Liberty Global CEO Mike Fries does not seem overly concerned about the cord-cutting and phone-streaming era. He thinks the old-guard telecom company holds the "killer app": broadband technology.
"There are pros and cons in cord-cutting," Fries told CNBC from the World Economic Forum in Davos, Switzerland, on Thursday.
"We've always been a video aggregator, whether cable or satellite and the industry is moving into OTT [over-the-top] aggregation of Netflix and Youtube," he told CNBC's Squawk Box from Davos. "This is a revenue stream we want to protect and we're launching really advanced versions of the box that can speak to the age of Netflix, Amazon or the BBC, wherever you want to go."
Comcast CEO Brian Roberts said during a CNBC interview after its earnings report on Thursday, "We've made a pivot to a broadband-centric cable company, that whether for streaming or gaming or any other app that you're interested in on your television, the best WiFi, that's the No. 1 product."
Investors are not entirely sold on the argument from the telecom giant. Liberty Global shares have trailed the market significantly over the past year, down roughly 10%; year-to-date shares have declined 12%.
Comcast shares fell on Thursday despite reporting an earnings beat, though the broader market was down as well. Comcast shares have risen by 25% over the past year.
Warren Buffett's Berkshire Hathaway has added Liberty Global in recent years among its stock holdings. Buffett's investment conglomerate also owns a stake in Charter Communications, which is a major broadband player, though the stakes in both companies are of a size where in recent years the investments may have been directed by one of Buffett's investing managers, Ted Weschler or Todd Combs. Buffett's company has bought — and sometimes sold — shares in these stocks since as early as 2013.
The killer app and meta-aggregation of content
Fries said Liberty Global, which has a large European cable business, is not losing as many traditional customers to streaming as in the U.S.
On Thursday, Comcast reported a larger-than-anticipated decline in video subscribers, though high-speed internet customers increased above expectations.
"Broadband is the killer app," Fries said. "We look at the margins in broadband as a strength versus the declining gross margins in video."
He acknowledged the costs to the company in this transition, saying it is losing 1% to 2% in Europe a year. In the U.S. it's 4% to 5%, including satellite. But he added, "The consumers in Europe ... 80% in Europe still want to sit back and watch on a big screen."
Comcast acquired European cable giant Sky in 2018.
Netflix chief product officer Greg Peters said on its earnings call earlier this week, " I think what we are seeing is there's more and more opportunity that we're finding through whether it's mobile operators, pay TV operators, ISPs to reach out to a customer segment ... We can actually accelerate that growth. And so it starts by just being available on the set-top box or the device that they're using to watch TV, and we can put Netflix there."
Netflix recently announced an expanded partnership with Sky.
Fries described the opportunity as a "chance to be a meta-aggregator of content."
"We're leaning into broadband," he said. "If we have both mobile and fixed assets, that is the long term plan. Connectivity is really where it's at."
And he criticized some of the hype surrounding 5G technology being pursued by competitors like AT&T and Verizon.
He said 5G is "happening" but it is expensive and he is not sure about the business case yet.
"We are behind it, but it will never replace fixed. ... The mobile customer is 5 gigabytes to 10 gigs a month. Fiber and cable is hundreds of gigs, 200 to 300 gigs on fixed for customers," Fries said. "Every ten years it goes up tenfold. You need fiber to get it done."
Disclosure: Comcast owns NBCUniversal, parent company of CNBC.
