Liberty Global sees capex-sales ratio falling

By Lucas van Grinsven, European Technology Correspondent

PARIS (Reuters) - Liberty Global (LBTYA.O: Quote, Profile, Research, Stock Buzz), the world's biggest international cable group, expects capital spending to fall as a proportion of sales as it completes projects aimed at keeping its edge over telecoms operators.

"I believe we've probably peaked in capex," Chief Executive Mike Fries told a Reuters Technology, Media and Telecoms Summit in Paris on Wednesday.

Fries said infrastructure investment had been needed to ensure Liberty Global kept an edge over telecoms operators as they also start to offer video over the Internet. He said four fifths of such investment also generated sales directly.

"It's not defensive capital or fixed capital that's hard to associate with a revenue stream," Fries said.

Fries said capital spending was currently "upwards of 25 percent" of revenues, but declined to give precise forecasts for how far or fast it might fall in relation to sales.

Key projects have included rebuilding eastern European networks and rolling out new set-top boxes for high definition television. Liberty delivers video, telephone and Internet services to customers in 17 countries.

Fries said Liberty Global took the long-term view that video delivered over the Internet would not be able to compete with the quality delivered to the home over much higher bandwidth and said this justified the company's big investments.

"Consumers will fall back in love with the television," he said. "There'll be no need to go to your desk, sit on a hard chair and put your finger on your keyboard. You'll be able to get everything you need from your TV set sitting on your couch."

Fries was also confident about cable's position in an emerging fight for content with the telecom firms.

"I think content will flow to the best networks. Cable will always have access to the best content. So, do we have to invest in content ourselves, I'm not so sure."

Fries said private equity investors who had bought cable TV companies throughout Europe appeared to be quite successful, but he questioned whether they had invested enough to ensure that continued in the long term.

"In the next five years, I don't think you'll be able to get away with that short-term focus. The game is probably up," he said.

(Additional reporting by Georgina Prodhan)