Liberty Global Ltd.

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Liberty Global's third quarter 2024 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 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 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 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 Freese.

Hello, everyone, and thanks for joining us today. As usual, we've got a lot of ground to cover and some pretty positive developments in our strategic plans to discuss with you. I'm going to kick it off with a handful of slides and then turn it over to Charlie to review our financial results. Of course, after that, we'll get to your questions, and I've got the full management team online with me today who will chime in as needed. So let me start on the first slide with some Q3 highlights. I think as you'll see, while we had a good operational quarter, this update here focuses entirely on our strategic plans, since there's really nothing more important right now than the work we're doing to drive value recognition in our share price. I'm sure you'd all agree. In February, we announced a handful of initiatives to do just that, and we've made substantial progress on each of them. By far the most impactful today is the pending spinoff of our Swiss subsidiary, Sunrise, which is now scheduled for November 12th. after 99% approval of the transaction at our EGM last week. I'm sure you're all following this, but the average analyst today is an 8.2 billion Swiss franc enterprise value on Sunrise. After adjustments for reduced debt levels, that results in a 3.6 billion Swiss franc equity value, which is $4.2 billion, or roughly $12 per liberty share. That valuation is underpinned by several factors. not the least of which is the intention to pay a $240 million tax-advantaged dividend in mid-2025 and a progressive dividend policy thereafter. It's also important to point out that despite theoretically representing nearly 60% of our stock price today, according to analysts, Sunrise only represents 20% of our proportionate EBITDA on what we now call our telecom group, and that's before any value was attributed to our cash balance and our growth portfolio. And more on all this in a moment. In the UK, we continue to make progress on our plans to create and finance the UK's second largest fixed network company, or Netco, fueled by an existing footprint of 17.8 million 1 gig homes, 5.6 million of which are already full fiber. I think anyone following the UK market today would know that quarter by quarter, things are slowly rationalizing on both fixed and mobile networks. An increasing number of altnets are beginning to either consolidate, seek recapitalization, or shut down. Importantly, in this context, Virgin Media O2 added broadband subs in the quarter and continues to grow ARPU on its fixed base. We also remain positive on the merger between Vodafone and 3 in the UK market. We believe, and have said publicly, that the CMA should and will likely approve the deal, which will result in a more stable mobile market for everyone, while yielding additional spectrum and mobile network benefits to Virgin Media O2. Now, there have been some key developments in the Benelux region. I'm very pleased to have Stephen Van Rooyen now at the helm in the Netherlands. He's already brought a sharpened consumer and product focus to the market with a strong determination, you can tell, to drive market share across B2C and B2B. Now, he's on the call today and available for any questions you might have. Welcome, Stephen. Our arrangements to cooperate with Proximus on the fiber rollout in Belgium are under review by the regulator there. As a reminder, if that deal is approved on terms acceptable to us, this would result in a large portion of our network having roughly 100% wholesale market share and the balance at 65%. That's really unprecedented. Even without the agreement, WIRE is a world-class infrastructure business with 65% wholesale market share across the footprint, which we believe is going to attract significant interest from PE and financing sources. And to be clear, we remain intrigued about the idea of putting these businesses together at some point, what we have dubbed Liberty Benelux, and we continue to see operational, financial, and tax synergies down the road if this were to happen. With respect to asset sales, we are optimizing our investment portfolio all the time, as promised, exiting lower growth businesses at substantial multiples of returns and putting that capital to work in both our telecom businesses, like the debt pay down at Sunrise, or into what we believe are more attractive long-term opportunities. In the last 12 months alone, we've realized $900 million in asset sales towards the high end of our forecast, demonstrating our ability to both generate and capture value from these investments. I think a few examples here are appropriate and will help make the point. You're already aware of all three media, which was sold for 12 times EBITDA, with proceeds used to pay down debt at Sunrise. We've now sold around 25% of VMO2's tower portfolio in two tranches for roughly 17 to 18 times EBITDA, netting $350 million of proportionate value to Liberty Global. We recently sold a portion of our stake in EdgeConnects, a premier global data center business, which values our residual interest at $370 million and implies a 30% IRR on our total investment. And we just sold our interest in PAX 8, a leading marketplace for procuring and managing cloud applications, realizing over $70 million on an investment of $20 million for a 36% IRR. So clearly, when it comes to our growth portfolio, we continue to prove out our ability to invest in strategic adjacencies, but just as importantly, exit those positions in a timely and profitable manner. And then finally, we also committed in February to repurchase 10% of our shares this year, and we are on our way to achieving that goal with 8% acquired year-to-date. And when you put it all together, this will end up being a record year for shareholder remuneration at Liberty Global. Our buyback will add up to around $700 million when it's complete. And with the Sunrise dividend at $4.2 billion, according to analysts, that totals nearly $5 billion of shareholder remuneration on a market cap of $7.6 billion. And as we'll cover today, we're not done. We assume that most of you have followed closely our progress on the Sunrise spin over the last eight months. Nonetheless, we provide on the following slide an update on the transaction, including all the key dates and trading details. This is a significant moment for Liberty Global shareholders, to say the least. So we are ramping up communications starting today as we draw closer to that distribution date. At 10.30 this morning, Sunrise Management will be hosting their own Q3 results call, sort of a dry run, followed by another week-long investor roadshow. I can tell you this management team is working very hard for you. And then on November 1st, this Friday, Liberty and Sunrise will be hosting our second investor briefing call to address any and all remaining questions on the transaction itself and trading mechanics. In particular, between the record date of November 4th and the distribution date of November 12th. We'll also cover key elements of the conversion from ADS to six shares. So we encourage you or your proxy to attend this session, please. On the right side, we simply repeat the compelling investor messages that have resonated with shareholders and analysts thus far. In particular, the fact that Sunrise is a scale-based challenger operating in Europe's most attractive telecom market with world-class brands, significant network optionality, and a compelling free cash flow story. It's also worth pointing out that we expect Sunrise A shares to be included on the Swiss Performance Index five trading days following the listing on six. That's an important moment. Now, understandably, there's been quite a bit of focus on what's next and what happens now to Liberty Global after the Sunrise spinoff. And the following slide outlines this next phase of value creation. One of the big strategic pivots announced in February was a renewed focus on distributing assets to unlock value for shareholders when the time is right. Given Sunrise CapEx profile and free cash flow generation, it was the obvious first candidate. Moving forward, we remain squarely focused on managing our remaining telecom assets, what we now call Liberty Telecom, for the benefit of shareholders in that manner. We'll also continue to rotate capital out of other positions and into strategic telecom transactions when that makes sense. Now, why is this exciting from our perspective? First of all, as I've already mentioned, despite representing 60% of our market cap, according to analysts, Sunrise is a small piece of Liberty Telecom today, representing around 10% of RGU's revenue and EBITDA on an aggregate basis, and as I said, closer to 20% of revenue and EBITDA on a proportionate basis. So post the Sunrise spin, Liberty Telecom still represents, on an aggregate basis, over 80 million mobile and broadband connections, $22 billion of revenue, and $8 billion of adjusted EBITDA. As with Sunrise, prior to our intention to spin, we believe we are getting very little, if any, value in our stock today for our interest in these assets. As a result, We are pursuing a value creation strategy for each Liberty Telecom business that's intended to drive commercial momentum, monetize infrastructure where possible, and deleverage into strategic transactions like the Sunrise Spin or other types of crystallization opportunities. All four markets, Holland and Belgium, the UK and Ireland, are in that pipeline. I'm not going to address today each of these development opportunities in any detail, but we're going to keep you updated as the structure, shape, and timing becomes clearer. One thing we know for sure, though, is that the European telecom sector is moving towards what I would describe as more rational behavior among competitors with a clearer picture of network and technology choices and an increasing regulatory support for investment, all of which means that Liberty Telecom with marquee assets, premium brands, and meaningful cash flow should become even more valuable over time. Now, you'll notice here that We've rebranded what we previously described as Ventures to Liberty Growth. Why did we do that? For starters, this more accurately reflects both the assets in the portfolio today, as well as our goal of investing into more scale-based businesses in tech, media, sports, and digital infrastructure that have tailwinds or represent unique market opportunities to create value. Great examples of this include Formula E. which we believe is poised for growth as the only global championship focused on sustainable racing. Atlas Edge is another great example, a massive data center play in Europe, owned together with one of the most successful investors in the infrastructure business. Liberty Growth, as you know, is a $3 billion portfolio today, and with our track record and focus on discipline and strategic opportunities, we think it's going to add significant value to our story over time. Finally, you also see on this slide what we call Liberty Services. We've talked in the past of our central technology platform, which provides $400 million of technology services and IP to each of our Liberty Telecom businesses today, pursuant to long-term contracts. Similarly, Charlie's organization has separate units, which provide over $100 million of financial services to these and other businesses within the family. We believe... There's an excellent opportunity to build on these internal businesses by partnering with other professional service firms, growing in-house and third-party revenue, and ultimately monetizing these contracts, IP, and talent over time. This is yet another underappreciated source of value creation and capital formation within the Liberty Global story. Now, where will Liberty Global trade after the sunrise spin up? Well, that math is for you to do. In our opinion, you can make an argument it should trade right where it is today. The $15 of cash and Liberty Growth assets, you don't need to assign heroic valuations to Liberty Telecom posts on Rise to get there, especially as we reduce complexity, create valuation transparency, and continue demonstrating our ability to generate significant returns with our capital. Before handing it over to Charlie, I'm going to walk through our operating results quickly on the next slide. I think the first point to make here is that taken together, all of our operations achieved sequential improvement in broadband and postpaid mobile ads in the third quarter, including a return to positive broadband ads in the UK and a particularly strong postpaid mobile quarter in Switzerland. Starting with Sunrise in the top left, you'll see continued commercial improvement over the last four quarters. including another positive quarter of broadband net ads, supported by management's churn initiatives with the main brand. And that includes more premium positioning, loyalty programs, and cross-selling into FMC. Meanwhile, the slowdown in fixed ARPU was impacted by the lapping of last year's price rise. As the team indicated at the Capital Markets Day, we've substantially completed the migration of UPC customers to Sunrise, with remaining migrations expected to be value-neutral. In mobile, our dual brand strategy continues to drive growth with 43,000 postpaid net ads. And while the negative result in mobile ARPU reflects lower priced flanker brand growth and lower out-of-bundle usage, we still feel very positive about that business. Now, the business also continues to benefit from a handful of innovations, including a new customer service AI tool, which supports five languages and allows customers to access help more seamlessly, Sunrise's device-as-a-service product, strong partnerships with hero brands like Swiss Ski, and Sunrise Moment's loyalty program. So a lot of positive things happening at Sunrise, and you'll learn more about that on their call today and their roadshow to follow. And moving to talent on the top right, you'll see continued small improvements in commercial results over the last three quarters, including an improvement in net broadband losses, despite a very competitive market. And this was supported in part by the launch of BASE in the south this past summer, Base fixed customers already stand at over 10,000, and we expect this to reach over 25,000 by the end of the year. That's well above our forecast. It's also worth pointing out there's been yet another quarter of fixed ARPU growth, supported by the June 24 price rise of 3.5%. In mobile, post-pay net ads of 1,000 reflect a return to modest growth in an increasingly promotional market where everyone is anticipating Digi's launch, including us. And while we're seeing higher value packages at a lower price, our base brand is well positioned in that context. And despite price discounting, we're able to keep post-paid ARPU stable year over year. And moving clockwise at Vodafone Ziggo at the bottom right, you'll see modest sequential improvement in both broadband and mobile losses in the quarter. The broadband market remains very competitive with price-led promotions. while we continue to focus on our value over volume strategy that's resulted in consistent fixed ARPU growth in four of the last five quarters. We did see higher fixed sales activity on the back of our UEFA football rights, which we believe provides an important differentiator in this marketplace, and also a sales engine given our distribution through the Ziggo Go app. Mobile post-pay performance improved sequentially, but was still impacted by some B2B port-outs related to local government contracts. And mobile post-based ARPU growth was strong. That's despite a 10% price rise a year ago. And then finally, Virgin Media 02 on the bottom left had a much better quarter sequentially. Growth in broadband base was 16,000. That was supported by NextFiber sales as we continue to ramp up marketing on the new build footprint. Gross additions on the NextFiber footprint were over 40% higher than in the second quarter. We continue to see heavy discounting in the market as alt nets seek to build penetration, which has put some pressure on the BAU footprint, which we expected. Despite the competitive environment, we continue to deliver on our value over volume strategy here as well, with fixed ARPU growth of 2.2% in the quarter. This is supported by the price rise of 8.8% in April, but more importantly, our ability to better retain these price rises today through our investments in the customer experience as well as digital initiatives that allow us to have much more personalized pricing capabilities. Immobile post-pay net losses of negative 15,000 was an 85% improvement over the second quarter, and that's due to reduced churn primarily at 02. We continue to see less activity at the premium end of the market, but we're well-positioned to deliver across the whole market with our gift gas and Tesco mobile brands at the lower end. By the way, our Volt FMC product has been very successful, continues to be very successful. In that customer cohort, we see higher ARPU, higher MPS, and lower churn. Postpaid ARPU in the quarter was broadly stable, given the inflation-linked price rise from Q2, offset by continued impact of our customer mix. As with all our businesses, Q4 will be a key trading period for VMO2, with major handset launches, Black Friday, and Christmas trading. The team has a number of initiatives in place to improve O2 performance in particular, including O2 switch-up, loyalty, and building some same digital capabilities as in fixed. Fortunately, Lutz is back in the office after a short health-related matter, and I'm thrilled he's on the call here today to take your questions as needed. So now, over to you, Charlie.

Thanks, Mike. The next slide sets out a summary of the quarterly revenue and EBITDA performance in our four key markets. We saw broadly stable revenue in EBITDA across all the OPCOs, with the exception of Virgin Media 02, which experienced a decline in both revenue and EBITDA. Sunrise reported a revenue decline of 1.3%, driven largely by the annualization of last year's July price rise, and partially offset by continued momentum in mobile subscriptions and B2B revenue. Telenet delivered stable revenue in Q3, driven by the one-off impact and the recognition of previously deferred revenues, that's around $18 million, which this is partially offset by a decrease in mobile revenue due to soft handset sales and a decrease in B2B wholesale revenues related to the loss of the VU MVNO contract. Virgin Media 02 reported a revenue decline of 4.5%. excluding the impact of the next level of construction, and this was driven by continued headwinds in low-margin hardware and B2B fixed revenues. It was also impacted by the comparison with Q3 2023, when there was a one-off $48 million item. Despite these challenges, mobile service revenue and fixed service revenue remained stable again in Q3 and indeed year-to-date, and Virgin Media O2 maintained positive fixed revenue growth in Q3, supported by ARPU growth of 2.2% year-on-year. Vodafone Ziggo delivered stable revenue driven by continued growth in mobile and B2B fixed revenues and offset by a decline in the B2C fixed customer base and a step down from the larger fixed price rises from 2023. Moving on to our Q3 adjusted EBITDA performance, Sunrise reported stable adjusted EBITDA growth driven by lower cost to capture and a decrease in labor costs, which offset the decrease in revenue. Telenet delivered adjusted EBITDA growth of 5.2% in Q3. Now, this was driven by continued cost control, but also the profit on the $18 million one-off revenue item. This was partially offset by higher labor costs and an increase in sales and marketing expenses driven by the launch of the base brand in the south of the country. Virgin Media 02's adjusted EBITDA decreased 4.1%, excluding next fiber construction. The profit on the one-off revenue item in Q3 2023 was a key reason for this decline. And finally, Vodafone and Zyga reported stable adjusted EBITDA driven by cost savings, particularly in customer service, IT, and procurement, as well as business contracting services and lower energy costs. However, these savings were partially offset by higher programming costs due to the UEFA Champions League broadcast, as well as labor cost increases related to the collective bargaining agreement. So into the next slide, we give an update on the key metrics supporting our capital allocation model. At the end of Q3 2024, the free cash flow profile for each of our key operating companies remained on track to achieve our full-year free cash flow guidance. We continue to hold a substantial cash balance of around $3.5 billion at the end of Q3 2024. Cash inflow related to operations in Q3 was $112 million, and with the dividends from our JVs expected to be paid in Q4. We continued investing modestly in our growth assets and executed share buybacks of approximately $165 million in Q3, in line with our 2024 guidance to buy back up to 10% of our outstanding stock. In our growth portfolio, we closed the quarter with a fair market value of $3 billion, making investments of around $73 million, largely in Atlas Edge and Next Fiber, whilst executing disposals of part of our stakes in ITV and Laceworks. We did take a write-down on Televisa Univision of around $72 million based on operating performance. And finally, turning to our sum of the parts, we wanted to highlight the key drivers of our stock on a per-share basis. We continue to believe the share price of $20 to $21 per share still doesn't fully value the inherent value of the business. We believe the sunrise spin is the first step towards closing this valuation gap, and have been encouraged by the average analyst valuation for sunrise of 8.2 billion Swiss francs, which implies a $12 per share contribution to the current Liberty Global share price. Following the execution of the Sunrise spinoff, our aim is to unlock the remaining value sitting in cash, our growth portfolio, and indeed the other FMCs. The book value of cash after the Sunrise deleveraging, listed stakes and unlisted assets in our growth portfolio, equals $15 per share. And when combined with the $12 per share for Sunrise, the implied value for each Liberty Global share is $27 per share. Now keep in mind, this doesn't attribute any value to the remaining FMC or indeed services businesses that we retain. Turning to our debt position, we maintain a strong position with the average life of our debt at nearly five years. We continue to have significant consolidated cash and liquidity with siloed debt stacks at the FMC assets. Our debt silos do not face any material maturities until 2028, and we remain proactive in extending the maturities of our debt, facilitated by our extensive swap portfolio, which is independent of the underlying bank debt, which allows us to term out bank debt and not lose the benefit of those attractive swaps. This strengthens our overall debt position and allows us to remain opportunistic and strategic in the market. Earlier this month, Third of Anzigo successfully issued a green bond consisting of 575 million euros of senior notes due 2032. Now, we used the proceeds from this to refinance the existing senior notes, which were due in 2027. Now, this transaction was net leverage neutral, but resulted in an increase in the average life of Bonifazigo's debt. At Sunrise, we are finalizing the paydown of the debt so that they are on track to meet their target net debt to adjusted EBITDA range of 3.5 to 4.5 times. The $1.4 billion cash injection will be completed prior to the record date from Liberty Global's corporate cash balance, with the remainder coming from Sunrise free cash flow. And then lastly, as part of our 2024 guidance, I would like to remind you that we had refined Sunrise free cash flow guidance from Swiss francs 360 to 400 million to Swiss francs 360 to 370 million at the capital markets day in September. I also wanted to reconfirm all our other remaining guidance metrics at Sunrise, Telenet, VirginMediaO2, and Vodafone and Ziggo. Now that concludes our prepared remarks for Q2, and I'd like to hand over to the operator for Q&A.