Liberty Global Ltd.

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Liberty Global's fourth quarter 2020 investor call. This call and associated webcasts are the property of Liberty Global and any redistribution, retransmission, or rebroadcast of this call or webcast in any form without the express written consent of Liberty Global is strictly prohibited. At this time, all participants are in listen-only mode. Today's formal presentation materials can be found under the Investor Relations section of Liberty Global's website at libertyglobal.com. After today's formal presentation, instructions will be given for a question-and-answer session. Page 2 of the slide details the company's safe harbor statement regarding forward-looking statements. Today's presentation may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including the company's expectations with respect to its outlook and future growth prospects and other information and statements that are not historical facts. These forward-looking statements involve certain risks that could cause actual results to differ materially from those expressed or implied by these statements. These risks include those detailed in Liberty Global's filings with the Securities and Exchange Commission, including its most recent filed forms, 10Q and 10K, as amended. Liberty Global disclaims any obligation to update any of these forward-looking statements to reflect any change in its expectations or in the conditions on which any such statement is based. I would now like to turn the call over to Mr. Mike Freese.

Thanks, operator, and welcome, everyone. Appreciate you joining us today. As this is our year-end call, we've got a lot of ground to cover. I'm going to apologize up front for the length of the remarks. But all my key execs are on the line, and I'll be sure to get them involved during the Q&A. And then as usual, Charlie and I will be speaking from slides, which are available on the website, so hopefully you can access those and follow along. I'm going to begin on slide four with some 2020 highlights, and by any measure, This was an extraordinary year for us, for our employees and our customers. Nobody was immune to the effects of COVID-19 in 2020, including us, as you'll see, but we were lucky. Lucky to have some strong antibodies, so to speak, that emanated from the critical role we play in the lives of our customers, which allowed us to meet or exceed nearly all of our own internal forecasts that we established pre-COVID. Families, schools, hospitals, businesses, big and small, saw the reliance on stable and robust connectivity rise to unprecedented levels. Average upstream and downstream traffic in January was still 90% and 60% above year-ago levels. So we're still in this and doing quite well. As with any crisis, so many operating lessons were learned. For example, the importance of putting our people first with flexible work arrangements, constant communication, and attention to their well-being. We also experienced a goodwill that comes from going the extra mile for our customers and our communities with more speed, more data, more entertainment, and essential and low-cost access plans. And we quickly identified the significant benefits of accelerating the digital roadmaps we were already on for customer sales, care, and retention. It's also fair to say that throughout the year, there was an underlying flight to quality among connectivity customers, which really played to our strengths. We already deliver the fastest speeds, the most reliable services, fixed mobile bundles, and better customer experiences in our competition. And as the customer puts a higher value on these factors moving forward, we're committed to the investments and the innovation required to solidify that position. And you've seen that happening in our fixed mobile transformation, our launch of one gig broadband everywhere, our investments in digital customer journeys, and our commitment to new connectivity and entertainment projects, which I'll talk about here. So with all that said, perhaps not surprisingly, 2020 was a strong year for us operationally and financially. There's a summary table on the right side of this slide with the key numbers, but I'll just highlight a few things, beginning with our significant increase in subscriber growth. We added over 80,000 new fixed customers in the year, reversing the trend of customer losses, which stood at 74,000 last year. And broadband net additions, perhaps one of our most important measures of growth, were 242,000, up threefold from 2019. We even saw growth in post-paid mobile ads to 513,000, despite shop closures throughout the year. Now, there were plenty of key drivers behind these results. For example, all operations saw reduced churn and higher MPS, and that provided a tailwind. This was particularly evident in the UK, where we delivered consistent growth on our BAU footprint and, of course, in new-built territories. We also saw consistent sales and net-add improvement in Switzerland every quarter, continuing the turnaround that began 10 quarters ago. Now, Charlie will take us through the financial results, but the bottom line is we delivered. If you net out the impact of COVID on things like premium sports and mobile roaming, we generated positive revenue, while at the same time exceeding our original expectations for EBITDA and operating free cash flow. The standout number for me, and I'm sure for you, was free cash flow, where we beat guidance with $1.1 billion this year, up nearly 40% year over year. Now, you can do the math against our 580 million shares outstanding to arrive at free cash flow per share, since apparently we're discouraged from doing that for you, and you'll see that the implied yield on our stock is attractive. Now, moving to the second box, there's more good news here when you look at our Q4 results. We've been talking about low-churning record MPS most of the year, and this continued to drive sales and net ads higher in Q4. making it by far our best-performing quarter of the year. Virgin Media in particular saw its best customer growth in 12 quarters, and our Swiss operation UBC delivered positive broadband additions for the first time in 13 quarters, and that complements another strong quarter from Sunrise. At the foundation of this customer growth, our key product launches around 1G, smart Wi-Fi, and our advanced entertainment platform. Again, I'll talk about those in a second. Now, despite working from home and all of the related challenges of a pandemic, We made some pretty big strides in our fixed mobile transformation here with two large M&A transactions, and you're aware of these. As I just referenced, the acquisition of Sunrise closed in November, and I could not be happier with the progress we've already made on leadership, integration, and commercial planning. We've got a rock star management team led by Andre Krause, who was the CEO of Sunrise, and including Severina Pascu, who launched the UPC turnaround and will now report to Andre in a COO role. The Swiss synergies have been validated, commercial day one planning is well advanced, and momentum in the meantime continues to accelerate. So we should have much more to say about that on our second quarter call, sorry, on our Q1 call. Now turning to the UK, as we do quite a few times today, I'm happy to report that the regulatory review of the joint venture we announced last May between Virgin Media and Telefonica's O2 is right on track. Now we've been heavily engaged with the CMA and feel really positive about a mid-year approval. Like Switzerland, everything we've learned in the meantime just reaffirms our confidence in this combination, financially and operationally. As reported, the Swiss and UK deals together represent about $12 billion of synergies on an NPV basis, and that's at today's FX rate, around 65% of which should accrue to us. Now, you can do the math on that in terms of potential value creation. And I'll also just point out, as with our Belgian and Dutch integrations, we have a pretty good track record of under-promising and over-delivering on synergies. As you probably noticed, Vodafone Ziggo reported around 6% EBITDA growth and $1.2 billion of operating free cash flow for 2020, with all expected synergies achieved a year earlier than planned. And as I mentioned on the last reading call, Vodafone Ziggo is a great case study for how fixed mobile convergence delivers growth and stable free cash flow even before the more strategic opportunities are factored in, which is a great segue to our 2021 priorities. And I'll start with our commitment to two initiatives that are very, very important to all of us. First of all, I'm extremely proud of our work in diversity, equity, and inclusion across Liberty Global. We've been focused for some time on gender equality and supporting the less fortunate in our communities with broadband access, but we can and we will do more. So we established our first global DE&I Council last year, which I co-chair. We've ramped up both our internal and external work around five pillars, ethnicity, gender, LGBTQ, ability, and generational equity. This builds on our programs already in existence and turbocharges others. But the bottom line here is that we will hold ourselves and the entire company accountable to greater awareness and tangible goals that reflect our culture and our purpose. I'm equally committed to our ESG programs where we're already a recognized leader. Most of you know that we've been in the Dow Jones Sustainability Index for years and are currently number three in the telecom media sector. We're also in the top 15% of S&Ps, sustainability performance measures, among other acknowledgments. And like many of our peers, we're squarely focused on our net zero targets, which we will announce later this year. Now, let me quickly hit on five other key priorities for 2021. First of all, as you'll see later in the presentation, each of our core markets is planning to deliver positive revenue growth this year, reflecting continued momentum in customer additions, expected or announced price rises, and progress in our B2B divisions. Just a footnote, that assumes modest, not necessarily heroic improvement in the COVID crisis throughout the year. Second, I'm nearly certain that despite $45 billion of accreted M&A last year, 2021 will be equally busy and exciting for us on the strategic front. Becoming a fixed mobile champion and number one or two in our markets delivers more than competitive stability and long-term growth. It also gives us the scale to shape our markets and drive even greater value creation, which we will do. Third, we'll continue to optimize our portfolio of venture investments in 2021 to bring greater transparency to the assets that we believe already represent about $4 per share, and I'll come back to that in a moment. And then fourth, we're laser focused on free cash flow growth. Charlie will take us through the guidance in greater detail in a few slides, but I'll steal the headline, which is that we're forecasting a 25% increase in free cash flow over the year. And when you factor in our commitment to buybacks with a billion dollars we purchased last year at about $19 a share and a new $1 billion buyback authorization in place for this year, we should see an even bigger increase in free cash flow per share. Now, let's dig a bit deeper on our operational performance on slide five. And the purpose here is to lay out visually the acceleration in customer growth we saw throughout the year, side by side with the core product innovations that stimulated and supported that growth. So starting on the left-hand side of the slide, you can clearly see the significant sequential improvement each quarter in customer and broadband additions, by far our most important measures of growth. Fixed customer ads went from negative 19,000 in Q1 to 56,000 in Q4, almost in a straight line. And we set new highs in broadband with 242,000 total ads that I just set up threefold from last year. And again, steady sequential improvement quarter after quarter. Now, the biggest contributor to this growth was our biggest market. Virgin Media added over 100,000 new broadband subs last year, drawing from, again, both the BAU and Lightning footprint. And in the fourth quarter, grabbed nearly 45% of all broadband net ads in the market, even though we only reach half the country. So many things are coming together right now in the UK. Lutz and his team have done a fantastic job. We've seen better base management and record low churn. They brought call centers onshore but still increased the percentage of digital sales to 50%. The network is resilient, and they've rolled out a bunch of new products like 1GIG, fixed mobile bundles, 5G, TV 360, and intelligent Wi-Fi. And those same growth drivers are being activated across our European footprint. So in the middle of the slide, you can see that we doubled the number of homes commercially available for one gig broadband to 20 million at the end of the year with most markets at a hundred percent coverage today. So back to the UK, our gig one commercial rollout reached 7.3 million homes by December, almost twice the number of BT open reach. And of course we're only half the market and we'll be firing up the remaining 8 million gig one homes throughout the balance of 2021. That will significantly widen the gap with BT and provide a great tailwind for Virgin media. To be clear, it's early days in the marketing of one gig services for sure. And you can see that in the middle of the slide, but just under 200,000 gigabit subs in our footprint today. But we know speed matters to customers. We know it matters now more than ever. Today, over 90% of our broadband subs are on 100 megabit or higher service, and half of our subs are at the 200 meg or higher level. And we've seen this movie before. It's just a matter of time before one gig product gains traction, and then we leave the market again. Now, turning the video quickly on the bottom left of the slide, You can see the improvement in video losses from 74,000 in Q1 to just 10,000 in Q4. Total losses of 180,000 in a year were 30% fewer than last year and represented around 2.5% of our video base. That's meaningfully better than the U.S. Now, we've talked a lot about the differences between Europe and the U.S. many times. We have lower video ARPU, so less pressure on subs. We have a stronger free-to-air broadcast sector, which keeps more eyeballs on linear and time-shifted televisions. And we have widely available fixed mobile bundles where we know the video products is a key component for customers. On top of that, we continue to roll out the most advanced video devices in the market, like TNA360, which I've mentioned in the UK, which has our latest UI and now shows an MPS improvement of 50 points, and our new IP box that we call Apollo, which is a 4K app-centric box, very inexpensive device. It actually fits in your palm and allows us to upsell the traditional video products. The entertainment roadmap, in my opinion, has never been more robust. with all countries on the same platform for the first time. I'll just close this slide out by saying the momentum you see building on this chart has largely continued into 2021. With modest price increases, continued churn management, and product innovation, this should be a strong year for our B2C business. Now, of course, that assumes the availability of vaccines will reduce the need for further lockdowns, as I already mentioned. In other words, we do expect a slow but steady improvement in economic activity throughout the rest of the year. By the way, just a footnote. We've given you an update on each country in the appendix, including data on Project Lightning, which I know you're always interested in. And I'll just say Project Lightning continues to perform brilliantly. So look for that information. I'm going to end my remarks with a few words on our Ventures portfolio. Last quarter, we provided a teaser for you with highlights on a handful of investments, but really not much granularity. And given that we believe the total portfolio is worth $2.4 billion today, or a little over $4 per share, We thought it might be useful to provide a bit more detail on these investments. So on side six, you'll see the four verticals that comprise a portfolio. Tech, content and sports, sort of emerging markets and a catch-all really, and infrastructure. And as you'll quickly spot, 90% of the value resides in the first two buckets on the left. So that's where I'll spend my time, starting with our tech ventures portfolio. As some will know, we began investing in tech about 12 years ago. with a small dedicated team in Denver and Silicon Valley, which remains very small today. And during that time, the goal hasn't wavered really. We're looking at mostly modest investments in early to mid-stage companies that provide products or services we can exploit in our operations. Historically, the team has been focused on verticals like infrastructure and cloud and machine learning with some blue sky investments and things like gaming or augmented reality or advanced advertising. Now, while the value we deliver to the portfolio company can be significant because we're typically a customer, That's why we get asked to be in a lot of deals. We don't include the value that the portfolio company brings to us in our returns. And trust me, there have been many examples where that number is large. Today, we have around $250 million currently invested in 40-plus companies, which we value at nearly four times that amount. This excludes the $180 million that was previously invested in the Ventures Fund and has already returned $350 million of capital to us, which we've just moved into our consolidated cash balances. The team, you know, they've historically invested around $50 million per year, but they have made some really smart bets, and we've shown a couple here on the slide. Skills, for example, is a mobile gaming platform that we invested $14 million in back in 2017, anticipating our role in the mobile business, and today is publicly listed with a market cap of just under $14 million, valuing our stake at $450 million. Plume is principally a supplier of smart Wi-Fi devices in the home. that improve or extend reach, but also serve as gateways for device management. We've rolled it out in Europe. Comcast is the largest distributor in the U.S. We began working with Plume in 2014 as a potential supplier and ultimately invested $25 million. And based on our latest funding round, that stake's worth around $170 million. And we have an incredibly strong relationship with this strategic vendor. There are a host of other examples in the tech portfolio. In fact, the team believes we're currently invested in no fewer than nine companies that either are or we think will be unicorns. Now, like any good venture investor, we have and we will continue to monetize these positions when the opportunity arises and then return that cash to corporate. The second large bubble represents our investments in content and sports, valued at $1.25 billion today. And this includes our stakes in companies like ITV, All3Media, Lionsgate, and Formula E. Now, as most of you know, we acquired 10% of ITV around seven years ago at an average cost of £2.16 pence. Not surprisingly, and as most have figured out, we fully hedged that position at the time with a collar. And as those collars will expire soon, we have begun unwinding that position and lowering our cost basis in the shares. Currently, we're long about 7% of ITV at 75 pence, and the stock closed Monday at 113, and the balance remains collared, and we may or may not close that out. We'll see. We did the same thing with our hedge position in Lionsgate when the stock was in the mid-single digits or thereabouts and now trades at 13. So let me preempt the question by saying right up front that these steps do not portend anything strategic with these companies. We're just taking advantage of market dislocation to materially average down our cost in these positions like any smart investor would do. And just a quick word on Formula E, which is starting its seventh season of eight races later this month in Saudi Arabia. I don't think I have to explain why this racing series is well-positioned, right? With manufacturers like Mercedes and Porsche now in the series, everyone appreciates the future of driving and racing as electric. And we have about $150 million invested at a 33% stake that we conservatively value at $250 million. And yes... Many SPACs have been circling. We'll see what happens. But the only other thing I'll mention briefly is our growing investment in infrastructure, which we believe holds immense untapped potential for us. And I'm referring to both our own infrastructure, like cabinets, real estate, and towers, which we're rapidly organizing into separate units where necessary, and third-party investments in businesses like EdgeConnex, for example, where we rolled our stake into EQT's $2.7 billion acquisition of EdgeConnex for a 2x return in the seat of the table for with what is arguably the smartest investor in infrastructure in Europe. So there's lots of exciting things happening on the ventures front. Historically, we've been pretty quiet about our activities, and certainly they're not taking resources or focus away from our primary business. But there is real value here and real strategic connection to our operations, and you can expect us to be more transparent moving forward. So let me recap. A strong 2020 operationally and financially and a great start to the year. You'll see that. Our two big fixed mobile combinations in Switzerland and the UK are right on track. And with $6 billion of liquidity at your end, we continue to invest our capital exactly how we signaled we would. So first, building FMC champions in our core markets. We've done that. A second, opportunistically investing in ventures that are both strategic and financially rewarding. And you are seeing the fruits of some of that work right now. And third, buying back our shares, which obviously we believe are undervalued relative to almost any measure. So I'm excited to take your questions. But first, over to you, Charlie.

Thanks, Mike. Turning to our consolidated numbers, I'm starting on a page entitled Underlying Revenue Stable. Total group revenue saw a decline of 0.5% in Q4, resulting in a full-year decline of 1.5%. We estimate the negative impact of COVID to be around $54 million in Q4 and around $200 million for the full year, which negatively impacted our growth rate by around 1.8%. Without that, we believe the group would have seen positive rule-based revenue growth for the full year. On the right-hand side of the page, for each of the last three quarters, you can see the five key areas impacted by COVID. In general, COVID impacted our business much less in Q4 than it did when the pandemic first hit in Q2. The impact of not having access to premium sports in Q2 was $34 million, but as the sports started to return by Q4, the downside was only around $7 million. Ansett sales and revenue revenues were impacted by the pandemic, and we estimate contributed to a $16 million drag in Q4, while the impact on our broadcasting businesses was around $6 million for the quarter. There was some impact on our B2B businesses. We estimate around $22 million in Q4, but it was largely due to reduced sales. Fortunately, to date, we haven't seen a material impact on bad debt and late charges on either our B2B or consumer businesses. On the next slide, we provide details of our adjusted WBA, For the full year 2020, we delivered minus 3.9% adjusted EBITDA growth, which was in line with our expectations. As we called out in our Q3 results presentation, Virgin Media declined 11% rebates versus Q4 2019. Now, this was driven by $7 million of costs related to the O2 merger and some other growth investments, particularly $21 million in the accelerated digitization and onshoring of our customer contact platforms, as well as an $18 million increase in marketing, which did result in accelerated subscriber growth. The remaining difference versus Q4 of 2019 was the impact of end-of-contract implications, network taxes, and the deferral of our price rise from Q4 to Q1 2021. Swiss trends continued to gradually improve with a 7.9% decline in Q4, partially explained by a 4% drag from $10 million of costs to capture our estimated synergies. While Sunrise's rebase results in the period since completion had zero impact on our year-on-year financials, As a standalone business, we've reported around 2% full-year growth based on a historical IFRS reporting policy. Turning to operating free cash flow, we delivered 5% operating free cash flow growth for the full year, which is in line with our guidance of mid- to single-digit growth. This is despite $26 million of cost to capture, which is equivalent to more than 1% of growth. Our capital intensity declines 22.5% in 2020, or 19.6%, exceeding capex related to project landing. And, but for cost of capture in Switzerland, all markets would have returned positive OFCF growth year-on-year. The standout result was our deconsolidated joint venture in the Netherlands, which grew 9% year-on-year, delivering $1.2 billion of operating free cash flow. Turning to our 2020 free cash flow results, we delivered 39% growth, or $300 million compared to 2019, and reported $1.1 billion of consolidated free cash flow ahead of our $1 billion guidance. This is despite some currency headwinds versus the guidance assumptions and a $16 million drag from working capital, which we generally believe should be brought back for telecoms companies such as ourselves. Our cash flow was further suppressed by $329 million of capital expenditures related to our UK network expansion project line. On the page entitled 2021 Outlook, we provide details of our expectations for our key assets going forward. Given that we fully expect our UK business will be deconsolidated into a joint venture by mid-year, and that Vodafone, Zyga, and Telnet already provide standalone guidance, going forward we'll provide our key financial guidance not on a group, consolidated basis, but for each business unit. At the group level, we'll be guarding only to consolidated free cash flow, which we expect to grow more than 25% to $1.35 billion for 2021, based on the assumption that the JV closes at mid-year. In the UK and Ireland, we expect a return to top-line growth despite an increased urine impact from end-of-contract and best tariff notifications, although cost-to-capture synergies will weigh in on adjusted EBDA and OFCF growth. For the full year, we would expect standalone Belgian milk to decline no single digits across both metrics. We also expect a return to revenue growth in Switzerland for the combined UPC Sunrise They expect a low single-digit adjusted EBITDA decline and a mid-single-digit OFCF decline. That's because we're spending over 150 million Swiss francs of costs to capture synergies, but on the underlying business, we think there'll be growth. Telenet, our Belgian operation, has guided to 1% to 2% adjusted EBITDA growth and continued free cash flow growth, expecting to generate 420 to 440 million euros. Urban Ziggo, our Dutch JV, has guided to 1% to 3% adjusted EBITDA growth An increase year-on-year of cash distributions to shareholders is guided to a range of 550 to 650 million euros or 677 to 800 million dollars. And with that operator, over to questions.

The question and answer session will be conducted electronically. If you would like to ask a question, please do so by pressing the star or asterisk key followed by the digit 1 on your phone. In order to accommodate everyone, we request that you ask only one question. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. We'll pause for just a moment to allow everyone an opportunity to join the queue. All right, we'll take the first question from Robert, excuse me, James Rasser. Pardon me. It is going to be from Robert Grindle with Deutsche Bank.

Okay.

Okay, that's me, I think. Yeah, hi there. How's it going? May I ask about UK? And I saw the strong lightning take up stats, but the lightning build was lower than the previous three years. Is that COVID-19? Or are you hanging fire a bit pending the O2 merger? Or I think you mentioned in the slides that passive infrastructure access is not really available at the moment. Is that what you're waiting for? And what's the prognosis there? Thank you.

Well, I'll just make a couple comments, and Luke, you can work up a more detailed answer. If you look at the last four or five years, we've always built between 400 and 500 homes 1,000 homes per year. Last year, we did 126,000, and we've done 2.5 million today. I wouldn't read anything into it. It's more about just optimizing our overall financial picture. Could we have built a few more? Yes. Could we have built a few less? Probably. The PIA is reducing our costs pretty considerably to below 600 pounds, which is a great thing. And the more we use of that, of course, it could accelerate both the capital we spend and the number of homes we build. So it's all good news there. There's really nothing negative. Our coverage is growing. Our penetration remains strong. Our ARPUs are strong, and the returns are high. So the Lightning project as it sits today is in great shape. Certainly when the merger closes or the joint venture closes, we will sit down with Telefonica when we're allowed to and really reevaluate the entire picture around our fixed networks in the U.K., specifically the pace of Lightning build, Secondly, our broader ambition to expand the network beyond our lightning footprint aggressively. The path we'll take to 10 gig. When we bring in financial partners, how will we accretively and aggressively take advantage of our network leadership in this market and ensure we remain network leaders for some time? That's our real opportunity here.

Any other color, Lutz? You said it all, basically. I think the only thing I would add is that the lightning team on top to the network expansion for homes is also now going to connect more and more base stations for 5G, right? We closed two big deals, one with Vodafone, one with H3G. And obviously here also you see now an acceleration of really connecting circuits. And so if you take those into account, then it runs at pace. And as Mike said, I think we have to review the strategy together then after the preview is telephonic.

Thank you.

All right. Once again, that is star one to ask a question. If you find your question has been answered, you may remove yourself from the queue by pressing star two. The next question is from Christian Fangman with HSBC.

Yeah, great. Thank you. Hi guys. Um, I have actually a question on Switzerland, so it looks like a good outcome back to broadband growth in that market on an underlying basis at UPC standalone. Um, my question is more on the integration costs and the phasing. Uh, you mentioned 150 million. Can you maybe give us a split between OPEX and CapEx here and also what you expect in terms of synergies already in 2020, and kind of the phasing over the next few years, at least broadly speaking, that we can model it properly. I think a bit more color or guidance around that would be nice.

Yeah, I don't, Andre's on the call. I can, you know, ask him to address to some extent. We're being obviously a little careful about annual synergy expectations. But I'll tell you that in 2021, the synergies are expected to be relatively nominal. I think maybe the $30 million Swiss franc range, something like that, you know, against the $150 million cost of capture. But it ramps pretty quickly. So, you know, I think in 2022, it's, you know, four or five times that number, and then it grows sort of randomly to the 2024, 2025 timeframe. And it's not going to look materially different than the Belgian Indica Synergy model or the Dutch Synergy model in terms of How much is revenue? How much is cost avoidance? How much is cost savings based on a 2020 cost base? And it's about 85-15, 15% revenues, and those are really in the later years. So it's a conservative synergy case in our view. Andre, I don't know what other color we're providing on those sorts of numbers, but I'll let you wrap that up.

Well, I think you outlined it well. I think on the cost of capture, of course, we try to be pretty front-loaded. We are moving fast. Integration is progressing quite well. And obviously, some of the OPEC stuff is going first, whereas some of the investments are coming later on as we go through it. And I would expect that the largest part of the total cost to capture should be done by the end of 22. And in terms of synergy phasing, of course, there's always a bit of a question mark around the revenue synergies, how quickly they're going to run through. But as Mike has pointed out, I would fully confirm the shape of the trajectory.

Thank you very much.

All right, the next question is from James Resser with New Street Research.

Yes, thank you very much indeed. The question for me really was around your cash return thoughts from here. I mean, firstly on the buyback, I noticed the pace of that seemed to slow in the fourth quarter. So I was wondering if there was any logic behind that and should we be expecting the pace of buyback to be accelerated during the first half of this year. And given the strong cash flow guidance that you're giving and the rate of buyback, you'll still end this year at the current run rate with well over $3 billion of cash on the balance sheet. So I was wondering if you could give any further thoughts around timing of that potentially being returned to shareholders or other uses of that capital. Thank you.

Well, can't identify any other uses of the capital beyond what I've said generally, which is we remain opportunistic around strategic transactional ideas that might occur in our core markets. And maybe, you know, continued modest investment ventures, nothing else that's jumping out of us at this point for that would require meaningful amounts of capital. So buybacks remain front and center. And as you said, Just looking at last year, you'll remember that we started out at a normal pace when, of course, the stock declined. We ramped up and bought most of our stock in that period of time, Q2, but at Q3. And from our perspective, we'll do the same this year. So I think the end of the year was a bit of an odd period, both related to where we were in our 10-25-1 plans and our material non-bunk information plans. And having just announced or about to announce the increased authorization, we wanted to get through the year, if you will, with what remaining we had. So I think you should expect us to look at the situation dynamically. And it wouldn't surprise me if we ended up buying more stock in the first half than the second half because we believe our operating and financial story continues to look better and better. But let's see how things evolve. But we've got the full $1 billion available. We have been spending more. uh daily in this year than we were when the in the fourth quarter and that shouldn't surprise you but let's see how things evolve can't be more specific than that james great okay claire thank you all right the next question is from michael bishop with goldman sachs

Thanks very much.

Yeah, I'd love to just try and pull together a couple of things on the free cash flow guide. It feels like the step up to 1.35 is largely driven by the higher Vodafone Zigo distribution, and then obviously the growth and the accretion that Sunrise brings. Is there anything else you'd call out as driving that 1.35, given it looks like you're guiding that operating cash flow will be modestly down for a couple of the assets like the uk um and switzerland and then if i could ask like a more forward-looking question on on the cash flow which is related it sounds like we should take the 1.35 and then effectively if you want to think about that on a run rate basis going forward you'll be spending you know at least 150 million on integration costs in switzerland 15 in the uk but then you you probably spend some for the second half as the deal in the UK closes. So, simplistically, should we think about the underlying cash flow being, you know, quite a bit above $1.5 billion? Thanks very much.

Good questions. Charlie?

I think you're quite right that we saw the acceleration in Budapest, which continues to be a cash machine. There's some acceleration, as you well know, in Telnet based on that guidance. In the U.K., it's more flat partly until we close the deal, but also because of the cost of capture and also the lightning bill. And, you know, again, I would emphasize that conceptually you could switch off the lightning construction cap ex, and that would increase our free cash flow pretty materially if we wanted to, which we're clearly not going to do, but it's an option. And then in Switzerland, I think you rightly point out that we're getting some good free cash flow growth, not least because we are getting some financial synergies as a result of the transaction. So I think the message is that we've got a real cash flow machine. I think Mike made the point about the synergies. There's a lot more to go from here. We would expect continued free cash flow growth as we monetize those synergies, as well as we see continued good operational performance, particularly in the center and in the U.K.

And as I said in my remarks, which you would already know, Michael, the free cash flow per share figure would be even, obviously, more robust on a growth rate basis, just given our repurchase of 8%, 9%, 10% of our market cap every year. So if you're looking at it... you know integrated the free cash flow underlying operating free cash flow story as Charlie said and as you pointed out is strong and then you're able to to accelerate that on a free cash flow for share basis just by virtue of our buyback activity thanks am I right so that the second half of the so just follow up on the second half of the year in the UK so I'm sort of right to think that that will be effectively

a small net cash outflow that's also in the 1.35, because a bit like Switzerland, your integration will be more than the synergy that you deliver.

I was going to say, the way we actually look at it is it's actually broadly flat, because of the seasonality in the free cash flow in the UK. So, you know, and again, we think the deal will close, and we'll give you updated assumptions when we close it, because obviously we don't have a lot of insight on what's going on there, too, but Our best guess is that, you know, if we don't close or close, it's probably about the same for your cash flow. There's a lot of variable in that assumption, you know, whether we're covering, you know, lightning or, you know, how underlying it is.

Matt, you're coming through a little bit fuzzy, Charlie, but I think the point was that the guidance is provided assuming that the deal doesn't close just to be clear for folks and give them a baseline on top of which they can overlay the JV. And as Charlie explained, indicated, interestingly, whether we consolidate a virgin media for the entire year or just half the year, interestingly, the free cash flow number won't be meaningfully different because we'll be then distributing that cash in the second half of the year back up to the parent. So I think you can look at it either way, Michael, and you're not going to get a materially different number, if that makes sense. Yeah, that's overly helpful.

Thanks a lot. Yeah.

All right, the next question is from Nick Lyle with Sockton.

Yeah, afternoon, everybody. Just one switch on, please, Mike, if I could. Just on the underlying competition still looks a bit tricky. You talked about discounts, I think, in the statement, again, on the front book. So is that doing anything in terms of your plans for price changes? Could you maybe just discuss at what point you think the new company can cope with price changes? And also, what are the plans for the brands in Switzerland as well, please? Thanks.

Sure. In fact, André, I want to let you take both of those.

Yeah, sure. Thanks for the question. So I would say overall, yes, the market is quite competitive and there's quite a lot of tension on the front book. However, I would say that both businesses, Sunrise and UPC, operating still majorly independent in Q4. have seen one of the best quarters for the year and not only for this year, but for the last three years, probably. So that is showing that we have a very competitive offering. Now, looking forward for us, of course, combining fixed mobile convergence is main of the game. And we have still a lot of opportunity on both businesses to actually drive more value to our customers while not necessarily destroying value, but rather creating value. So I think that's one key lever that we want to pull. In regards to brand consolidation, that's something we are currently looking into. Most likely we'll probably operate with two brands. We have seen that working out quite successfully in the past couple of quarters within Sunrise, and that's probably a strategy that we will embrace also for the combined business. We haven't taken a final decision on what those brands are going to be.

Okay, thanks very much.

All right, the next question is from David Wright with Bank of America.

Yeah, good afternoon. Good morning, I should say, and thank you. Yeah, it's just on the UK. I really don't want to downplay the achievements of Lutz and team, but a lot of the commercial momentum has come with the delay in the price rise. So I guess the question is, to what extent is that a factor? And as you bring pricing into the customer base in end of Q1, early Q2, I believe, how do you think those KPIs could respond? Is the commercial activity driven more by price right now, do you think, or more by the quality of service and the branding and the product? Thanks.

I'll just say, and then I'll let Lutz provide a bit more color. This began building early in the year, David. So if you look at the UK broadband ads, you know, first quarter is 8,000, I think. Second quarter, 33,000. Third quarter, 47,000. Fourth quarter, 54,000. And, you know, it's our view that that is sort of undeniable. That's an undeniable trend, regardless of any announcements that may or may not have been made on price increases. And As I mentioned in my remarks, lots of positive things driving that. And Lutz, why don't you flesh that out a bit more?

Yeah, exactly. So, I mean, we put together a strategy to get back to sustainable growth in 2019. PIX Mobile Convergence won a lot of innovations, right? Mike has already called out better base management, onshoring of customer service, a huge effort in digital. So this has led to reduced churn and increased sales. And you're right, obviously, waiving the price rise in 2020 has helped here. So if we would have done one, the numbers would be a bit lower, the net gross. However, it would be still substantial, though, higher than 2019. And maybe I give a bit of flavor of the price. That's how it's going. So, um, I mean, we are, uh, we, we've got very rational reaction, uh, from the public. So, um, uh, in the, in, in the press and in customers, it was well received. Um, we're in the middle of it at the moment. And, um, it seems that the demand for higher speeds in the pandemic, especially, right. It's increasing when you have kids doing homeschooling, parents working and stuff, you need higher speeds. And so we're offering that. So therefore, obviously, Q1 net ads, while doing a price rise, cannot be higher than the 55,000 bought by net ads you have seen in Q4. However, I would not be surprised if we would have still positive net ads in Q1.

Can I just ask as a follow-on the commentary you made on the demand for higher speeds perhaps deriving from COVID, etc. Also, you have seen some competitors announce some fairly substantial price rises in the UK too. After a couple of choppy years, do you feel like the UK market is returning to more rationality perhaps supported by that COVID effect?

Yeah, well, I think all the players have big investments on one hand side right in next generation networks on the big side and 5g on the mobile side sky does also a big investment on the content side so that's one second usage has increased dramatically as mike has pointed out so that means also obviously that all needs some funding and therefore i think price rises have been done by almost everybody. BT, CPI plus 3.9, I think would have been the same. I think just today, Sky has announced their price rise for this year as well. And we have done it in January. So I would say on price rise, very rational. And I think also, however, well received by the customer, as I said before, there is still higher competition on the acquisition side. So here, right, prices, if you compare price developments for, for instance, products like in the 60 max space, prices are lower. So that is the dynamic. We haven't followed that so much as the media, and we get our fair share. Very good point.

Yeah. By the way, the prices are lower in those lower tiers, but we're actually offering generally faster speeds. So, you know, BT might offer a 38 meg or Sky might offer a 60 meg product. We're at 100 meg for that same target customer base. So our price per megabit, if that's something we want to look at, is much more attractive. And as people get smarter and more focused on the broadband product, that's not an irrelevant stat. We're always faster, even if the prices are comparable.

Thank you. Yeah.

All right, the next question is from Polo Chang with UBS.

Yeah, hi. Yeah, hi. Thanks for taking the questions. So the first one is for Mike. You talked earlier about how you'd be busy on the strategic front in 2021. So can you just elaborate on those comments? So were you referring to completing the UK deal or are you doing new additional things that you maybe give us you know, some sense in terms of the areas that you're looking at. And really just have a follow-up question, which is really just about Sky. Dana Strong has obviously taken over as CEO of Sky, and she obviously knows Virgin Media very well. So do you see scope for a closer cooperation with Sky going forward? For example, maybe Sky co-investing alongside you guys in terms of a fiber footprint expansion or maybe doing cable wholesale banks?

Well, I'll take those. Um, first with respect to Dana, of course she is very well known to us. She worked for us, for me for over two decades. And I consider her to be an outstanding executive. So obviously we're happy for her. And I think it helps for us to have somebody in that seat who we know well, who knows us well, and I think who Comcast know well. So it's a good decision. And we're, um, you know, of course we're in touch with her and working very closely on a number of things. She's also quite deliberate and careful, so she'll take her time to evaluate opportunities in the marketplace. Having said that, I have no reason to believe she wouldn't be just as strategic as Jeremy was around their long-term strategy in this marketplace and what options they have to secure owner economics or reduce costs to serve and all the things that anybody who's building a business or whatever rebuilding a business in some cases, would look to do. So I couldn't be happier with her and more proud of her. On the other hand, I think it does give us a great dialogue and great opportunity to continue to talk about each of our strategic futures here. We can't do much until the deal is approved, as you could imagine. And you're unlikely to read or hear anything between now and then. But I wouldn't surprise me if we re-engage on a number of topics with Sky, who are a very important partner for us in this market. On the M&A side of the strategic front, I wasn't referring to anything specific, but clearly, if I go through those three buckets again, core markets, ventures, and buybacks, our core markets, I think we've done exactly what we said we would do. In the last five years, we've done something like $80 billion or bigger, actually, $80 billion plus of transactions allowing us to exit markets at double-digit multiples where we didn't have scale and bed down markets for fixed mobile convergence, becoming a champion in markets where we did have scale. And I think the way we've done it depends on the market. We've either exited, bought, or merged, and we think in all cases we've done the right thing. So we now have the number one or two player in these markets, and that gives us the scale to be I would say, opportunistic and creative. If you're now the number two player in each of these markets relevant to the incumbent, you're in a different position when you look at those core markets strategically. You can imagine what those might include. The markets that we haven't yet done anything in, Ireland and Poland, for example, of course, we're going to continue to evaluate what the right long-term future for those markets is in terms of their strategic footprint and whether there's a fixed mobile opportunity, etc. So you should assume that that's high on our list. And it would be surprising to me if we ended 2021 without continued transformation, even in those two markets, whatever that might look like. The only other thing you might have heard me reference indirectly is that we are really excited about the infrastructure space. Not surprisingly, we sit on massive infrastructure ourselves, both fiber-based, towers directly and indirectly. We have real estate. Charlie and his team have done a great job extracting property assets from joint ventures and off-cos, allowing us to look at the future of edge computing. So you should assume that we are being about as creative and opportunistic as we can be in infrastructure. We're not going to go compete with you know, the big player, Selmex, et cetera. That's not necessarily what I'm referring to, but there are going to be opportunities for us to partner, raise capital, monetize, and that'll keep us busy because those are, you know, we know the underlying value of our networks is significant, and there is massive amounts of money looking to invest in those networks, so we'll be creative to see if there are ways for us to create value. That's what we do, Paul. You know that. We're not... Anything we would do, though, would be accretive to our base case plans or guidance, whatever we might be, you know, referring to at the time. But it's exciting to me and something that, you know, we'll be working on closely in 2021.

Clear. Thanks. Yeah.

All right. We'll take the next question from Steve Malcolm with Red Burns.

Yeah, good morning, guys.

Thanks for taking the question. I'll try and go for a couple of quick ones. First of all, just on Vodafone Zigo, I guess paradoxically, it's delivering the best financial numbers in the group, but the operational KPIs are amongst the weakest. You've lost 60,000 RGs in the last couple of quarters. Do you feel that you've got the balance right there between volume and price, particularly as, you know, KPN ramps up its fiber build over the next three, four, five years? Interfere your thoughts on that. And then just swinging back to the UK, can you just help us understand sort of the evolution of the versions after through the year? Obviously, you've had best tariff notifications, you've skipped the price rise, you get the price rise in the first quarter, best tariff begins to lap, I guess, towards the back end of the year. If you didn't get that UK offer back flat, you know, how should we think about the progress of that number through 2021? Thank you.

Steve, you're moving pretty quick on the UK question. Could you repeat that just a bit more slowly? Not all of it.

I just wanted to understand, you should think about the evolution of the UK after 2021. I think you were back down to about 4% before. You obviously had best tariff notification. You skipped the price rise. You get the price rise in Q1 back end. You begin to lap the best tariff impact through the second half of the year. to just kind of, you know, understand what do you think you can get that number back to stable, but the ARPU picture is a bit blurry. Thank you.

Okay. Luke, you want to tackle the ARPU question and give your two cents on that?

Yeah. Yeah. So, um, I mean, you, you, you called yourself, uh, the, the key deeper. So price rise, uh, will give us a good, uh, tailwind, um, to get the ARPU growth again. On the other hand side, there is EOCN and ABTN, right, Average Best Health Notification, which hasn't really kicked in into 2020, but which will kick in in 2021. So in our plan, we are careful. So we have contributed quite some revenue loss to ABTN. So therefore, we think we are more coming to Apuflabs

into 22 rather than 21 but it won't shrink a lot but it might be a little it all depends on customer reaction on abtm yeah and a dutch market um in the dutch market i think and you're ruining the team and charlie you can jump in here too have had it figured out pretty well clearly it's a competitive market and kpn has made announcements about getting to roughly 50% reach with fiber, which we always assumed would be the case, but we've now got one gig everywhere, 6 million homes, and are marketing aggressively. So I think this is just a breather, if you will. The synergies and the execution have been intense, and a whole lot of new products have been successful. I think 21 is not indicative, as we look at it, of the longer-term opportunity in the marketplace, and I think the guidance there just reflects it. a bit of a breather, if you will, not necessarily a discernible trend over the next three years. And I have confidence in their ability to optimize price volume, to look at this market dynamically. They're already, I mean, if you just compare them to KPN in 2020, which probably many of you do, it's not a very fair comparison. I mean, they've had an incredible year relative to KPN in terms of net ads, in terms of pretty much almost any metric. I think we've grew revenue 2%, and EBITDA 6%, KPA went back 4%, and I think 4.5%. And, you know, we had about 270,000 mobile net ads. I think they had 55. You know, their broadband result was worse. But as with any market, Steve, you're going to have ebbs and flows. I mean, KPN's a good operator. They're not going to be, you know, down and out forever. Everybody comes back punching. So that's the nature of competitive marketplace, and I have confidence that this management team has there. has a good strategy in place for the longer term, let's say the median term, and any one year won't be indicative of what you should expect. Any color on that, Jeremy?

I'd agree. The only thing I'd say, they've done a great job on B2B. I don't know if you've noticed, but they've moved their market share very materially on B2B, and there's still a lot of runway to go. So I actually think they're doing a terrific job of execution, perhaps amongst the best in the group. So I care everything Mike said.

Yeah. Okay, I know the decision not to give revenue guidance at Vodafone Ziggo as well. Can you hear me?

Yeah, I think the question, Charlie, was the decision not to give revenue guidance at Vodafone Ziggo.

Is that just because of the reader that you're talking about and giving some flexibility to respond to that situation?

No, I just think, to be honest with you, revenue guidance in a world of COVID is not the easiest thing. I think we all have a lot more confidence in in cash flow gardens, because who knows, you know, what the impact on sports and whatever. No, no, this company's performing well, and I think you'll see some pretty good results. Management's famously quite conservative. There he is, putting pressure on the group.

We'll see. Okay, one second, guys. You got it.

I think we're at the mark here, Rick, or you're taking another question or two? Last one.

All right, the last question is from Andrew Beale with Erit Research.

Hi.

I wanted to come back to both of you again, actually, and just ask you about your background and thinking around a possible IPO there. Obviously, you've just discussed the results in Holland, but I guess it's a business that's giving you and continues to give you large dividends. So just wondering how you thought about the ongoing value from 50% ownership of those dividends in a business you like versus the opportunity to highlight equity value more broadly across your wider group operations. And obviously, I appreciate you've got a partner there. So, you know, there are things you won't be able to talk about. But any background around that thinking, not just for Vertifim Digo, but the sort of wider outlook for local IPOs?

Yeah, good question. And, of course, there's nothing to report. We do have a partner. They're quite busy right now on a number of other things and doing great stuff. My guess is if you ask each of us, we both like this business a lot, and not just because it's in a three-player market and really in many ways, number one, in terms of market share and most of the B2C products and has great pre-cash flow profile, as you've already indicated. Is it an IPO candidate? Potentially. You could look at that depending on how the market evolves. Listen, I think there is a bit of a rotation occurring and long delay. There should be a rotation occurring in Europe because you've got many tailwinds, I think. One, regulatory. Regulators are mostly focused on infrastructure and build-out. They want to see companies in a fair bet environment where if they invest the money, they get a return. It's a good thing. You might even see further consolidation of mobile. We'll see. We've already pointed out how COVID can help those who are prepared with great products to grow, and consumption is never turning back. I mean, consumption is going nowhere but up. Multiples have been depressed for a period of time. There's a lot of positive things in our sector. Of course, we're a bit of an outlier because we feel more entrepreneurial, more profitable, and more strategic than a lot of our peers. But nonetheless, the sector in general is possibly due for a pretty good year here. Would it be an opportunity to look at listings? I would say possibly. It's not up to us. We wouldn't want to do that with a partner who was resistant to it. Longer term, there are built-in provisions in these documents for a reason. Each party can force an IPO. One party can force a sale of a company. And they're in there for a reason because nobody knows what five years, six years will look like. We're getting to those points. And so it's going to be an interesting 24 months where a very solid partnership will have to come together and decide what's the right outcome for each of us in this particular assets and markets. And I'm thrilled to be in that position with a business that's actually hit the ball in the park and achieved everything we thought it was going to achieve. So it's all good news. But as Charlie likes to say, you know, it's delivering cash to the parent, really meaningful cash. And, you know, that's something we can bank on almost. And as you look at our free cash flow story, you know, that's certainly an important piece to us, that business, and disrupting it or, you know, impacting the dividend or having our partnership be a bit ruffled. That's also, that's not something we're anxious to do. But keep your eyes on it. You know, stay tuned. The next 24 months, I think you'll see activity on that front, and, you know, we'll certainly let you know when it happens. But anyhow, look, I'll close it out just briefly. Appreciate everybody joining the call. We felt it, you know, was a difficult year for everyone on the planet, and we feel fortunate to have come through it with pretty strong operating and financial results. And as I mentioned in my remarks, results that mostly have continued through this year. So that wasn't a one-off in our mind. There's a lot of momentum going into 2021, and thus far we're seeing that momentum continue which is a really positive indicator for q1 and then strategically i think we're focused on the right things you know the ventures portfolio give it a look it's not something we're sharing with you you know for just because there's nothing else to talk about we really believe that there is underlying value we've made smart investments now these are investments that enable our opcos and our operating businesses mostly and that's something to be taken into consideration and and there could be more coming and uh As ever, we're working on the value gap, doing our best to both execute on the business, but also be sure strategically and financially we're making it clear to investors where we see the value in the company. So appreciate your joining us, and we'll speak to you soon.

Take care.

Ladies and gentlemen, this concludes Liberty Global's fourth quarter 2020 investor call. As a reminder, a replay of the call will be available in the investor relations section of Liberty Global's website. There you can also find a copy of today's presentation materials.