Liberty Global Ltd.

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Liberty Global's second quarter 2021 investor call. This call and the associated webcast 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 a 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 two of the slides 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 fact. 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 Security and Exchange Commission, including its most recently 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 statement is based. I would like now to turn the call over to Mr. Mike Fries.

Thanks, operator, and hello, everyone.

As always, we appreciate you joining us today for the Q2 results call. We've got a lot of ground to cover, so I'll begin with some operating results and a deep dive into a couple of topics that I'm sure will be of interest to you all. Then after Charlie covers the financials, we'll get right to your questions. I'll kick it off on slide four with five key headlines that should capture the broader narrative of the quarter and our value creation opportunity. First of all, our goal of creating FMC champions in our core markets is working. We made a very conscious and deliberate shift in our strategy four to five years ago, which saw us exit subscale markets at premium multiples and concentrate our resources into really four key countries. where we've become fixed mobile champions. I'm going to illustrate this more fully on the next slide, but despite reducing our geographic reach by 40%, we increased aggregate revenue by 40% and now serve a larger base of 85 million fixed and mobile subs. And those FMC champions are driving scale and growth. supported by unrealized synergies of $12.6 billion from our last two deals in the UK and Switzerland. That's on an NPV basis. And by the way, given our ownership, over $8 billion of that will accrue to our shareholders. Second, the demand for fast and reliable connectivity in Europe continues to anchor strong commercial momentum across our footprint. I'll speak to the numbers in a second, but we reported good revenue and subscriber growth in a standout quarter from Virgin Media O2. Third, we've talked quite a bit over the last year or so about our network strategy options. Yesterday, we made a big move in the UK, announcing our plans to upgrade to fiber across our footprint. I'll speak to that in a moment. But the main takeaway is that we have great options in every market, and one size will not fit all here. To answer the question preemptively, cable and DOCSIS will continue to play a big role, even in markets where we intend to upgrade to fiber. And given our speed leadership today and heavy investment in fiber-rich HFC, we can approach this moment in an offensive posture with a clear focus on free cash flow and recreative returns on capital. Fourth, it's becoming increasingly hard to ignore our ventures portfolio, which has been valued by third parties at $3 billion or about $5 per share. That's around 20% of our current stock price, and I'm guessing very little is being recognized today. We're going to continue to provide greater and greater transparency of our tech, content, and infrastructure investments. These strategically align with our core operations, and they also benefit from our unique track record in telecoms and treasury and M&A. We also announced that we're engaged in non-binding negotiations with Iliad's Polish subsidiary to sell UPC Poland for $1.9 billion. That's about 9.3 times EBITDA. We don't normally announce these things, but Iliad was required to do so for other reasons, and But I can tell you, these sorts of asset sales at these sorts of multiples should also help bridge the value gap in our stock. And then speaking of our stock, we're making a big commitment today to put our money where our mouth is. Rather than decide periodically how much and at what price we're going to purchase shares, we're announcing today our commitment to buy back 10% of our market cap annually for three years, which means we're adding $400 million to our current $1 billion program for the remainder of 2021. Now, I just referenced the transformation of our platform over the last four to five years, and we've been trying to find a way to better illustrate the transition to an FMC champion. And slide five does that, I believe. If you had asked me 10 years ago, do you think you could build a better, stronger business by exiting half your markets and concentrating all of your resources into a handful of fully converged fixed mobile operations, I probably would have said, I don't know. I'm not sure. But when broadband competition intensified, Cable consolidation slowed and the demand for broadband capacity and mobility skyrocket. We rapidly pivoted and are a much stronger and more valuable company today for it. That involved four key steps. First, of course, we exited five subscale markets like Germany and Austria at premium multiples to mobile-only players like Telecom and Vodafone. Aggregate proceeds were $25 billion. And these guys needed a fixed network solution in their markets. On one hand, this validated the underlying private market value of our cable operations, something we continue to demonstrate even today with the potential sale of Poland. But on the other hand, it allowed us to focus resources on those markets where we had a pathway to fix mobile convergence by acquiring or merging with mobile operators, specifically in Holland, Belgium, Switzerland, and of course, the UK. So even though we shrunk our geographic footprint by 40% with a concentration in four countries, We have $25 million more fixed and mobile subs than before, $85 million in total, and 40% more revenue, $24 billion in total on an aggregate basis with a very balanced blend of fixed and mobile revenues. And the benefits of that fixed mobile transformation are showing up in our results. It was a solid quarter for our businesses really across the board, as you can see on slide six. We delivered positive revenue growth across all four key markets. Charlie's going to walk through the details, but Vodafone Zigo grew 3%. Telenet and Virgin Media grew 4%, the latter representing just the two months prior to the merger. By the way, for a good look at pro forma financials, Virgin Media 0-2 for the second quarter and restated for prior periods, take a look at their fixed income release. We can't provide that data in our GAAP presentation this quarter, but we'll do that going forward. You'll see that Virgin Media O2 combined revenue was up slightly in the quarter, and EBITDA was up 6% on the back of cost control and commission savings in the mobile business. It was also a good quarter for broadband and postpaid mobile net ads, which totaled around $250,000 in the quarter across the group on an aggregate basis. Here on the top left, we do show full quarter results for Virgin Media O2, which added 22,000 fixed customer additions, our fifth straight quarter of customer growth, by the way. And that was supported by 36,000 broadband net ads, up 8% from Q2 last year, and 65,000 post-pay mobile acts. You can see on the bottom left, we continue to benefit from convergence, with total fixed mobile convergence ratios up to over 40% in all operations. Virgin Media O2 now sits above 40%, with the addition of the O2 mobile subs who subscribe to Virgin. And Switzerland's at 56%, which is clearly a medium-term target for every market. The right-hand side of the chart provides some operating highlights for each of the big four opcos. I'm not going to go through all of this in detail, but Virgin Media 02 is off to a great start as of June 1st with record-six sales in the month and strong mobile ads. The team is working on some exciting commercial offers and is focused on driving the benefits of an expanding 5G presence and the availability of 1G broadband across 100% of the footprint by year-end. Sunrise UPC continues to benefit from strong sales momentum and the early rollout of FMC offers with 6,000 broadband ads and 41,000 post-paid mobile ads in the quarter. The integration in Switzerland is right on track. In fact, the team just raised the Synergy target by 50 million Swiss francs, which after cost of capture brings the NPV of Synergy to 3.7 billion, up from 3.1 billion. Photopone Ziggo delivered its ninth consecutive quarter of revenue growth with fixed ARPU increases and mobile post-paid ads, offsetting the loss of broadband subs. And with 5G rolling out and one gig services rolling out there, the company is well positioned to deliver its 2021 EBITDA and free cash flow guidance. And then finally, Telanet continues to be our most innovative operator, launching yet another converged fixed mobile offer called One, which helped the company deliver positive subscriber growth in video, broadband, and mobile for the quarter. So each of our four kioskos are performing well. Now, let me switch gears to a subject on slide seven. I know you're all interested in, I'm sure by now, You've seen the announcement and read the press and analysts' remarks about our decision to upgrade Virgin Media O2's fixed network to fiber over the next seven years or so. We already have fiber to the premise to about 7% of our homes through the lightning build. So we're talking about 14.3 million homes to be upgraded at a cost of about 100 pounds per premise. And lots of discussion around why are we doing this? What does this mean for cable and DOCSIS? Is this cost really that low? And let me start by reminding everyone that Virgin is today the undisputed speed leader on 15.5 million homes across the UK. Average customer speeds are only 200 megabits per second, with the balance of the market around 40 megabits or so. So speed matters in the UK. Of course, that's why BT is building fiber. But today, they only pass about 10% to 15% on our footprint, we believe. And we'll be offering 1 gig services to our entire footprint in five short months from now. So using an Olympic analogy, we all have our eye on advancing to the 10-meter diving platform, if you will, over the next seven years with 10 gigabit speeds. But today, we're already standing on the 3-meter platform. And the rest of the market, in our view, just has their toes in the water at the edge of the pool. It doesn't matter how fast BT gets to 1 gig. We will always have an advantage. It's almost not a fair fight. Now, all of that is attributable to cable infrastructure. and DOCSIS, which will be part of our network solution in the UK for a long time to come. We're not decommissioning our cable network. Quite the contrary. We are simply expanding its capacity by pushing the fiber that's already there in the ground even closer to the customer. In fact, that's why we can upgrade for a fraction of BT's cost. We already have fiber deep into the network in mostly urban markets, and we have access to our own underground ducting that will require far less digging, and that's the most expensive part. And for these same reasons, upgrading the fiber is only marginally more expensive than DOCSIS IV, which is not the case in every market, but we made this decision pretty easy in the UK. Like everyone else, we will incur costs to connect the drop to the home, but that will be a variable cost based upon demand over time. It's also important to point out that these are gross capex costs, so they don't take into account the expected revenue uplift that could occur here. You can see some of those economic benefits outlined on the right side of this chart. Both DOCSIS 4 and fiber to the premise will make our B2C and B2B services more competitive. That's clear. But given the marketing halo around fiber that seems to be building up in the UK and the benefits of symmetrical services to the enterprise market, we would argue that fiber probably has a slight advantage and will derive more value. Similarly, while cable can do wholesale, just look at Telenet, the likelihood of deriving value from the 1 billion pound wholesale market in the UK, if we chose to do it, which is quite mature and busy, is enhanced by an off-fiber solution. Since we only cover half the country, it's safe to assume that wholesalers want to keep their technology platforms simple and seamless across providers. And a fiber solution does that, of course. Now, beyond those economic benefits, fiber to the premise in the UK also provides greater confidence as we think through network expansion options beyond the steady lightning build today. And we continue to evaluate that opportunity to add an additional 7 million homes, sort of a supercharged lightning, if you will, And we're in good discussions with financial and strategic partners about what that might look like. So stay tuned. Now, in light of this UK announcement, I think it's important to stress that there's no direct read across to cable or other markets from this decision. Because the truth is we have multiple paths to 10 gig in every market, and we're evaluating the right path on a case-by-case basis. So slide eight lays out how we're thinking about it across three approaches. The first, of course, is simply accessing someone else's fiber network. allowing us to avoid the capex associated with the upgrade and providing some measure of market rationality if others are pursuing the same approach. Sunrise has successfully done this in Switzerland with the Swisscom wholesale arrangements. The negatives or costs are also clear, though. You're foregoing owner economics in your most important product, broadband, and you're somewhat exposed to fluctuation in wholesale rates, among other issues. Obviously, DOCSIS 4 will be a transformational technology development when it arrives. And it has a robust ecosystem of cable operators around the world, particularly in the U.S., supporting the innovation of the platform. As we've seen in the transition from DOCSIS 2 to DOCSIS 3 and then to DOCSIS 3.1, the costs are generally lower than a fiber solution as they build upon the existing platform before it, and the rollout can be faster. But on the flip side, DOCSIS does require a relatively substantial one-time investment in the active and passive components of the network to enhance spectrum capacity and speed each time you upgrade. It's also not clear when the technology will be available for commercial exploitation, but we are part of a select group of operators working together to accelerate that timetable. And then finally, while DOCSIS 4 will get us to 10 gig, there's no current roadmap beyond that or a forecast for what it will cost to get to, say, 50 gig. Fiber solves both of those future issues, of course. As our announcement today makes clear, Building fiber to the premise is a real and a creative option for us in certain markets. I've already mentioned the clear path to 50 gig speeds, the benefits of symmetrical services, especially to the B2B market, and the significant opportunity that some markets offer around wholesale revenue. The price for that is higher up from costs, which vary significantly by market. The decision about which path we'll take always comes down to a few key questions. It's clear to us that we are likely to avail ourselves of all three options across our footprint and to varying degrees by market. First, of course, is the competitive environment. What other operators are doing? Are they building fiber? How quickly? Second, as I've just mentioned, is the relative CapEx costs associated with each option. That's obvious. Where it starts to get interesting is around the economic benefits that accrue from one approach to the other, specifically the positive impact on the B2C and B2B competitiveness, the size and attractiveness of the wholesale market, as a provider or a user, and of course, the strategic and financial partnerships you can form to support the plan. I can tell you that work is underway, well underway, in every market. You're probably familiar with Telenet's announced discussions with Fluvius to upgrade Flanders to fiber over time. Ireland looks a lot like the UK to us. Switzerland is likely to be a hybrid approach, and Holland is still in the early phases of analyzing the best plan, but a fiber-deep DOCSIS IV strategy might make the most sense there. In the end, as we've done in the UK, we're going to be extremely focused on optimizing the medium-term and longer-term ability to compete, grow, and generate free cash flows and make those decisions in every market. Now, in my remarks on slide nine, with a quick recap of how we intend to create value for shareholders from this point forward, and it comes down to three core pillars, if you will. First and foremost, we're going to focus on maximizing the value of our fixed mobile operations. These are the crown jewels of our business. We've worked hard to build scale as a number one and number two player in each country so we can shape markets, radically innovate, and make the important strategic decisions that are going to underpin growth for years to come. How will we do that? Well, as you've already seen in Holland and Belgium, it helps when you have a near-term catalyst of synergies to kickstart growth and support cash flow longer term. We also know that an increasingly competitive market convergence is working. It drives cross-sell and up-sell. It reduces churn and makes customers happier. Nobody debates that anymore. The key is to stay rational on pricing and put the real effort into seamless digital experiences that keep customers coming back for more. The endgame in every market is to generate distributable cash to the parent from free cash flow, dividends, recaps, whatever source. That's the metric that matters to us, and that's the metric that will fuel our model today. Now, as we provide more visibility to our infrastructure and network strategies, you're going to see that these are largely offensive, as I've just gone through. In many cases, like the UK, they come with significant strategic opportunities around new revenue streams, network financing, and strategic partnerships. Hopefully, also, a re-rating of our business. And then lastly, we'll always look for ways to create demonstrable and transparent value, either through asset sales, like the potential sale of Poland, and possible public listings in markets where there is serious pent-up demand for local telecom champions. The second major pillar is becoming too big and too important to ignore, and that's, of course, our growing ventures portfolio. With a focused investment strategy around tech, content, and infrastructure, in markets and services that are adjacent to our core operations, we continue to create value, whether that's by benefiting from some smart early venture capital deals, such as Plume or Skills, We're watching some larger positions like ITV, Univision, or Formula E appreciate. We're also excited about our move into infrastructure, where we have a real right to play, given our track record in telecoms, financing, and M&A. All in all, the portfolio is valued at $3 billion, which I mentioned, about $5 per share. And it's starting to realize cash returns. It's already returned $400 million to the parent. By the way, we've begun the process of monetizing hidden assets in our opcos. like towers in Holland, Belgium, and the UK. That could add about $2 per share net of adjustments in the opcos. And that's not accounted for either in the ventures group. It's not in that portfolio or in our stock. So watch this space. And then the third pillar is our levered equity model, which is unique in the European landscape and distinguishes us from mainstream telcos in Europe. At the core of this strategy is the prudent use of leverage, in our case, four to five times on a fixed rate currency hedged and siloed basis. And that creates the opportunity for recaps and greater equity appreciation. You all know and understand that strategy. But we combine that with a strong stock buyback plan that just got stronger today with our commitment to repurchase 10% of our market cap annually for three years. And again, that means we're adding $400 million to this year's $1 billion program, only three quarters of which we've spent so far. And we'll seek to purchase 10% of the shares in 22 and 23. So that was a mouthful for me, I know. And let me turn it over to Charlie. And then we'll get straight to your questions. I look forward to addressing all of those shortly. Charlie, over to you.