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.