Liberty Global Ltd.

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Liberty Global's first quarter 2022 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 sections of Liberty Global's website at libertyglobal.com. After today's formal presentation, instructions will be given for a question and answer session. Today's presentation may include forward-looking statements within the meaning of the Private Securities Litigation Form Act of 1995, including the company's expectations with respect to its outlook and future growth prospects, and other information 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 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 changes in its expectations or in conditions on which any such statement is based. I would now like to turn the call over to Mike Friese.

Okay, thanks, operator. Hello, everyone. We appreciate you joining us today for our first quarter results call. As usual, I've got a number of folks from my leadership team on the call with me here, and I'll be sure to get them involved in the Q&A as needed. But first, Charlie and I are going to run through the slides that we've posted on the website. Hopefully, you've found those slides. We've added a few more to the finance section, so Charlie's working a little harder today. And I'm starting on slide three with some key highlights from the quarter. First, like each of you, we remain extremely troubled and concerned about the war in Ukraine, and our thoughts and prayers go out to everyone impacted by this crisis. I have to say I'm particularly proud of how our operating companies and employees have stepped up to support those in need. In addition to things like free or reduced connectivity costs, humanitarian aid, and programs to hire Ukrainian refugees, We also signed a joint statement by EU and Ukrainian telco operators to reduce wholesale roaming and termination rates between the EU and Ukraine in order to ensure communication remains cheaper and easier for Ukrainians inside and outside the country. Now, looking at this more broadly, every European company has addressed how the current macroeconomic environment has affected their operating results, and Charlie's going to do that in a few slides. The punchline for us, however, is that we've been able to manage well through the current environment of higher inflation and declining consumer confidence. Anyone who has followed our industry knows that we are highly resistant to economic volatility, since connectivity is one of the most important services consumers buy. And while our markets as a whole experience a slowdown in sales in Q1, which is not atypical for the first few months of the year, our disconnect or churn rates remain very low. Charlie will walk through how we're responding to cost and supply side factors, but it's worth pointing out right up front that and we've been able to minimize the financial impact with reasonable price adjustments pretty much across the footprint. That's just one reason why we're able to deliver stable to growing revenues across our FMC operations in the first quarter, and importantly, strong EBITDA growth in our core markets. There's been a lot of talk lately about the role of M&A in the European telco sector. I think it's fair to say this is an area where we've consistently overachieved. So far this year, we closed on the sale of our Polish business to Iliad for 1.7 billion, or nine times EBITDA. And as reported, Telenet very effectively monetized its tower portfolio for 745 million euros, or 25 times EBITDA. I have to say, given current prices, this may be the largest gap between public and private values that I've ever seen, with no discernible decline in private market demand for telco assets. And not surprisingly, we've accelerated our buyback program, which, as you'll recall, was targeting a minimum of 10% of the shares this year. We're already 50% of the way there through today, and we'll continue to take advantage of current prices as long as we can. And finally, as Charlie will explain more fully, we are reiterating our 2022 guidance today, including our $1.7 billion of distributable cash flow. More details on that in a minute. So we certainly have a lot to be confident about as we look to the balance of the year with things like integration synergies in the UK and Switzerland, strong cost controls, and the expected benefits from price rises supporting our growth targets. Turning to slide four, we try to simplify the presentation a bit with just one operating slide that shows our connectivity trends for broadband and postpaid mobile over the last nine fiscal quarters. The main takeaway here is that despite a softer sales environment in many of our markets and announced or implemented price increases, we had a good first quarter. The only standout is Virgin Media 02, where broadband and postpaid mobile ads were flat for the quarter, and there's some very good explanations for those results. Starting with broadband, where three things impacted Virgin Media O2's net ads in the first three months of the year. To begin with, as you know, VMO2 implemented its largest price rise since 2014 with a 6.5% discretionary increase across the board. Of course, we took no price increases on broadband in 2020 and a 4% rise in Q1 of 2021. Now, typically, growth slows in the quarter where we take price rises. The good news is that customer reaction to the increase in Q1 measured in churn and MPS is exactly where we expected it to be. The unexpected news is that broadband sales in the UK market as a whole were down in the first quarter, reflecting the end of lockdowns, perhaps, and consumer attention being redirected to other costs like utility bills. And for VMO2 gross ads, this was compounded by reduced marketing and promotional activity in January and February while the price rise was landing with customers. I think it's also important to point out that we do not see any noticeable impact from fiber overbill, which shouldn't be surprising since we're already marketing 1 gig services to 100% of our homes and continue to see meaningful increases in average customer speeds in our network, which now exceed 230 megabits per second, up 24%. Speaking of networks, just a quick update on our fiber expansion plans in the UK. The fiber rebuild is on track, and we should have the goals achieved by year-end that we set for ourselves. And we receive strong interest from the financial community on our plans to build an additional 5 to 7 million greenfield fiber homes with concrete discussions underway as we speak. Now, sticking with the UK, post-paid mobile growth for VMO2 was a tale of two brands, really. Our Volt launch drove great O2 mobile gains, even with the announced average price rise of 8.8%. This has certainly proven the magic of convergence, if you will. But we did see a drop-off in lower ARPU Virgin mobile subs as we implemented a new terms and conditions for them, as well as we lost some Virgin SIMs as folks subscribed to the Volt bundles. Now, several things give Lutz and his team confidence that we'll see an acceleration in broadband and mobile for the balance of 2022, including product innovations like TV Stream, a continued footprint expansion through our Lightning program, and, of course, the benefits of digital. Now, I'll just hit the other markets briefly, since results were strong in each case. A summarized UPC had a good broadband and post-paid mobile growth in the first quarter, totaling $56,000. Broadband was supported by the new full-service offering from Yalo. That's our discount brand in Switzerland. and post-paid mobile momentum was driven by premium and challenger brand segmentation, despite a relatively competitive market. A few other points in Switzerland. We remain confident in the hybrid network strategy, which gives us access to the best networks wherever we are, including Swisscom's Fiber, where we just signed a new wholesale deal. We also launched Sunrise Moments, which is a loyalty program that provides reward packages and exclusive access to cool concerts and live experiences. So far, a great response. And then lastly, but maybe not surprisingly, Sunrise outperform Swisscom in Q1 on pretty much every key financial and operating metric. Now, Vodafone Ziggo lost broadband subs in the quarter, which they attribute to both the continued competitive pressure from KPN and the launch of the new F1 season on the Viaplay platform, which KPN basically gave away for free to their customers. Both the mobile apps at $37,000 were attributable to a softer B2C market, but Vodafone Ziggo outperformed KPN again and regained the leading NPS position across both fixed and mobile. And Convergence continues to pay dividends in Holland with a total of 1.5 million FMC households now, where MPS is 19 points higher and customers are 50% less likely to churn. Not much to report on Telenet that John didn't already cover in his earnings call. Generally, low churn and low gross ads means there was simply less flux in the market. And Telenet delivered positive broadband and postpaid mobile ads regardless. And that was helped, of course, by the one product that they are marketing today. Now, two more slides from me before we get to Charlie's finance presentation. As I mentioned in my opening, transformation through M&A seems to be a hot topic these days in Europe. So I thought it might be useful to refresh folks on our journey from a cable company operating in a dozen European markets just five or six years ago to a fixed mobile champion operating in a handful of Europe's most attractive markets today. This is a great example of getting smaller to get bigger. If you look at the left-hand side of the chart, you can see that we reduced our footprint from 12 countries to essentially 5 today, exiting markets at private market values that range from 9 to 12 times EBITDA. You'll all remember those deals. At the same time, though, through fixed mobile mergers or acquisitions, we increased our subscriber base from 58 million fixed to mobile connections to 85 million, with fixed becoming a much smaller part of the equation. At the same time, while consolidated revenue declined, from 17 to 8 billion. We gained exposure to a much bigger revenue base of 19 billion through our 50-50 JVs in the UK and Holland. So aggregate revenue, if you will, expanded 60% to 27 billion. And there were four great reasons to do this, and they're laid out pretty clearly on the right-hand side of the chart. First, it's all about national scale in the connectivity business, and we're now number one or number two in just about every market, right behind the incumbent, who is generally slower, less agile, and less entrepreneurial. Secondly, the synergies in fixed mobile mergers are substantial with low execution risk. You know our success in Belgium and Holland where we generally exceeded targets or achieved the goal earlier than forecast. And our recent combinations in UK and Switzerland are tracking right on course with expectation that total synergies will reach 11 billion on an MPV basis at which about 8 billion will accrue to Liberty Global proportionally. You can do the math yourself on a per share basis. Then third, the strength of these businesses lies in the power of convergences. already at or approaching 50% FMC penetration with fixed mobile bundles that provide faster speeds, more data, smarter video solutions, and entertainment perks. As we've already demonstrated, the benefits to ARPU, Churn, and MPS allow for sustainable growth in what we believe are Europe's most rational markets. And then finally, as we've discussed many times, scale and competitive strength give us the strategic optionality and confidence to shape our markets and make decisive moves on networks, content, and capital structure to It simply wouldn't be possible as a smaller operator. So you're familiar with all those projects at the bottom of the slide and the opportunities we're focused on, including fiber expansion, wholesale revenue, and infrastructure modernization. Now I'll end on a slide entitled Allocating Capital Efficiently. This might be the most important slide today. We've demonstrated a willingness and an ability to transact when it matters. I've shown you that. The transformation we underwent with divestitures, acquisitions, and JVs involved 11 different European markets over basically five years. I also reiterated the strategic and operating rationale for those decisions where we've prioritized national scale, executable synergies, competitive strength, and control over strategic market developments. That's half of the value creation story. The other half is what we do with the capital we realize or upstream from divestitures, JVs, and operating subsidiaries. As this slide shows on the left, in the last six years, we've generated $22 billion of cash to the parent company, $12 billion in net proceeds from those asset sales, $2 billion in net proceeds upon the formation of our JVs in Holland and the UK, and an additional $8 billion in free cash flow during that period. Over that same timeframe, we've allocated $18 billion of that capital into three value drivers. By far the largest investment, $13 billion, or 72% of that, has gone right back into our own company in the form of stock buybacks. $4 billion, or about 22%, has been used for mobile acquisitions in Belgium and Switzerland, deals that position us as a fixed mobile champion in those markets. And about $1 billion, or 5%, has been used to expand our ventures platform, which, as you know, we value today at over $3.4 billion, or $7 a share. All that leaves us with roughly $4 billion on the balance sheet today. I'll address right now what is likely to be the first question. How will you allocate the $4 billion? I'll also give you the answer that I normally give, which is that our future investment of cash is unlikely to look meaningfully different than what you see on this slide. We will continue to prioritize stock repurchases while keeping an eye out for direct investment opportunities either into or around our core FMC operations. Nobody is pleased with the stock price today. You can put John and me at the top of that list. When we look at the European telco space, we see headwinds and tailwinds for the sector at large. But our tailwinds are enhanced by having national scale in the best and most rational markets, by having unrealized synergies, by having the willingness and ability to be strategically agile and opportunistic when it matters, and by running a levered equity capital structure that prioritizes buybacks and value creation, especially on a free cash flow per share basis. Obviously, we're ready and excited to invest in those tailwinds, especially at these prices. Charlie, over to you.

Thanks, Mike. I will begin by discussing our revenue performance in Q1. Overall, it's been a strong start to the year with our core assets delivering stable to slight growth with more support from pricing to come from Q2. Virgin Meteor O2 delivered stable top-line growth, including stable mobile revenues, excluding handsets. This being driven by a tough B2B comp, which we expect to ease throughout the year. We expect revenue trends to recover throughout 2022 as the impact of price rises land from Q2. Moving to Switzerland, we delivered continued revenue growth of 1%, driven by mobile subscription revenues and B2B, in particular wholesale voice. We continue to execute on brand segmentation with reduced discounting to drive an improved ARPU mix. In the Netherlands, we saw stable revenue growth supported by mobile subscriptions, which reached a five-year high in Q1, We continue to see fixed ARPU growth at 2%, and effective from July 1st, we will implement a price rise of 3.5%. And in Belgium, top-line growth of 0.7% was driven by growth in mobile and B2B subscriptions, in addition to wholesale and roaming revenues. Telnet has brought forward its price increase of 4.7% to June, given the existing inflationary pressures, which should benefit revenue performance in the second half of 2022. And now, moving to EBITDA. I will start with Virgin Media 02, where we delivered over 2% EBITDA growth, which was slightly better if you exclude cost-to-capture costs. This was driven by strong cost control, including the benefits of migrating the Virgin Mobile MVNO from EE to Vodafone, lower sales commissions, and deal-related cost synergies. We continue to expect EBITDA growth to accelerate through the year at Virgin Media 02, given pricing moves and further synergies. Sunrise UPC delivered close to 10% EBITDA growth in the quarter, This was flattered by the phasing of cost-to-capture costs, which were lower in Q1 2022 compared to Q1 2021. The strong underlying EBITDA performance was driven by the increasing MVNO synergies as we migrate UPC mobile subscribers to Sunrise. It was also impacted by the phasing of our marketing spend from Q1 to later in the year, and because of this re-phasing, our full-year guidance for Switzerland remains the same despite the strong Q1 result. Vodafone's Zygo reported healthy 2% EBITDA growth, in part driven by a 4% decline in operating costs. It was also impacted by the end of the Formula One contract at Zygo Sports, which although it contributed to lower top-line growth, was more than offset by the associated content cost savings. Telenet reported a modest decline in EBITDA of minus 1.7%, driven by the impact of wage inflation and higher network costs, plus a top comparison compared to a VAT refund in the prior year. So overall, the consolidated group reported over 2% rebased every day growth. Moving to free cash flow and the key drivers, we delivered $137 million of full company free cash flow on an adjusted and distributable basis, despite the phasing of interest payments, which fall predominantly in the first and third quarters of the year. Our capital intensity has remained broadly stable in Q1 year on year. We made the 2022 telenet tax payment of $92 million a quarter earlier than last year. We received dividends and loan interest in the quarter of $109 million from our Dutch JV. As we highlighted at year end, we now include direct acquisition costs in our definition of adjusted free cash flow, which is how it's presented on this slide. We incurred $17 million of direct acquisition costs outflows in the quarter, leading to adjusted free cash flow of $137 million. Because the UK JV recapitalization is expected towards the latter end of this year, this means our distributable free cash flow is the same as our adjusted free cash flow for this quarter. Moving to the next slide, I wanted to address key inflation and macroeconomic challenges that we are facing across our core operations. As everyone knows, we've seen inflation has picked up materially in UK and Europe, albeit not much in Switzerland. This impacts our business in a number of ways, including our pricing actions, where we have in some cases brought forward and increased price rises, and also where we benefit from direct inflation links, such as the one we had with O2 in the UK. Secondly, we see a number of impacts within operating costs and capex, which I will discuss. Starting with energy, across our four largest fixed-level convergent assets, we typically see energy accounting for low single-digit percentage of operating costs. From a hedging perspective, we typically target hedging 12 months out, But for 2022, we do have a degree of unhedged exposure of Virgin Meteor 02. It's run just under half of the total cost. Vodafone, Ziggo and Telenet to manage through the remainder of the year. Secondly, on wages, we see different impacts. But overall, we only have direct links to inflation in Belgium. And our wage increases have largely been agreed for 2022 in line with budget. Thirdly, we see continued bottlenecks in supply chains. which to date has had limited direct impact on CPE and network projects, but it is something we continue to try and manage as best we can, leveraging our scale. Despite these macro inflationary headwinds and based on today's energy prices, we're still reiterating all of our four-year guidance targets. Turning to synergies and the costs associated with capturing them, we've included the next slide to add visibility on the key projects underway through 2022, And also to recap on overall cost to capture, which are peaking in 2022, particularly in Switzerland. Starting with Sunrise UPC in Switzerland, we continue to expect to deliver a 3.7 billion Swiss franc NPV of synergies and incur 400 million Swiss francs of one-time cost to capture them. Over 150 million Swiss francs of cost to capture are expected in 2022, which is approximately one-third OPEX and a balanced CAPEX. We continue to benefit from the early execution on MVNO synergies, particularly in the first half, and also headcount synergies. We also expect DSL migration synergies to start to build during the year. Moving on to Virgin Media 02, where we expect to deliver 6.2 billion pounds of MPV synergies, we expect roughly a third of synergies to come through in the first 18 months. We expect 2022 to be a peak year for cost of capture. with over £300 million of a total £700 million of expected cost of capture to be spent this year. Key synergy projects underway for 2022 include the MVNO migration, initially to Vodafone and then ultimately to the O2 network, network synergies headcount, and executing on revenue synergies, including Volt. The next slide is our standard overview of our capital allocation framework, starting with the buyback. We accelerated execution of our annual 10% target during the first quarter, and year-to-date we've completed around 50% of the buyback, or 27 million shares, through 7th of May. This has been taking advantage of some dips in the share price, which we continue to view as undervalued. Our balance sheet position remains strong, with total liquidity of $4.7 billion, including $3.2 billion of cash. Performed for the published proceeds received in April, we continue to expect to end the year with around $4 billion cash balances, although this will be impacted if we increase the buyback. 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 Zigo and Virgin O2. As interest rates rise, this should be a source of value to our shareholders. And lastly, turning to ventures, where the fair value fell slightly to $3.4 billion, driven primarily by the fall in the ITV share price during the quarter. There is more detail in the appendix, but net investments in the quarter were around $65 million. Turning to the next page, we are confirming our 2022 distributable free cash flow guidance of $1.7 billion at the guidance FX rates. This is despite the higher energy and inflation costs that we're now experiencing. We're also reconfirming all our opcode guidance targets shown here on the left-hand side. From a foreign exchange perspective, the stronger dollar year-to-date, particularly against the pound, does drive a headwind to our reported free cash flow, with around a mid-single-digit percentage headwind from the currency, assuming current spot rates. We anticipate being able to limit this impact relative to the $1.7 billion, but clearly currency remains volatile. As a reminder, distributable free cash flow is a new metric we use that includes both our free cash flow as historically defined and additional cash that we receive from our joint ventures for recapitalizations. Our distributable 2022 free cash flow forecast does include cash that we expect from a debt raising of Virgin Media O2 later in the year as part of their 1.6 billion pound overall shareholder distribution guidance. Despite the credit market volatility, we remain confident that the credit markets are open to support this financing of what will still be, by historic standards, very attractive rates. One final housekeeping item to flag is that from the second quarter, we begin reporting EBITDA, which is EBITDA after leasing expenses. Many of our European competitors report EBITDA due to the significant difference in lease accounting between US GAAP and IFRS. We believe this metric will provide a clear and comparable approach to our European competitors, particularly reflecting the impact of tower transactions. Of course, we will still continue to report adjusted EBITDA. And with that, operator, can we hand over to questions?

Operator?

Thank you so much. 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 only ask one question. If you are using 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 is from the line of Maurice Patrick with Barclays. Your line is open.

Oh, hi, guys. Thanks for the chance for asking the question. If I could ask a big picture one, please, Mike. Some of the European telcos have made a big sort of lobbying point around net neutrality, hoping to recoup some of the network costs from some of the streamers, given that sort of 70% or so of traffic comes from data streaming these days. There was a study funded by some of the larger telcos. I just wanted your sort of take on in terms of that debate, the ability to, I guess, what do you think is right to try and recoup some of your capacity-related costs from big tech and whether you'll be joining that sort of lobby effort. Thank you.

Thanks, Maurice. Listen, as many of you would know, this is a long-standing debate in the European telco sector among operators, regulators, and the big tech companies. I'm not convinced that it will be successful. However, if it were to be successful, we would gladly benefit and participate in any regulatory initiatives that supported it. It's a difficult issue. We are all benefiting from this ecosystem. We're delivering high-capacity, high-quality networks that provide the connectivity consumers want and demand. And big tech companies and streamers are providing the content and the experiences that drive consumers to our network. So, you know, thus far, I think the ecosystems worked well. However, as we saw through the pandemic, there were material increases in data usage and broadband, you know, capacity utilization anywhere from 30 to 40% a year, either both on mobile and on fixed. And so we will bear the burden of increasing investment in our networks. And, you know, it certainly has had some impact on our decisions in certain markets to invest in fiber. So I'm not really going to weigh in specifically on this call, except to say we watch it closely. We haven't yet made a public announcement on our position, but we'll watch it closely and keep you posted on what happens there.

Thanks, Mike.

Operator?

Thank you. Your next question is from David Wright with Bank of America. Your line is open.

Yeah, thank you, guys. I guess, Charlie, I picked up on that word you mentioned on the buyback unless you increase it. I guess you guys are running ahead of the curve at the moment on the 10%. What would be the basis for increasing? You've obviously been able to to run ahead of the curve without impacting liquidity. So can we kind of take that first five months as a run rate and just aim to kind of come in a little bit ahead of the 10%? And just on the basis of having cash to spend, if I might just add, one of the conversations, I think, or one of the communications that you guys have given and Vodafone has given on Vodafone Zigo and the potential ownership of that is that The asset's doing great, and obviously the EBITDA was powering ahead, but the last couple of quarters has definitely been a little bit more – it's come under a bit more pressure, and maybe some of the low-hanging fruit on the merger has been taken now. So I'm just wondering, has the time come to maybe approach Vodafone again and start discussing who could be the full owner of that asset? Thank you, guys.

Well, listen, on the buyback – thanks, David – on the buyback, we remain opportunistic. That has been our posture on buybacks from the beginning. So clearly with our stock, you know where it is, we are going to be looking aggressively at buying back stock. You would expect us to do it and we are doing it. I can't predict what the stock will be in the second half of the year. So it's difficult as we sit here today to tell you what that absolute figure will be in terms of cumulative buyback for the full year. But I would suggest that in the second quarter call, which will be just, you know, in August, early August, we'll clearly, or end of July, we'll clearly be able to give you a better read on both what we've done through that period of time and how we see the rest of the market. So probably best not to be more specific than that, except to reiterate that we are opportunistic. And when the stock is cheap, we buy more, as you might expect us to do. On the Vodafone Ziggo question, There's really not much to say. I mean, we believe the business remains a very, very successful FMC champion. It's delivered everything that we at Vodafone have asked them to deliver. Jeroen's on the phone call. He can speak to that himself. But, you know, it's been almost a poster child for the success of Convergence, both in terms of, you know, sustainable revenue and EBITDA growth. as well as, more importantly, delivering free cash flow and distributions to shareholders, which we see continuing. All the issues that we referenced through the quarters, whether that's sports and Formula One or impact to broadband competition, we report on regularly, but it hasn't changed our overall perspective on the business, which is it's extremely rational market with a strong management team, a your great position needs to be the incumbent in all sorts of opportunity in terms of what we in Vodafone will do. That's just, you know, not something we can comment on on this call.

Thank you guys.

Your next question is from the line of Ulrich Rath with Jefferies. Your line is open.

Thank you. My question is to Lutz please. So the, the minus 1000 broadband that adds, um, Could you comment a little bit on how this looks in the BAU footprint compared to the new footprint, whether you're seeing disconnections also in the new footprint potentially on price rises, whether that's sort of normalizing and approaching the BAU footprint, and also whether you do see at all a difference in disconnections where you are actually facing open reach fiber that's being actively marketed and those areas where you do not face that. Thank you very much.

Yeah. So, uh, right. I mean, only to put it in context, we we've done a price rise of 6 or 5% and the number of disconnections in 22 has been higher than a year ago. Right. So, so, so I think this is important. Um, now we are obviously, um, in terms of net ads, right we managed all the quarters before to also have positive net ads in the existing coverage so in the business as usual coverage now we are negative we don't see any severe deviations in churn across lightning homes dau homes and also homes that are covered by open reach so actually we are, as you can expect us to do, we are monitoring the churn in overbuilt areas, which are now, according to our numbers, 30%, very closely, and we don't see higher churn, and we also don't see less penetration growth in lightning. So that obviously might change one day, but, right, I mean, we are serving 1.1 gig across our entire footprint, so there is no speed advantage from open reach. So customers only would churn because we have dissatisfied them before. I hope that helps.

Very helpful. Very helpful. Thank you very much.

Your next question is from the line of Robert Grindle with Deutsche Bank. Your line is open.

Yeah, hi there. It's a follow-up question on VMED, actually, on your broadband subs. presumably your competitors should suffer some churn because their price rises happen since the end of the quarter, whereas yours were earlier in Q1. Are you seeing an increase in customer inquiries since then? And is that the opportunity behind the thinking on the recent Solace broadband standalone tariff initiative? And if I may, what's the customer reaction so far on the 9% price increase for our O2 customers? Thank you.

Okay, so the 9% price increase has landed as planned. So we kept the churn rate stable at .9%, which is market leading. So therefore, and this was very, very important for us, probably the most important thing in Q1, we landed both price rises as we have planned in fixed and mobile. And they've been massive, and therefore you can expect us to see the translation into revenue growth in the coming quarter. Your question on the acquisition market. So according to our data, the acquisition market in broadband in Q1 has been much smaller, and especially very small in the month of March. Um, now the way we dealt with it was one, we, we, we, we did less promotion activity. Um, uh, right. And, and also we, we did generate less cross it. So the Delta and net ads, um, compared to the quarter year ago comes out of the acquisition market. Um, and do we see a recovery? Um, in April we see a recovery. Does this come from now? churn from the price rise fast maybe yeah but we we don't know exactly um so um and i mean uh solos approach let's let's put so we're always selling solos right i mean let's right it's it's we have not invented a new product what what we are doing is we we are um doing different market tests at the moment right um and i think the idea is to obviously on one hand side still grow NetApps, but without jeopardizing price rises in the customer base, right? And there's different approaches to it, and you can expect us to test, learn, and optimize this approach.

Thank you.

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

Hello, guys. Yeah, just back to Vodafone Ziggo, if that's okay. Just for... Mike, your subs and your broadband were pretty weak again this quarter, as David sort of alluded to on his question. So you've mentioned F1. So as that comes off, do you expect a bounce back in subs numbers into second quarter and second half? Or is the price rise going to take its toll, do you think? Could you give us an update on how you think that business is going to trade and what you're seeing from the price rise comments to customers? And the second thing, when do you expect a network decision on Vodafone, Ziggo, as well? And is there anything holding that up? I mean, are you waiting for the ACM decision? Are you waiting for Vodafone in terms of networking capex, or is there a disagreement about future dividends? How does that sort of work itself out? Thanks.

Well, yeah, great. Listen, Jeroen is on. I'll let him address the first question around broadband in particular and what we're seeing in the market. But as it relates to the networks, Listen, we have what we believe today is a very strong network strategy focused principally on capacity expansion, you know, CP swap outs, and, you know, where it makes sense, investments in fiber, both in B2B and in new build. You know, because our research says that that's the principal issue. It's not so much headline speed. It's all about quality of service and that customer experience. So we're at one gig, I think, to 80% of the footprint today, and we'll get to one gig, I believe, by the end of 2022 everywhere, if not sooner. And really investing in DOCSIS 3.1 with a migration plan of DOCSIS 4, which you might have noticed Telenet just tested successfully recently to deliver exactly what we hoped it would deliver. So a lot of things happening on the network side that management would view as base case strategy and which they certainly believe will have the desired effect of improving the broadband experience for customers as well as broadband sales and net ads. Do you want to expand on that, Jeroen?

Yes, I'd be happy to, Mike. Thank you. To your specific questions about broadband, for this quarter, we can see three things coming together. And the big difference with the last quarter is the main reason it's Formula One. So we lost the rights to Formula One. So Viaplay has launched that offer in the market. KPN has taken the opportunity to quite aggressively market this to new customers with an offer for a full year free. We've taken a very different approach. We have decided to go for our existing customers primarily and offered something to both our existing and our new customers. So if you look at the step up in customer losses in Broadland in the first quarter, it's almost entirely explained by the loss of Formula One. If I can put it all in perspective, if you see KPN has accelerated their fiber bills quite significantly, and despite that, let's say the broadband performance, the fixed performance has been fairly consistent with the previous periods. And that's not really surprising if you look at the investment in the fixed network. As Mike was already talking about, we currently have 80% of our footprint, which is basically the whole country, 80% of the country covered with DOCSIS 3.1 with enough capacity and a modernized network, which means we offer up to one gig speeds, which indeed, as Mike said, before the end of the year, we expect that to be 100% of our footprint. So we have enough capacity. We have modernized the network. We have switched off analog completely to give us that capacity. The speed is there. The stability is there. And on top of that, we have rolled out up to now 40% of our households with smart Wi-Fi because the reality is customers don't really go for pure headline speed. They want a combination of speed, stability, capacity, great Wi-Fi, and in our case also the content and the FMC proposition. So we're very comfortable that we are in a good position despite the fact that the market is competitive.

That's great.

Thank you.

Your next question is from the line of Andrew Lee with Goldman Sachs. Your line is open.

Yeah. Hi, everyone. I just had a question on your updated thoughts on your ability to mitigate cost inflation or more precisely to pass through higher costs to the customer in the context of what you've seen so far in the UK but also across your other core markets. Just an update there will be really helpful. And then If possible, a second question. Just, Mike, something you speak about a lot on the gap between public and private valuations. Is there any updates in your thoughts on how best to try and bridge that? Obviously, you've got the buyback. You've discussed in the past the potential to spin out. Is there any shift in your view versus spinning out to public markets versus private markets? That would be really helpful to get your views there. Thank you.

Thanks. Yes, on the first question, I think Charlie had a good slide up where he showed the price increases we're taking in pretty much all of our markets, with the exception of Switzerland, where, in fact, inflation is quite low, remains quite low, but anywhere from 3.5% in Holland to 4.7% in Belgium to almost 9% on mobile in the UK and 6.5% on broadband in the UK. Putting those price increases through clearly is the best way and most direct way to mitigate the impacts of inflation on your core business. And I think as Charlie also mentioned, wage increases generally have been in the low single digits, so not nearly at inflation levels. And then we manage the energy and the other costs and supply chain issues as best we can. But your best course is to stay efficient, obviously, in your costs, to be vigilant in terms of how you manage energy and supply chain related cost factors, but also to be judicious but appropriately, you know, fair and aggressive in how you push price increases through to customers, you know, as your costs go up as well. So that's what we've done. And I think it's, you know, most of those price increases will hit the second half of the year or early Q2. So you'll see the benefits of those, you know, in the broader financials through the course of the year. But that's the primary. Charlie, I'll let you think through if there's another answer to that. or go ahead and offer it up right now quickly if you can.

Yeah, I don't think there's anything else. You covered everything. I think the real question, of course, is the success of these price rises, and Lutz maybe and others will have more of a view on that. But we are a consumer-facing business. We have a very sticky product. We are very optimistic. Yeah.

And then on the gap between public and private values, as indicated, it's quite large, and not the first time we've seen this sort of gap. Does it change what we do on a day in and day out basis? Not necessarily. It doesn't change how we run our business, but it does make us more aware and more focused on opportunity, whether that's in the case of Poland, where we decided nine times for that business was something we needed to look seriously at. And that should just be to you an indication of how we look at value and strategy. And also, you know, the fact that we're willing to be aggressive where it makes sense and to respond where it makes sense. You know, I think our track record on this issue is exceptional. You know, we generally don't talk about M&A ahead of M&A, but if you look back at our track record, we have been extremely successful at taking advantage of opportunities both as a in terms of dispositions and acquisitions and joint ventures. So you should expect that we're on our front foot there, that we're always focused on opportunities to close the gap, and especially opportunities that create long-term value for us, that our track record, we think, is exceptional, and we're not going to get ahead of ourselves by promoting one or another strategy or market opportunity. That generally doesn't work, but we'll certainly, I would say, surprise you or delight you to the upside if and when opportunities arise. So we'll just keep it at that.

Thank you.

Your next question is from Matthew. Your line is open.

I assume you said Matthew Harrigan. I was curious what your view is on the venture portfolio, very slight novel decline. and where you're marking it. And I know the private valuations haven't come in that much, but what do you think the opportunities are for adjacencies moving forward if these financial conditions persist? And then secondly, your Denver compatriot, Charlie Ergen, spent a lot of time talking about 5G enterprise, private networks and the opportunities there. I know Europe is a little bit behind there. the U S but if you could just touch on that, you know, briefly, I know a lot of it is very open ended and longer term, but it sounds like it could be a decent, decent pool of dollars. There are euros there. Thanks.

Sure. I'll let Enrique prepare an answer on the 5g enterprise question on ventures. Matt, listen, you know, we'll continue to report on a quarterly basis, what we're doing, what we're seeing. Fortunately for us, most of our tech deals are in cloud based services, applications, software. we're not heavily exposed to the sort of tech investments that I would say are, one, experiencing issues in the market as we speak, but two, you know, flash in a pan or moonshot type of opportunity. Most of our tech investments are strategic in that they involve businesses where we can be a customer, which is a good thing, and two, you know, are, I would say, more down the middle in terms of the kinds of services, applications, or solutions that they're addressing. And I think that makes it a little less volatile than most. Infrastructure, which we've been pretty successful with, is obviously an area that's going to be creating long-term investment opportunity for us. So you're not going to see volatility in that. Our content investments haven't been meaningfully volatile because, if anything, they're on the upside. I mean, ITV had good results today. and other investments, I think, are more stable. So I don't think you'll see great volatility in that portfolio, but you'll see us obviously continue to make investments. Amike, you want to address 5G?

Yeah. Private mobile networks is clearly a good opportunity to grow the services and hopefully the revenue that we can get from our 5G upgrades. The good news for us is that The way these 5G networks are built, you mentioned Charlie's program as an example, the way these networks are built, more and more the modularity on the software lets us build functionality like mobile private networks as we go, if you will, as opposed to one big investment. So we clearly are going to be testing that. We're going to see the reaction in the markets. And I do expect it will become an important element of our 5G deployments. Thanks, Mike.

I mean, in that context, let's hear, right, we have just launched the first multi-site private network with British Sugar. So we are doing exactly what you're talking about. And obviously, this is one area where we absolutely see growth.

Your next question is from Sam McHugh with BNP Paribas. Your line is open.

Thank you. I just wanted to go back to the UK, please. And just if you could expand on your commentary about the UK broadband acquisition market. Do you think the broadband market as a whole grew in the first quarter? And then how confident are you that you're not missing data on things like mobile-only households or whether the exposure is quite poor? Or maybe put another way, do you see a change in your disconnecting customers? Are you losing people to BT Sky in the same proportion as the past? Are there any signs that this is maybe changing?

Thanks. So, I mean, the mobile broadband acquisition market, right, was smaller than a year ago, according to our data in Q1, right? So, but obviously, right, there is acquisition volume there, but it has been smaller. I mean, at the end of the pandemic, people have been looking at other stuff being more outside. You see that also in the channel mix. According to our information, the online channel has been used less and the physical channels get more traffic again. Now, how does this evolve through the entire year? Let's see. The thing is that obviously, right, British households care for other things at the moment, first and foremost, and this is energy bills and other stuff and not broadband. And they have been caring a lot for it during the pandemic to make sure they sit on the best connectivity. Now, you see that in the price elasticity, right, with the flexible way of living now and the flexible working, that they still value their connectivity. So therefore, we see still a very interesting exhibition market and we will take our fair share out of it. But it has been smaller according to our data in Q1. I think on your churn question, if it's linked more to mobile, I mean, the most important customer base for us is O2 Postpid. And maybe a good proxy is how are we doing on churn? Are we a net winner or net loser out of, we get the data out of private, out of number portability. And here the development is encouraging for us. So we are net winner. And right, I mean, we have only started to leverage vault. So I think there's more to come.

Thank you. Your next question is from Carl Murdoch-Smith with Berenberg. Your line is open.

Good morning. Thank you. Looking in the proxy statement ahead of the AGM, I noticed that Net Promoter Score last year missed its target, leading to only a 61% payout on that metric. Can you talk a bit about NPS by geography? In which operations is NPS not quite where you want it, and what are you doing to fix that? Thank you.

Yeah, fair question. I think it was a difficult year in 21 for all operators, you know, with the pandemic, with, you know, expectations and challenges that consumers were experiencing. And it varies by market. I know in Holland, for example, we've just become, I think, number one again in MPS, or certainly had been improving MPS substantially in fixed and mobile. But I'll let maybe Andre, why don't you address MPS in the Swiss market as an example?

Yeah, the Swiss market is operating on a relatively high level in terms of NPS. But last year, while we were doing quite many migrations, we had also some operational challenges that customers were feeling. And as a result, we have been just shy of our target for last year. Nevertheless, I would say we're operating in positive territory in terms of NPS results, which I think in a cross-comparison is on a high level. And we are seeing the numbers improving again since then. So therefore, overall, I think last year was not exactly what we were hoping for, but to a certain extent, understandably driven by the things that we were changing towards our customers. And I know operating in a much better environment and also improving the numbers while we're speaking.

Yeah. And just to round it out, we do have that same sort of customer focus in our 2022 bonus programs. Each Opco has their own specific approach to customer results, if you will, involving MPS and other factors, and then we roll those up at the parent company. So everybody, even at the corporate level, is impacted by how well we do. So we're all focused on it, but it's a fair question and it's something we continue to stay vigilant on for sure. That's great. Thanks very much. Yeah.

Your next question is from Paula Tang with UBS. Your line is open.

Hi, thanks for taking the question. This is actually a question for Andre on Switzerland. Can you maybe just comment on the competitive environment? So we heard from Swisscom the other week who noted that competitive dynamics were calm during Q1, but they were quite cautious that sunrise would get more promotional. So how would you describe competitive dynamics in the Swiss market and If you look at historically, growth at Sunrise has really come from driving volumes and taking share rather than increasing prices. But how do you see the growth drivers for Sunrise UPC going forward?

Yeah, so firstly, I would comply with what Swisscom has been saying. We were coming off a very heated promotional environment in Q4. where we have seen promotions going to a level which was not sustainable. And we have seen a more rational environment in Q1. Nevertheless, you can see from our results that despite a bit of a cooling down on those promotional activities, we were still taking a fair share from the market, in fact, outperforming our competitors. So that rationalization has not driven any performance downside at the moment. Looking forward, clearly there is a big change, of course, for us in Switzerland, given the fact that with the combination of the two businesses, now our MacBook has a very different structure and different challenges than previously. And as a result, of course, there's more of a balance between volume and value that is becoming important for us. So we will only do promotional activities and volume intake. in a very balanced way, looking also at the impact that it could cause on our customer base. So I would expect the market to become probably a bit more rational. At least it will be true for us and maybe for Swisscom. Can't really speak about SALT, but I think also that they are not ruling the market, as you can see from their numbers. So it is really about how Swisscom and us are behaving and what we are doing, and clearly the indication is a bit of a rationalization in Q1.

Thanks. And some of the drivers you've got this year, Andre, obviously the Swiss Ski Partnership, you've got the Sunrise Wii product, a rebranding most likely coming, a number of things. summarize moments that are going to really push the brand, push the product, push the conversion strategy in a very clear and consistent way that I think will be a big momentum builder for the second half of the year.

Agreed. Yes, absolutely. I mean, yeah, there's a lot of things coming.

Yeah. Okay. I don't know if there's one more question, operator, or if we're going to wrap it. Do you know, can you jump in here quickly?

Yes, we have the line of James Ratzer open from New Street Research.

All right, last question. Go ahead. Great. Yeah, thank you, Mikey. And I'm just going to move to the last question here. So a question, I think, maybe more for Lutz at this stage, but just love to hear a bit more about the ARPU versus gross margin mix going forward here. in the uk and i mean specifically i'm thinking you've got a price rise coming on the main product which is clearly arpu accretive and gross margin accretive but then at the same time you seem to be losing tv rgus and telephony rgus on the base which you know is going to be arpu negative but maybe gross margin accretive. Be interested to get your thoughts on that. And then maybe you're starting to push some of the lower end broadband products a bit more. So just love to hear about how you're thinking about future ARPU versus gross margin. And if it is the last question, just a couple of housekeeping issues, please. On slide five, strategic options in the UK, you didn't include tower monetization, but it is there. obviously in Telenet and in Vodafone Ziggo, are you still thinking about CTIL? And on the fiber joint venture, I think you initially said up to 7 million homes. And then Mike, I think in your prepared remarks, you mentioned five to seven. Is that just semantics or are you now thinking about potentially lowering the size of the new fiber joint venture slightly? Thank you.

Yeah, I'll address those quick. Yeah. I'll address those quickly while Lutz prepares an answer on our gross margin, but on CTIL, that is absolutely an opportunity. Quite frankly, just maybe ran out of space, but it's certainly on the list of things that we would and should consider with our partners, but maybe a little early to signal that. We don't have any active discussions, but as you do know, CTIL was essentially put into a position structurally and with all the proper agreements to be easily monetized if we chose to. So fair call out. Didn't mean to exclude it as such, but it's certainly not front and center as we sit here at this moment. And then on the five to seven, I guess more semantics. We set up seven. We prefer seven, but we're being, you know, providing typically a range. But I think that's, yeah, I wouldn't read it too much into that.

Luke? Thanks.

Yeah. So on the app, you, um, there's a lot of, uh, puts and takes, um, but, but overall, uh, we, we are confident that first of all, um, um, we are able to generate a growing up, right? So that's, that's number one. What are the puts and takes? So we are able to sell higher speeds into our customer base. So the average, consumed speed has been growing 24% during the last 12 months. We are also obviously having the big price rise, which is increasing R2. Now, telephony is, I mean, if it's an RGU or not, doesn't make a difference because the price between broadband only and broadband and telephony isn't different. However, we see less telephone usage now after the pandemic again. Now, right, there's not so much left anymore, but this is a drag. And on the video side, we are very stable on the video side with our high-value video customers consuming high-value content. you see us losing some video customers more on the low-end video side. And I don't know if you've realized, but we have launched a really strong innovation now a week ago, Virgin Media Stream. So the customer, without a monthly fee, pays £35 upfront and gets for that free TV and the opportunity with a new user interface on a monthly basis to purchase put in all OTT product the customer wants and gets 10%. So, and the margin of this product is very similar to the margin of other video customers. So therefore, um, we are looking at RQ, um, and we have, we are looking less as a at telephony RGUs because right mobile usage is picking up again and I think you can reverse that trend. However, that is factored into our numbers. And we have just launched an innovation to put us into better profitability with the fully-fledged IP video products. I hope that helps.

Yep, great. Thank you very much, Douglas. Appreciate it.

Okay. Well, listen, everyone, thanks for joining the call. We'll end it quickly here. And our punchline is we think we're managing very well through these macros. challenges, particularly with price adjustments that certainly provide tailwinds. And as we step back and look at it, we're in the right markets. We have the right network strategies, right product strategies, right brands, right team, and feel like we've got, you know, all the ingredients, if you will, to be successful longer term. And we remain agile and opportunistic on the strategic issues that matter to you. And you'll have, you know, you'll know our track record there. So, you know, stay tuned. And we're committed to our levered equity strategy on the capital structure, which really is as much as anything dependent on not just leverage and pre-cash, but also the buybacks, which, as you know, we've been pretty aggressive with. So appreciate you joining us. Look forward to updating you on our Q2 results shortly and speak to you soon. Thanks, everybody.

Ladies and gentlemen, this concludes Liberty Global's first quarter 2022 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. Thank you. You may now disconnect.