Liberty Global Ltd.

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Liberty Global's third 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. As of 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 also include forward-looking statements within a meaning of private securities litigation reform act of 1995. including a company's expectation with respect to its outlook and future growth, prospects and other information, and statements that are not historical facts. These forward-looking statements involve certain risks that could cause actual results to differ materially from those expressed or implied by these statements. These risks include those detailed in Liberty Global's filings with the Securities and Exchange Commission, including It's 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 expectations or in the conditions on which any such statement is based. I would now like to turn the call over to Mr. Freese.

Thanks, Operator, and welcome, everyone, to our third quarter results call. Now, Charlie and I have tried to shorten our prepared remarks a bit to leave more time for questions. So I'm going to jump right in on slide three with what we think are the three key points, the key takeaways that characterize both the quarter and our strategic position today. Number one, you'll see that our operating and financial results are generally positive, especially in our largest market, the UK, where volumes picked up in the quarter and growth is steady year over year. But while mobile and B2B continue to perform well, our fixed B2C business remains challenged. As we've discussed in the past, despite good broadband revenue growth, we continue to feel the impact from a combination of broadband competition, cost of living challenges, and secular headwinds in voice and video. Like our peers, we've been implementing a number of strategies to address the fixed B2C business, including price increases, digital platform development, converged bundles, broadband speed boosts, and an investment in our networks. Long-term, these strategies will work, but we anticipate continued pressure going into next year. Here's a second big takeaway. While we continue to maintain a levered balance sheet, in this environment, it's critical to remind folks just how strong our capital structure is. With no material maturities for five years, siloed and fixed rate credit pools, and a significant cash position. At the same time, we've allocated over $14 billion to our buyback program since the beginning of 2017. And if you include our announced increase today, we will have bought back nearly 60% of our shares over that timeframe. Which leads me to the third takeaway, something we stress on every call but needs repeating. We are absolutely 100% committed to bridging the value gap in our stock price and delivering that value to shareholders. We believe our narrative and strategy are clear and the inherent equity value of our core FMC operations is substantial. But despite our long track record of crystallizing that value and allocating value, Most of that capital is shareholders. The market seems to be in a wait and see mode and not really appreciating our own sense of urgency. We get that. And in order to clearly communicate our plans, we've decided to extend our upcoming Q4 results call to provide a more detailed strategic update on the concrete steps we're taking market by market and with our ventures portfolio. Now, Charlie and I are going to provide a bit more color on all of these core points in the slides that follow. beginning with some operating highlights on slide four, which shows broadband and post-paid mobile ads for FMC markets over the last five quarters. By the way, you'll find more detail market by market in the appendix. I'll start with Virgin Media 02 on the top left, where you'll see that post-paid mobile return to growth with 50,000 net ads after two quarters of losses, and that was fueled by our Volt bundle and, of course, our dual brand strategy. And despite a softer broadband market in Q3, with estimated market sales down 5%, the VMO2 share of gross ads was up, and together with more normalized churn following our double-digit price rises last quarter, we delivered 41,000 net broadband ads, our strongest result in the last seven quarters. Now, with average customer speeds five times the national average and one gig available across 100% of our footprint, we expect these trends to continue supported over time by our aggressive fiber upgrade and expansion plans. And moving to Sunrise, post-paid mobile ads were steady at 29,000 in the quarter, with both our Sunrise and Flanker brand, YALO, performing well, despite some price-related churn. But we continue to experience tougher broadband results in Switzerland, following our recent price increase and a challenging gross ad market. Our loss of 7,000 subs was also impacted by our structured migration of UPC subscribers to the Sunrise brand. The good news here is that we see improving trends quarter over quarter and light at the end of the tunnel. By year, for example, we'll have migrated nearly half the UPC base and, importantly, the most value-sensitive segment of that base. The Belgian market remains relatively rational, with price rises offsetting inflationary pressure, but Telenet continued to be impacted by a reduced marketing spend as it managed through some IT issues in Q3. As a result, both postpaid and broadband ads were negative in the quarter. On a positive note, though, September saw a recovery in subscriber volumes, and the marketing machine has ramped back up in Q4. Strategically, we are really excited about the formal launch of WIRE, our 70%-owned network JV that serves Telenet and Orange, and will have roughly 70% network utilization. Of course, WIRE is going to build fiber to just under 80% of Flemish homes over time. It's worth mentioning, though, that we always anticipated optimizing CapEx spend in this netcode. So we welcome the recent comments by BIPT regarding potential fiber network cooperation in Belgium, and we're working to understand how this could further improve our already strong economic model for wire and telnet. And then finally, the Dutch market remains competitive, with KPN continuing to be aggressive on front book pricing. Our strategy has been to prioritize value over volume, which resulted in another quarter of broadband losses, but importantly, solid growth in both fixed B2C revenue and ARPU. In addition to broadband speed boosts and some select front book propositions, we continue to differentiate our entertainment service in Holland with unique offerings like Champions League football and an exclusive deal with the new Sky Showtime service. Meanwhile, Vodafone Ziggo continues to grow post-paid mobile ads, supporting our 10th consecutive quarter of mobile service revenue growth. And we just announced a 10% mobile price rise from October, which should support the full-year outlook as well. Now, I'll close on slide 5 with a teaser for what we'll be sharing with you on our next call, namely... the core initiatives that will drive value creation moving forward and shrink the gap in our stock price. That strategy falls into three pillars, beginning with the most significant, and that's our national FMC champions. I've already provided an operating and strategic update by market, and Charlie will round out the financial picture. But suffice it to say that we're squarely focused on ensuring that these businesses remain clear market leaders with the scale, talent, products, infrastructure, and cash flow margins required to support strong equity returns in what we believe are Europe's best markets. If you give full credit to our ventures platform and cash, you get to roughly $16 to $17 per share. That's our current stock price, which means the entirety of our proportionate interest in these 85 million fixed and mobile subs, $25 billion of aggregate revenue, and $9.4 billion of aggregate EBITDA, as well as the $1.6 billion of distributable cash flow we'll generate at Liberty Global this year, is essentially valued at zero. Here's another way to look at it. If you simply add one EBITDA multiple to our current trading values, which would be about six and a half times that one additional multiple, and apply that to our proportionate EBITDA in these operations of roughly $5.6 billion, and that's net of our corporate cost, you get to $30 per share. Anyone can do that math. It's all public knowledge, but sometimes it's helpful to lay it out plainly. So what are we doing to help bridge this gap? You should assume we're working on multiple alternatives, many of which will be easier to achieve once we re-domicile the Bermuda later this month, and all of which we'll provide greater detail on when we get together next. The second pillar includes the strategic moves we're making in our ventures portfolio, including our increasing exposure to infrastructure investments like European data centers, energy services, and fiber networks. The goal here is simple. Take advantage of our existing asset base, market knowledge, and deal expertise to to create and or invest in unicorn or multi-billion dollar businesses. Atlas Edge, our Edge data center business, is the best example of this. And while the tech vertical continues to return cash and invest small amounts in scale-up companies that are strategically aligned with our corporations, we're taking a hard look at our media and content portfolio. As you know, we're well underway with the sale of all three media, and we just announced the sale of a partial stake in VMO2's tower holdings that should return $435 million to the joint venture and ultimately to shareholders. Conservatively, and including the two deals I just mentioned, we're targeting around $500 million to a billion of proceeds to the parent company from asset sales by H1 2024. The third pillar in our value creation strategy is well understood by now. We remain committed to our levered equity model characterized by smart debt structures and an aggressive buyback program, which has only gotten more potent with our stock trading off this year. We started, for example, with a commitment to buy 10% of the shares this year. and we raised that to 15% on our last call, and we're now targeting between 18% and 19%. There are few, if any, companies buying back nearly 20% of their stock every year and at historically low or arguably ridiculously low prices. It's probably also worth mentioning as I close here that everyone on this management team, myself especially, holds a sizable equity stake in our company. My stock position is public knowledge. I own around 1.5% of the economic value, just under 10% of the vote, and nearly 15 million options. pretty much all of which are currently out of the money. So I am motivated, the team is motivated, and the board is motivated to get this done. Over to you, Charlie.

Thanks, Mike. The next slide sets out the quarterly revenue and EBITDA for each of our key operating companies. For the quarter, Virgin Media O2, on a reported basis, delivered 7.1% revenue growth. But excluding the impact of Next Fiber construction revenues, Virgin Media O2 revenue growth was 1.2%. with our price action supporting growth in service revenues. Revenues were also supported by a one-off benefit to a related party contract change in the quarter, to the amount of $48 million. Now, this compares to a one-off benefit in the prior year at Q3, around $35 million. Vodafone Ziggo delivered stable revenues in Q3 as the Dutch business registered its 10th consecutive quarter of MSR growth, which was offset by a decline in B2B mobile. Despite pressure on fixed volumes, we also returned to fixed revenue growth. and Belgium delivered stable revenues as the impact of the mid-June price adjustment was offset by declines in production and advertising revenues. Switzerland saw further stabilization in revenues, with the July price rise of 4%, supporting a recovery in fixed revenues. Moving on to our Q3 adjusted EBITDA performance, Virgin Media 02 delivered a sequential improvement in EBITDA of 5.1% growth, despite $28 million of OPEX costs to capture in the quarter. Excluding the next fibre construction contribution, EBITDA grew 4.5% in the quarter. And EBITDA growth was supported by our pricing actions and synergy realisation, as well as the related party contract change, which I mentioned earlier. Vodafone's ego saw an EBITDA decline of 4.1%, as cost inflation headwinds from both energy and wages continued to weigh on performance. And Telenet reported an EBITDA decline of 2.6%, driven by cost inflation headwinds, along with temporarily higher outsourced call centre costs. Sunrise saw EBITDA decline by 3.4% with higher direct costs and continued headwinds from the UPC right pricing activity impacting the quarter. The Swiss business continues to work through right pricing the back book to set the basis for future growth. Turning to capital allocation on the next slide, we continue to have a strong liquidity profile and delivered capital intensity in line with the respective full year guidance ranges across all of our core markets. On a reported basis, we delivered distributable cash flow of $863 million during the first three quarters of 2023, including $815 million of distributions from VMO2 from our share of the recapitalization and distributions of $41 million from Vodafone Zigo. We continue to execute our buyback strategy, having repurchased 15% of the shares year-to-date to reduce our share count to just under $400 million. Finally, we continue to hold a substantial consolidated cash balance of $3.5 billion, topped up by a further liquidity of $1.5 billion from our revolving credit facilities. On the next slide, I wanted to provide an update on our debt position. Our debt across all silos is fixed to maturity with an average tenor of around six years, and we've fully fixed all our interest rates and swapped any currency mismatches. So all in our blended, fully swapped cost of debt, at consolidated level today sits at 3.5%, 3.9% of Vodafone Ziga and 5% of BMO2. And we continue to proactively manage our capital structure, recently completing two BMO2 refinancings, a $500 million tap on term loan Y and a €700 million tap on term loan Z. The proceeds will be used to further extend our debt windows whilst continuing to optimize our all-in cost of debt. And it's important to note that we can extend the maturity of our financings, but still benefit from the pre-existing swap cost to original maturity, which is, of course, much lower than the current market. Now that Telanet is 100% owned by Liberty Global, Liberty Global intends to align Telanet's capital structure with Liberty Global's policy and revise it to four to five times just that ever done. Lastly, we're in the process of extending all our revolving credit facilities to 2029 on comparable terms as they are today, which further underpins our strong liquidity profile. Turning to our guidance slide, VMO2 are updating their revenue guidance from revenue growth to stable revenue for the year. This decision is driven by continuing pressures on the fixed business as a result of the household continuing to optimize their spending habits and a softer performance in handset sales year-to-date, which is probably related to the same issue. Excluding VMO2's revenue guidance, we're actually reconfirming all our other guidance metrics for VMO2 as well as across each of our key operating companies. And we're also reconfirming our group guidance of $1.6 billion of distributable cash flow. And this is based on the 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 asterisk key, followed by the digit number one on your telephone keypad. In order to accommodate everyone, we request you ask only one question. If you are using a speaker phone, please make sure you mute your function is turned off to allow you to signal and reach our equipment. The first question comes from the line of Robert J. Griddle with Dolce Bank. Your line is now open.

Hi, thanks very much. There was a nice rollout at NextFiber in Q3. Are we at run rate yet? Are the NextFiber homes being marketed to the NO2 customers? What's the early experience? And you're thinking about eventually... Hey, Robert, Robert, Robert, we're having a hard time. Yep.

Having a hard time hearing your question, there seems to be somebody in the background talking over you. Could you start over maybe in a quieter spot? I just want to make sure we get your question.

I'm sorry, can you hear me now?

That's better. Can you hear me better now? Thank you.

Okay, sorry about that. My question was about Next Fiber in the UK. Are we at run rate yet on that field? There was a big increase in this last quarter. And Next Fibre Homes, are they being marketed yet to the M02 customers? And what's the early experience?

Yeah. Andrea, as the chairman of Next Fibre, do you want to take that?

Yes. Thanks, Mike. Hey, everyone. It's Andrea here. So in terms of run rate, I would say, as you've seen from the numbers, it's stepping up. And we're not quite at run rate, but we will be by the end of the fourth quarter. So I would expect that would, you know, you'll see that annualized through next year. In terms of the VMO2 selling on, that was launched a few months ago. It's early days, but yes, you know, we still retain our confidence in the long-term projections on that.

And then, Lutz, you've been marketing. Yeah, the second question, Andrea, and maybe Lutz can tackle this, was, you know, are we marketing next fiber homes and Certainly, as we have with Lightning, we are marketing Greenfield Homes. Lutz, do you want to talk about that experience, please?

Yes.

We have, with Next Fiber, launched our first fiber proposition, so fully across broadband and video. We are selling this, and we are ramping this up. Our early experience is... is similar to the lightning penetration, so there's no reason to believe that we won't get to similar numbers.

Thank you. Yep.

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

Hi. Thanks for taking the questions. Just two quick ones. Firstly, in terms of your share buyback, it's been targeted at the non-voting K line of shares, but would you consider buying back the A voting line of shares after your change of domicile to Bermuda? If I look at the spread between the A and K lines of stock, it's quite wide, it's 8%. So can you remind us what your criteria are for choosing one line of stock for the buyback versus another? I just had a follow-up in terms of your comment about commitment to shrink the value gap in terms of your stock. In your view, what is driving the value gap and what do you see as the optimal level of leverage in the company? So given where interest rates are currently, do you think you'd get more credit in the share price if you have lower levels of leverage and potentially did less in terms of buybacks? Thanks.

Thanks, Polo. Listen, on the buyback question, our policy has been historically to buy Ks over As principally because they have traded until more recently at a discount. And we don't believe either share should trade different than the other because even though one is voting and one is non-voting, we've always viewed them as economically equal. The reason for historically buying Ks over As was to try to maintain the liquidity of the As since there were fewer of them and there are still fewer of them so that we'd have two healthy trading markets. Of course, that's changed more recently. And I think we will look and should look at changing that policy. You're right. And the variance has been only more recently a large one. And so we are refocused on it. I think if we started to buy A's and not K's, that gap would narrow. So it's somewhat self-fulfilling. We have, you know, if we're a bit out there for K's and there's somebody selling A's, you're going to have that widen. If we start buying A's, it comes back in place. But so I think that's, it's a good point. And I think Bermuda would potentially give us some alternative options to look at that. So you should assume going into 24, we'll look at that very closely. On leverage, again, think the business, as we've described in our remarks, is really stable, that our balance sheet, both with the liquidity we have, the maturity schedules we have, the fixed rate nature of our balance sheet is unique if you look at our peer group. And so we don't think there is an issue with leverage today. It doesn't mean investors see it that way. That's just how we see it as the folks running and operating the company day in and day out. To shrink the value gap, you asked what is driving the value gap. I think it's the things that I mentioned to some extent. We've talked for some time about the ability to deliver private market value or transactions that would get closer to private market value. The sale of Poland a couple years back was the last time we did that at nine times. I think people are in a wait-and-see mode as to what we do next. That's fair enough because the market has a right to be to demand action, but we take action when we think it makes sense and on the basis that we think it makes sense. In the call we have in a few months, we will dig deeper into the sort of things that we're considering, and as I've said in the past, nothing is off the table, meaning that we will look at any and all structures, ideas to shrink that gap, because we're heavily motivated to shrink it, and we believe it's an anomaly here. And so I think we just need to get the energy back in the narrative. And we're not going to get into that today, all the things that we're working on, because I don't want to get ahead of ourselves. But when we move to Bermuda end of the month, I think that's going to open up some opportunities. And I think more importantly, stable markets, continued performance of our businesses, and a keen eye to the sorts of transactions that we could pursue here will be illuminating. Leverage, might change into some of those transactions, I suppose. If I were to say, for example, hey, we're going to list an asset, you would rightly say, well, that's tough to do it five times. So we might consider ways of de-levering into value-creating transactions. But absent that, I don't see us de-levering. I think the business is solid and steady. And we have no balance sheet issues or concerns, as we've said many, many times. So I hope that's an answer for you. But a little bit more to come.

Very helpful, thanks.

Thank you. The next question comes from the line of James Rapser with New Street Research. Your line is now open.

Yeah, good morning, Mike. Thank you very much. So I had a question. I know you've talked in the past around kind of pressures in the B2C business, but in your opening remarks there, it sounded like you were kind of a bit more open around this issue as your kind of lead point and suggesting this pressure could continue into 2024. How are you kind of thinking about that specifically as you think about the guidance for next year? Is this just continued pressure on KPIs or are you kind of thinking it could be harder to push price rises through next year would just be interested to hear what you are thinking about on those B2C pressures going into 24. And then also, I mean, you've changed the Telenet leverage approach here, which means it looks like if that cash in Telenet is upstream to the top co, you're going to have about kind of three and a half billion dollars of liquidity now sitting at the top co. I mean, I know you can't tell us exactly what you're planning for this strategic update, but, you know, should we be expecting as part of that that that cash could be used somehow or, you know, we'll be still at the end of 2024 with $3.5 billion of liquidity still sitting at the top code? Thank you.

Yeah, good questions. On the cash point, you know, I'll tackle that first, you know, whether it's at Telenet or upstairs, it's consolidated and accessible. And I think it would be my preference, and I'm sure everyone on this call would agree, that by the end of 2024, do we need to be sitting on $3.5 billion of cash? I would suggest no, we do not. That there should be and are likely to be opportunities for us to put that cash to work in value accretive transactions or opportunities it's never been our desire to sit on the cash as such. I think we've always, as you've noticed, put that cash to work either in investments to a lesser degree or into our own stock to a greater degree. I think that's going to change materially, but I do take your point that, and I did sort of say just a moment ago, the kinds of things we would be looking at could require some cash, and that would be only if we felt that the sorts of moves we could make would be value accretive. So let's see how it unfolds. In general, having all that cash on our balance sheet doesn't necessarily serve shareholders, and we want to put it to work in ways that create value and drive the stock. So that's the short answer. On the B2C business, I think it was just an acknowledgement that if you look at our results across the group, mobile is a steady business for us. Mobile service revenue in particular, excluding handsets, continues to be a strong performing revenue stream. that our B2B business is pretty much consistently in the low to mid-single-digit kind of revenue growth range, and that's an opportunity for us to continue to drive value in our opcos. And the B2C business, not unlike our peers around the world, faces some structural or secular headwinds, not the least of which is a video business that's declining and a voice business that's declining. So overcoming those challenges requires... you know, strong moves and what we're doing in digital and price increases and broadband speeds and fiber bills will have an impact. But those things take time to deliver value and results. So I'm merely just pointing out what everybody realizes that our fixed B2C business, you know, requires continued care and feeding and that, you know, as we go into 24, you should assume that is going to be an area of our P&L we are heavily focused on and we'll continue to, you know, update people on, but it's going to take quite a bit of time and effort and energy. As we get into questions in each of the markets, I'm sure the CEOs on the call will address that fixed challenge in their own markets. It's different in most markets, I will say that. It's not the same challenge beyond the video voice issue. We have different competitive environments, some more rational than others, different headwinds, so I think it does differ market to market, but it's just an acknowledgement of what analysts are already identifying here, which is We've got to get busy on driving that fixed consumer business to a positive revenue growth position.

Thanks, Mike. And that shouldn't then kind of derail your thinking that the Swiss business, which has been a bit of a drag recently, should still be able to achieve the Q4 stabilization in EBITDA and going into next year support from there.

Andre is confirming his guidance today, and if we have questions on Switzerland, I'm sure you can address that. Got it.

Thank you. Yep, you got it.

Thank you. The next question comes from the line of Yurich Raffi with Society General. Your line is now open.

Yeah, thanks very much. So, On this strategy update and sort of the activities that you're planning there, it's really not a new topic. So my question is a little bit about the timing. What's the urgency now as compared to a year ago or two years ago when we were talking about this value gap in similar terms, maybe not quite to the same extent, but it was there. And the reason I'm asking this is the cornerstone stake sale was at a trailing multiple of 19 times, and I think your European tower pairs are trailing more than 23 times. So what's the reason to sort of, you know, in this perfect storm environment that we are in at the moment, to sort of start getting active on this front? And then if I may, just a clarification. Charlie, you talked about getting the benefit in the UK refinancing from swapping this into fixed. because the swap rates are below the variable current. Could you just put numbers behind that, where you swapped into, because that was actually an original question before you made the comment that I had. Thank you.

Yeah, I'll let Charlie work up an answer on the refi. First of all, on the CTI sale at 19 times, remember we're disposing of a very small minority interest in that Tower portfolio. It's not as if it's a change of control transaction. It's a relatively small stake and, you know, might lead to more things. So, you know, multiples have come down a bit and we thought that that particular price made sense in the context of what we were offering and the other elements of the deal, which are quite complex, as you know, in Tower sales. So that to us made sense and to Telefonica it made sense and we pursued it. On the strategy update, let me maybe provide some color, it's not as if we're going to show up and tell you exactly what's happening and when. It's not as if we have transactions ready to execute. But I think we want to be clearer with what our tactical game plan could look like so people can start understanding the path that we believe, or the paths, I should say, that we believe exist in front of us. So it's not a new topic. We're always working on these things. You can look at every fiscal year where we've done these calls, there's something happening on a strategic level. But it feels to us that it's a moment where we should provide some greater clarity, what's the extent of what we're willing to consider, and also give people a better sense of how we see value in the opcos, for example, how we might be utilizing our cash, updates on our buyback strategy. I think concrete examples of what we might be pursuing and how we see the market unfolding to potentially accept those types of strategies would be worthwhile. It's not as if we're about to transact in every instance. So consider it an update, not necessarily a, you know, here's what we've done and, you know, but I think the update could be useful for people to start understanding the way we see the value creation narrative and the things that we'd be willing to consider and might be already working on. We'll find out, you'll find out in that context. So,

And just to pick up on the debt point, broadly, if you look at our debt, more than half of it is actually in what's called bank loans, which is slightly misleading because it's institutional investors who buy what's called a floating rate product, just like a bank loan, LIBOR Plus. And when we did those transactions, which generally had maturities of eight years, we did swaps from floating rate into fixed rate. And therefore, the LIBOR plus the spread, and our spread, broadly speaking, around 300 basis points, 300, 325, those kind of numbers. At the time we did the swaps, we were swapping at about 1%, whereas the swap rate today is probably 4, 4.5%, depending on the market. And the point I was trying to make was that those swaps survive independent of any refinancing. So they go to maturity, if you like. So it's not when you refinance your debt you lose the benefit of the swap. The swap continues. So in effect, what it says is that on the bank loans, which is this disclosure of my debt, we're hedged until 2028 and beyond in many cases. And it's really a question of what we do about hedging after that period. That was the only point I was trying to make.

Got it. Thank you very much for both answers. Thank you.

Thank you. The next question comes from the line of Carl Murdoch Smith with Barron Burke. Your line is now open.

Hi, thanks very much. My question is on Virgin Media O2. With the fiber base now well over 3 million and starting to approach 4 million, I was just wondering if you had any lessons learned about customer behaviors in that base? Is there any difference to customers on the rest of your network in terms of either MPS or propensity to churn or ARPU? And I guess I asked slightly because all your services are marketed as fiber broadband, so I was just wondering in terms of what are the differences you've seen between that cohort of customers and pre-existing customers. Thanks.

Luke, do you want to address that? Yeah, sure. So first of all, we are only marketing fiber into the next fiber footprint car. So we haven't started to market fiber in our existing footprint. So that means we are talking about something like 700,000 homes. And we have started to generate customers. but the amount of pure fiber customers in it is not so big. Now, having said all of this, in terms of customer satisfaction, in terms of installation, speed, reliability, we don't see really massive differences between a fiber customer and a Quark customer. And the reason for that is, We think because our existing coax network is very strong, offers today up to 1.1 gig speed, has a really high reliability, and the customer doesn't really perceive, in our opinion, the different underlying technology. So no material difference from our scene so far. Might change in the future, but so far not.

That's great. Thank you.

Thank you. The next question comes from a line of Maurice Patrick with Barclays. Your line is now open.

Thank you for taking the question. If I could ask a question on the Dutch business. So you've seen broadband net ads because they've taken a sort of step down again. We're down minus 30. On the previous call, I think Jerome was when asked about whether you were seeing loss to AltNets or KPN, seemed to indicate it was more sort of KPN being deeply promotional rather than a loss to AltNets as such, despite the continued rollout of the folks at Delta Fiber and ODF. I'm just curious to understand whether those dynamics were changing at all, and if it's still KPN driving most of that decline in your base. Thank you.

Jeroen, do you want to address that, please?

Mike Ritchie, your room just dropped off. His line got disconnected. You want me to take over, Ritchie? Yes, go ahead. What you see happening is that KPN, amongst the others, are extremely aggressive still in terms of promotional pricing. I think Mike mentioned it already at the call. So deep promotional pricing, which is for sure impacting us, which you also need to bear in mind in the third quarter. You get the knock-on effect of the July 1st price increase, which was a very successful price increase. leading to revenue growth and RPU increase, but it also shaved off a bit of the net-add performance. But to your question, KPN, super aggressive, like the others as well, rolling on Fimer.

I think the question is whether AltMets are impacting our performance. My understanding is it's limited impact from AltMets. As you might know, Maurice, the two AltMets in that market have been quite disciplined about not overbuilding each other and building in unique, discrete areas. And so Delta, half their footprint isn't even on our footprint. And, you know, ODF is quite not very far along. So I would suggest the answer is it's limited impact. But, Richie, the question was whether we've seen any meaningful impact from alt-meds on our footprint.

No, you're right there. I missed the beginning. You're right there. So it is, back to my earlier answer, it is mostly the KPM side of the house. Because the other state, as you say, is rather disciplined.

Thank you.

Yep.

Thank you. The next question comes from the line of Stephen Mackham. We're at Fredburn Atlantic. Your line is now open.

Yeah, good afternoon, Mike and Charlie. Thanks for taking the questions. A couple in the UK, if I can, just coming back to Next Vibrant and Virgin. First of all, NextFiber, you undertook an acquisition in September, you bought up. It looks like you passed in Trulia a few months ago. Can you help us understand what you liked about up and what wasn't so good about Trulia and maybe just the lens you're looking at these transactions through as we look forward to the next 12 months or so? I guess alongside that, any progress on wholesaling with NextFiber beyond Virgin Media? Maybe just sort of any color on transactions there or discussions? And finally, one quick add-on, just back to the UK and interest rates. Can you help us understand what your sort of base case for rates is in the UK? And I think you just, you refinanced that 1.2 billion. I think it's the, you know, it costs you north of 8% from 27. We can all do the math. You know, if you refinance your debt stack at sort of 8, 9%, you pretty much wipe out your operating free cash flow. You know, are you assuming the rates will fall back or do you just think you've got enough EBITDA on, you know, growth and capex declines to absorb that in extremists to allow you to keep running the debt stack in that sort of low 20 billion sterling total? Thanks a lot.

Yeah. Well, Charlie, you get ready for the interest rate question on the, uh, next fiber question. A simple answer on up versus truly is a percentage of overbuild of our own footprint. Uh, we have quite a big plan for the East of England and most of the homes that hundred cent by thousand are in the East where, uh, we are not necessarily today. So next fiber, uh, is looking for acquisitions aggressively. Um, of alt nets, principally that don't already overbuild Virgin Media O2 and create real greenfield opportunities where Virgin Media O2 can be a customer as well as potentially others. No real update on wholesaling. We did have success in Ireland, as you might know. We have now Vodafone and Sky wholesaling, or whole buying from our fiber network in Ireland. So there are no sort of institutional biases against wholesaling from Liberty, I can tell you that. It's just a matter of time, in my opinion, and we're relatively hopeful on that. Charlie, you want to address the interest rate question?

Yeah, so as you say, we did that refinancing in the UK. That was of this type of bank debt, what they call bank loans or traded loans. So as a result, what we were really rolling was maturity and credit spread. So the credit spread actually rolled at the same as it had been. So what, in effect, we did was we took the maturity from 2028 to 2031 and But what we didn't do was put the swaps on for the interest rates in 2029, 2030, and 2031. So in theory, on that debt, we are fixed until 2028, and then we will become floating in 2029, 3031, although we have the option at any time to lock in a fixed rate for those three years if we choose. And as you rightly point out, we're probably not paid to guess on interest rates, but it does feel to us the rates are reasonably high today as the central banks try and squeeze off inflation. And there's certainly the European Central Bank yesterday. I think it suggests that rates probably are certainly not going any higher and maybe starting to trend down. So we'll see how that plays out. But just to reiterate, we have a lot of time. You also made the point, though, but if it does settle out at this 7% or 8%, what does that do to the four to five times? I think I would observe that we're in a very big investment cycle, pretty much across the piece, perhaps not in Switzerland, but certainly across the piece we're investing in fiber up in the U.K. particularly. And so, you know, all things being equal, and whilst we don't give long-term LRP guidance, it's probably worth observing that it's pretty likely CapEx is going to be materially lower in, you know, five, six, seven years' time, which would increase the free cash flow conversion. So we'll have to see how it plays out. But I think we still feel pretty comfortable with this four to five times. But we do understand, you know, through the cycle at times it seems high-ish, and at times I've had, you know, investors tell me it's too low. But, you know, for the time being, we're comfortable.

Okay, just to be clear, so if the rates don't move from here, you feel comfortable with where you are, and you think the CapEx declines would absorb a lot of the uplift in interest costs in a sort of four to five-year view. I know it's difficult to predict, but is that fair?

Yeah, I mean, by the way, my lawyers, I can imagine Brian sort of going, what do you mean you're giving five, seven, eight-year guidance? But, you know, yes. Don't kill me.

No, but I mean, clearly with that amount of debt, you can't wait four or five years to refinance it, right? You're going to have to get moving over the next couple.

No, but the point I was trying to make, though, but you are refinancing the credit spread, let's be clear, right? Yeah. And that's the point I was trying to make with the swap point. Yes, if you refinance bonds, then you do lose whatever the interest rate was at the time, which was clearly pretty low at the time. Remember, though, that a lot of our bond debt was actually 10-year debt. So not always, but by and large, that is beyond 28 across the complexes. So, again, there are individual examples, of course, but that is longer than the bank does. So to be honest with you, the bond debt, yes, we should refinance it, but it doesn't all have to be refinanced in the next four or five years. In fact, very little needs to be refinanced on some metrics.

Okay. Thanks a lot.

Thank you. The next question comes from the line of Georgios Lykrodakounou with Citigroup. Your line is now open.

Yes, good afternoon and thank you for taking my questions. The first one is around the comments you made about using some of your liquidity in order to crystallize value. And one of the things that investors are concerned is the leverage at OpCo level. for some of their subsidiaries. So my question has in a way two sides to it. Firstly, whether you are envisaging a way in which to fund investments within your subsidiaries maybe to allow for the leveraging or improve the liquidity of the subsidiaries. And secondly, in those cases where you have JV partners, where you believe there is alignment around the strategic options. And obviously, there's been partial sale announced yesterday in the UK, but there's a lot more assets and a lot more subsidiaries that may be available. And then my second question is just to get a bit of clarification around group and other. I know it may be hard for you to give us precise guidance, but it creates a lot of volatility which may not affect cash, but it's a key metric. So I was wondering if you can give us some indications as to how we should think about the next couple of quarters and then whether this turns into a tailwind from the second quarter of next year. Thank you.

Charlie, I'll give that last question to you. On the leverage point, absent some event of some sort that we felt would be value accretive, I don't see us de-levering with cash based on everything we've just said, which is our balance sheet is strong, our interest rates are fixed, our maturities are long-term. We're not in a crisis. We don't see any reason to start de-levering as such. Now, your question was, will we put capital into the subsidiaries at some point to de-lever? The answer is perhaps, but in my opinion, only if we really feel that that would create value in the context of an event. I'll leave it at that. That's not complicated. You know what I'm referring to. Absent that, no, I think the leverage should stay where it is, and we have, for the time being, a very stable de-risked balance sheet. In terms of JV partners, we have two partners, and they're both good partners. And, you know, we generally see eye to eye on all matters, including operational, but, but especially strategic. So I would suggest that, you know, I don't see that as a major obstacle if we have clever ideas or they have good ideas about how to not just advance the business operationally and financially, which of course we always listen to, but, uh, you know, ways in which we can drive value for our respective shareholders, they are open ears and also full of ideas. So I don't see that as being a point of friction or a reason why something can't get done. So I'll leave it at that. Charlie, you want to address the last question?

Yeah, so I think you're correctly identifying volatility in the reported OFC effort corporate, which is the central charges. So just to remind everybody, the central charges broadly relate to the technology services we provide to our opcos. and also related to the genuine sort of central activities, things like shared services that we then recharge to the opcodes, et cetera, et cetera. And you will have noticed, the eagle-eyed among you, there is a bit of volatility. We've always told you that that should be a 200 to 250 million cost, and we're very comfortable with that. Frankly, I am giving long-term guidance on that basis. We're pretty comfortable with that number. The reason there's a volatility is the magic of accounting. So apparently, when we did this transaction, which I think is a fantastic transaction and really creates enormous value for our shareholders and also really validates all the value that we've been created and the technology that's been done in our tech space. We have, unfortunately, a non-cash charge, which we have to bleed through the P&L, certainly in this quarter and next quarter, and I'm hoping not next year, though the accounting vagaries remain dazzling. But it's non-cash, and we try very hard to disclose Anyway, and I'm very happy to pick it up with you afterwards, but it's a non-cash write-off that the accountants, correctly, I'm sure, say it has to go through this RFCF line. But the cash narrative is still at $250, and will be, in my opinion, for quite a bit of time.

Thank you. Operator?

Thank you.

Did that get your questions, Georgia? Okay.

Thank you. The next question comes from the line of Matthew Harrigan with the Benchmark Company. Your line is now open.

Thank you. Thank you for taking my question. The emphasis number 100 million is certainly impressive. I assume that's an admixture of OpEx and CapEx. And is that indicative of further technology savings? I'm sure that's going to be a discussion point at your extended 4Q strategic review. And do you have any further thoughts on the long-term capital intensity? I think, you know, Rick, over a period of years, has talked about, you know, 17% being the end game. I know that's affected by mobile, you know, pulling it down. Do you see a lot of variance in the capex intensity by market, given your network strategies and access and all that? I know that's a little extended, but I'd love to get your thoughts. Thank you.

Matt, on the long-term capital intensity, I think you can see it. Markets do differ depending on where we are, particularly on fixed network strategies, as well as how far along we are on 5G development. But the good news is that these things have lives to them, and we anticipate, as Charlie indicated, capital intensity declining long-term. So that is the short answer. I don't know if Charlie or Enrique want to address this. impact that the Infosys deal might have on further savings opportunities, but I'll let one of you pick that up.

Enrique, do you want to address that?

Yeah, Enrique, go on to you.

Yeah, on the first part of the question, it is a mix of OPEX and CAPEX, of which OPEX is a larger component than CAPEX, on the 100 million annual run rate estimate. And yeah, we do expect that there will be evolution of that deal that will bring in additional technology improvements and savings, although we are really focused on making sure that we maintain a great customer experience. So, you know, this is not a purely cost-driven program.

Thanks, Mike. Thanks, Enrique.

Thank you.

Thank you. The next question comes from the line of David Wright with Bank of America Merrill Lynch. Your line is now open.

Hello, Jen. Thank you very much for taking my questions. My first one is on your joint venture partners. My sense was that Telefonica is definitely reconsidering the re-leverage trade at VM02 and paying that back upstream. because it is just plain and simple financially diluted for them with, you know, 5% cost of debt and you've just refinanced at 8%, for instance, against their balance sheet to 3.5%. And they're just paying dividend. I mean, you can obviously justify the trade much more efficiently, I think, with buyback. So it does feel like there is some misalignment there. Now, they've got a capital markets day, 8th of November. So I'm just wondering if they're going to announce a slightly different objective for maybe VMO2 leverage that you might want to just sort of consider here. And then just on the cash next year that you guys obviously have on the balance sheet, I guess one of the possibilities is that you do see less dividend upstream, whether it be VMO2, I'm not so sure, but surely Vodafone's ego is struggling to justify a dividend, I think, given its operational performance and its leverage. So is it the case that you could use the cash maybe to sustain the buyback with less dividend upstream in the near term? Thanks so much, Mike, Charlie.

Before you answer, can I just make a quick point? First of all, just real quick, we haven't recapped at 8%. We've recapped at 4% because of these swaps that I was talking about earlier on. Maybe I misunderstood your question, but because the swap rate is already locked into 2028, we've just extended... the spread. And I think if you're talking about the debt raised earlier in the year, we had done actually forward swaps. So I do agree going forward, if we recap, it could be 8%. And I think as we indicated, we'll always evaluate like all these decisions with our partners, you know, whether it's the best use of capital. But I just want to make sure we're clear that it hasn't, it wasn't that we've just extended our balance sheet at 8%. We've extended our balance sheet at 4%, but with an open question around 2029, 3031. Sorry, Mike, do you want to pick that up?

I did get that.

No, that's fine.

I'm sorry, Charlie, but their balance sheet is at 3.5. So for them, it's a dilutive. When the debt to EBITDA is considered proportionally by the agencies, it's a fiscally dilutive move.

No, no, I get that. I mean, obviously, they've got their own. I mean, I'm not for me to pine on their capital structure. I was making the point there when you said 8%. That is slightly off.

I've got you.

Anyway, sorry.

That's appreciated.

Yeah, and I think that's the point. We're not going to comment on PEFs. Capital Markets Day, he'll come out and provide, I'm sure, a point of view on lots of things and perhaps even on the JV and these sorts of matters. I will simply say that we are consistently aligned on most everything that we consider. I'm going to just leave that at that. You also asked if we would use cash on the balance sheet to sustain the buyback, potentially. I don't know that we would. We certainly wouldn't exclude that idea. I mean, it seems to us if the stock... this continues to trade at meaningful discounts to any reasonable value, then we should be looking at it as we would any investment. And I'm not commenting on distributable cash flow next year because it's October or November 1. On the other hand, to answer your question directly, sure, why wouldn't we if we felt like that was the best use of cash? Certainly we would look at that as an alternative.

Just sneaking in on the cornerstone sale, just a very simple question, you know, why did you not look to sell all of the stake, I guess? I mean, obviously, it's, you know, it's a lot more complicated than that simple question. But was it a case of, you know, I know that Vantage has expressed an interest in owning more of cornerstone to bring the asset into fully consolidated financials. So I'm just wondering, it was obviously one-third of your stake was sold. Is there any reason why you didn't exit in entirety? Andrea, do you want to handle that?

Yeah, thank you, Mike. Look, I think we explored all the alternatives. I would say, as in all these TAO transactions, there are complicated sets of variables. It's a trade-off, obviously, of retaining strategic and operational co-control at a time when we're investing heavily in the network versus realizing some proceeds today. So I think in combination with Telefonica and given the app site that we saw out there, we made that trade off and we're actually delighted with the result that we got. I would add that just a comment that I think one of the earlier questions on, you know, could we sell it cheaply was the implication. If you look at the, if you look at where the European tower goes to trading, they're trading at 17, 18 times. And obviously as I think everyone in this call appreciates when you sell a tower company, there are many different ways that you can put value into the, into the taco or you can keep value in the M and O. So it's extremely difficult to compare. you know, results across individual transactions. So I think that, you know, a minority stake that allows us to keep financial control and strategic control of the asset at a time when we're investing at a slight premium to where the current players are trading with an ability to get a control premium, you know, from other operators down the road, we thought was a very smart trade.

I hope that addresses the question. Just quickly. Yeah. Thanks, Andrea. I was just going to say that you mentioned control, but it's not control, right? Because

there's it's a 50 50 yeah sorry i mean i should yeah yeah that's that's a very good point it's co-control with vantage but you know it's obviously important to us got it thanks buddy thank you the next question comes from the line of joshua mills with bnp parapus your line is now open uh yeah thanks very much i had a question on the netherlands and question on belgium so

Just starting with the Dutch market, I mean, the last few quarters both Vodafone, Ziggo and KPN have blamed each other for front book pricing trends, which have been very poor. I just want to ask, in your view, is there more of a structural issue here around network quality? And maybe one way of answering this would be if you could provide some color around NPS scores, because you do refer to these in the Vodafone, Ziggo reports improving as you move to convergence but kpn last week were basically implying that network schools are negative to their competitors and on the front book trends i think in the the same press release you talk about the launch of the front book propositions with faster internet speeds to try and repair net ad trends so maybe it's how you're thinking about value over volume because obviously it'd be great for the market if everyone went to value but I read that comment in the report as slightly a shift towards volume. And then on the Belgian side, just a quick question on the IT issues. Are these all fixed now, and should we start to see a recovery in net ads and commercial trends as we head into Q4? Thanks.

I don't know if John's on. The short answer on the IT issue is yes. So the answer to your direct question is yes. And I don't know if Jeroen, if you're back on the call, Yes, I am.

Yeah, do you want to address the question? Yeah, go ahead. Of course. No, thank you, because the value over volume question is super important, and let me try to build that story for you. And just to take you back to the quarter three results, what you have seen indeed is a drop in our net ads. I wouldn't say that's entirely by design, but it's important. If you want to play the value game, As we do, there's always a balancing act between your customer numbers, your net ads, versus your ARPU. So we have seen more churn in July and August than we normally see, and that's basically because we have done a few things. One of them is we increased our prices by 8.5%, compared to, for instance, the year prior, 3.5%. And that also, therefore, means that you have more impact. You have a little bit of a bill shock with customers. It's important to note, however, that the reason customer's churn is then cost, higher prices, rather than the fact that they move to fiber. The market is, however, very competitive, and that's something that we have to deal with. If you look at the promotional level, KPN is still offering product plus type offers, so free TVs or tablets and what have you. Nodido, formerly T-Mobile, recent offer is eight months, 35 euros for a broadband TV connection, which is Very, very aggressive. So you see that dynamic. We try not to play that. Occasionally we have to move into that, but we try to stay away from it. But very important, linked to your point about front book, back book, I want to be very clear. We were the first this year to go to market with a fixed price increase of 8.5%, which was the highest price increase on fixed in the market, on both the front book and the back book. APN then a couple months later went to the market with a price increase that was a little bit lower, 6.4%, but that was only for the back book. And not only did they not increase the front book, they actually decreased the pricing in the front book by 5%. That created the delta, basically, our back book, our base, versus their front book, i.e. what people see in the market, of about 13.5%. That is a very clear, let's say, That's where you see the difference. We do genuinely go for value. We have therefore increased our ARPU this year so far by 4.5%. We have a leading ARPU and fixed of 56 euros. And for the first time in two years, this has helped us actually get consumer fixed back to marginal growth in the third quarter. So to your point, we are definitely playing a value game and not a volume game. I hope that gives you a bit of background there.

Thank you. Thank you.

Yeah.

I'm just operating. I'm sure. Yeah, go ahead, Josh. Go ahead.

Yeah. No, no, it's fine. I mean, just so I'm clear though, on the, on the actual commentary in the report, when you talk about the launch of a new front book proposition, is that just a range of different tariff changes or it's actually a price move that you're making in, in Q4, just to this explicit page with the voter pens that go before.

Yeah, it's a very good question. It may be a bit too detailed to go into, but obviously happy to speak offline or maybe Richie can do that, our CFO. But we have made a small adjustment to our front book, which is basically one or two tariffs that we made a slight adjustment because we were too far out of kilt. Had to be 13.5% more expensive than the incumbent is simply too much. And we've also given our customers more value. And that's the most important point. So we only made one small tweak on the pricing, but we gave customers more value by giving them higher speeds. And for new customers, for instance, better Wi-Fi in the house. So we're trying to give customers more value rather than lower the price.

Yeah, I think that addresses it. Thanks, Josh. Look, we're over time, so I want to thank everybody for hanging in there. If you're still on, then obviously we appreciate you. you know, listening and asking good questions. I'm glad we were able to get a good 50 minutes or so of questions and I could get more of the executives involved. That's always helpful. We're busy. We can't wait to talk to you in February on our next earnings call. And so we'll speak to you then. Thanks, everybody. Take care.

Ladies and gentlemen, that concludes Liberty Global's third 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.