Liberty Global Ltd.

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Liberty Global's second 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 a 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 slides 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 Forms 10-Q 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 Fries.

Okay. Hello everyone. Thanks for joining the call today. We've got a lot of ground to cover, so I'm going to jump right into prepared remarks. My senior team is also on the line as usual, so I'll be involving them in the Q&A when we get there. So I'm starting on our Q2 highlights slide. On our year end call in February, you'll all remember that we laid out what I think is a clear strategic plan, which included three core elements. First of all, maximizing the intrinsic value of our FMC operations. That's critical. Second, using the ventures portfolio to create liquidity to support those operations and to invest in strategic platforms. And then most importantly, putting all that together to both create and deliver value to you, shareholders. At the top of this slide, we provide an update on each of these core initiatives, beginning with Switzerland, where the Sunrise Spin, which we have talked quite a bit about, is on track for the fourth quarter of this year. The purpose here is to hand shareholders a significant and well-deserved dividend of what analysts are estimating is around $12 per Liberty Global share. As a reminder, Sunrise represents only about 20% of our proportionate EBITDA, and that excludes, of course, the value that might be attributed to cash and ventures and our stock price. Now, those Sunrise valuations of $12 per Liberty Global share are supported by 1.5 billion Swiss francs of deleveraging that we will fund pre-spend. And it's supported by a commitment for Sunrise to pay an annual dividend of 240 million Swiss francs beginning next year in 2025. So those two things are anchoring that $12 per share. Now, we've scheduled the Sunrise Capital Markets Day. I'm sure you saw that for September 9th in Zurich. Of course, there's going to be a live webcast and replays, and management's going to hit the road right after that. So hopefully you'll have a chance to connect with Andre and his team. They are an outstanding group. I'm sure you'll see that immediately. You also should stay tuned for more details on the spin mechanics and logistics as we finalize the SEC process and start working towards the shareholder meeting in the fall. So a lot of communication, and we'll be heavily engaged in making sure you understand everything that's happening there. Now, we've got three key strategic updates in the U.K. as well along the same strategic path. Earlier this month, we announced a fairly comprehensive agreement with Vodafone in the U.K., which strengthens and extends our mobile network sharing agreement, which we've had for some time. And that's going to occur whether or not the merger with 3 goes through. And it includes the right for VMO2 to purchase Spectrum should the deal be approved. And both of these address some of the concerns raised by the CMA, including rebalancing Spectrum among operators, but in either case are highly accretive to VMO2. And on the fixed network front in the UK, we've now reached 5 million fiber homes across VMO2 and NexFiber, and that build-out and upgrade is ramping up and accelerating. Also, our announced plans to create a UK NetCo are on track for the first half of 2025, with financing discussions probably commencing really Q4 this year. And I'll give you a bit more on these developments in a moment. Moving to the Benelux, where we are also making meaningful strategic progress at the country level in Belgium and Holland. That progress is going to support our ambition to create a regional operating platform with scale, with synergies, and with strategic optionality. So, for example, in Belgium, we announced a preliminary agreement, or MOU, with Proximus to avoid overbuilding each other with fiber in about 2 million homes. And just as importantly, for each of us to use the other's network, in those areas so we can maximize utilization. In the Netherlands, the 5G spectrum auction finally occurred, and we were able to recently acquire 100 megahertz of 3.5 gig spectrum, well below the expected price we thought we'd pay. And then sticking with Holland, we could not be happier with the hiring of Stephen Van Rooyen, who will become CEO of Vodafone Ziggo in September. I've known Stephen a very long time, and this is not the first time I've tried to hire him, by the way. Both we and Vodafone recognize right away his deep expertise and brand and production and innovation that he's developed over 17 years at Sky. And we're convinced he's going to bring the right energy, operational focus, and strategic direction to this critical market. And then finally, as I just mentioned, we're using our Ventures platform to provide a source of capital that we can rotate into other strategic opportunities... It also has an investment vehicle for innovation and new scale-based businesses that align with our core value creation goals. Now, we're delivering on that first objective with $650 million of asset sales in the last six months, a large portion of which will support the leveraging of Sunrise pre-spin. And we remain focused on larger platform opportunities, as you can tell by our plans to increase our stake in Formula E and our increasing commitment to digital infrastructure. And I'll talk about those in a moment. Now, moving from those strategic initiatives at the top of that page to our regular Q2 highlights, I'll start with our balance sheet and capital allocation model, which are in great shape. As we point out on every call, our debt profile is long-term, fixed rate and siloed with no debt at the parent company and no material maturities until 2028. We're also sitting on a cash balance equal to roughly half our market cap. And by the way, we continue to shrink that market cap through an aggressive buyback program, which saw us repurchase 5% of our shares year-to-date towards a planned 10% of shares through year-end. We also continue to both invest in growth and execute at the core FFC operating level. That includes powering through headwinds. We talk about this, as do our peers, every quarter. We are facing an increasingly competitive marketplace with consumers who continue to feel the stress of inflation and macro challenges as You'll see in a moment, while our fixed ARPUs are rising or stable, and that's great news, we're feeling pressure in the mobile sector from promotions and from flanker brands. Now, despite that, we are confirming all of our 18 different guidance metrics. That's right, 18 different guidance metrics we provided, with the exception of one, which is revenue growth at VM02. We are lowering that as a result of slower hardware sales in the mobile business. Now, these are low-margin revenue sales at best, so we're still going to hit our EBITDA-free cash flow guidance in the UK. That's important. And I'll end this slide by emphasizing that we are also seeing some tailwinds, in particular, as we begin to read the benefits of four things. Number one, our investments in fiber and 5G, which remain substantial. Number two, the growth in our flanker brands. And number three, our access to new revenue streams and new homes. generated by our fixed network strategies, and then lastly, the hidden value of our digital infrastructure assets. I'm going to touch on all of these, but the punchline is that we feel we have a pretty good operating and strategic toolbox here to help us work through this transition and ultimately deliver that value to shareholders we've been talking about. So moving to operating highlights, so we provide our traditional KPIs on this slide, the big FMC opcos. I'm going to move clockwise from top to left Starting at the top left, you'll see that Sunrise had a really strong quarter leading into the spin, which is always good. Broadband and postpaid mobile ads were 38,000. That's nearly double the prior year and up around 20% sequentially. This is also the third straight quarter of broadband growth improvement in Switzerland, driven by reduced churn on the main brand and continued strong inflow. We're also benefiting from progress on the migration of the UPC base, which we've talked about for four or five quarters now. That should be largely completed by year end. Those factors, along with the price rise last summer, have helped deliver four straight quarters of fixed ARPU improvement. It's also delivered another strong quarter of mobile postpaid growth, supported by improved churn and our flanker brand, YALO. The market continues to be highly competitive. This is a theme everywhere, with budget brands heavily discounting, and that's adding pressure to mobile ARPUs. Moving to Belgium, Telenet's results were largely consistent with prior quarters and up from Q2 and Q3 last year when the company was managing through IT challenges. We lost around 5,000 broadband and post-paid mobile subs in the quarter in a very competitive Flemish market with intense promotions, by the way, ahead of this anticipated mobile launch from Digi. To combat that, we are executing a multi-brand strategy, as you know. Most importantly, though, we now have a nationwide FMC flanker brand That's available not only in the Flanders, but also in the south of Belgium, where we've just launched and are targeting a modest 10% market share. Everything's off to a good start there. And then finally, fixed ARPUs at Telenet continue to grow mid-single digit. That was helped by the price rise last year, with this year's price rise of 3.5%, taking effect early June and also landing well. And then moving to Vodafone Zigo, what was a challenging quarter in the Netherlands? Operationally, the financial results were outstanding. Charlie will cover those numbers. Vodafone Ziggo delivered a steady quarter on broadband with slightly improved losses of 23,000 in a highly competitive market. The good news is that churn is declining on the back of extensive programs that provide more value to customers, including speed increases, more entertainment, customer experience improvements. Big Star Group continues to grow in the mid-single-digit range in Holland, supported by the retention of last year's 8.5% price increase. And after steady gains, Postpaid mobile subs turned negative in the quarter, but that was driven primarily by the loss of low ARPU B2B contracts with local government. Similar to fixed, postpaid mobile ARPU was up mid-single digit, supported by the price rise last October. And looking forward, Ziggo implemented a 2.5% fixed price rise in July, which is landing well, and is also supported by our exclusive UEFA broadcasting rights, a strong FMC proposition, and I think importantly, our successful loyalty program called Priority. And then finally, in the U.K., Despite a tough trading environment, Virgin Media O2 delivered its fourth straight quarter of improved fixed ARPU results with 3% year-over-year growth in the second quarter, reflecting our focus on value over volume and the retention of price rise benefits. We continue to take a higher share of gross ads in the broadband market as broadband growth in the next fiber footprint continues to build steadily and is expected to ramp in the second half. However, as with any price rise quarter, we have seen a moderate increase in churn, with overall broadband losses of 12,000, broadly in line with the prior year. The post-paid mobile market in UK continues to be soft. You're hearing that, I think, from all of the operators, especially at the premium end, with weakness in the handset market continuing. Now, while O2 churn remained stable, Luce and the team are implementing a series of measures to rebuild post-paid mobile momentum in the second half. That includes proactive campaigns to drive retention, Strong offers around new hardware launches from Samsung and Google and iPhone later this year. Renewed energy in our FMC packages and better performance in the indirect channels. So 2024 is a transition year, as we've said the last few quarters here, and we are focused. I know the team is focused on preparing BMO2 for a strong 2025. Again, each of the OCO leads are on the call, so we can dig into any of these markets during Q&A. Now we move to the next slide. We've talked a lot about our fixed network strategies, in particular our fiber build plans, and then more recently our efforts to de-layer certain of our businesses by separating out our fiber and HFC networks from the service platforms. Now, we've already achieved this in Belgium, and we've talked about it, with the formation of WIRE, which together with our partner Fluvius now owns and controls the Telenet HFC network, passing 4 million homes, plus or minus, with a commitment to deliver fiber to about 80% of those homes over time. WIRE is already wholesaling a fixed network to Telenet and to Orange Belgium across Flanders and representing about 50-plus percent utilization of the network. And they also recently announced you might have seen an MOU with Proximus to share the fiber build-out in around 2 million homes. and to whole-buy access from each other, which would bring utilization of the wire network in those areas to over 80%. It's among the highest in the world. Similarly, we've announced our intention to create a netcode-like wire from our 16 million fixed network passings in the UK, 3.8 million of which have already been upgraded to fiber. Together with our JV, which we call NextFiber, VMO2 will ultimately have access to between 21 and 23 million fiber homes in the UK. That's about 80% of the urban market. And the combined network would be available to third parties, potentially driving even higher utilization and newfound wholesale revenue. So why are we doing all this? What is the rationale for what appears to be, from the outside, a relatively complicated restructuring of our operations into netcos and servcos in these two markets? I think the answer is pretty straightforward, actually. On the netco front, once the physical infrastructure is isolated in these platforms, they can generate stable and high-margin cash flows. driven primarily by the fixed monthly wholesale payments they receive from retailers for utilization of that network. As the utilization rate climbs, the cash flows improve, driving long-term returns to financial and strategic investors. These platforms also allow us to attract new capital, which helps accelerate our network upgrade and extension plans, and they can facilitate in-market consolidation of both network and operating platforms. The remaining SERVCO can also benefit from the separation. What you end up with is an asset light, typically a digital first business model that prioritizes customer experience in order to differentiate from other retailers. There's more focus inevitably on innovation to drive new revenue streams, as well as the opportunity for in-market consolidation of other B2B and B2C service providers. Now the far right hand side of the slide demonstrates the hidden value in our network assets. What we show here are nine recent fiber transactions that have been concluded in Europe, where the median EBITDA multiple in those deals was about 18 times. Now, of course, there's a wide variance of valuations, which reflect things like the CapEx profile, the amount of overbuild in the market, forecast utilization rates, and what the wholesale revenue opportunity is. But if you compare that to integrated telco multiples of mid-single digit, where most of us are trading, this is obviously a significant premium. Now, these are not easy transformations. The execution risk can be high, but we're focused and we have focused our resources on the two markets where this will most easily be achieved. And I think where the dynamics will generate the most significant value creation for shareholders. So stay tuned. Now, before handing it over to Charlie, I'm just going to spend a moment on some developments in our 3 billion ventures platform. To begin with, in October of last year, we committed to 500 million to a billion of non-core asset sales before mid-2024. Good news, we've achieved that goal with over $650 million of proceeds through Q2, and we're targeting another $100 to $150 million before year-end. This is consistent with our strategy of rotating capital, as I've said, out of ventures and other non-core holdings and into higher growth or higher return opportunities. Obviously, the sale of all three media and the use of that $400 million to deleverage Sunrise pre-spin is an excellent example of that. We also remain focused on building larger positions in scale businesses like Atlas Edge in the digital infrastructure space, where our portfolio now totals a billion. And Formula E, where we just announced our intention to increase our stake from 38% to 65%, at what we believe is a very attractive valuation. Now, interestingly, we haven't talked a lot about Formula E, so on the right-hand side here, we provided a short update of this platform. After just 10 seasons, This is one of the fastest-growing motorsports in the world with over 400 million global fans, races that span four continents, and revenue growth of nearly 20%. As a reminder, we have an exclusive license with the FIA for electric racing that runs another 15 years. And we're riding the tailwinds, obviously riding the tailwinds of vehicle electrification with the support of car brands like Porsche, Jaguar, McLaren, Maserati, and Nissan, who are also committed to that. Next season, the Gen 3 Evo car will be 30% faster than an F1 car at the zero to 60 mile per hour range with massive headroom on speed and performance moving forward. And the format of this race is extremely exciting with nearly twice as many competitive overtakes per race as F1 and every champion pretty much so far being decided on the final weekend of the season. Also important to note, Formula E has been net zero since day zero, which is another major selling point for sponsors and for fans. We definitely have work to do, particularly on the modernization of media rights globally and other things. This is work in progress after 10 seasons only. I think it took Formula 1 75 years to get to where it is. And we're going to continually refine the racing series along with the FIA and with iconic racing partners like Andretti and Penske. I think the bottom line is with minimal future investment, the upside here we believe is significant. and we are squarely focused on realizing that potential. So, Charlie, over to you now.

Thanks, Mike. The next slide sets out the quarterly revenue in EBITDA for each of our four key markets. Now, we saw similar trends to Q1 with broadly stable reported revenues across all our opcars in the second quarter. Sunrise delivered stable revenue in Q2, supported by the July 2023 price rise, and continued growth in mobile subscriptions and B2B. Now, because there's no price rise this year, the second half of the year will not see a price rise benefit. Telenet 2 posted stable revenue in Q2, despite slightly weaker mobile performance. And Virgin Media O2 reported broadly stable revenue, but excluded the impact of the next fiber construction, so a revenue decline of around 4%. Now, the key driver of this decline continues to be lower year-on-year hardware sales, which, although they're very low margin and have a limited impact on the EBITDA of the company, do impact top-line growth. Now, despite this, overall mobile service revenue and fixed subscription revenues did grow. And encouragingly, as Mike noted, in fixed, we saw improved ARPU trends supporting fixed revenue growth. At Budapest and Ziggo, revenue was up 1.5% this quarter, supported by price indexation, continued growth in mobile and B2B fixed revenue. Q2 was another record quarter of strong mobile service revenue growths. Moving on to our adjusted EBITDA performance this quarter, Sunrise posted stable adjusted EBITDA growth, including cost of capture, driven by the revenue increase in the quarter and lower OPEX, particularly in labour costs and marketing spend. Telenet's EBITDA was down around 9% year over year, reflecting a tough comparison base against Q2 of last year. Now, this included a €10.5 million one-time benefit they got last year. In addition to this, the decline was due to higher staff-related expenses following the mandatory 1.5% wage indexation, and growth in our overall FTE base. This quarter, we also had increased sales and marketing expenses, including the FMC launch in the south of the country, compared to the same period last year, when we scaled back our spending due to IT platform migration issues. Virgin Meteor O2's adjusted EVDA decreased 1%, including next fiber construction, as the quarter saw reduced contribution for B2B fixed. Additionally, Q2 BMO2 continued to invest in the future growth drivers, largely in IT and digital efficiency programs. And Vertifone and Zyga delivered around 8% EBITDA growth, driven primarily by the reversal of energy cost headwinds and lower consultancy service costs. Now, this was partly offset by wage increases due to the new collective labor agreement. Turning to the next slide, we give an update on the key metrics underpinning our capital allocation model. In the first half of 2024, we saw consolidated free cash flow and central spend on track, and as is the case in previous years, anticipate cash distributions from the JVs will be realized in the second half of the year. In relation to our cash position, our consolidated cash balance was $3.5 billion at the end of Q2 2024, and the quarter saw cash inflow related to operations of $0.3 billion. We realized net cash from our ventures of $300 million, and share buybacks were around $170 million during the quarter. consistent with our guidance for up to 10% buyback in 2024. On ventures, we closed Q2 with a fair market value of around $3 billion following the all-through media disposal. We made net investments of around $100 million in ventures, focusing on Atlas Edge and Edge Connects, both are data center assets and part of our infra pillar, where we see strong growth potential and are focused on creating new unicorn assets. And finally, turning to our sum of the parts, we'd like to highlight the key value drivers of our stock on a per share basis. We believe the current share price of $18 to $19 per share still does not reflect the inherent value of the business. And we're committed to closing this valuation grab. And the sunrise spin is the first step to do it. Encouraging the current average analyst valuation for sunrise of 8.4 billion Swiss francs, which is up from 8 billion Swiss francs in Q1, now implies a $12 per share contribution to the current Liberty Global stock price. And as we go through the Sunrise spin-off execution, our aim is also to unlock the remaining value sitting in cash, ventures, and the other FMCs with Sunrise and the rump trade separately. So when taking the book value of cash, listed stakes, and unlisted ventures, which sums to around $14 per share, and combining with the Sunrise $12 per share, the implied value of a Liberty Global share is around $26 per share. This is even without attributing any value to the remaining FMCs. The implied value is around the current average analyst target price of 25 bucks a share. But if the sunrise value is realized over time, does imply very substantial upside on RomCo from a performer value of seven bucks a share to $13. Turning to our debt stack, we continue to have a strong position, maintaining long-term fixed debt profile of around five years. We also continue to hold our cash and liquidity at the parent company with the debt stack siloed at the key FMC assets. Now, our debt silos do not face material maturities until 2028, and we remain proactive in extending the tenure. This is facilitated by our extensive swap portfolio with the swaps independent of the underlying bank debt. And importantly, this allows us to remain opportunistic and strategic in the market and strengthens our attractive debt position. At Sunrise, we're proactively deleveraging ahead of the spin to ensure an initial leverage range of 3.5 to 4.5 times. The 1.5 billion Swiss franc deleveraging, which is approximately $1.7 billion, will be funded by Liberty Global corporate cash, Sunrise 2024 free cash flow, and the all three media proceeds which we received in Q2. And lastly, I'd like to give you an update on our 2024 guidance. At VM02, the company expects to deliver a low to mid-single-digit decline in revenue, excluding the expiry of construction. Now, this is a decline as a result of the lower margin hardware revenue, which continues to be a headwind. However, the other revenue streams are expected to be stable, and adjusted EBITDA, adjusted free cash flow, and all other 2024 guidance is reiterated at BMO2 as the company continues to invest in its growth drivers. To underpin this, BMO2 has had a solid start to the year with a slightly better than 2% EBITDA decline. I also want to additionally reconfirm all other guidance at Telanet, Sunrise, and Benefensica. And that concludes our prepared remarks for Q2 2024, and I would like to hand over to the operator for Q&A.