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Berkshire Hathaway's key positions in 4th quarter 2013

Part 3
Berkshire Hathaway's key positions in 4th quarter 2013 (Part 3 of 6)

Buffett’s Berkshire Hathaway opens a position in Liberty Global

Berkshire Hathaway and Liberty Global

Berkshire Hathaway said in its year end letter that it increased its ownership interest last year in each of its “Big Four” investments—American Express (AXP), Coca-Cola (KO), IBM (IBM), and Wells Fargo (WFC). It also bought shares in Exxon Mobil (XOM), DaVita HealthCare Partners (DVA), Liberty Global (LBTYA), and Goldman Sachs (GS).

International cable company Liberty Global (LBTYA) is a new 0.25% position initiated by Berkshire Hathaway in 4Q. Liberty Global operates in 14 countries, including 12 European countries.

Buffett's Berkshire Hathaway opens a position in Liberty GlobalEnlarge Graph

Liberty Global PLC, the company controlled by billionaire John Malone, agreed in January to acquire Dutch broadband provider Ziggo NV (ZIGGO) for $6.7 billion. With Ziggo, Liberty Global is targeting 160 million euros in annual run-rate synergies by 2018, as the company continues to build its scale in Western Europe. Liberty Global will merge Ziggo with its wholly owned Dutch cable operator, UPC, and compete against Dutch telecommunications company Royal KPN.

The cable company generates about 90% of its revenue from Europe. Liberty and Vodafone (VOD) are driving consolidation in the cable industry in Europe amid rising demand for “quad play,” which are bundled packages of fixed-line phone, mobile, TV, and Internet services. Last year, the company acquired Virgin Media in a $14.1 billion deal and sold the majority of the London-based Chellomedia to cable business AMC Networks for $1 billion. Liberty Global already holds a 58.4% stake in Belgium’s Telenet and owns Germany’s second-largest cable operator, UnityMedia. Liberty Global was interested in bidding for Kabel Deutschland, which was later acquired by Vodafone, but it faced competition concerns, as it already owns substantial cable assets in Germany. Both companies are also reportedly in the fray to buy Spain’s largest cable operator, Ono.

Liberty Global chief financial officer Charles Bracken said last year at a conference, “We need to be able to react if and when markets evolve to all-inclusive bundles but we’re still not totally convinced that quadruple-play is a must-have.” The company hired a European mobile operation head last year to become “a full mobile virtual network operator (MVNO) in most of its European operations.”

The company said 4Q net loss narrowed to $121.2 million, or $0.31 a share, compared with a year-earlier loss of $331.3 million, or $1.27 a share. Revenue rose 71% to $4.47 billion, primarily driven by the inclusion of Virgin Media. During 4Q, Liberty Global added 413,000 organic revenue generating unit (or RGUs), including additions of 270,000 and 192,000 subscribers for broadband Internet and telephony services, respectively, and a net loss of 50,000 video subscribers.

On December 31, 2013, the company had total debt and cash and cash equivalents of $44.7 billion and $2.7 billion, respectively.

In 2013, Liberty Global returned over $1.1 billion of capital to shareholders through stock repurchases. Plus, it recently increased its buyback program by $1 billion. The company is also authorized to purchase an additional $3.5 billion under the buyback program through the end of 2015.

Buffett's Berkshire Hathaway opens a position in Liberty GlobalEnlarge Graph

The company is considering spinning off its Latin American operations. Its Latin American operations include VTR Internet and wireless businesses in Chile and its 60% share in Liberty Cablevision of Puerto Rico.

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