Liberty Global Restructuring Push Continues

Liberty Global is preparing to spin out “one or more” of its subsidiaries within the next two years, chief executive Mike Fries said on Friday, as part of a continuing drive to reshape the business and lift its share price.

The US-based group, which owns 50 per cent of UK telecoms operator Virgin Media O2 and holds a controlling stake in electric racing series Formula E, is exploring a range of structural options. These include further spin-offs, tracking stocks, initial public offerings and other transactions involving any of its portfolio companies. The portfolio also contains a 50 per cent stake in Dutch telecoms operator VodafoneZiggo and full ownership of Belgian operator Telenet.

Fries told investors the company was willing to consider a broad set of approaches to unlock value. “If we decided to simply track or spin our interest in Virgin Media O2, for example, we could give investors an opportunity to directly own shares in the business,” he said, while adding that this was only one of several possibilities under review.

Share Price and Cost Pressures

Liberty Global shares have fallen about 12 per cent over the past five years, underperforming wider markets. The company has been restructuring in an effort to address the gap between the market value of its shares and the worth of its assets. Initiatives have included offering redundancy to roughly one-third of its direct workforce and disposing of non-core assets such as one of its private aircraft.

The group completed the flotation of its Swiss telecoms unit, Sunrise, last year, marking a shift towards separating individual businesses from the holding company. This approach is designed to provide investors with greater transparency on the performance of specific assets and, potentially, higher valuations.

Telefónica Partnership

Fries’ comments come shortly after a disagreement with Telefónica, Liberty’s joint venture partner in Virgin Media O2. Telefónica this week announced it had halted plans to spin off its Spanish fixed broadband network, an initiative Fries had previously supported as a way to release value from infrastructure assets.

Marc Murtra, Telefónica’s chief executive, said the company “preferred their assets whole” and would not proceed with the separation. When asked about the decision, Fries described Telefónica as “good partners” and emphasised that the two companies would continue to collaborate on strategic initiatives in the future.

Sale of Vodafone Stake

Liberty Global also confirmed it had sold its 5 per cent stake in Vodafone, which it had acquired in 2023. Fries said the divestment was not a reflection of reduced confidence in Vodafone or its chief executive, Margherita Della Valle. “That is not the case,” he said. “We just have to look at what is the best use of our capital.”

The Vodafone stake had been seen as a strategic investment when purchased, with the two companies already linked through the VodafoneZiggo joint venture in the Netherlands. The sale frees up cash that Liberty Global can deploy elsewhere in its portfolio or return to shareholders.

Financial Performance

The announcements came alongside Liberty Global’s second-quarter results. Total consolidated revenues were $1.2bn, representing a 20 per cent increase on a reported basis and a 1.8 per cent rise on a rebased basis compared with the same period last year. The figures reflect both underlying operational improvements and the impact of acquisitions and disposals over the past year.

Fries said the company’s core businesses were performing steadily, with operational efficiencies helping to offset a competitive telecoms market. The group continues to focus on improving customer service and expanding network reach, particularly in markets where it has scale advantages.

Strategic Rationale for Spinouts

Analysts say that Liberty Global’s interest in spinning out assets is consistent with its long-standing strategy of building, scaling and eventually monetising telecoms and media operations. By separating units into standalone entities, the group can attract investors who want exposure to specific markets without taking on the complexity of the wider portfolio.

Tracking stocks, which reflect the performance of a specific division without creating a separate legal entity, are one option. They can allow shareholders to invest in a particular business line while the parent retains operational control. Full spin-offs or IPOs would go further, giving the separated companies independent governance and capital-raising ability.

In the case of Virgin Media O2, a spinout could be attractive to investors seeking exposure to the UK telecoms market, particularly if accompanied by a clear dividend policy. However, any move would need to be agreed with Telefónica, which owns the other half of the joint venture.

Market Context

Liberty Global’s push to restructure comes amid a wave of asset reviews across the European telecoms sector. Operators are looking for ways to reduce debt, fund network upgrades and respond to growing competition from low-cost challengers. Infrastructure carve-outs and partial asset sales have become increasingly common, as seen in Deutsche Telekom’s sale of a stake in its towers unit and Orange’s creation of an infrastructure subsidiary.

For Liberty Global, which has operations in multiple European markets, the challenge is to demonstrate that its diverse holdings can deliver stronger returns. The group’s sprawling structure and mix of mature and growth assets have sometimes made it harder for investors to assess its true value.

Looking Ahead

Fries did not give details on which subsidiaries might be spun out first, but suggested that decisions would be guided by market conditions, partner agreements and investor appetite. The two-year time frame allows flexibility, giving the company room to prepare assets for separation and to choose optimal market windows for any transactions.

While the sale of the Vodafone stake and the potential for further spinouts signal a more active portfolio management approach, Fries stressed that Liberty Global remains committed to its core telecoms operations. “We have great assets and great partners,” he said. “Our job is to make sure the market sees that value clearly.”

Analysts expect that any significant spinout, particularly involving Virgin Media O2 or VodafoneZiggo, would draw strong interest from both equity investors and infrastructure funds. With broadband and mobile services remaining essential utilities, these assets can offer steady cash flows even in challenging economic conditions.

However, they also note that the competitive pressures in telecoms require continuous investment in networks, which can constrain short-term returns. Balancing these demands with shareholder expectations will be a central challenge for any newly separated entity.

Conclusion

Liberty Global’s willingness to pursue spinouts, tracking stocks and other transactions reflects a pragmatic approach to value creation in a slow-growth sector. The group is positioning itself to respond quickly to opportunities while managing its portfolio more actively.

Whether these moves will be enough to reverse the share price decline remains to be seen. Much will depend on the execution of any separation, the terms agreed with partners, and the market’s assessment of the growth prospects for the businesses involved.

For now, Liberty Global has signalled that it is open to structural change on multiple fronts, setting the stage for potentially significant shifts in its portfolio over the next 24 months.