestitures and the strategy of separating out the parts-while meant to address the conglomerate discount-reduce the overall revenue base and shrink future earnings potential, especially as previously sold business units like Sunrise now outpace the market capitalization and profitability of the remaining portfolio, increasing the risk of prolonged revenue stagnation.
  
• The company's consistent reliance on high leverage and complex, siloed debt across operating companies raises the risk that rising interest rates and tightening credit conditions will significantly inflate interest expenses, erode net margins, and constrain Liberty Global's capacity to invest in critical network upgrades, impacting long-term earnings and financial flexibility.
  
• Regulatory scrutiny and cost pressures in Europe, especially from digital privacy and infrastructure access regulations, may sharply increase compliance and operational costs, limiting profitability and restricting corporate strategies that depend on market rationalization or infrastructure-sharing agreements, adversely affecting net margins.
  
• The slow pace of migration to next-generation networks-such as an overreliance on HFC upgrades instead of full fiber-increasingly exposes Liberty Global to risk from ongoing commoditization of connectivity, while potentially falling behind competitors on network quality and capex efficiency, ultimately leading to higher churn, lower pricing power, and pressure on both revenue and long-term earnings potential.

Valuation

• The assumed bullish price target for Liberty Global is $27.81, which represents two standard deviations above the consensus price target of $15.22. This valuation is based on what can be assumed as the expectations of Liberty Global's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $35.0, and the most bearish reporting a price target of just $9.9.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $5.1 billion, earnings will come to $650.1 million, and it would be trading on a PE ratio of 16.1x, assuming you use a discount rate of 8.5%.
• Given the current share price of $11.56, the bullish analyst price target of $27.81 is 58.4% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.