Liberty Global Ltd.

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Liberty Global's fourth quarter 2021 investor call. This call and the 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 a listen-only mode. Today's formal presentation materials can be found under the investor relations session on 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 Security Litigation Reform Act of 1995 including the company's expectation 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 the Liberty Global's filings with the Security and Exchange Commission, including its most recently filed Forms 10Q, and 10-K as amended. Liberty Global disclaims any obligation to update any forward-looking statements to reflect any change in expectations or in the conditions on which any such statement is based. I would now like to turn the call over to Mr. Mike Freeze.

Hello, everyone, and thank you for joining us today. We've got a lot of ground to cover, so I'm going to skip the intros and get right into it. As usual, we'll be referencing slides that have been posted on the website, beginning with slide three, which introduces five key headlines for the past year. Before we get into these highlights, let's just offer perhaps the most important takeaway here. In what has been an extremely challenging two years for everyone across industries and markets, We've been fortunate that our people, our networks, and our business have performed really well. Over this period, we've retained and even expanded our talent pool despite hybrid working conditions. Our broadband and mobile networks delivered outstanding service despite massive increases in the demand for bandwidth. And for two years in a row, we've exceeded even our own internal budgets despite a global pandemic that's upended most industries. I just couldn't be prouder of our company and our operating businesses, and I think the results we'll be sharing today – as well as the strategic plans that underlie our guidance and our path forward, reflect that confidence and that enthusiasm. So consistent with those thoughts, you won't be surprised to have learned that we hit our 2021 guidance across our FMC portfolio, as well as our group free cash flow target, which we actually raised last November on our Q3 earnings call. And supporting this financial performance is strong commercial momentum that we experienced across broadband and mobile services, with the demand for connectivity continuing to exceed our expectations. Simply put, our FMC champions are delivering. We added over 1 million broadband and mobile subs in the year across our footprint, with a solid fourth quarter. Convergence continues to drive higher sales and MPS and reduced churn, with the number of broadband subs taking a mobile product from us now nearing or even above 1%. 50% in our four converged assets. And our track record of nailing merger integrations is helping us produce synergies in the UK and Switzerland that total around $14 per share on an MPB basis. Adjacent to our core operating platforms, we continue to invest in our ventures portfolio, which now stands at $3.5 billion, or about $7 a share. And that increase of 46% or $1.1 billion year over year is almost entirely attributable to appreciation of the value of our portfolio investments With new investments, net of distribution is totaling only around $300 million for the year. And then finally, total buybacks in 2021 totaled $1.6 billion, equivalent to 10% of our shares outstanding. We are committed to doing that again in 2022 and 2023, which is a great segue to slide four. I think it's always good to step back and refocus the investor's attention on the core value creation strategy we're pursuing. This is the narrative that defines what we're doing and why we're doing it. And that big picture, if you will, consists of three pillars. It starts on the left of this slide with our FMC champions. I just talked about those. These converged and highly profitable operating companies are the foundation or bedrock for value creation. And as you know by now, we had to get smaller to get bigger, divesting half our markets and putting our attention and capital into a handful of operating platforms that now reach over 85 million fixed and mobile subs and are either number one or number two in every country. As I've said before, this convergence – drives the scale we need to challenge incumbents, to negotiate with suppliers, to hire the best talent, and shape the markets we operate in. Convergence also delivers massive synergies to accelerate value creation and support investments. I think you know that. At the same time, Convergence delivers the brand, the products, and the market share to drive organic growth in customers' revenue and ultimately free cash flow, which for us, by the way, was up nearly 40% last year. And convergence delivers great strategic optionality to consolidate horizontally or even vertically, to monetize hidden assets like towers, and to control the future of networks in an accretive way. Those are the unique tailwinds that we're riding, but there are also some strong structural tailwinds in the European telco sector that are worth mentioning. First, the demand for connectivity has created commercial momentum and pricing power that should support growth in broadband, mobile, and B2B for some time. especially in markets like ours that are rational with strong consumer trends. Second, regulators seem less focused on us these days, which is a good thing, and that's fueled much-needed consolidation and paved the way for greater investment in and monetization of our infrastructure. And then third, with the current wave of fiber and 5G capex set to slow down over the next couple of years, private equity capital is swarming the sector in anticipation of significant free cash flow growth in the future. Now, the second leg of the stool is our growing ventures platform. I just spoke about that. And Charlie is going to spend a few minutes on this in his section. The key point is that all three strategic pillars of our investment strategy, tech, content, and infrastructure, are strategically aligned with or adjacent to our broadband and mobile businesses. And they're proven to be a great source of value creation and even dividends to the parent company. And then finally, the flywheel to both of these pillars is is our levered equity model of long-term fixed-rate debt, strong free cash flow, and consistent stock buybacks. Again, $1.6 billion last year and another 10% of the shares outstanding this year and next. And since we're funding that buyback with cash flow generated by our operating businesses, we continue to have over $4 billion of cash reserves to put to work in either core markets, ventures, or additional buybacks. Now, Charlie is going to present financial results, but I just want to comment briefly that, on our top line performance, which has been stable to improving across the group. So on the top right of slide five, you'll see our two most developed fixed mobile operations, Vodafone Ziggo and Telenet, both of which have benefited from fully converged fixed mobile operations and product offerings. Now, Vodafone Ziggo delivered its third year of consecutive revenue growth, around 2%, anchored by mobile and B2B growth. And despite an increasingly competitive broadband market, the Dutch market is remains largely rational, with two fixed-line players and three mobile operators. Telenet returned to top-line growth in 2021 of about 1%, supported by subscription revenue and modest ARPU growth. And more broadly, the Belgian market also remains rational, with both Proximus and Orange taking healthy price increases, which is a good precedent for Telenet's own price increases that occur generally over the summer. The two bottom charts show revenue growth for our two more recent fixed mobile combinations in Switzerland and the U.K., To summarize, UPC on the bottom left returned to revenue growth throughout 2021, with 1% in the fourth quarter compared to negative 4.5% in Q4 last year, so a big turnaround in the first year of integration, which was just solid execution by the Swiss management team. Inflation remains relatively low in Switzerland, so we're not expecting significant price rises by any of the operators this year. And Virgin Media O2 also saw steady top-line performance, basically flat revenue for the second half of the year versus negative growth in the first half. Virgin Media O2 is a large operation, remember, with 10.4 billion pounds of revenue and some year-over-year comparison issues in B2B and mobile, which Charlie will address. But the UK has seen a significant rise in inflation, and operators have followed suit, either based upon contractual increases of RPI plus 3.9% or on a discretionary basis. For example, PT raised contract prices over 9%, and we announced a discretionary increase of 6.5%. on our fixed business and a contracted increase of 11% on the O2 mobile base. So those should provide tailwinds for 2022, along with continued fixed mobile convergence cross-sell and up-sell offers. The side six provides a market-by-market look at quarterly subscriber growth over the last two years. And I think the main message here is the relative consistency of growth throughout the period. On the top left box, you'll see that Virgin Media O2 had another strong fourth quarter with 189,000 net ads. We outperformed the market again on broadband, supported by nationwide 1 gig speeds and record low churn, and the seventh straight quarter of broadband growth in both the lightning footprint and our existing footprint. That's really strong. And mobile growth was also solid on the back of the lowest churn in the market and our compelling FMC bundles, which we'll talk about in a second. The top right box shows subscriber results for Sunrise UPC in Switzerland, where we had 57,000 fixed to mobile subs in the fourth quarter, fueled by record high sales, and over 200,000 for the full year. We continue to add market share and broadband relative to our peers in Switzerland, and we lead the market in mobile editions with the best 5G network. Now, looking forward, we'll keep momentum in Switzerland with brand consolidation on the premium services under Sunrise and a more complete low-priced brand we call Yalo, which will offer a full bundle of services for the first time. The telling ad on the bottom left continues to add broadband subs at a steady clip, with some of the lowest fixed churn we've ever seen, around 8% per annum. And post-paid mobile ads picked up in the fourth quarter, helped by their one-up FMC bundle. And then finally, the bottom right shows Vodafone Zygo, where we remain the broadband market share leader, but have seen modest erosion in the broadband base over the last six quarters. We think this is attributable to a number of factors, namely promotional activity, the recent loss of some content rights, and fiber competitions. probably the only market where we're seeing any impact from fiber. The team's been addressing each of these issues with the completion of their one gig rollout this year and continued rollout of smart Wi-Fi and plume pods and over a million installed to date. And these efforts are paying off. Ziggo was just named the number one broadband provider in Holland based on download, upload, and latency. And Vodafone, the mobile platform, has the highest NPS of any operator in the Dutch mobile market. And then just a quick look at our fixed mobile convergence results on slide seven. You'll see on the left that we're approaching around 50% convergence in the UK, Belgium, and Holland, where one of every two broadband subs is taking a mobile product from us and closing in on 60% in Switzerland. Now, we've talked about the NPS and churn benefits of convergence. Those are well understood. But these bundles also drive the sales engine. For example, the launch of Volt in the UK is off to a great start. and has really supercharged the brand and our portfolio, bringing together the best of 1GIG fixed and 5G mobile, along with world-class entertainment services. We estimate that around 2 million O2 customers on the Virgin Media footprint use someone else's broadband, and the goal will be to convert them over time to the VMO2 bundle. It's the same strategy in Switzerland, where we estimate less than a third of the combined customer base, fixed and mobile, takes a converged bundle today. And the new Sunrise We portfolio drove record high sales in the fourth quarter, and we'll see additional product rollouts this year as we converge under one premium brand. And then I'll end my remarks with an update on our fixed network strategies across all five markets. Now, as you can imagine, we are spending quite a bit of time fortifying our lead in 1 gig services across the footprint and finalizing our roadmaps to 10 gig. And you've seen a version of this chart before, now with some updated stats and a status report by market. First, you'll see again with the orange bars that across our 30 million home footprint, we are already upgraded to one gig speeds everywhere, with the exception of Holland, which will go from 73% to 100% this year. You simply can't overstate how important it is to have speeds two to four times faster than your average competitor and to be able to offer those speeds to all households. The incumbent telcos remain committed to their own network upgrades, not surprisingly. And you'll see in the first gray bar below that at year end, their fiber reached around 30 to 40% of our homes, except in Belgium where it's only mid-teens. Even when you add alternates to the picture, those numbers don't move much, at least not on our footprint. Now beneath these bars, we've provided a quick update on our own plans and strategies by market. And I'll start with the UK, which is on the top of everyone's mind, I'm sure. Three key developments here. First of all, as our base case plan, we are accelerating our lightning build program in 2022. from around 330,000 homes last year to over 500,000 homes this year. We continue to see cost per premise decline to below 600 pounds per premise as we use more of BT's passive infrastructure, and that only improves the significant return on capital we're already seeing from this investment. Second, we completed the 50,000-home fiber to the premise trial that supports our previously announced intentions to upgrade our entire 15 million homes to fiber by 2028. Really important here, everything is checked out, and we remain confident about the technology, our suppliers, and the estimated cost of the project. And then third, and perhaps most importantly, we've recently launched a process to establish and capitalize a new fiber netcode together with financial partners that will build up to 7 million new greenfield homes outside our current footprint, eventually bringing our total fiber footprint to 23 million homes. That's essentially 100% of the urban U.K. market. Now, what makes this an attractive opportunity to prospective partners? Three things in particular. One, Virgin Media O2 will commit to be an exclusive anchor tenant of the network with its proven track record of achieving 30% penetration in new build areas. We've demonstrated that. Two, we'll open the network up to other ISPs on a wholesale basis, further increasing utilization and improving financial returns. And three, we have a proven capability to roll out new networks on time and on budget, having already built 2.7 million homes through Lightning. Now, turning to the other markets quickly in Ireland, we began our fiber-to-premise upgrade in the fourth quarter, and we're getting close on agreements to wholesale that network. Remember here, like the U.K., our upgrade costs compare really favorably to DOCSIS 4, so we've gone the fiber route. Sunrise UPC, on the other hand, will pursue a hybrid approach using DOCSIS 3.1, DOCSIS 4, other people's fiber networks, and some perhaps of their own. And they've just signed new agreements with Swisscom and SFN. which will give them a real advantage. We'll have 1 gig everywhere today and access to 10 gig wherever and whenever it's built. Telenet's making good progress with Fluvius on a fiber netco. I think you've heard about that from John and the team. And they should have agreements finalized this spring and services launched in the third quarter. Remember, with 70% utilization day one, this will be the de facto leader in wholesale access in Belgium, in Flanders. And my guess is you will see a strategic shift in the market towards Telenet as a result. There's just not enough market share left to support alternative network plans. And finally, Vodafone Ziggo continues to pursue an HFC solution supported by best-in-class speeds and capacity, but we will evaluate other options and opportunities as they arise. Now, as Charlie will discuss in a moment, 2022 will see a step up in our fixed and mobile CapEx. That shouldn't be surprising to drive these strategic and operating growth plans. And we'll also see a peak year for cost to capture in 2022 in order to achieve the immense synergies that we have planned for 2023 and beyond. So that's a good, hopefully, update and overview of our operations. And now I'll turn it over to you, Charlie. Thank you.

Thanks, Mike. I'm starting on a slide named Back to Stable and Growing Revenues. Full year 2021 rebase consolidated revenue growth for the group was 1.5%. Now, in the UK market, Virgin Media O2 saw revenue decline by 1.1% in a year on an IFRS performer basis, as growth in consumer fixed was offset by declines in mobile and B2B fixed performance. In Belgium, Telenet delivered 0.7% of revenue growth in 2021, driven by higher subscription revenue. And in Switzerland, Sunrise UPC delivered revenue growth of 0.5% in 2021, with higher consumer mobile and B2B revenues, partially offset by a decline in consumer fixed revenues. Finally, Vertopensica continues to maintain revenue growth momentum, achieving an increase of 1.9% in the year and delivering an 11th consecutive quarter of revenue growth. Moving to the next slide, consolidated adjusted EBITDA declined by 1.4% in the full year 2021, impacted by increased cost to capture in Switzerland. Without those costs, it would have been broadly flat. Virgin Meteor 02 EBITDA increased by 1% in 2021 on an IFRS performer transaction adjusted basis, including cost to capture costs of $81 million. Telenet achieved 1.2% growth in EBITDA in 2021, as its organic revenue growth was enhanced by cost discipline, with operating expenses remaining stable throughout the year. Sunrise UPC declined 1.8% in 2021, but did include $29 million of cost to capture. Excluding these costs, EBITDA was stable. And in the Netherlands, Vodafone Ziggo posted a 2% increase in 2021, driven by strong revenue growth, as well as good cost discipline. Moving to the next slide, at a group level, consolidated adjusted EBITDA less P&E additions declined 2.7% in 2021, with $126 million of cost to capture weighing on the full year performance. Urgent Media 02 saw IFRS pro forma transaction adjusted EBITDA less P&E additions decline primarily due to a step up in CAPEX as the JV continues investment in mobile and fixed infrastructure, in addition to $184 million of cost to capture expenses. Telenet and Switzerland both saw small declines in 2021, both driven by higher growth-related investments. Switzerland recorded $109 million of cost to capture, which reduced its 2021 number to $548 million. Vodafone Ziggo saw a 0.6% increase in adjusted EBITDA-less P&E additions, as its adjusted EBITDA growth was partially offset by an increase in P&E additions, which was largely due to increased investment in its customer experience, with an upgrade of the customer premise equipment, as well as the capacity of the fixed and mobile networks. On the next slide, we set out our free cash flow. We achieved our free cash flow guidance for the year, which we upgraded at Q3, with a nearly 40% growth in adjusted free cash flow to just under $1.5 billion under our guidance definition of free cash flow. Now, we're now changing our definition of adjusted free cash flow to now and prospectively include direct acquisition costs, or DAC, as we call it. The inclusion of direct acquisition costs represent costs that we incur related to acquisitions and or disposals, such as corporate advisory and banker's fees. And under this revised definition, adjusted free cash flow in 2021 was $1.4 billion. Now, we'll clearly highlight DAC as a line item to ensure comparability going forward in our reporting. The next slide sets out some details on our ventures portfolio, which has seen a step up in fair market value to $3.5 billion. This slide is aimed at giving better visibility on the key movements as Ventures continues to go from strength to strength. As you can see, our content portfolio is now worth around $2 billion, including our stake in ITB, around $600 million, Formula E, all three media, and an increased valuation for Univision following the completion of its merger with Televisa. Tech is now worth around $1 billion, including a recent uplift in valuation for Laceworks, which is a cloud security service provider. And in infra, we continue to see this as a key growth area, and in Q4, made a move in the energy space with the launch of our smart energy offering under the name Egg, focusing initially on a subscription-based EV home charging solution. Given the adjacencies of our smart digital home products, we see this as broadening opportunities to sell services to our customers, leveraging our existing operating infrastructure. Moving to the next slide, as you can see from the chart on average, we have repurchased around 7% annually of our outstanding shares every year from 2016 to 2020, and 10% if you include our 2019 tender following the sale of our German and Central European assets, purchasing in total around $11 billion of stock. We're now increasing our returns to shareholders and are committed to buy annually 10% of the shares outstanding from 2021 to 2023. And in 2021, we started this program and repurchased $1.6 billion of Liberty stock in a year, or around 11% of our year-end 2020 equity value. In 2022 and 2023, we will continue to execute against this 10% buyback commitment. And in 2022, we'll target buying 10% of the shares outstanding at year-end 2021, or around 50 million shares. Our balance sheet continues to remain strong, with our total liquidity arriving at $5.3 billion. Our debt position remains very strong, with average debt maturities of six years or longer in every operation. All our debt continues to be hedged into the currency of the underlying cash flows, and virtually all of it is fixed at a blended cost of around 3.4% across our consolidated debt silos and around 4% if you include Vodafone, Ziga, and Virgin O2. As interest rates rise, this should be a source of value to our shareholders. As part of our ESG agenda, we also refinanced over $2 billion of debt in Vodafone Zygo using a new innovative sustainable finance framework. Other ESG initiatives include the launch by Sunrise UPC of its ESG strategy, including Net Zero, Scope 1 and 2 Direct and Indirect by 2030. Together with ventures initiatives like Egg and Liberty Charge, our public EV charging joint venture in the UK, this is all part of our ongoing ESG agenda. And in 2022, we will look to finalize our net zero commitment, including Scope 3. On the last slide, we summarize our outlook for full year 2022. Starting with Virgin Media Road 2 guidance, on an IFRS basis, we expect to achieve improved revenue growth. Make single-digit transaction adjusted ever DA growth supported by improved top line and OPEX synergy delivery benefited from early synergy wins like the Virgin Mobile MVNO migration to the O2 network. This is excluding cost to capture for the year, of which we expect to incur OPEX and CAPEX cost to capture of around 350 million pounds, which is within our aggregate guidance of 700 million pounds. On cash distributions to shareholders, Virgin Media O2 is guiding to around £1.6 billion, including those from recapitalizations, as we aim to stay towards the five times leverage target, given the support of Outlook in the credit markets. Turning our attention to Switzerland, we expect stable to modest rebase revenue for the year, along with stable adjusted EBITDA, including cost to capture. We guide property and equipment additions as a percentage of sales to be 18% to 20%, again, including cost to capture spend. And cost of capture spends will be 150 million Swiss francs across the year, and a third of that spend bucket will be attributed to OPEX. The outlook for Telanet is revenue and adjusted EBITDA growth of around 1%, and property and equipment additions as a proportion of sales are expected to be around 25%, with stable adjusted free cash flow in the year. Finally, our Dutch JV is guiding to stable to modest adjusted EBITDA growth, with P&E additions to sales of 22% to 24%, reflecting a modest step-up in CapEx related to capacity and customer-related spend. Four-year shareholder distribution guidance is €550 to €650 million of cash returned to the shareholders and is stable versus 2021. Finally, on group cash flow guidance, we're guiding to $1.7 billion of distributable cash flow in 2022, representing another year of growth. Now, this does include an assumption for DAC to remain at the same level of 2021, though this could change depending on the level of M&A activity. And this is despite a $200 million year-on-year increase in our cost-to-capture spend in the UK and Switzerland and the commitment to investing in our networks that Mike set out earlier. We're now guiding to a new term called distributable cash flow. which is made up of the free cash flow that we received from our consolidated operations, as well as dividends from our joint ventures, including the proceeds that we expect to receive from any debt recapitalizations at Virgin 02, whilst remaining within its five times leverage target. Because of these high return investments, adjusted free cash flow will be down in 22 versus 2021. And with that, operator, time for 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 one on your phone. In order to accommodate everyone, we request that you only ask 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 give everyone an opportunity to join the queue. Your first question comes from the line of Robert Grindle with Deutsche Bank. Your line is open. Robert Grindle, your line is open. And if you're on mute, please unmute your line. Do you want to try another one, operator? Yes, I will proceed with the next question. Our next question comes from the line of Polo Tang with UBS. Your line is open.

Hi, thanks for taking the question. Just have a question in terms of UK footprint expansion. You've made it clear that you're talking to financial partners about a deal, but can you comment on whether you've had any interest from strategic partners to be involved in the project? Also, a number of potential financial partners already have existing fiber assets in the UK. Therefore, would you consider partnering with an existing old net?

Hi, Paulo. Good questions. I guess the answer to them is yes, we would and are in discussions with All the above. I think the process that we've initiated here to seek out financial partners is the right next step. As you point out, there are a few involved today, but more importantly, plenty of capital and plenty of interested parties. We think this opportunity stands out as perhaps the best you're going to find in this market, principally because it involves an existing operator like Virgin Media O2 that can pretty much guarantee utilization. And at some point you could easily see it folding into our other 15 million homes. So I mentioned a 23 million home footprint. Well, nobody, none of the alt nets and none of the alternative providers are looking at a 23 million home footprint. So I think it's a winning opportunity and platform. That's for sure. And you should assume we're talking to financial strategic and perhaps even existing partners in the market.

And can I ask a follow-up question in terms of your UK price rises? What's been the customer reaction to the 6.5% price increase? And given that's lower than the 9.3% increase put forward by BT, do you maybe see scope to gain market share?

So far, so good. But, Luke, do you want to address that?

Yeah. So customer reaction on our price increase is as planned. So it is also a bit higher than the year before. But, I mean, you see that we are operating on a very low churn. And the price increase from BT customers is just landing in the market. So it's too early to tell if there will be more churn and therefore more customers available. Let's see. Thanks.

Your next question comes from the line of David Wright with BOA. Your line is open.

Thank you very much, and I hope you guys can hear me. Yeah, just maybe looking over to Holland and the guidance, the outlook for Toto, Fern and Ziggo, it's a little bit underwhelming. I hesitate to say that. I know it's a great business, but the guidance is a little bit underwhelming after some of the momentum we've maybe seen building. could you just sort of talk us through how you're looking at that business, um, and, and, and why perhaps it's, it's not really pushing ahead. Um, and obviously the question that, that I think you often get is, you know, could you guys look to perhaps own that business in totality? I think Vodafone has made it very clear that it's open to business, um, on its, uh, on potential restructuring of its asset base right now. So just some thoughts around Vodafone and Ziggo would be really appreciated. Thank you.

Sure. Sure, David. I'll just start on the second part of your question. As everybody would know, we've been in this JV for quite some time with Vodafone. They have been fantastic partners. I hope they would say the same of us. We work really well with management, and we've built together a business that has achieved pretty much everything we set out for it to achieve. Solid and steady EBITDA growth, significant free cash flow and distributions to shareholders, a market-leading position in broadband and really B2C generally. And if you just look at 2021 and you compare Vodafone Zygo to KPN, I don't think there's a single metric, with the exception of possibly broadband additions, where we haven't outperformed KPN pretty impressively. So, so it's delivered everything we hoped it would. Um, and it's, you know, in our opinion, um, you know, one of the best businesses in Europe for all those reasons, uh, in terms of the guidance, listen, it depends on which particular aspect of the guidance you're asking about. Um, you know, the cash distributions will be roughly equal to what we had last year. So that's a proxy for free cashflow, a little bit more cap X as they, uh, intend to invest more significantly in both the mobile and fixed networks period. And that's pretty important. You should expect that that's something all operators are focused on in competitive markets. So that would drive a slightly lower result in operating free cash flow, but they're making up for that in terms of the underlying free cash flow figure. And the EBITDA stable to modest is not surprising given a business that has to invest in both new products and new services as well as ensuring customers see them as know the winning solution in the marketplace it's a rational market but a competitive market so uh we think it's the right guidance and we think that the investment they're making in fixed and mobile um is the right investment and we think that their investment in customers which leads what critical in this market is also the right investment so we're at a bit of an inflection point in terms of you know what each party will do i think you have to ask vodafone what their intentions are we're happy with the business I think the management team is doing a fantastic job. Richie, the CFO, is on the call. Do you want to add anything to the guidance point, Richie?

No, I think it's well said, Mike. So it's not a structural, let's say, issue. We are investing a lot to make sure we keep on being the winner in the Dutch market. I think it boils down to that. Yeah.

Smart investment. Okay, thanks, guys.

You got it, Dave.

Your next question comes from the line of James Ratzer with New Street. New Street Research, your line is open.

Yes, good morning, Mike. So a couple questions just coming back, please, to the UK fiber joint venture. I think in the past it had been talked about doing this at the Virgin O2 level, and it now looks as if you're shifting this to a parent company investment jointly with Telefonica. I was wondering kind of firstly why you were considering that change. And then secondly, as part of the agreement, would Virgin O2 give any volume commitments to the new JV as an anchor tenant? And can you give us any indication on what wholesale rates the new joint venture would be looking to charge? Thank you.

Yeah, I mean, I'll just quickly say on the second two points, you know, that's all work in progress, and we haven't gone out with an official investment memorandum yet. That'll happen shortly. So we're going to hold back on any specifics around wholesale commitments and pricing, you know, as we want to get deeper into the conversations with investors before that comes out. In terms of why this would be a partnership between Telefonica and Liberty Global with financial investors, it's our view that that creates a fair amount of flexibility for all parties. So with respect to VM02 or Virgin Media 02, they'll be able to have this off-balance sheet. I think that's important. And it provides them with the comfort they need that this particular project will be financed and that they'll have the benefit of the growth and the opportunities that the project provide as if they were an owner, but without having to be one. And the capital would come from the parent companies, so us and TEF, as well as the private partner, whoever that may be. So we thought it was just simpler and cleaner. It also provides greater optionality for the shareholders themselves in terms of what we may ultimately do with our infrastructure, businesses, and assets. I think from an investor's point of view, it's really, it's a non-issue because we are the owners of VMO2. VMO2 will be the essentially builder and operator of the network. It'll be a very light netco. It won't have to do all the things that other netcos are doing with startup costs and large management teams and all of that stuff. You know, we rely on VMO2 to essentially supercharge lightning, if you will. and essentially can start redirecting lightning resources to this NETCO. And that seems like a really simple way to proceed, and I think we all feel pretty positive about that approach.

Thanks, Mike. And would you give, I mean, at this stage, any indication on how you might then consider funding the entity? I mean, could you replicate a model we saw with Deutsche Telekom where you were to, say, maybe sell 50% stake in this joint venture to a financial party, and those proceeds would actually fund any contributions you'd have to make. So this could be cash flow neutral at the parent company over the first few years of the build-out?

Yeah, good question. That'll all be resolved in the process of negotiating with partners. We believe that the project has... fundamental value today before, you know, the first home is built, given the, you know, the ready-made nature of this particular opportunity. And we will seek, obviously, to convince private investors that, you know, Vodafone, I'm sorry, Virgin Media O2's ability to penetrate our, you know, the speed at which we can get rolling should generate or result in a a private market value for that asset even before we begin but we may not and we'll see it has a lot to do with wholesale rates and utilization rates it's really an economic equation and a lot of that will be negotiated so let's see it's possible but we're not we're ready to write a check if that were necessary and we know what that number is and it's not substantial in relation to our cash balance it's not substantial in relation to Telefonica's cash balance so Either way, this is moving forward.

Great. Thank you, Mike.

Yeah.

Your next question comes from the line of Robert Grindle with Deutsche Bank. Your line is open. And, Robert, you may want to pick up your handset, please.

Hi. Sorry. Can you hear me now?

Got you.

Yeah, I'm having trouble today. Apologies for earlier. May I ask about ventures where you've had some amazing value appreciation? Can I clarify in what you're effectively saying? Are you saying you'll divest content assets and redeploy that into infrastructure and then technology you can either buy and sell and you won't have to put new money in? Is that how you're thinking about it? That's sort of the main tilt going forward is infrastructure. Thanks.

Yeah. So, um, no, I wouldn't be that, um, I wouldn't be that concrete about what you've just said. I think what we've said in the past is that our content investments, which are, uh, substantial, um, you know, could, you know, we will look at them carefully to determine whether we want to increase those investments, monetize those investments, or do something with those investments of a strategic nature. Um, and you know, they're large, you know, the portfolio itself is it's the largest of the three, uh, elements. So I think it's safe to say we'll be opportunistic around the content portfolio and what we'll do with either those public or private interests. Uh, does it mean we'll never do another content investment? No, it doesn't mean that it doesn't mean that we'll do that. That means we'll be creative and opportunistic with those, which, you know, about a billion, 6 billion, seven of value that we could look at in terms of the content portfolio. We said historically that the tech ventures group, which is about a billion plus, generally distributes to us, you know, two to 300 million a year and, you know, or less or more depending on exits. So it could largely fund itself given the amount of capital we're putting into tech annually. We would expect that the tech platform could be self-funding, if you will. but that may be the case in most years. It may not be the case if a particular deal comes around, but I think that's a safe assumption. The side of the pillar that does require capital and looks to be very exciting to us is the infrastructure side, and those are usually larger investments if you're building fiber or data centers or new startups, as Charlie described. Those can be a bit more expensive in some respects, and so I think that'll be a net user of capital since it's very early stages for infrastructure. So that will be a net user of capital going forward. I hope that helps.

Got it. Thank you.

Your next question comes from the line of Carl Murdoch-Smith with Barenburg. Your line is open.

Hi. Thank you for the question. I just wanted to ask about... the kind of 2027 target for the additional 7 million homes rollout. On the back of an envelope I calculate that that roughly means kind of doubling or even tripling the pace of lightning currently. So I was just wondering if you could kind of help us through the pace at which we should expect your rollout to to accelerate and also what gives you confidence that you can accelerate that much given the historic issues that you have faced with with the pace of project lightning rollout thanks yeah i'll let you answer that i'll simply say we haven't really faced any issues we've delivered between three four five six hundred thousand homes for the last four or five years so other than

I think many years ago when we first started the project, maybe you're referring to, but I don't know how many years we have to hit the numbers to have that particular issue go away. We built 2.7 million homes, over half of them are fiber homes. We're consistent and steady. Suppliers want to work with us. We pay our bills. We're predictable. But I think, Luz, why don't you address that more specifically?

Yeah. So we have been a bit light last year, but that is because of the pandemic We have guided that we will build more than 500,000 homes this year. We have actually ensured supply for a higher number than that. And we are also in sync with this fiber company to build in conversation with tier one vendors. And there is an appetite to further accelerate rollout with us. And I think what we have to offer is, right, VMO2, we have a history of building 2.7 million homes. Every second household is a customer of ours now. And so if a tier one supplier gets a midterm commitment from us, that drives interest, right? You always want to balance your client being a supplier between alternates, which may be a bit more uncertain and the big tiers in the market. So yes, you're right. We plan for an acceleration, and yes, we are confident that we can ensure also a supply.

That's great. Thank you.

Your next question comes from the line of Nick Lyle with Faction. Your line is open.

Hello, Mike. Hello, Charlie. It was a couple of questions on the UK, please, Mike. Just in the cable footprint, how much of the 2.1 billion capex for 2022 for VMO2 is going to be on fibre, please. And how many homes do you think that's going to get you to with fibre? Just to get an idea of the sort of phasing of the fibre rollout, if possible. And then second, I think you said last quarter that Openreach were at about 2 million homes with fibre in the cable footprint. So have you seen a big acceleration in that now as they start to ramp up the numbers? And how are you competing in that 2 million or 2 million plus homes, please? Thank you.

Yeah, Lutz, you can prepare for the second question. I think on the first one, I'll just tell you we're not providing detail around the build estimates there. So we have said we'll build more lightning homes. You can do the math on that. We did 330,000 in 21. We're going to ramp that to above 500,000. So that will clearly be a portion of the incremental CapEx in the base case guidance. But we haven't been specific about how many homes will upgrade the fiber. We have told you what that will cost, but we haven't told you how many. I think that's by design. And then that does not include, the CapEx estimate provided does not include any costs associated with this recently announced financing that we just spoke about a moment ago. Not that that would create significant costs because VMO2 would be reimbursed for any costs it provides services for, but it does not include that. So I think that's the right answer. We'll provide more guidance on the fiber upgrade as we get into it, but the only message we're providing today is that we did the 50,000-ohm trial, and it checked out really well. So, Luce, you want to address the second question?

Yeah, so OpenReach covers now roughly one-third of our network, a bit less, and we are carefully looking at the impact in terms of customer churn and so far we see very little impact now obviously we have invested a lot of money into higher speeds customers are sitting on a much better customer service of com complaints went down 93 percent and more and more customers are also having mobile with us 45 percent and we have a lot of good content so Therefore, we do everything we can to obviously keep our customers as low as possible to ourselves. At the moment, the numbers we see we are losing is really low. But the other thing we also have to take into account is the pandemic, right? So customers might be a bit more careful at the moment. switching their connection to the outside world during the pandemic than they would do afterwards. So therefore, we do everything we can to keep NPS growing and showing down. And so far, we see very little NPS.

Just to clarify, Luke, sorry, you say about 5 million open reach overlap at the moment, do you, in the cable network? Is that the right number?

It's open reach and oldness, but I think it's something in that magnitude it is, yeah.

Okay, that's great. Thank you very much.

Your next question comes from the line of James Ratcliffe with Evercore ISI. Your line is open.

Thanks for taking the question. I'll dig a little more into strategy and ventures. When you talk about infrastructure investments, can you give us any idea of any particular areas you're focused on and what sort of deals? Are you looking to be a minority investor or controlling investor? And are we just talking about Europe or globally? Thanks.

Charlie, you want to take that one?

Sure. I think the rationale for infrastructure is we already have a bunch of infrastructure assets that are probably mispriced in a conglomerate kind of telecom structure. One example is our hub sites, which are clearly very high quality technical sites, which if they were a sort of a technical REIT would probably be something like 20 times cash flow. And that was indeed the transaction we did by merging that in-kind asset with our private equity partners, who've been excellent, by the way, Digital Bridge. So we're going after the edge cloud computing. And the reason that's a good deal for us is that obviously there's a long-term growth profile there, and we have the option to buy out our partner down the line if their fund comes to an end. But also it's very synergistic to our businesses. There's a lot of increase in fiber connectivity that comes from that cloud computing background. And so I think as we think about the infrastructure, it's those kind of opportunities. And the key areas that we've thought about are leveraging our expertise and being able to build fiber homes. So he's done an excellent job. Robert Dunn, who was the old CFO of Virgin, is leading the charge at looking at places where we can partner up and leverage our expertise in building homes at scale. And I think I would echo what Lutz said, that we're actually the best in the UK at building at scale in many respects. And then the third big area for us is energy. Rightly or wrongly, we're a big consumer of energy, and rightly or wrongly, we are, like everybody else, working through that process of making the transition to net zero, whether it be electric vehicles and or solar panels and or and or. And if you think about it, we have enormous field operations who are very experienced in going to homes, and we see a big opportunity to leverage that expertise in building a new business. And again, we're trying to do that with partners. We have an excellent partner for our public charging network called Zoo Capital, and that Business is doing very well, getting a lot of very good wins of local authorities in the U.K. And then we've also launched a more consumer-focused, that's the egg thing I talked about. And clearly the plan would be to take that across Europe into the Benelux in Switzerland initially and leverage our experience of subscription-based customer relationships and how you finance them and how you manage them and how you leverage call centers. So that's the adjacencies we're thinking about as we go into this infrastructure space.

Great. Thank you.

Your next question comes from the line of Maurice Patrick with Barclays. Your line is open.

Well, thanks for taking the question. Yes, a question on Switzerland. I wonder if you could walk us through the moving parts on the EBITDA for 2022 and 21. I'm assuming there's probably a reasonable slug of synergy delivery in the year, probably offset by high cost of capture as signaled. But to get to a flattish EBITDA would be very helpful to get some color in terms of the moving parts. And just related, I mean, on your first slide, Mike, slide three, you talked about $14 a share of synergy value. Just curious as to how much would have been captured by the end of 22, say. Thank you.

Yeah, good question. And, Andre, I'll let you prepare for the first part of that. I would say if you look at the two assets, you know, we gave you synergy estimates for both of them. in the order of, I think, 530 million pounds plus or minus for the UK. I want to say 330 million Swiss francs. Those would be sort of run weight synergy estimates for each of the businesses. And, you know, we're reasonably far along. I don't know that we're giving, I'm not sure we, you know, are prepared to give exact, you know, and specific numbers, but we're making great progress. I know that this year in Switzerland is a peak funding year. So it's cost of capture year. So, Whereas last year, I think we said we spent in Switzerland around $116 million to capture synergies this year. That will go up to, I think, about $180 million plus or minus, and that'll be a peak year. But in this particular 22, we expect to almost break even between synergies and cost to capture, which means 23 will be pretty substantial, and 24 and 25 will be pretty substantial positive synergy years. And BMO2 is about a year behind, right? So it started almost a year later. So there, you know, we've given you the numbers for cost of capture, I believe, in the press release. So you can see what those numbers are. It's about twice what they were in 21, but not quite breaking even yet on synergies in 22. And that'll happen, obviously, over the next, you know, 23 to 26 when we hit that 530, 540 million run rate. So there's some big picture targets. Andre, you want to talk about the EBITDA?

Sure, yeah, and you touched on it, Mike. Yeah, it's true. We are having many moving parts in the integration, investing a lot of cost to capture to build the business, to set the foundations for growth. We talked about that we are consolidating our brands on one premium brand. We have a second brand with Yellow that will also help us to attack the market from both angles, from a premium perspective, but also from a no-fills perspective, which I think will give us continued momentum, plus also good growth on B2B. 2022, obviously, is the year with the heaviest exposure to cost to capture. We are ramping up. and most of the initiatives that we have started off already in last year. And as such, we also see that the impact on the EBITDA in terms of cost to capture is more or less going to roughly 50 million, plus then also synergies coming in and increasing. But on the other hand side, also we have other OPEX line items for launching the new brand. We are also engaging in a new sponsorship with the Swiss Ski Association, which puts our brand on a stronger footing. So there are many moving parts, and that is why you see not yet the full power of our business really materializing in a strong EBITDA growth. It's subdued to all of those integration efforts. But underneath the surface, I think you can see also in the physical performance of the business, i.e. the KPIs on customer numbers as such, that we are on a good trend to drive market share growth in all of our segments. And that is what we try to continue to bring the business onto a footing that helps us to drive not only top line but also bottom line growth in terms of EBITDA and free cash flow growth in the following years. Thank you.

Your next question comes from the line of Matthew Harrigan with Benchmark. Your line is open.

Matthew Harrigan Thank you. Especially in the context of VM02, can you talk about how All fiber reduces your costs over time, customer touch points. Yeah, at least one company in the U.S. is really talking, you know, 30%, even 40% there. And then the flow through of the long-term capital intensity. And then I guess lastly, the optionality, it opens up on the commercial services side, having that capability as well. I know you have a lot already, but it feels like there's still some headroom there. Thanks for taking the question.

Mike, you there?

Maybe we have to... Sorry, I'm there.

Is that the Verizon moment, Mike? Was that the moment?

Yeah, yeah, yeah, yeah. There we go. There's a lot of benefits to a fiber upgrade, Matt, and you hit a couple of them. Obviously, having the ability to provide more sophisticated and competitive services in the enterprise space, potentially offering wholesale revenues, and just... being a more marketable, to some extent, B2C proposition. And so we think there's benefits across the board beyond just simply having a more robust network to compete against existing operators and incumbents. On the fiber cost point, in the UK we are, and I think you've said this before, since it's a relatively long build process, we don't intend to shut down the HFC network. In fact, it wouldn't be surprising to me if the HFC network we're operating for quite some time in a sort of a dual mode because we don't want to force migration to fiber. We don't need, unlike the phone companies that have copper lines, you know, forcing migration to fiber allows them to dismantle their copper infrastructure. In our case, you know, we'll, we'll, we'll migrate people to fiber who want one, two, three, 10 gigs. But if you're happy with your 500 mag or your 250 mag, we may or may not incur the cost of, migrate you to fiber because our network is really robust on its surface, on its face. So we're going to run two networks, if you will, for a period of time, which is the best of both worlds. One gig available everywhere, and then as we roll the fiber out, 10 gig and other advantages where it becomes available. So there will be cost savings over time, but I think for the foreseeable future, we're going to run two networks.

Thanks, Mike. Appreciate it. Yep.

Your next question comes from the line of Sam McHugh with BMP Paribas. Your line is open.

Yeah, thanks very much. Just on the UK again, sorry to labor this stuff. I think BT talked about the Armageddon scenario of you wholesaling your network to some of their big customers. So when you're talking to potential industrial partners, what is it you think you bring to the table differently to Openreach? And do you think it would make sense for some of your theoretical partners to have skin in the game in the network to align their interests so they can share the upside with you on any network build. Thanks.

Well, I'll let you think of some suggestions here, too. I'll just make one point, which is the main difference is that we're envisioning a full fiber network of 23 million homes by 2027, 2028, and that those homes will represent, you know, almost 100% of all urban markets, and it'll be the first time this country has ever seen a competitive provider of wholesale if we go that route. So the idea that Openreach will retain 100% of wholesale revenue, whether it's us or Altnet's competing, is zero. There is zero chance that BT will retain 100% of wholesale revenue over the next five years. How could it possibly do that? With all the capital being invested in competitive infrastructure, there is a zero chance of that. So we think if you look at the prospect for penetrating some of that revenue, certainly Virgin Media would be the number one choice because of our scale, our reach, and our ability to deliver. So that's the broad narrative. It's not that complex. And the notion that there will be Armageddon, I think, is foolish. I don't believe he really means that. I don't know why he would say that. I'm not sure he did say that. But if he did say that, that's certainly not a smart thing to say, you know, if you're already sort of a monopolist. There's going to be competitive infrastructure in the UK. There's going to be competitive infrastructure in the UK. We are the single greatest source of that competitive infrastructure.

and we're pretty excited about the opportunity you want to add anything to that lutz yeah i mean um right in the future the isps have the choice between two national networks instead of one and if you would be an isp i'm sure you would use both so right this is what you said mike before and and then also what do we have to offer well it depends uh how quickly we are able to close some of these deals but uh we are sitting today on the fastest giga, right, the largest one-gig network in the country by far. So also there's some appetite from other ISPs to leverage that. So I think we have a lot to offer. We are a challenger in the market, a competitor, and so let's see.

Super. Thanks very much.

Our last question comes from the line up. Okay. Our last question comes from the line of Andrew Beale with Arete. Your line is open.

Hi. I just wanted to build on that question about the FiberJV and wholesaling. I guess I'm just asking, how are you going to subcontract to BMO2 to speed up the ramp and eliminate duplication, and whether the new NETCO JV also contracts directly with new construction partners to get the pace up and footprint up. And then when you're wholesaling, will that be both from VMO2 and the FiberJV? So you offer the full 23 million footprint, as you just mentioned, rather than just the seven. And finally, will VMO2 also look to wholesale from Openreach or others to take its long-term footprint up towards 30 million or full coverage?

Yeah, three very good questions. And, you know, I think Luce can address the first one. I think, you know, in terms of Lightning essentially being transferred into the NETCO, the new network JV, all of that build capacity, build relationships, supply relationships, activity would essentially be transferred. So you could easily see VM02 redirecting its forces into the network JV and achieving pretty substantial growth. Remember, our pace of lightning build has been not a function of our ability or willingness or a capability to build. It's been more or less trying to drive a free cash flow and financial outcome for the company. You know, Lutz comes to me every year and says, I want to build more. And we say, yeah, but we want to generate free cash, so let's find a happy medium. So there's never been an issue of capabilities. It's always been financial management, which is what you want us to do, is managing the pluses and minuses. So I think we're all convinced that if we set Lutz and his team free to build more, they could build more. It's just a matter of the capital. And you hit the nail on the head in terms of the 23 million homes. Sure, that will be and should be a combined investment. approach if we get to that point, and you would see VMO2 managing that wholesale activity. In terms of the third point, you know, we haven't worked much on that, Lutz. You can jump in on that. We haven't really modeled much access to third-party networks, but you want to add anything to that, Lutz?

Yeah, maybe, right, to support your first two points, right, at the end we are leveraging the built machine and And then also the whole machine we're currently building for that new FiberCo. And if you're an ISP, for you it's easier to contract for 23 million homes instead of doing two contracts. Why would you do that? And I think in terms of what you said, lightning, the lightning machine will absolutely work then for that FiberCo. Who owns the contractual relationship with the suppliers is a different question, right? And we are sitting, obviously, today on great contracts like that. So we have to consider that. But I think both machines will work for that. On the one, what are our plans to wholesale on Openreach Network? So in general, we only would wholesale on fiber and not on copper. And obviously also Openreach is first focusing on urban areas as we do. So therefore, there is less build to be expected on the 7 million homes from Openreach. And the other piece is simply, right, we are integrating two companies. We have a lot on our plate. so let's uh let's not to uh to be too ambitious and do everything at the same time so therefore we see that as a as a second priority maybe we would do it later but but not in scope at the moment great all right well listen we're a little bit over appreciate you hanging on if you still are still on um you know uh i guess just three points one we really are seeing the continuation of the commercial momentum

You know, over the last 24 months in our core operations, that's critical. I think that's really the most important piece of the puzzle is that we continue to grow organically. And then secondly, as you've heard and understood, we're making smart investments, both in cost of capture, which will pay off, you know, in immediate future. And those are investments you want us to be making. And then in some instances, our networks, particularly in the UK, where we've spent quite a bit of time today talking about the opportunities that that presents. And then thirdly, we've got some exciting catalysts, whether that's ventures or towers or buybacks. All three of those things act as sort of catalysts to what we think is a great fundamental story. So appreciate your support, and we'll be talking to you soon. Thanks, everybody. Take care.

Ladies and gentlemen, this concludes Liberty Global's fourth quarter 2021 investor call. As a reminder, a replay of the call will be available in the investor relations session of Liberty Global's website. There you can also find a copy of today's presentation materials