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How Liberty Intends to Spend Proceeds from Sale of Austrian Business

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Mar. 28 2018, Updated 9:02 a.m. ET

Deutsche Telekom looking to strengthen its position in Austria

In a deal expected to close in the second half of 2018, Liberty Global (LBTYA) is selling its Austrian business under the UPC brand to T-Mobile (TMUS) parent Deutsche Telekom (DTEGY). Liberty’s UPC Austria has about half a million fixed-line broadband subscribers. Deutsche Telekom (or DT) hopes that the acquisition of UPC Austria will make it a stronger competitor in Austria, where it is challenging market leader A1.

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Shareholder capital return

As for Liberty, it is looking to utilize a portion of the proceeds from the sale of its Austrian business to return capital to shareholders through share repurchases. Since 2005 to the end of 2017, Liberty has returned more than $18 billion to its shareholders through stock buybacks. The company has lined up a $2.0 billion buyback plan for 2018.

In March last year, Verizon (VZ) announced a capital return program that included repurchasing up to 100 million of its shares, a program that could last until February 2020. Comcast (CMCSA), the American media giant that is also expanding into the wireless business to challenge Verizon and AT&T (T), is planning to buy back $5.0 billion worth of its shares in 2018.

Strengthening the balance sheet

In addition to returning capital to shareholders, Liberty intends to spend a portion of the proceeds from the sale of the Austrian business to strengthen its balance sheet by reducing its debt, especially debt under its remaining UPC business, which has operations in Switzerland and Eastern Europe.

Liberty was carrying $41 billion in debt at the end of 2017. As the chart above shows, debt specific to its UPC unit stood at $7.3 billion.

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