Liberty Global Ltd.

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Liberty Global's first quarter 2024 investor call. This call and the associated webcast 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 listen-only mode. Today's formal presentation materials can be found under the investor relations section of Liberty Global's website at libertyglobal.com. After today's formal presentation, instructions will be given for a question and answer session. Page two of the slide details the company's safe harbor statement regarding forward looking statements. Today's presentation may include forward looking statements within the meaning of the Private 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 fact. These forward-looking statements involve certain risks that could cause actual results to differ materially from those expressed or implied by these statements. These risks include those detailed in Liberty Global's filings with the Securities and Exchange Commission, including its most recently filed form, 10Q, and 10-K as amended. Liberty Global disclaims any obligation 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.

Hello, everyone, and thanks for joining our first quarter investor call. Charlie and I are going to handle the preparatory marks as we usually do, and then during the Q&A, I'll get other folks from our management team involved Now, to get us started, I'm going to jump right in on slide four with three key takeaways from Q1. First of all, on our last call, we articulated a strategic plan to both create and deliver value to shareholders. The rationale for that plan was pretty clear. Despite repositioning our operating perimeter over the last five to seven years with timely market exits and in-market consolidations, despite purchasing nearly 60% of our shares, and despite successfully redomiciling to Bermuda, we continue to trade. at a substantial discount to our sum of the parts or net asset value. So as we stated in February, from this point forward, we are focused on maximizing the intrinsic value of our core assets and, where possible, delivering that value to shareholders over time. Towards that end, we made five announcements last quarter. In the last 10 weeks or so, we've actually made substantial progress on each of them. In particular, our plans to list our Swiss operating business and spin off those shares to our stockholders. More on all of these in just a moment. Second, with continued uncertainty in the macro environment, particularly around interest rates, we think it's smart to keep reminding everyone of how strong our balance sheet is today and tomorrow. Charlie will cover the details, including recent refinancings, but we're sitting on $3.2 billion of consolidated cash, which rises to $3.9 billion if you include liquid securities, and we continue to benefit from a long-term fixed-rate credit structure. We also remain extremely disciplined when it comes to capital allocation at the corporate level. whether it's our buyback program or selective deleveraging or strategic venture investments. Each of these things will drive returns to the business and to shareholders over time. And then finally, we're investing for growth across our FMC Telco footprint. For example, our fiber upgrade and extension plans in the UK and Ireland and Belgium are picking up speed and we're on track to reach roughly 20 million fiber to the home premises by the end of 2026. And that represents just about 50% of an expanded 40 million home footprint. 5G is the same story, where in addition to consumer and competitive retail benefits, we also are starting to see real B2B opportunities emerge from mobile private networks and network slicing and IoT applications. And then finally, like our peers, we believe the investments we're making in digital and AI will be game changers for us. Now let me dive into each of these over the next few slides. Beginning on slide five, which recaps the three core building blocks of the strategic plan we laid out for you last quarter and the steps we've taken since then. So starting on the left-hand side of this slide, first and foremost, we're focused on maximizing the value of our FMC telco operations in every market. As a reminder, these operations in the aggregate serve 85 million fixed to mobile connections, generate over 25 billion of annual revenue and 9.3 billion of annual EBITDA. They're generally number one or number two in just about every product with outstanding brands and outstanding management teams and we believe they are valued at zero in our stock price. Now, needless to say, these are not easy businesses to manage. I think we make that point every quarter. Markets are competitive, consumers are under pressure, and the capital intensity is high, but they are large subscription-based revenue streams with extremely attractive margins, and we're sitting at the center of the most exciting ecosystem on the planet. You name it, AI, digital, edge, metaverse, cloud, streaming, all of these innovations are drive an unstoppable demand for bandwidth and connectivity. And whether we're driving better retail market share with digital and AI or expanding our B2B business with new 5G and ICT services or de-layering to optimize the infrastructure values that are embedded in our operations, we think we have numerous strategic options for value creation in these FMC markets. The second building block is our highly targeted and strategic investments in tech content and infrastructure that both support those core telco operations and provide the opportunity for significant value creation in their own right. It's hard to know how much of this $3 billion portfolio is being valued in our $6 billion market cap today, but we're actively managing these positions and, where appropriate, crystallizing value. And then third is our renewed commitment to create and deliver value to shareholders. We would continue to shrink our equity, executing on the growth and strategic plans that should improve our trading multiples. And finally, where appropriate, putting value in your hands through spins and dividends and things like that. On the right-hand side of the slide, we provide an update on the five key steps we have publicly disclosed. Of course, there are many more initiatives we're not talking about today, but you should assume we're working on. Starting with our FMC champions, our plans to carve out the fixed network in the UK and create a separate net code there are well underway. We've hired Deloitte and BCG to help us with the actual planning, processes, and financials, and without asking, have received significant inbound interest from infrastructure investors. That's not surprising. This will be a substantial asset, which if we were to include our next fiber JV, will reach 21 million fiber homes across the UK. So stay tuned for more information about this. Secondly, we've made good progress in the Benelux. Regarding our Benelux Holco, we continue to see the potential synergies across the Dutch and Belgian markets improve, and that we're quietly entertaining indications of interest to actually invest in Liberty Global Benelux at a meaningful premium I might add to our trading multiple today. On the ventures front, we have now received the approvals required to complete the sale of all three media for 12 times EBITDA, and we expect that to close May 15th. Again, this would result in $400 million of cash proceeds to us, which we then intend to invest in the Sunrise spin transaction. This is just one example of how our Ventures portfolio creates valuable assets and then helps us fund our broader strategic initiatives. By the way, last year we committed to realizing between $500 million and $1 billion in asset sales by the second half of 2024. With the partial sell-down of Towers in the UK and this all-three media deal, we already surpassed 500 million, actually closer to 600 million. And just to let you know, we have an additional three to 400 million in the pipeline, which might be realized by year end. And finally, we come to the main objective. And that, of course, is creating and delivering value to shareholders. Our stock buyback program remains a key part of that strategy. And we've now purchased approximately 3% of our shares year to date. And as you recall, we've authorized up to 10% of shares for 2024. Today, we have 372 million shares outstanding. That's down nearly 60%. from over 900 million shares at the end of 2017. Now perhaps most important of all is the value we expect to create with the separation and listing of Sunrise in Switzerland, and then the subsequent spinoff of those shares in the fourth quarter of this year. And slide six provides an update on where that transaction stands today. Now perhaps just to recap the transaction rationale for a moment, I mean by listing Sunrise on the Swiss exchange, the goal is to create a fully distributed local valuation for the company, which will represent, we believe, a meaningful premium to our stock trades or whatever value we're being attributed today. The Sunrise equity story is compelling. Switzerland is a stable three-player market where Sunrise stands out as the only pure play national champion. Andre and the team have multiple growth levers in front of them. And perhaps most importantly, significant free cash flow margins, which will underpin an attractive dividend story. We're targeting Q4 this year to complete the transaction, which will entail spinning off again 100% of the shares to Liberty Global shareholders. The current schedule is to file a confidential form F4 with the SEC next month. As a reminder, we will be injecting 1.5 billion Swiss francs, or about $1.7 billion, into Sunrise. to deliver the company pre-spend. Obviously, this will increase the equity value of the listed vehicle, which accrues directly to you in the form of a higher Sunrise stock price. And Charlie will talk about this math in a moment. And then funding the $1.7 billion will come from a combination of all three media proceeds, that's about $400 million, Sunrise free cash flow through the course of 2024, that's about plus or minus $400 million, and then approximately a billion of corporate cash. Not surprisingly, at J.P. Morgan and UBS, have been approached by both financial and strategic parties interested in potentially participating in this transaction pre-listing. I'm simply going to say we're in a listening mode, but we do not intend to slow the process down, and we are committed to proceeding either way. This transaction is happening. Many of these groups are attracted to the dividend profile sunrise, which we expect will pay out a minimum of 240 million Swiss francs per year, and that would rise over time. Just to put that into perspective for a moment, the dividend from Sunrise alone that I just mentioned would represent a 4% yield on the entire market cap of Liberty Global. Now, so far, 11 analysts have figured that out and have published reports on the Sunrise spin, which pegged the equity value in the range of $11 per Liberty share. Now, we're not commenting on these numbers, but it sure looks significant in relation to our $16 stock price. Your opportunity to learn more about this is coming up soon. The management team intends to conduct a capital markets day in due course, followed by a complete roadshow. Now, someone asked, what happens to the remainder of Liberty Global after the spinoff? Before answering that, I think it's important to put things into context for a second. Sunrise only represents about 12% of our aggregate EBITDA and around 20% of proportionate EBITDA. So the bulk of our fixed mobile converged business remains unchanged for now. And as we've just talked about, we believe we have a lot of really strong opportunities to drive value in those remaining markets. Of course, our cash balance will be reduced by around a billion, but we still generate free cash flow upstream. And as I mentioned, we continuously look at asset sales to replenish our cash. And then lastly, Sunrise, like all of our operating businesses and even those we've sold, by the way, will still be reliant on Liberty Global for certain technical product and administrative services, which will continue to offset a bunch of our central costs. Now, before handing it over to Charlie, I'll hit a couple of operating updates beginning on slide seven, which shows broadband and postpaid mobile ads for each market over the last five quarters, as it's a slide we show every quarter. On the top left, you'll see that Virgin Media O2 delivered 5,000 broadband net ads in the quarter. That's despite a soft overall market with estimated industry sales off 7%. Our share of gross ads continues to rise, and that's supported by our Greenfield Next Fiber expansion, which recently reached 1 million homes. Importantly, you'll notice that we added a blue box for each opco, showing the evolution of fixed ARPU. VMO2's ARPU performance has improved every quarter, with essentially flat ARPU in Q1, even before the benefit of a contractual 9% price rise, which kicks in April. Postpaid mobile sub growth in UK was impacted by a weaker handset market in Q1 that impacted O2 primarily. Our flanker brand, meanwhile, continues to add customers. O2 was also impacted by churn attributable to a legacy IT migration. And despite that, mobile service revenues were up 4.2% in the quarter. Now, Lutz is on the call. He can take questions. But we feel good about the investments he's making in the commercial machine. And we expect to see those benefits build as he returns to growth in 2025 and beyond. Sunrise had a strong quarter across the board, returning to growth in broadband with 6,000 net ads, reflecting strong inflows and improved term performance on the Sunrise brand and continued momentum on YALO, the Flanker brand. Consumer loyalty programs and a lower impact from the UPC migration drove those term benefits. And as we foreshadowed, fixed output performance has improved every quarter since year end 22. In mobile, the combination of Sunrise, YALO, and B2B drove another strong quarter of postpaid ads at 26,000. Looking forward, Andre and the team are implementing a number of initiatives to continue the commercial momentum, which bodes well for the second half of 2024 and, of course, bodes well for the upcoming transaction. Turning to the Netherlands, Vodafone Ziggo saw a slight improvement in broadband net losses versus the last three quarters, but continues to be impacted by promotions and high levels of fiber overbuild. This is the story there. Now, the value over volume strategy that Jeroen and the team have been pursuing is, in fact, paying off. And you can see that with fixed ARPU up about 4% in each of the last three quarters. Meanwhile, the mobile business is strong with another quarter of post-paid mobile growth and mobile service revenue up 6.5%. The Belgian market remains competitive with Telenet losing 6,000 broadband subscribers despite stronger growth sales and reinvigorated FMC marketing campaigns. The post-paid mobile base was largely stable. On the positive side, churn has improved from the second half of last year. When John and the team were managing through some IT migration issues, in fact, they've seen major improvement in resolving those technical problems with customer service time back to normal. Looking forward, in our view and their view, more personalized customer experiences, expansion into the south of the country, and the fiber upgrade that's underway with wire should drive better commercial momentum. And then I'll end with a simple slide highlighting several of our active investment programs. that will support the long-term growth and competitiveness of our FMC champions. On the top left, we summarize the status of our fixed networks. As you see, at the end of 2022, we reached 32 million fixed homes, of which around 12% were on-net fiber homes, but importantly, 100% were capable of one gig speed. Now, that last point is key. We continue to have speed leadership in our markets. Just take the UK, for example, where the average customer there of ours is getting 350 megabit And that's exceeding the average fiber customer speed, according to Ofcom. By 2026, our footprint will have expanded by 25% to 40 million homes. And that's mostly through Greenfield Network extensions, but also includes some wholesale arrangements. And those 8 million homes have and will continue to represent a significant growth opportunity, as we've seen at Virgin Media through the last five to six years. And thanks to the investments we're making in the U.K., Ireland, and Belgium, nearly half of those 40 million homes in 2026 will be on net fiber homes. In two of those markets, Belgium and the U.K., we will have created netcos that house, manage, and derive revenue from those networks, and you're aware of those value creation opportunities. At the bottom, you can see our 5G coverage ratios in 2024, which range from 100% in Switzerland and Holland to 50% and greater in the U.K. and Belgium. three of our four markets will reach 100% by 2026, with only the UK on a slightly slower path. I think it's important to point out that both fixed and mobile CapEx are not far from their peak periods. In fact, mobile CapEx peaks this year, and fixed CapEx is not far behind that. And the point here is that we, like other European telcos, will start to benefit from even higher free cash flow margins when these programs either complete or are moved off balance sheet. Then on the right side, We are also beginning to reap the benefits of our considerable investment in digital, as well as our more recent AI initiatives. Just a few examples here. Having just completed our IT migrations of the O2 Postbay mobile base in the UK and Telenet's residential subs in Belgium, we're now operating nearly fully digital customer experience platforms for those customer bases. On the mobile front, with fully virtualized five GSA cores under development in Belgium, the UK, and Switzerland, we're going to be able to provide much greater scale, flexibility, and cost benefits to customers. Network as a service is early stage. We talk a lot about it, but we've demonstrated both our technical readiness and the potential benefits of these use cases at Mobile World Congress in Barcelona. And on AI, we're focused on harnessing the power of predictive and generative AI to increase productivity and efficiency at scale across our network customer and employee platforms, making our customer facing agents smarter, predicting network outages and reducing power consumption. and streamlining internal processes are just a few of the applications we're rolling out. Now, many of these things are happening under the radar, and we're all being careful not to overpromise, but our team is convinced that these and similar innovations will provide us and our sector more generally with a much needed source of both revenue growth and operating efficiencies. With that, Charlie, let's take them through the financials.

Thanks, Mike. The next slide sets out a summary of the revenue and MDA profile in our four key markets. we saw broadly stable reported revenues across all opcos in Q1. Virgin Media 02 reported stable revenue, but excluding the impact of next-fiber construction, a revenue decline of 4%. This was driven by low-margin handset and B2B fixed revenue declines, which we highlighted in Q4 as part of the softer revenue guidance. However, underlying service revenue performance did improve, even before the Q2 price rises, with stable fixed revenues and mobile service revenue growth accelerating versus the fourth quarter. About a few days ago, revenue was up close to 2% this quarter, supported by tailwinds from the 2023 price rises, with another record quarter of mobile service revenue growth at over 7%. Fixed mobile pricing was supported by healthy ARPU growth, as we capture the benefits of the mid-2023 price adjustments. and Telenet delivered stable revenue in Q1, supported by consumer mobile revenue underpinned by price adjustments last summer. Sunrise posted stable revenue in Q1, mainly led by the positive impact of the July price increase and continued momentum in B2B, offset by lower handset revenues. Moving on to our Q1 adjusted EBITDA performance, Virgin Media O2's adjusted EBITDA decreased just under 2%, including next fiber construction, as VMO2 invested in the future growth drivers that we laid out in the 2024 guidance. Specifically in Q1, there was a step up in IT transformation costs, and VMO2 has started scaling our marketing efforts in the next fiber areas. Vodafone Zygo delivered close to 9% EVDA growth, driven primarily by the reversal of energy cost headwinds and, of course, the revenue growth. IntelliNet delivered stable EVDA for the quarter due to price increases, lower programming and interconnect costs. along with lower energy costs, which were offset by higher staff-related expenses following the mandatory 1.5% wage indexation increase. In summary, it's posed a stable adjusted EBITDA growth, including cost to capture, driven by lower OPEX and direct costs, and we expect cost optimization benefits to be more visible from Q2. So into the next slide, we give an update on the key metrics underpinning our capital allocation model. recurring upstream free cash flow from our wholly-owned FMC opcos, and cash distributions from our 50%-earned JVs, our holdco cash and liquidity, and the fair market value of the Ventures portfolio plus listed stakes, and finally, the underlying equity values of all our FMC champions. So starting on the top left with the breakdown of our free cash flow profile for Q1 2024 by operating company, along with four-year guidance. Now, as has been the case in previous years, Q1 is typically a modest cash outflow quarter, given the timing of cash interest payments on our DESAC and with limited cash distributions in the JVs, which tend to be back-ended loaded to the second half of the year. Turning to our cash position, our consolidated cash balance was $3.2 billion at the end of Q1 2024. And in the chart, there is a walk versus the closing Q4 balance, including the modest cash outflow related to operations was about $0.2 billion in Q1. Ventures investments, which were primarily in Atlas Edge and Edge Connects, were about $0.1 billion and share buybacks of around $180 million during Q1, which again is consistent with our guidance for up to 10% buyback in 2024. Moving to ventures, compared to the fair market value of our ventures portfolio, this increased in the quarter, driven by an increase in the value of our stake in EdgeConnects, plus our listed stakes, including ITB, which was offset by a decline in tech valuations, primarily laceworks. We made net investments into ventures in Q1 of approximately $100 million, primarily in Atlas Edge and Edge Connects, and both assets are within our infra pillar, which is focused on the data center space where we see strong growth potential and a clear right to play. And finally, to highlight on a per share basis the key value drivers of our stock, largely speaking, analysts share our view that there's a significant discount in our stock, which is currently trading around $16 to $17 per share versus the average analyst valuation of $26 a share. But as Mike indicated in our Q4 strategy update, we are keen to close that gap. If we start with our $3.2 billion cash balance and take out to summarize the leveraging injection of $1.7 billion, which is around $5 per share, we get to a value equivalent to $4 per share. Our venture portfolio, regularly valued by an independent third party, is worth $2.4 billion or $7 per share. Well, our listed equity stakes plus the cash we're going to get from the all three media sales are worth a combined $1 billion or $3 per share. Now moving to the sunrise spin and assuming and only assuming the current average analyst valuation of the company of 8 billion Swiss francs, we arrive at $11 per share per former for the cash injection of 1.5 billion Swiss francs committed by Liberty Global. Now if you add all these up without any value attributed to the other FMC champions, The implied value of a Liberty Global share comes out to be around $25 per share, assuming 350 million shares around the time of the Swiss spinoff. Lastly, we highlighted a Q4 on a peer-comparable basis, enterprise value to operational free cash flow. We believe that there's also significant equity value in our remaining proportionate interest in BMO2, Vodafone, Ziggo, Telnet, and Ireland, with cash being upstream despite the current elevated investment cycles related to 5G and fibre to the home. Turning to our balance sheet, we continue to have a strong position and continue to do opportunistic refinancings. During March and April, we refinanced nearly all of the remaining 2027 maturities at BMO2. As opposed to the usual slide showing our siloed debt by OpCo, this chart highlights our aggregate debt position, including the joint ventures where we earned 50% by debt instrument. Overall, we have around half our aggregate debt in the form of bank debt and the other half in bonds. And as the chart shows, the bank debt typically has a shorter remaining duration versus our bonds, as the latter are typically issued with around a 10-year maturity. Crucially, all of our variable bank debt is fixed using swaps, typically until maturity, with the swaps independent, and that's really important, of the underlying bank debt. We would argue that these swaps, totaling $23 billion for an average remaining life of five and a quarter years, are a significant asset, and indeed in our balance sheet we record an in-the-money valuation for our interest rate swaps of over $1.5 billion. Specifically, we have around $10 billion of notional swaps maturing in 2028 and $9 billion in 2029. This allows us to refinance near-term maturities and push out the tenor of our bank debt, while still benefiting from the underlying swaps, which can remain in place until 2028 and beyond. And as a result, we have a limited debt repricing risk, apart from any change in what's called the credit spread. So as a case study, we took advantage of this at BMO2, proactively refinancing $2.4 billion across March and April, largely addressing the 2027 maturities with only a 20 basis point increase in spread. So overall, for VM02, this extended the average life of the debt stack by 0.4 years, at less than a 0.1% increase in the overall weighted average cost of debt. And lastly, as a reminder, all our debt is fully siloed and FX matched, and we intend to remain proactive in terms of pushing out our maturities to maintain tenor. Lastly, I wanted just to reconfirm all our 2024 guidance across all the OPCOs, which we set out at Q4 in February. I won't run through all the metrics again, but after a strong start to the year financially in Q1, we remain confident across all the OPCOs in terms of hitting the numbers. And that concludes our prepared remarks, and operator, we're now ready to move to Q&A.

The question and answer session will be conducted electronically. If you would like to ask a question, please do so by pressing the star or asterisk key, followed by the digit 1 on your phone. In order to accommodate everyone, we request that you ask only one question. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. We'll pause for just a moment to give everyone an opportunity to join the queue. Our first question comes from the line of Joshua Mills with BNP Paribas. Joshua, your line is not open.

Hi, guys. Thank you very much for taking the questions. I had a couple on the Netherlands and then one on the UK, if that's okay. So I think in the Vodafone SIGO disclosure last night, you talked about improved net promoter scores related to FMC. It'd be great if you could share some detail about perhaps how your net promoter scores are performing in that business and if there's any green shoots there which might point to a better net ad trend through the course of the year. And then related to that, you mentioned as well in the call that Fiber to the Home overbuilds. is one of the issues you're seeing in the Netherlands. I'd like to clarify whether that is coming from the alt nets or rather from KPN. And then if I just move on to the UK, my question there is if you could provide a bit more color around how much of the post-paid subscriber losses were related to this change in billing system and give an indication of what the underlying subloss in the quarter would be, that would be much appreciated too. Thanks.

Thanks, Joshua. As you know, Jeroen Hohenkamp, our CEO of Vodafone Ziggo for some time, has officially retired as of yesterday, so he's off on vacation. But we have Richie Throes, the CFO, you all know quite well, on the call with us today. Richie, do you want to address the NPS point?

Yeah, sure. Thank you, and thank you for passing it on to me. What you do see, we don't measure a Vodafone Ziggo NPS. We clearly measure it through the brands Ziggo, Vodafone, and Hollands Nielsen. You would? And on all three brands, we see a gradual step-by-step increase on the MPS course, leading to positive MPSs for sure also on the fixed side. And the latter has been one of our challenges in the past to address that. So all three brands are positive, which also then leads into, if you combine, let's say, the offer into FMC offers, that you see a definitely for sure uptick on the MPSs. Based on a couple of things we're doing is the value add through the entertainment proposition, but also through a constant improved, I would call it, customer service profile. Hopefully that addresses the question. And if you want, Mike, I can also tackle the second one.

Yeah, go ahead.

Yeah, so by now, both KPM, Odido, and ourselves are public, so we have a pretty good feel on how the market is doing. I would always say that if you look at our churn, It's mostly triggered not by fiber, but by the sheer fact that the fiber players actually use price and promotions as one of the instruments to actually get traction on the fiber footprint. If you would slice and dice ourselves and compare that, for instance, to the incumbent KPN, KPN in itself has on a like-for-like basis also pretty, let's say, moderate performance, I would say, both consumer and B2B, which basically then leads to the ODDO results as well as Delta, who didn't go public, If you combine ODDO and Delta, they take effectively the growth in the market, which is predominantly the growth in new-built homes taking broadband services. So that's a long way of saying that it's not the incumbent KPNN ourselves, but the growth goes to the other two big players using price a lot as the instrument to gain volume.

Yeah, I think it's also important to point out that those other two players are building in discrete markets. they're not overbuilding each other and they're not building the entire market, you know, between one and one and a half million each. So it's, they're, they're sort of, it's a fragmented, but from an outsider's point of view, looking in quite rational overbuilt situation. So Lutz, do you want to address the postpaid billing question?

Yeah, sure. So yeah. Hi, Joshua. So right. A couple of things here. I mean, Q1 is typically a week, post-paid net at quarter the Delta compared to a year ago is 50,000. We have finished the migration of a double digit million customer base, right from one CRM system to a new one. Um, and obviously this has always an effect on some customers, which you are unable to migrate on the new system. We're not disclosing the numbers for sure, but I mean, you can see maybe similar CRM migrations in the market, and you will be astonished that the number is pretty good. And number three, what I want to iterate is you can look at post-paid net ads, but our strategy going forward is to have with O2 more the value brand, and with GIFGAF, the pay monthly... for value seekers, right? One is premium, one is value. And you see that this starts to pay off in our service revenue growth before price rise in mobile of further 2%. So I hope that helps.

I'll just add one point, which I think is important to remember. Since we formed this JV, we've grown the mobile contract-based every year, and we've had consistent mobile service revenue growth. So I would view this as more of a blip than a long-term trend. Next question, operator.

Thank you. Our next question comes from the line of Maurice Patrick with Barclays. Maurice, your line is now open.

Yeah, thanks, guys, and thanks for taking the question. If I could ask a question on the UK market, please, really relating to the net add trajectory and state of competition. So I'm sort of curious that the UK broadband market's grown in size over the last few years, but the last 12 months seems to have topped out. I'm just curious if you think the market can grow maybe in the next 12 months. And just linked to it, if I look at some of the Altnet data, it looks like in the last 12 months they've added about half a million customers in the UK market. You've historically, I think, talked down the impact of alt-nets. I wondered the extent to which those are now starting to impact your net ads and your legacy footprint. Thank you.

Lutz, why don't you address the net ad question?

Yeah, sure. So, I mean, if you compare the net ad development Q1 this year compared to Q1 2020, Three, the data is 20,000. A couple of things here. Obviously, the market is a bit weaker. So according to our data, it's something like 7% less. Number two, we see some more impact on altnets. Not incredible, right? I mean, look at the delta two years ago. So we are not talking big numbers. But I mean, my view is the altnets, are not getting to the penetration they want, and therefore, as a fact, they're getting more aggressive in promotions, and you see some of these effects. The question is, how long will this last? And then, right, we have obviously now added one million fiber homes, and we are starting to sell more into our expanded network, but also this takes some time because it is fiber, right? So, I mean, in Lightning... we were used to sell quarks fiber is right new video product it's a different technology and we really started to sell fiber mid of last year so that machine week over week we are selling more so we also confident here but therefore expect more impact into net ads out of next fiber I hope that helps I think the other point is you know we do talk about all next every quarter and you know we're by no means

discounting the capital they've expended and the network they've already built. Typically, what we're describing to you is where we see the next 18 to 36 months and whether they have the capital and the ability to sustain that build and get to their hoped-for build-out ambition. And I think the answer we're seeing is unlikely. That doesn't mean with the network already constructed, and there's quite a bit, as you know, they aren't going to penetrate. To our knowledge, they're not reaching penetration levels that are going to sustain their businesses, high single digit, 10%. That is not, for the most part, going to work long-term financially. But the network has been built, and they're going to do what they can to obviously create a return on that network. So they're active in the market. That's for sure.

And the market growing? Do you think the market will grow? Do you think the UK broadband market will grow in the next 12 months?

Luke, do you have an impression of that? I mean, we're adding customers generally. There's a lot of swapping happening. There's certainly a lot of flux in the market. We think our business will grow. The broader market generally does add every year, but we think we are getting more than our fair share. That's for sure.

Yeah. Thank you. But there's not a lot of growth in the market. Thank you.

Thank you. Our next question comes from the line of Ulrich Graetz with Bernstein Societe Generale Group. Ulrich, your line is now open.

Yeah, thanks very much. In the prepared remarks, Mike, you talked about the value creation embedded in the network . Now, in Belgium, I think you had a pretty clear all this might work. In the UK, it's maybe less clear. You talked about sort of unsolicited interest already. But could you just describe the value creation levers that you see of the carve-out? And if I may, just one point of clarification. In the Netherlands, the distribution outlook there is up to 300 million available for distribution and non-recurring investments. Could you narrow that down already at this point in time, or is this simply something, you know, as the investment opportunities unfold, that you will clarify how this might split? Thank you.

Yeah, Charlie or Richie, you can address the cash upstream question. Listen, I think the value creation levers in the UK are many. For starters, you know, we're able to isolate that network construction, network build, network asset into a vehicle that we believe could very well attract interest from strategic and financial parties. The benefits of that interest would be obviously capital raising, we believe, at accretive multiples, but more importantly, the ability to potentially accelerate our activities in that marketplace. I mean, we're going to already have announced that we expect to be at 5 million homes in Next Fiber by 2026, and we would build out the balance of our upgraded network, what we call Fiber Up, by 2028, 2029, but to the extent we can accelerate those builds, as well as the migration of customers onto those fiber networks, all the better. We think, number one, it creates financial flexibility and optionality to accelerate our activities in that market. And we all know that there are, you know, I don't know the exact number, but there's $2 trillion of private equity money flowing around. A big chunk of that is infrastructure capital. And we certainly believe that the infrastructure business is alive and well and that there is an interest, certainly, in these types of netcos that start life with 35%, 40% utilization. a lot of EBITDA and a clear plan. I mean, you know, we think our network, which will ultimately be 21 million homes, will be the second network in the marketplace, and it will attract wholesale customers over time, but more importantly, give us a competitive advantage to retain and grow our broadband base. So there's lots of goodness that comes from these. We're not the first person, obviously, to look at de-layering our business. We've done it in Belgium. I think John's on the call. He can speak to what we're already seeing there with WIRED and the opportunities that that's created for us in the Belgian market, not the least of which is potential cooperation with Proximus there to try to rationalize the construction of fiber so that we're not wasting capital. So there's lots of opportunities that come when you start this process, when you begin this journey that we think could be very accretive for Virgin Media O2.

Just on the show distribution, Rich, I don't know if you want to answer it, but obviously one of the things that goes across Europe in telecoms is from time to time there are spectrum auctions. We're obviously not allowed to comment on specific auctions, but I think we just want to make sure, should one of these emerge, that we didn't mislead our investors. So it's really related to that. I don't know, Rich, if you'd add anything to that.

I think that's well said, Charlie. So we're reconfirming the up to $300 million with the remarks we made at the Q, sorry, the year-end results in line with what you just said. Thank you very much for both answers.

Next question, operator.

Thank you. Our next question comes from the line of Robert Grindle with Deutsche Bank. Robert, your line is now open.

Yeah, hi there. Thanks, all. Thanks for the presentation. Some good new graphics. I'd like to ask about the Benelux hold code. The idea seems to have shaken out interest, as you said, Mike, from external investors. It sounds encouraging given the low or negative implied equity on the opcos. Is this interest all contingent on fully controlling Zygo or not necessarily? Is there any movement on Zygo from your co-shareholder in Paddington? And if I could have a very quick follow-up on the UK alt net point. Do you need to offer more alt net-like than VMO2 prices to get customers onto NextCyber? Or so far, at least, do you think the Virgin brand carries the premium to what the other altnets are charging? Thanks.

And, Lutz, you can work up an answer on the UK altnet point. Yeah. Listen, I think the interest that private equity could have in the 30-billion Benelux asset is clear. You're talking about a defined region with a lot of similarities, 3 billion of EBITDA, on a combined basis, potential synergies if there's further consolidation of ownership interests, and obviously undervalued assets that have good cash flow characteristics, et cetera. And I'll add lastly, unrealized value in infrastructure, whether that's through wire, the Netco in Belgium, or from towers that haven't yet been monetized in Holland. So there's lots of interesting elements there to, I think, attract interest. Would it be contingent on getting control of the underlying asset? Not necessarily. It doesn't appear to us to have to be contingent on that. And I think you'll have to ask our friends in Paddington what their long-term game plan is with the Dutch business. At this moment, there's nothing to report, and I think they've obviously been highly focused on the perimeter that they're building and exiting certain markets and doubling down in others. You have to ask them where Holland sits in that scheme of things. That's for them to answer, not us. But obviously, we're good partners. We've been good partners for a while. We're making moves here that we think will add value to our stock price long term, but also are strategically accretive. And we're going to make those moves either way. Let's see what they instigate, if anything. But we're moving forward.

Yeah, on your question is the ARPU. Yeah, Robert. So the short answer is we keep the ARPU premium. So we are not selling Virgin Media in areas network expansion cheaper than in other areas. We are getting more and more to regional pricing. But this is then a question how we use this in the future. So we are not doing this. What we have just launched is the ability for customers also to record with fiber all the TV content. And therefore, before that we have stream, which is the low-end video product, plus broadband. If you add that, you get to a little lower APU, but this is not because we don't get the premium for Virgin Media. This is because the 360 product, the box was missing so far, and now this will change.

Thanks very much.

Thank you. Our next question comes from the line of Steve Malcolm with Redburn Atlantic. Steve, your line is now open.

Yeah. Good afternoon guys. So you can hear me. Okay. Thanks for taking the questions. Um, first of all, just on the sort of status of the retail relationship between VMA, VMA two and next fiber, obviously part of the lowered guidance for this year was you're maybe a little slow at the blocks and kind of getting all the, your marketing ducks lined up on next. Are you, where are you on that, on that journey? Are you kind of, you know, up and running? Are you still going to add for a little light? This quarter on the market was a bit weak, but you feel like you're where you need to be in terms of, you know, marketing that footprint. And then secondly, just might you raise the point on kind of your Liberty post-sunrise spin? There's still a lot of interesting aspects of the story. But, you know, one of the concerns I have is that, you know, if the share price doesn't move, the market gap is going to be kind of below two and a half, three billion dollars. Liquidity maybe becomes an issue. Is that something you've thought about at all? And any sort of steps you can take to deal with that in terms of buybacks and things like that? Just curious to know your thoughts on, you know, liquidity post-spin things.

Yeah, thanks for the question. Lutz, you can work up an answer on NextFiber, but let me address the second question first. I want to make sure I understand it. Listen, we obviously believe that the steps we're taking, in particular the steps around Sunrise, will force the issue, if you will. And as shareholders, and we're all shareholders here, if we receive a share of stock in Sunrise of a material value, and the Remain Co., if you will, doesn't trade, then we'll be looking at what sort of steps we need to take to bridge that gap or shrink that gap with the Remain Co. or take other steps. But it's one step at a time. That's certainly how we're looking at it. We're not anticipating anything but a re-rating, if you will, of Liberty Global as a result of that spin. And as we continue to demonstrate that we're executing on our growth plans, on our strategic plans, and the assets that we owning control and the ones we're partners with are valuable assets. The $3 billion point, I mean, I'm not sure if I followed that. Maybe, Steve, just clarify the question around $3 billion just so I'm clear on what you're getting at.

I guess my slight concern, Michael, I think one of the issues you face is you're clearly quite an esoteric company. You're listed in the U.S. You operate over here. Market cap's quite small. You're quite complicated. And as the market cap shrinks, it's it becomes harder for investors, I guess, to sort of spend the time and liquidity in the shares potentially dries up. I mean, obviously you had the problem with Telnet, you know, very, very small free, but it's slightly different. But are you worried at all that, you know, if the market cap doesn't adjust to the steps you're taking, that, you know, buying back stock becomes more difficult because liquidity is potentially impacted by the small size of the company, you know, and just how you're thinking about that post-sunrise life really as a potentially much smaller company again.

Yeah, I understand your point. I mean, our expectation is that the Remainco trades up from where it is today because we believe, obviously, you know, depending on how the spin works and the value attributed to the shares, that the remaining assets are equally undervalued. Now, you make a point, hey, they might just continue to trade where they trade. We'll cross that bridge when we get to it. At this point, our expectation is that the Remainco will be re-rated and that the underlying businesses we continue to own in the UK and Belgium and other markets will be valued on a similar basis because we've demonstrated that there is intrinsic value not being recognized in the stock. If that doesn't occur, we'll cross that bridge when we cross it. At this point, I'm not going to tell you prematurely what we may or may not do, but you raised good points and let's see how it unfolds. I'm pretty confident of two things. One, that this Swiss transaction is going to be a game changer and is going to happen and we're all going to be very thankful that it does happen, and that secondly, it will reset how people view Liberty Global in terms of how we're both approaching value creation as well as value distribution and where our heads are at in terms of the remaining businesses we own and control and how we build value with those businesses. But let's see. I understand your point. I'm not going to guess at things prematurely. Let's see how things unfold. Lutz, you want to address the next fiber point? Yeah, yeah, yeah.

So, I mean, I agree, right? We have 1 million homes built and so therefore now the sales machine is ramping and it has to further ramp quarter over quarter over quarter. And our relationship with Nextfiber is very good because At first, you need to build a network, right? And a year ago, the big question was, hey, you have to double your bill. Is this working? La, la, la. And it did, right? We celebrated 1 million homes. And now the question is, do you get to the penetration we need for this network? And what the NextFiber team is able to see is what I said before, that month over month, we are selling more, more, and more. And the driver for that first was get the fiber product ready, right? So therefore, we couldn't simply keep doing what we were doing with lightning because that was cool. And second, now, we have to ramp the sales channels, especially field sales, right? As you can imagine, if you have now much more homes you want to penetrate, you need the field sales channel to target these customers where build is. And so we are ramping months over months, also our field sales team and train them. And, and therefore we are confident that we are getting to the number we have agreed with next fiber end of this year.

Okay.

Thank you. Our next question comes from the line of Matthew Harrigan with the benchmark company. Matthew, your line is now open.

Thank you. I actually have two questions. I think I'll go with the more mundane one first. When you look at Liberty Global versus the U.S., you've got some advantages in terms of Greenfield, JVs and all that, but if you look at the core business, you're doing better than the U.S. peers on units. Both of you are realizing pricing power, but they've got video businesses just falling off a cliff. I do think there's some decent contribution margin there, even though they really downplay it. When you look at your video business, you're losing some units, but it's certainly no sense if you're going off the cliff. And you really have the benefit from consumers moving to streaming on the consumption side. You're benefiting your broadband business. And I think you probably have much better contribution margins as well as stability outside the UK on the continent on the video business. And it's obviously not something that's terribly glam. You don't talk about it very much. But do you have any thoughts on how that lays in strategically with what else you're doing on your core operations? And then I have a follow-up after that.

Well, I think you've characterized it accurately, Matt. While we are dealing with many of the same trends that the U.S. operators are dealing with, we're not impacted nearly as severely So our video losses are a fraction of the U.S. losses. For example, the trend is the same. We're not growing the video base. In some cases, we're trying to remain steady at the video base. We're migrating quickly to IP boxes. We've got every app integrated. So we're doing all the same things to make the video product as part of the bundle attractive to people. including very cheap and cheerful IP devices and making it easy, even subsidizing certain streaming services. So we're trying to keep people connected as video customers, but we're not losing customers at the same clip and are unlikely to lose customers at the same clip as a U.S. guy. So that is absolutely the case. And we're not losing broadband subs in the same manner either. In fact, we're generally growing broadband subs, with the exception of really Holland, which has been a tough market, and we've discussed that every quarter. We're generally growing broadband customers and taking, you know, our fair share or more. So I think there's, you know, and our contribution margins are, my guess, pretty good. I mean, relative to the U.S. guys, they don't have their numbers to hand. Broadband margins are 90 plus percent. And our video margins, especially on the continent, are probably 75, 80 percent. So, you know, I think these businesses, while relatively small, the video business for us in the aggregate, you know, is more stable. Having said that, you know, we're putting our effort on, you know, 50% of our revenue is now mobile. So the mobile business for us is not a hobby as it is in the U.S. It's a core revenue stream. And thankfully, it's growing every quarter. Mobile service revenue grows every single quarter. So we have a growth business along with B2B. B2B and mobile are growing every quarter. And that to us is a fantastic, you know, accelerant and tailwind for It's the fixed business that we constantly look to improve, whether that's on the broadband side and investments we're making in fiber, bundling. And so that's the piece of the puzzle that we're investing a lot of time and energy into, as well as capital costs. And I think it's working. If you look at our fixed ARPUs over the last four or five quarters, they're either improving in every market or nicely positive. So I think it's having an impact on us. So we are in the same industry, of course, but we're not struggling or faced with the same headwinds and obstacles that the U.S. guys are. I think we're in a better position, personally. What was your second question, Matt?

Yeah, more conjecturally, when you look at netcodes, I mean, over a period of time, intermediate, it seems like that could be a nice new growth factor. Layers in even more complexity when your JVs already have JVs, unfortunately. But it's interesting when you look at that, you know, and various consultancy studies, a lot of tech company and growth, tech company growth has kind of been almost a free rider phenomenon on your network, you know, 5G as well over a period of time. Is there anything, when you did NetCoast, is there anything that could make it structurally easier? for you to capture growth in new tech businesses other than what you've done with your venture portfolio, which has already made a nice contribution just in terms of how the economics of that could lay out so you get more contribution from that? Thanks.

Well, that's a good question. I mean, look at the netcos that are embedded inside of our opcos, if you will, are owned by the opcos. So any benefit that comes from setting up a netco, financing a netco, Selling a netco, partnering with a netco, bringing in new revenue streams to that netco are going to accrue to the owners of the opco. And that's not really our ventures portfolio as such. Having said that, you know, we certainly are always looking at ways to create additional value in and around those netcos. We're looking at Metro Fiber, for example, our investment in data centers and the edge. Those things all relate. The opcos aren't pursuing those business opportunities, but we at the ventures are pursuing those. those kinds of business opportunities around the opcos, if you will. In some cases, we'll work together. There's opportunities for VMO2 to do work for us on our charging points, what we're trying to build in the UK. So there will be, I would say, synergies, but I think the ownership of these opportunities are pretty distinct. We have partners in the UK, and what we do has to be something TEF wants VMO2 to do. So there's quite, I think, an appropriate set of governance rules there. But I think they do fuel each other. There are benefits for sure, and I think you'll see us take advantage of any and every opportunity to invest in infrastructure in and around our opcos as those opcos themselves take advantage of the infrastructure they've been sitting on for decades and try to finance those and identify value in those in a new way. I think we have time for one more question. Thanks, Matt.

Thank you. Our final question comes from the line of Carl Murdoch-Smith with Barenburg. Carl, your line is now open.

Hi. Thank you very much for the question. On a kind of similar point, I'd like to address your waterfall chart on slide 10 where you talk about your view that the equity is mispriced and valuing the FMC operations at zero. I think I agree that the equity is mispriced, but I disagree with the component parts of that slightly. And I guess my point would be on the ventures portfolio and whether the ventures portfolio is being priced at the value at which you are attributing to it. And I guess my question is, do you think that the share price is giving you a a right to play in that market, or is it being discounted unfairly in the share price? And with your comments that there could be another 300 to 400 million additional pipeline monetization by the year end, will that be the start of a longer-term trend to seek to monetize those ventures portfolios? or I suppose the flip side is every time I hear you talk about Atlas Edge or Edge Connect, you sound very excitable. So the question is, should the size of that venture's portfolio go up or down on a longer term view? Thank you.

Yeah, it's a good question. I'll just make a couple points up front. We're not coming up with that value for the venture's portfolio. That's Deloitte coming up with that value. So We're very conservative and I think very rigorous in how value is ascribed to those assets within the portfolio. It's not like we're making it up. That's point one. Whether or not people are giving us full value for that is a judgment call. It's hard to know. Nobody's giving us their views on a day-to-day basis. I will say, however, that we just demonstrated with all three media that an asset that was, if you're right, getting no value, we just sold for 12 times. So I think there is, you know, the truth is the portfolio consists of a number of verticals. Some of those verticals are, you know, perhaps at a different stage of development than others. I would say our content vertical, which is our largest, has more in it to rationalize and potentially exit or monetize. And so we'll see how that goes. The infrastructure side of things. It's a bit of both. We've got some things that we could possibly monetize, but we're also excited by the infrastructure opportunities that are right in front of our noses, and we have a right to play in those spaces, so that could be a bit of both. And the tech stuff pays for itself. I mean, everything we invest in tech is more or less funded by exits that they are creating for themselves annually, and the benefit we get from tech is really accrued to the opcos as much as anything because we're investing in AI companies and cloud companies and security companies all of which we hope will be customers or partners and suppliers of our optos as well. It's not a simple story. I appreciate that. But the three verticals have their own unique characteristics. We are where we are. These assets have been built over time, and it's the right question. What will it look like in one, two, and three years? We'll see. I'd say there's going to be a bit of both, a bit of modernization and a bit of investment. And three could become four, three could become two. Let's see how it goes. We're not setting a target that it has to be a particular number. But we are very disciplined about it, and we are focused on things that we think investors will understand and appreciate, like infrastructure, for example. And we're making decisions that, you know, in light of the broader business we're in. So, for example, exiting all three media, you know, and putting that capital into Sunrise, Was that accidental? Not really. We're thinking about right pocket, left pocket all the time. And I think we'll continue to look at this portfolio of assets as both an opportunity to create value, but an opportunity to redistribute value into other strategic initiatives that we hope will bridge the gap in our stock. So long answer, but I think we're looking at it in a flexible way, not a predetermined way. And that's how we'll focus on it going forward.

That's great.

Thanks very much. You know, again, I think you're – yeah, you got it. Okay. Thank you, Carl. Operator, I think that's it. So, listen, everybody, appreciate you joining us today, as always, and hopefully you got a lot out of, you know, what we had to say in the update in particular on the five initiatives and what we've been able to do in a short 10 weeks in each of those instances. You know, we're – the balance of the year, we're focused on growth. strategic positioning of our opcos, and also trying to find ways to monetize or create value with the embedded assets that those opcos have, and then ultimately delivering that value to you. So the Sunrise transaction is front and center for us. You should assume we're prioritizing the things that we think will create value for shareholders, and we look forward to updating you on the next quarter. So thanks for joining us.

Ladies and gentlemen, this concludes Liberty Global's first quarter 2024 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.