Liberty Global Ltd.

Good day, everyone. If you're holding for Liberty Global's second quarter 2023 investor call, thank you for your patience. The investor call will begin approximately in five minutes. Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Liberty Global's second quarter 2023 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 form of presentation materials can be found under the investor relations section of Liberty Global's website at libertyglobal.com. After today's form of presentation, instructions will be given for a question and answer session. Page two of the slides details the company's safe harbor statements regarding forward-looking statements. Today's presentation may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. including the company's expectations with respect to its outlook and future growth prospects, and other information and statements that are not historical facts. These forward-looking statements involve certain risks that could cause actual results to differ materially from those expressed or implied by these statements. These risks include those detailed in Liberty Global's filing with the Security and Exchange Commission's including most recently filed forms 10Q and 10K as amended. Liberty Global disclaims any obligations to update any of these forward-looking statements to reflect any change in its expectations or in the conditions on which any such statement is based. I would now like to turn the call over to Mr. Mike Freese.

Okay, thank you, Operator, and welcome, everyone, to our second quarter investor call. Charlie and I are going to jump right into the presentation and our prepared remarks, and time for questions, of course, will follow. And I'm beginning on slide three with some key headlines from the quarter, all of which, as we'll discuss, support our core value creation strategies. And by value creation, we mean only one thing, staying aligned with shareholders as we work to increase the value of our stock. That's it. Now, some have asked for a clearer articulation of that narrative, which we've summarized right at the top of this slide. For us, it involves three main strategies. First of all, we're focused on maximizing the inherent equity value of our core operating businesses and doing what we can to ensure that that equity value is transparent or crystallized for the benefit of shareholders. Second, we're making smart investments in strategic adjacencies that both benefit our platforms and generate significant returns. And third, we're managing a dynamic capital structure that receives cash from operations and asset sales from time to time, which together with our sizable liquidity today, we are largely allocating to buying back our own stock. And we made good progress on all three strategies in the second quarter. I'll start with our national FMC champions in the UK, Switzerland, Belgium, and Holland. which continue to deliver solid operational performance. Financial results for the entire group improved sequentially, particularly just at EBITDA. And as Charlie's going to discuss in a moment, we're confirming all of our guidance for the year. Now, just diving into that for a second, we've talked about the importance of pricing actions at the OPCO level to balance out inflationary pressures and support revenue growth through 2023. As of now, you would have noticed we have taken price rises in all four core markets, ranging from a low of 4% in Switzerland to a high of 14% to 17% in the UK. And this means that customers have been notified and are already starting to respond, which you can see in our fixed and to some extent mobile subscriber results in the quarter. Two pieces of good news here, though. One, price reactions have been largely consistent with exactly what we expected across the board. And two... while we've absorbed that churn and subscriber rotation, we have not yet realized the financial benefits of those price rises. In the case of VMO2, for example, the vast majority of the fixed price rise will materialize in the second half of the year. And price rises in Belgium, Switzerland, and Holland just took effect in June and July. So the same thing. Now, second pillar of our value creation strategy is our ventures platform, where we remain committed to three core verticals, tech, media, and infrastructure. We also remain committed to smart, discipline management of these investments, which will include exits and divestitures where it makes sense. You probably read about all three media, which is our third largest portfolio investment. After terminating exclusive discussions with ITV, we're launching a broader process, which has already attracted interest from strategic and financial players on both sides of the Atlantic. And then from a capital allocation point of view, we are uniquely positioned with a strong balance sheet characterized by long-term fixed rate debt and significant cash resources, Today, we announced a material increase in our buyback program, which demonstrates our confidence in both our capital structure and our stock. More on that in a second. And then finally, several recent developments helped to turbocharge these initiatives. First, we acquired over 90% of Telenet in the first round of our tender offer, and we expect to get the balance of those shares in September. As a reminder, we financed this purchase with credit support solely from our Telenet stake. and we're quite encouraged by their progress on the infrastructure side of their business. We're also exploring the potential monetization of both UK and Dutch tower portfolios and what we expect could be premium market multiples. And finally, we're thrilled with the overwhelming support we received for our move to Bermuda. Thank you to those who voted. As a reminder, this is not a tax-driven deal, and no changes to our board, our listing, our financial reporting, or our day-to-day business will occur. What will change is our ability to pursue corporate and financial transactions, in particular at the FMC Opco level, that will help us create, crystallize, and share value with our investors. We're already busy on some of these ideas, and we'll keep you posted on those as they develop. Now, I mentioned the acceleration of our buyback program, which we provide a bit more detail on in slide four. First of all, the headline is that we're formally increasing our commitment from a minimum of 10% of shares outstanding to 15%. For those that pay attention to our activity, you'd know that through the end of last week, we'd already purchased about 8.4% and would have reached the 10% level probably by mid-August, hence the increase. Again, the 15% is a minimum, and we reserve the right to go beyond even that number, depending on market conditions. And the chart on the left is simply a reminder of how consistent we've been over the last six to seven years, reducing shares outstanding from $900 million at the beginning of 2017 to to less than $400 million by the end of this year, assuming the 15% minimum level is achieved. That's nearly a 60% reduction. Now, before I hand it over to Charlie, I'm going to quickly canter through our four main operating businesses. You'll see that this quarter we've included one slide per market that provides some brief commentary on the macro picture, our quarterly broadband and postpaid mobile results, high-level financial information, and some strategic updates. In the interest of time, I'll try to just call out a few things in each market, beginning with VMO2 on slide five. Now, from a market perspective, the economic picture in the UK remains challenged, with inflation still around 7% and GDP growth largely stagnant. As I mentioned, though, we raised prices in both fixed and mobile 14% to 17%, respectively. This was largely in line with the rest of the sector, and because of how we specifically do it, we should see the vast majority of those benefits build through the second half of the year. That was a slow quarter. for broadband and post-paid mobile ads in the wake of our price rise announcements, but we continue to grow our fixed base in greenfield territories, and we're maintaining a strong share of fixed gross ads across the footprint. The mobile market as a whole was soft in the quarter, but the O2 brand continues to see the lowest churn, and GIFGAF, which just launched its own contract plans, continues to grow well. I'll also add that we've seen some modest improvement in front book pricing in both fixed and mobile. Financially, VMO2 reported a sequential improvement In both revenue and EBITDA growth, revenues for the quarter grew 6%, but we're actually closer to 1% when you exclude the next fiber construction contracts. Charlie will get into those details. Mobile revenue and B2B continue to shine, growing 4.5% and 2.5% in the quarter. And EBITDA grew 4.4%, or around 3% if you adjust for the next fiber contracts. Strategically, we are executing our fiber extension and fiber upgrade plans really well. with over 640,000 homes delivered against a year-end target of 1.5 million. In the meantime, we continue to benefit from the country's largest gigabit network, reaching 16.4 million homes today. We like to make that point because we think fiber is critical to our future, but today we lead the market in speed. As you might expect, we're monitoring the alt-net space in the UK, and consistent with our strong view that the market needs consolidation, we're open to evaluating opportunities as they arise today. And finally, we're monitoring the Vodafone 3 deal and exploring win-win outcomes should that deal be approved. Now, moving to Sunrise on slide 6, the Swiss macro environment is more benign with continued low inflation of less than 2% in June. As we flagged earlier in the year, we implemented our very first price rise of 4%, which will take effect in July and support second-half growth. All customers have been informed, and so far, the sales, call volumes, and churn numbers have been really well-received and fall within expectations. Now, while Swisscom has added a CPI clause to their contracts, they've said they don't intend to take price rises this year or next. Salt, on the other hand, recently announced their own 3% mobile price rise. Now, our price rise, together with promotional intensity in the market, did impact broadband trends in the quarter, but post-pay growth was strong under the circumstances. Q2 revenue growth was negative 1%. That's an improvement over the first quarter, but still impacted by what we're calling the right pricing of our fixed UPC customer base, which should alleviate during the balance of the year. EBITDA growth in the quarter was flat, also a sequential improvement over Q1, and that's driven in part by lower costs to capture and lower labor costs. Strategically, we've successfully underpinned the Sunrise brand with a number of key initiatives, like our SwissKey partnership and what we call Sunrise Moments. And we feel really good about our ability to continue to take share with our broader portfolio. Meanwhile, from a network perspective, We're executing on our hybrid strategy, benefiting from our existing HFC network and benefiting from additional fiber-to-the-home wholesale agreements with Swisscom and SFM. Now, like many Western European countries, Belgium, on slide 7, has also seen a steady decline in inflation to around 4% in June, with consumer confidence stabilizing. All operators have taken price increases in Belgium, with Telenet implementing a 6% rise from June. Broadband and post-pay mobile subs declined in Q2, in part, from announced price rises, but also due to a slowdown in market campaigns in the wake of some IT migration issues. Financially, revenue grew 1%, and EBITDA was up 5% in the quarter, supported by mobile and B2B, but also a one-off settlement with Fluvius. Strategically, as I mentioned, we're particularly pleased with the rollout of Telenet's new net co-partnership called WIRE, and we see great potential for both high utilization and high margins that will support the fiber build-out, as well as some strategic financing opportunities. Then finally, in Holland, Inflation has also started to fall, reaching under 6% in June. On one hand, the market remains largely rational, with all operators taking high single-digit price increases and focusing their fiber build-outs largely in discrete regional areas when possible. On the other hand, KPN remains aggressive on the fixed front book pricing, which, together with the timing of our price rise announcements, negatively impacted broadband results in the quarter. Meanwhile, though, post-pay mobile ads continue to be strong, driving a 3.3% mobile service revenue growth figure. In fact, mobile services and B2B delivered their ninth and tenth consecutive quarters of positive growth. In Q2, both FMC households and SIMs increased, delivering significant NPS and customer loyalty benefits. And B2B continues to go from strength to strength, mainly driven by Soho. On the financial front, EBITDA is still impacted by inflation, in particular higher energy and wages costs. And then more strategically, we continue to invest in the wider customer proposition here with new OTT apps being added and the UEFA Champions League rights starting next year. So in a highly penetrated and competitive market, we believe differentiation remains key. It's also worth noting that we were the first operator, I think globally, to deliver a 15 gigabit per second speeds over a live DOCSIS 4 trial. That's a pretty big milestone and it underpins our confidence in in HFC and DOCSIS IV as a key technology for us going forward. Notwithstanding that, you should also assume that we and our partners continuously evaluate strategic options to ensure Vodafone Zero strengthens its market position. So that's a roundup of the four core markets, and I'll turn it over to you, Charlie.

The next slide sets out the quarterly revenue and EBITDA for each of our key operating companies. As Mike discussed, we largely expect an acceleration in growth in the second half of the year as the full impact of the various price increases across our companies becomes fully effective in Q3 and Q4. For the quarter, VMO2 on a reported basis delivered 6.2% of revenue growth. Excluding the impact of next fiber construction revenues, VMO2 revenue growth was 1%, with our mobile price rise supporting strong mobile service revenues, which offset fixed revenue pressures. We expect to see the impact of the fixed price rise build in the coming quarters, supporting improved sequential top-line trends in the second half. Vodafone and Zygo delivered stable revenues in Q2, as weakness in consumer fixed continues to be offset by strong B2B and mobile performance, with the Dutch business marking its ninth consecutive quarter of mobile service revenue growth. We expect our fixed price adjustment to around 8.5% to support revenue trends in the second half. Belgium delivered revenue growth of 1% in Q2 as the mid-June price adjustment in 2022 continues to support top-line fixed performance. And Switzerland saw a slight revenue decline in Q2, driven by continued pressures on consumer-fixed ARPU, as the continued impact of the UPC right pricing activity is partially offset by strong flanker brand performance. Sunrise has implemented a 4% price adjustment from July across all brands, which is expected to support revenue performance in the second half. Moving on to our Q2 adjusted EBITDA performance, BM02 delivered 4.4% EBITDA growth despite $22 million of OPEX cost to capture in the quarter. Excluding the next fiber construction contribution, EBITDA grew 2.8% in the quarter. We expect EBITDA trends in the second half to be driven by the timing of further synergy realization with support from our fixed price adjustments also expected to build to the rest of the year. Verifone Ziggo saw modest sequential improvement in EBITDA in Q2. The Dutch JV saw an EBITDA decline of 3.6%, driven by anticipated inflation headwinds from both energy and wages. And Telanet reported EBITDA growth of 5%, driven by a one-off benefit from expected settlement of some contingencies. Our price adjustments implemented in June will support growth in the second half of the year, as they did last year. summarize saw EBITDA stabilizing Q2 driven by an improved OPEX profile due to reductions in OPEX cost capture, offsetting continued headwinds from the UPC right pricing activity. And finally, a point on central revenue in EBITDA. You may have noticed in our filings that there is an accounting change impacting reported central results. This is driven by our intention and plans made this quarter to market and sell our internally developed Horizon and EOS platforms to third parties. As a result, The accounting rules require that any proceeds received from licensing internally developed software to third parties, which includes actually Virgin Media O2 and Vodafone Zigo, will now be applied against the net book value of our internally developed capitalized software until that balance is reduced to zero. Now, regardless of the accounting change which is required, we continue to receive cash proceeds from these arrangements. So as a result, the cash impact on our net central spend isn't impacted. In the appendix, we've seen our central results, including $31 million in Q2 net proceeds from FSAs with non-consolidated entities added back. And as I indicated previously, overall, there's no change to our net central spend from this accounting presentation change. And as we discussed at Q1, we continue to target recurring net central spend of $200 to $250 million. Turning to the capital allocation slide, all our core markets delivered capital intensity in line with their respected full-year guidance ranges. On a reported basis, we delivered distributable cash flow of $554 million in the first half, including $404 million of distributions from VMO2 from our share of the recapitalization and distributions of $27 million from Vodafone Zigger. We continue to have a substantial cash balance, but on a consolidated basis of around $4 billion, with just under $3 billion at the top co and a further RCF liquidity on top. I wanted to provide a deep dive onto our debt profile on the next slide and reaffirm that we operate a strong balance sheet. All our debt is fixed to maturity and the average tenor on our debt currently sits at around six years. We have also fully fixed all our interest rates and swapped any currency mismatches. All in, our blended, fully swapped cost of debt at a consolidated level today sits around 3.2% and around 4% across all our companies. As you can see from this chart mapping out our debt maturity profile, our first material debt maturities are in 2027, largely in the UK. This long duration provides a healthy period to find the right refinancing windows to further extend our debt, as well as optimise the refinancing cost. On the next slide, you can see a breakdown of our ventures portfolio, split into four verticals. This quarter saw a decline in fair market value of approximately $200 million, bringing the fair market value to a balance of $3.2 billion. This is principally driven by a reduction of $300 million in the valuation of some of our listed securities, as well as an updated valuation of two of our tech investments. The first pillar is our content pillar, which represents over 40% of the value of the venture's portfolio. Here we hold selected strategic stakes in a number of content players, ranging from studio production businesses to next-generation sports and gaming operations, as well as taking advantage of emerging Web3 platforms. This quarter, we saw a slight decline in the value of the content portfolio, primarily reflecting the recent decline in the ITV share price. Next is our technology pillar, representing around 25% of the total venture's portfolio. We continue to invest in early-stage product, service, and technology companies that hold strategic adjacencies with our FMC champions and are at the forefront of emerging advancements in AI, digital security, and cloud optimizations. The technology pillar is essentially self-funding, with the generated proceeds being reinvested straight back into the pillar. We do have some valuation reductions this quarter, notably in Plume, which provides smart home technology, and Lacework, a cloud security platform. Moving to our infrastructure pillar, this is currently concentrated around three main assets. Digital infrastructure companies such as Atlas Edge, our 50-50 JV with Digital Bridge, and our Edge Connect data center business. And then thirdly, our build vehicle in the UK, Next Fibre, which we've mentioned before, plans to build 5 to 7 million greenfield fibre homes. Supplementing these companies within the pillar, we strive to be one of the first movers in the emerging energy transition race, with our emerging solar energy business in egg continuing to execute along its growth trajectory. And then finally, in our fourth pillar, which is the financial pillar, we hold within it our 5% stake in Vodafone. To remind on our Vodafone stake, we had a limited capital outlay of only £225 million for the investment. And this quarter, we do see a reduction in the value of our stake given recent share price weakness in Vodafone. However, our downside risk is hedged through the collar structure we implemented at the time of the investment. Finally, we are reconfirming our guidance metrics for each of our key operating companies. And this is set out on this last slide. We've also reconfirming our group guidance of $1.6 billion of distributable cash flow And this is based on FX rates in February when we gave our original guidance. And with that, operator, over to questions.

Absolutely. 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 ask for key, followed by the digit one on your phone. In order to accommodate everyone, we request that you ask only one question. If you are using a speakerphone, please make sure 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. The first question comes from the line of Robert J. Riddle with Deutsche Bank. Robert, your line is now open.

EOS to third parties certainly appears very logical as an opportunity but but why now and why all of a sudden if indeed it is all of a sudden as well as a third party opportunity is this an arm's lengthening exercise between central and the opcos and is it triggered the approval for the move to Bermuda

Hey, Robert. First of all, there's no correlation between that particular accounting change or intention in Bermuda at all. I think the right way to think about this is we are always looking for opportunities to manage our central spend and central costs. You would know that in the past we've entered into arrangements with companies like Infosys, for example, that help us provide services to Vodafone or Deutsche Telekom, companies we've sold assets to, and to do so in an efficient and cost-optimized way. So the way to think about this potential idea, and it's really an intention, not a sure thing, is that in the context of perhaps expanding relationships like that, we might consider monetizing the investment we have in what we think are world-class platforms. I wouldn't read too much into it beyond that. It's not related to really anything else. It's just us doing exactly what we told you we would do, which is to be sure we're never at the short end of the stick when it comes to matching revenues and costs in our central services platforms. And we're always looking for ways to continue to optimize the spend at the center, which you can rest assured, will happen here over time. And this could be one potential outcome of that, quite frankly. I think it's a bit premature to make the accounting change, but we've done it anyway, and I don't think there's much more to read into it than that.

Thanks, Michael. Thank you. The next question comes from a line of Carl Murdoch Smith with Berenberg. Your line is now open.

Hi, thanks very much. I just wanted to ask about the ARPU movement in the UK. So you've talked about it a bit, but given the 14% price increase, it's quite surprising to see a 4% ARPU decline. So I was wondering if you could just help us with the various moving parts there. So kind of within that 18% swing, kind of how much is due to TV switch off, how much is due to telephony switch off, how much is due to spin down, and then how much is due to customers on special offers not having the price increase to begin with, and kind of what percentage of the customer base was actually impacted by the 14% price increase. Thank you.

Yeah, I'm going to let Lutz address that, but Carl, you've answered your own question in the last comment there where you mentioned that a relatively small percentage of that price increase has actually worked its way through the P&L as of June 30. But Lutz, why don't you provide additional color?

Yeah. Hi, Carl. So first of all, Different to a year ago, we sent out the price rise letters across April and May this year. So therefore, it only became effective for a fraction of the customers in Q2. So that's number one. That is different to a year ago. We did it consciously to have more time to deal with every customer. That's number one. Number two, we apply the price rise only to customers who were out of their limited discounts. And number three is that therefore during the course of the year, you will see that the majority of the price rise will be materializing. And maybe the last topic in that context, right? So we have lost 15,000 broadband customers. Different to our mobile contract situation where it's part of the T's and C's, customers can react directly with us. So therefore, in our case, you see that the churn has already materialized into Q2 And so you won't see that anymore happening during the course of the year. And you will see a higher materialization of the price rise in Q3, Q4.

Just one thing to add to that. Going into 2024, our contracts now say that we have a contractual right to raise prices by CPI Plus in the same way that VT and other operators in the market have. So this is the last year where, you know, for us, customers have a choice, whereas in other contractual arrangements with other operators, they really don't have a choice. So that'll be a benefit in 2024 because the contracts have changed.

Does that help, Carl?

That's great. Thanks very much, guys.

Yeah, you got it. Thank you. The next question, cross-border line or deal rate date with Society General. You may proceed.

Yeah, thanks very much. I was, if I stay with the UK, please. I was wondering about the sort of the broadband churn that you're seeing. I think you mentioned in the prepared remarks that there is still growth in the new footprint. I assume that goes sort of sideways, so stable, which would mean the BAU footprint would have seen quite material churn. Now, you said it's about in line with expectations in the prepared remarks. I'm just wondering what kind of incentivization did you have to give customers this quarter to sort of mitigate the effect, given that it looks pretty steep, at least from the outside. Anything unusual there? And could you comment on how this sort of leads to drop-through, affects the drop-through? Thank you very much. Luke, you want to tackle that?

Should I do this, Mike? Yeah, go ahead. So, a couple of things. So, you're right with your assumption that that the churn is higher in our existing coverage because we are growing at the new coverage. Is it that material as you think? I wouldn't say so, but I think we are not disclosing the number. Actually, the churn number is significantly lower compared to what we have planned for internally. So we think the impact is much less. And how do we manage churn? This year, we do it on a much, much more advanced and sophisticated level. What do I mean with that? We have visibility of all customers across all different product sets, so broadband only, broadband voice and video, broadband on voice, all quad plays of all customers, and then in areas like where we are overbuilt by open reach, overbuilt by ordinates, and then we have tenure, right? So how long are these customers with us? Are they in the promotion period? Are they off our step up whatsoever? And during the recent months, we were in the position, therefore, to come up with very targeted offers for every sub-segment, and we managed this to target very specifically And therefore, we are also in the position to have now understood that the balance always between churn and retention benefits are managed in a very balanced way. And therefore, we have also a very good feeling for the revenue to come. So that's a much, much more advanced and sophisticated level than previous year. I hope that helps.

It's helpful. Could you quantify that in any way at all?

I think we don't do it.

I don't think we're going to do that today. Yeah, we're not going to provide that information. I mean, we haven't in the past, so we're not going to do it today. Got it. Thank you so much. Thank you.

Thank you. The next question comes from the line of Yimmy Valana with Goldman Sachs. Your line is now open.

Afternoon. Thanks for taking my questions. It appears the UK has been fairly well litigated, so could you maybe double-click on Dutch KPIs? So one area you flagged weakness was related to front-book pricing from some of your competitors. Is it fair to then say as a result you should expect some dual benefits from pricing and a return to more normalized, approximately flat volumes from here, or are there any other effects around that fixed base that we need to be aware of? Cheers.

Well, I think the main points We tried to make, and I'll let Richie, who's the CFO of Vodafone, go on the call, address that in more detail. But the main point we tried to make was, We felt there was a double whammy this year with KPN, who reduced their front book and took price increases later in the year, whereas we took our price increases quite early in the year. And so our view is, despite what they said on their call, which was baffling to us, a fair amount of promotional intensity largely driven by them. And so we respond and we manage through the best we can, but I think the circumstances of how they've approached pricing, lowering their front book and then not increasing prices until mid-year versus what we've done, which is raise prices early in the year, it had the effect that you would think it would have, which is to impact our broadband gross ads insurance. Richie, do you want to address that any further?

Yeah, I think it's well said, Mike. The one thing I would like to add is that if you look at the expectation and from an RPU perspective, needless to say that the price increase still need to kick in in the third quarter. And there we do get the, not only the kicker compared to the RPU levels we have today, but also compared to KPM's pricing, because they'll have to suffer to the back book front book pricing. Having said that, we maintain premium levels in the market, which I think is the right thing to do. And then going forward, that also broadband development should, let's say, be more rational in terms of, let's say, the net ad performance.

Our price increase was $8.50, by the way. Theirs was $6.40, so that was maybe a third down. A slightly lower price increase.

Yeah. Yeah, very clear. Thanks for the call. Would that help? You got it.

Thank you. The next question comes from the line of Polo Tame with UBS. Your line is now open.

Yeah, hi. Thanks for taking the question. I have one main question on Switzerland and a follow-up on Telenet. Just on Switzerland, can you maybe talk in a bit more detail about the reception of your 4% price rise, and should we expect the soft net ads that you saw in Q2 to continue in Q3? Also, can you maybe comment in terms of the reaction to SALT's price move, and how should we think about the profile of Sunrise Financials over the coming quarter? So you've got the price rise, I appreciate, in Q3. but should we actually get a big step up in terms of financials in Q4, given you're lapping the drag from closing down UPC brands? That's the first question, Switzerland. Just a quick one on Telenet, because in the call earlier, in his closing remarks, John Porter mentioned that Telenet may not be listed going forward, but he hinted that Telenet could come back in a different form. So I was just wondering if you could... maybe expand on this and give your view on this and also maybe talk about the merits of revisiting a telenet go to phones to give a merger. Thanks.

Sure. I'll address the second one. And Andre, who's on, and Charlie, whoever wants to address the issue around Switzerland, price increases and visibility to tech and have financials. On the Telenet question, obviously, for those who may not be aware, we intend to delist the company hopefully in September after, I think, 16 years, 17 years, something like that. And that's moving forward. So there should be no confusion about that, and I'm not suggesting that's what they meant. In terms of any future moves, listen, consistent with what I've said at the outset of my remarks, we are going to look at every opportunity to maximize the equity value of our opcos, And that may include pretty much anything. And so it's certainly possible that you could contemplate several different opportunities in the Benelux region for us to look at combinations or relistings or things of that nature. So I don't mean to suggest that it's scattered. Our thinking is quite clear. I'm simply saying I can't give you visibility to anything specific as we sit here today. I'm not sure what exactly he was referring to, but certainly as we've discussed in the past, we're going to look at all options. to ensure that we can drive value to our shareholders from what we believe are extraordinarily good businesses, the best businesses in what we think are Europe's best markets, which today are being valued at virtually nothing. So just you wait. We will certainly be focused on things like that, perhaps. I can't give you any more specifics, nor could he, but we'll keep our options open, which wouldn't surprise you, Polo. Andre, do you want to tackle this first question?

Sure. So, frankly, on the price rise, it's pretty well so far. We have seen relatively little impact in regards to churn or customers wanting to step out. In fact, we have been the first one in the market moving. Swisscom decided, as Mike mentioned earlier, not to do a price rise this year. Nevertheless, they have stopped now that they offer to their customers, which is a 10 Swiss per month, price improvement they have stopped that at the same time when we have announced our price rise so in fact our comparable price to swisscom has improved at the same time so that has not really hurt us i would say salt um was quite technical about the price rise that have only announced lately um after the extraordinary termination right of our customers had expired In the meantime, try to benefit from our weakness to poach some customers from us, which I would say if you look at our numbers, net additions and the negative 3,000 fixed net additions are softer than before. But let's also not forget that Q1 was benefiting still from extraordinary high liquidity and strong Q4 with some flow over into that Q1. So if we really look at the in-year performance so far, I would say the inflow was not that soft. Churn was somewhat higher, but not as high as we were worried in terms of the price rise. So overall, I'm quite positive about what we have seen in terms of impact so far. Now, as you mentioned, the price rise will only impact our second half-year numbers. At the same time, the lapping of the softer quarters in the second half year, so from that end we are expecting to see sequential improvement into Q3 and into Q4. Q3 may still see some impact from roaming, and again here the impact is more that customers are having more roaming packages included into their tariffs, and as such we will see lower incremental roaming charges flowing through, We would expect that sequentially Q3 and Q4 should see improving trends in terms of financials and hence also making the four-year guidance as we confirmed at the beginning. Hope that answers your question.

Yeah, great. Thanks.

Thanks, Andre.

Thank you. The next question comes from the line of Matthew Harrigan with the Benchmark Company. You may proceed.

Thank you. Since you're very focused analytically on EPA minus GAPEX, I'm curious, where does kind of the steady state GAPEX as a percentage of sales fall out now with the all-fiber initiative in the UK and also the very positive development that you're able to get 15 gigs on the hydrofiber coax? It feels like a lot of the arrows are moving in the right direction in terms of maybe moving that down a little bit more than the than people had assumed at one point in time. I know you're a little reticent on that point, but if you could just kind of give us some directional feedback, that would be helpful. Thank you.

Well, Matthew, there's a few things working here. You know, a lot of the, quote-unquote, fiber activity in the U.K. is off-balance sheets, so we've obviously seen an improvement in the CapEx intensity in the U.K. because of that, although we are investing in 5G and mobile, as you would expect us to. But I think the numbers that Charlie showed you on site then, which give the capital intensity for each asset, are pretty steady state. Now, whether that's speaking this year or next year, you should assume we believe capital intensity is declining longer term. as these investments trail off. At some point, you have upgraded fully your 5G network. We've done that in two of the four markets already. At some point, you have completed any network investments that would be necessary. And unlike maybe prior decades or prior years, there doesn't appear to be a meaningful change you know, new technology or new structure or new investment required longer term. So we would see capital intensity declining longer term. I think that's a safe statement. But we're probably in the next 12, in this next, you know, 12 to 18 months peaking out kind of at levels where we are today. And you can get those levels, obviously, right off the financials. Charlie, do you want to add anything to that?

No, that's right. I mean, if the investment cycles We're in the 5G, as you say, the fiber upgrade and to some extent the digital transformation. So these are elevated levels. You know, I would guess mid to high teens will be where we'll settle out. But it'll take a few years. Don't forget that, you know, Telnet, for example, has got a pretty big potential rebuild, et cetera, et cetera. But I think Mike's right.

Thanks, Mike. Thanks, Charlie.

Thank you. The next question comes from the line of James Ratzer with New Street Research. You may proceed.

Yes. Hello, guys. Thank you for taking the question. I'd love to come back, if we can, just to the topic of KPIs and the broadband net ads, just given the swing we saw in this quarter, and would love if we could isolate a bit more what you think is kind of just specific to the price rise and how much could rebound in the third quarter. And in particular, I'm looking at VM02. We saw a swing of almost 40,000 in the rate and in Vodafone Zigo, a kind of change of 20,000 again in the quarter. Given those markets went with early price rises, and I think you're suggesting that the kind of churn impact from that is now finished. Are you already seeing evidence of that in July? And should we be expecting, therefore, that in Q3, you know, we can go back to a 20,000-plus run rate in the U.K. and, you know, something closer to flat in the Netherlands? Thank you.

James, you're specifically speaking about broadband. I just want to make sure I understand your question and not broadband.

I am, yes, yes. Sorry, yeah, the broadband net app.

Yeah.

Yep.

Yeah. Listen, I mean, we try to refrain and we do refrain from quarterly forecasting. And so we're not going to take the bait here. But in a market like the UK, I think it's a safe assumption that as we look to the balance of the year, we intend Q3 and Q4 to be better than Q2. That's our intention, obviously. And you can almost assume that given the guidance we've provided and and you can look through the guidance in each market and draw those conclusions. But I'm not going to give you any specific numbers, and I'm not going to let the off-code guys do it either. But I think we were clear that this particular quarter was impacted by certainly price rise announcements, which were sizable, you know, mid-teens in one market, 8%. We've never taken 8% increases in Holland, 6%. You know, these are big increases, historically large increases. which we think play out well for us financially over the long term, but had what we also thought would be the intended effect of driving some churn in the period. So I think we'll just leave it at that.

Okay, do you think maybe I could ask more qualitatively then? I mean, are you seeing other impacts that could, for example, like hold back net ads in the back half of the year? Is it the fact that your customers could still try to move operator out of contract, you know, could be a drag in the second half of the year or is that cost of living issue or increased competitive issue? I'm just trying to think about whether, you know, once we're through the price rise, is there anything more structural going on in the market from a competitive or contractual point of view?

Well, every market's different and every market has a different set of, you know, headwinds and or tailwinds. And, you know, we are operating in competitive environments. And so don't walk away from this call thinking everything's, you know, simple and rosy. These are competitive markets with competitive products and services and competitive pricing. And, you know, we're not going to give you guidance except to say that we think Q3 was extraordinary in its in its impact and that we are hopeful of better results for the second half of the year. But I don't want to also lead you to believe, because that's not doing me or you any favors, that this is a simple equation. We might think one thing here on July 25th and then KPN decides that they're going to drive units again in the fourth quarter and make irrational pricing decisions or something happens in another market of that type. So we just can't predict those things. We can stick to our own business and manage them as best we can, focused on price and value. I'm just going to leave it at that. I mean, I think we're certainly optimistic, but I don't want to pretend that these aren't competitive markets. And I think you all know that.

Got it. The only thing I can add for you, Kay, and I'm not giving any guidance, is, right, and I said it before, right, customers... have an extraordinary cancellation right, right, 30 days after they got the letter. So therefore, the feedback on it entirely materialized into Q2. And there was a cost of living crisis before the price rise, and there's one after. So therefore, we actually have planned internally with a higher churn on the back of the price rise that is double the size from previous year. I don't know what models you are working with, but we think that the impact from churn was rather modest. Maybe that helps. Got it.

Thanks, Lutz.

Thank you. The next question comes from the line of Georgia's Yurakunakuno City Group. You may proceed.

Yes, good afternoon, and thank you for taking my question. I had one, and then one clarification, please. My question is regarding the UK market, and you mentioned in your opening remarks the appetite for consolidation in the alternate space in the medium term. And I'm just curious, there's been, obviously, a lot of news flow around different companies in the UK. Some of them changed hands. Some others are looking at financing options. But so far, you haven't really pulled the trigger on any of these transactions yourself. So I'm curious whether it's a matter of scale, whether it has to be on a certain level for you to show interest. Is it some of the technologies or the way in which some smaller large nets may be structuring their networks? Is it a case of overlap and antitrust concerns? I just wanted to understand why there hasn't been any progress, let's say, on that front. And my second question is just a clarification on the response to Paolo's question earlier. I think, Andrea, you mentioned the fact that the extraordinary cancellation ride is now over. However, my understanding is there tends to be a delay in the KPIs in Switzerland. Is this still possible that the beginning of the third quarter we may see a significant impact from that period, or do you think the trend effect is already fully reflected in the second quarter? Thank you.

Thanks. Listen, on the alt net question, we're going to be very careful here. Certainly what I mentioned remains true. We think the market requires consolidation and will seek consolidation. And you raised all the reasons, or let me say all of the factors that we consider when we look at those things, overlap, technology, how much retrofit is required, scale, size, price expectation. So should those assets come to market, and I'm not going to say whether they have or haven't or whether we've looked at them or not, but you can probably assume we have, we're going to be evaluating them very carefully in the context of those variables. The fact that nothing's happened yet, publicly to date, I wouldn't take too much or wouldn't look into that or read much into that. I think there will likely be more coming, it seems to us, given where the interest rate environment financing market seems to be settling out. So we'll just keep you posted. I mean, I think my point was to say we are monitoring that environment, that we are obviously active ourselves in upgrading and new build. And so we should naturally be evaluating opportunities should they come forward. And you should expect we will do that. That's all I'll say there. And Andre, do you want to address the Swiss question again?

Yeah, sure. Thanks for the question. So yes, it's true. There will be some churn impact also happening in the third quarter. The reason for that is that the customer did have an extraordinary termination right if they are in a contractual binding period. That is true for roughly 40% of the customers. 60% are not bound, so they could also be free to churn when their invoices are now coming out with the higher price points. Now, first indication is that it's not any higher than what we have seen in the extraordinary termination period. Hence, we are not expecting that to be a larger impact than what we have seen in Q2. And the positive impact in Q3 is twofold. One, we are no more aggressive again on our front book driving more sales. We have come down a bit in the period when we announced the price rise because we didn't want to put more oil to the fire with our promotions. But we are doing that now after the summer period again when people are getting back to school and we run the usual campaigns on the back of that. And the second thing is also the price rise of salt gives us a stronger argument to retain our customers if they are not liking the price rise as the market has moved on, in particular on the mobile side. So, yes, there is further churn exposure also in the third quarter, but we think we have better tools now also to manage that, and we are not having any indication of that being any higher than what we have seen.

Very clear. Thank you.

Thank you. The next question comes from the line of Nick Daphnis with Redburn. You may proceed.

Thanks very much. It's really just a follow-up on the Georgios question, but for the Netherlands. I think, Mike, you said that you're exploring strategic options to strengthen the Dutch business. Can you talk a little bit more about that? Are you talking about additional fiber assets or what was in your mind? Thanks very much.

Well, I was making more of a general comment about two things. Number one, we and our partners at Vodafone are, I would say, intensifying our attention to the market and to the asset, which is a good thing. I think that partly has to do with new management at Vodafone and partly has to do with circumstances in the market. So I would say, number one, That's positive, and that's partially what I was signaling with that comment. And number two, I'm not going to be specific about what that might look like. because there's lots of options, except to say that we believe Vodafone Ziggo today is a unique business with a massive customer reach. I think 7 million Dutch people have some product from Vodafone Ziggo. It more or less is equal to KPN in some of the most important customer reach metrics. And so it's a very valuable and profitable asset. And you should assume that we're going to look at it strategically and try to make decisions about it that maximize value for us and our partners. That was really the main point there. I'm not going to get into what those options might be, except to say that we're squarely focused on it. So, sorry, I can't be more transparent. I just wanted to make the point that there's a renewed intensity to be sure we are looking at all options and doing all things in that market to preserve and drive value creation from Vodafone Ziggo.

Okay, thanks very much.

Thank you. Final question comes from the line of David Wright with Bank of America Merrill Lynch. You may proceed.

Thank you very much. A couple of questions, please. Mike, I guess I just want to understand and perhaps there's an element of frustration here that you are having to sort of balance this price rise versus churn all the time. And just your view on why perhaps consumers are not willing to accept the price increase when you know you are arguing for better speeds through the cable networks etc versus competition why is that not being valued and maybe retaining customers a little better and then I guess I guess my question second question is also quite top down which is you know you obviously talk about the value in liberty and I think your actions in terms of buying back stock clearly reflect your belief that there is a lot of unlocked a lot of locked value in this business but I guess at the same time you know value in the equity markets is always founded on very clear financial reporting and earnings visibility and there's so much around the business now that is maybe speaking on my own behalf, but is relatively opaque. We're having to deal with Next Fiber adjustments at VM02. We've got this new central accounting that is complicated. There are nested joint ventures that are building, off-balance sheet, etc. Do you think the complexity of the group works against its equity share price? Is there any way to resolve that or are these things that just need to work through before you can consider your options longer term. A couple of, I guess, fairly high-level questions. Thank you.

Thanks, David. Those are good questions. On the customer point and why aren't we retaining more in the wake of price increases, I would just remind you we are still in a cost-of-living crisis. Inflation is still at extraordinary levels. And our competitors... are good at what they do. So these are intense markets from a promotional point of view. We're taking significant price increases in an environment where customers are challenged. So I think what you should want to know is, are you achieving the results that you intended to achieve when you implemented the price increase? And while we don't provide you with that visibility, I think the answer you should take away from this call is largely yes. that we are more or less on track in each market where we've taken large increases, and that we feel like the trajectory is essentially as we predicted. The last point I'll make on that is, unlike here, say, in the UK, we have historically given fixed customers an option to opt out. That will go away next year. And so this is the last year where customers will be given this extraordinary period of time, which BT does not provide then, to say, well, you know what, I don't like that price rise, so I'm coming back to you for something different or I'm moving on. That's not the case with other operators. We've done that in almost every market now. We have contracts that are clear. And so that's a historical fact that we think we've sorted through going forward. So three points. One, these are still challenged consumer times. Two, we have strong competitors. Three, we're doing essentially as we expected we would do. So that's a data point. I think that's important for you. And then lastly, our contracts are better moving forward. On the value point, listen, I appreciate what you're saying. And we could spend an hour walking through how we got to where we are today with joint ventures in the UK or Holland or this, that, or the other thing. And along that journey, you would say, that was the right decision. Yep, that was the right decision. Of course, that was a smart thing to do. And the net effect of that has been to create some complexity in our structure and to some extent, and as a result, in our financial reporting. I will tell you that we are not fans of complexity. It doesn't serve us either and that everything we're doing strategically and to the extent we can financially is to reduce that complexity. So, for example, one of the benefits of delisting Telenet is to reduce complexity. There are other advantages too, which we'll talk about over time, but certainly one is to reduce complexity. Now, we can say that in two of the large or three of our five operating markets, we have 100% control. Our joint ventures, that was the nature of how those businesses came together. We're certainly happy they did because the synergies are substantial, our partners are good, and we have much more strategic optionality moving forward. So our goal is to try to find ways to reduce that complexity over time and create transparency and value crystallization. Bermuda is a great way to make that simpler. You might not think so, but trust me when I say it is. And the ability for us to make decisions quickly about assets is substantial. It's difficult to do that in the UK context. And we're aligned with you. I mean, nobody's more frustrated about where we sit today than me. Personally, me. I've got a lot of stock in this company. And everybody on this call from management is equally incented to deliver that path, to shrink that gap, and be sure that we're aligned with shareholders the entire way to drive value. And I would tell you that there's nothing off the table to achieve that. You may not want to hear that. Actually, you want to hear that. I'm not going to put that in a press release, although I probably just did. But there's really nothing off the table in terms of how we shrink this gap and create value. There's a sense of urgency. I think that's a proper urgency that the management team has and the board has. And we're going to stay diligent and vigorously achieve those goals on a timeframe that makes sense for all of us. So that's probably a great way to end it. It sounds like that was our last question. I certainly appreciate everybody's participation in the call. And whether that's the buyback or our free cash flow guidance... You know, on the capital side, I think we're doing everything that we think we should be doing to demonstrate our commitment to the stock, to the company, to value creation. And our operating businesses, as you know, are complicated businesses and competitive markets. But I think we have the best management, best brands, and the best assets in those markets. So, you know, we are, I think we're well positioned to, over time, Find the unique approach in each market to maximize value for the benefit of shareholders. With that, we'll let you go. Appreciate you staying on as long as you have, and we'll speak to you next quarter. Thanks, everybody.

Ladies and gentlemen, this concludes Liberty Global's second quarter 2023 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.