Q1 2020 Earnings Call - Liberty Global plc and Telefonica SA Joint Venture Call
Here that more than a few investors have asked us to put forward a simple some of the parts analysis and shows the value gap, we talk about.
This is always a debate with the lawyers and the IR folks that we've tried to provide regionally complete and hopefully simple version of that on slide nine.
On a break this down and of course, we're happy to take questions. The first two building blocks of value our cash balance at Q1, and the value of a publicly traded chairs and telling it together those two numbers at up to about $60 per share.
And that's just an objective and another.
We don't assign a specific value to our interest in Holland and Switzerland on this page, but we do provide the necessary metrics for others to do that pretty easily.
You can choose your methodology, there are plenty of comparable to measure against.
But we think you can get to five to $7 per share pretty easily for our interest in these two markets that supported by a 14 multiple uncle Scf at the low end and a 10% free cash will yield the high end and if you would use telenets multiple dose you have to get somewhere in the middle. So again, many we'll find a round numbers here.
You know what are the point those at our current trading levels are and $21.
I was modest analyst have pointed out that you could arrive at that price on these three numbers alone cash plus telenet stop.
Our interest in Holland, and Switzerland in other words, the UK wasnt, perhaps do it being assigned zero equity value.
In our share price.
Lufthansa District, we address that point are showing just one way to look at the implied value of the transaction.
We just announced.
Our three simple elements here number one is the expected net proceeds of $1.75 billion, which equates to roughly $3 per share.
When you have our 50% of the estimated synergies, which added to about $6 per share and finally, there is implying transaction value. So the underlying Virgin media business will be combined.
And we know to greater just mentioned 18.7 billion pounds, which after debt represents an implied value for the equity today, we're on $14 per share of Liberty Global if you add all that up you get to about $23 per share and Thats just on the UK business. We understand that everyone will have a different view that different valuation approach in particular.
There so might argue that the implied value the Virginia deal and in the combination is you know a challenging northern has not been an acceptable we don't agree with that of course, but if you want to haircut the deal multiple by 20%.
But it does in the mid Sevens, you still get the $16 per share with the entire transaction.
It's hard to argue that we didn't have a considerable value gap here and I think you're all capable of doing the math on your own but we just want to give you those components of hopefully.
Clarify what we've been talking about for some time.
I don't want more slide here the media to help round out the operating update I'll pass it to churn rates.
Okay. There are more operating a bit slides like this in the back when their assets, but well see that we we tried to focus here on the data that we believe is most important for tracking progress in our core markets, namely we didn't give retaining customers across our fixed mobile BT business, secondly, growing ARPU beat Upselling cross sell and third driving fixed mobile convergence.
We're also focused of course and extending our network reach in speed leadership.
Driving cost efficiencies in effect on the cost efficiency side, we've been forced to accelerate some of the transformation in our care sales capabilities to be more digital to operate more efficiently and that's going to pay dividends on either side and there are few good visuals in the middle two pounds here, you'll see firstly that Virgin medias customer base has been largely stable at just under 6 million.
In fact, the number is only moved about 20000 customers in five quarters.
Yes, as we show the customer gains we pick up and lightning are often upset with the customer losses in the behavior footprint, but the numbers are not significant another direction. You can also see a strong customer ARPU trend. The last five quarters, we want a 2% growth year over year in fiscal year and this is driven largely by price increases and again cross sell upsell, but also underpinned by prior.
Innovation and improved based management, we are continually seeking to enhance the value for money proposition for customers in this market with things like our next Gen. BCP V. Six set top boxes broadband speed stuck in the past quarter, we boosted over 1 million customers to 100, megabit broadband speeds, bringing our average speed across our base average speed to.
The 140 Megabits.
Just by reference or for reference there versus the rest of UK market is averaging consumer speed of 30 megahertz second. So we are our average virgin customers getting broadband speeds four to five times faster than the rest of the market.
As we point out often 95% of that UK network is already will get ready and we've launched so speeds across the major towns in the 30% footprint I put us on track to network wide coverage of one gig in 2021, delivering 50% of the government's national gigabit ambition for years early there's enough said there.
Our lives and the team has also been already focusing on the cross selling to mobile mobile to the six days at following the launch of divergent bundles of a year ago and UQM postpaid net adds were good at 72000 to fixed mobile convergence is already working at Virgin were at 22%.
Fixed mobile convergence ratio with plenty of runway remember telenet broader from zero in the mid 40, so as we all know fixed mobile convergence drives higher NPS and lower churn as the fundamental rationale for the deal we announced today. So at all now is a good started here for there to media even in light of that endemic LFC at margins are strong at 23% before lightning.
The decrease in after our civil customer base grew 7% in a team is managing through the headwinds we identified at the beginning of the year. So the increase in network taxes and the contract modification program further because we've been managing through those very very well.
MPS is up and as noted turns down in the I think the group is really well positioned to come out of this coated period very very strong so enough for me.
I'll pass it over Charlie and that we look forward to get to your questions. Charlie Thanks, Nick and now I'm going to page. The divisional overview, Mike is giving you the key operational highlights of Virgin Media and then the appendix. We've included similar pages showing the key operational driving Spiro other major fixed mobile convergence businesses in interest of time, we're looking to review these pages in Europe.
Thanks, David Please do contact me on team if you want to discuss the building on this page we stood out the key financial metrics, which we are using terrific performance of these national FMC champion.
Focus continues to be to drug UFCF for CF months accrued capex and free cash flow.
Markets mature in terms of broadband penetration.
Not for reference we also incurred a page in the appendix Steffi answer our view 2019 free cash flow through each of our divisions of the allocation of interest and the central technology integration Capex.
For the quarter will Miss side, I will focus on the underlying.
And with year on year revenue, you cannot into slightly down 9.6% walked mcf decline through the whole percent.
FCF before lightning construction capex increased $18 million to 372 million Boes per quarter, we increased our investments in London compared to 2019, Q1 and spent $99 million from 93000 homes release during the quarter revenue growth in Belgium was slightly down at no 0.4%, we don't CFO.
0.6% and year on year, CF down $10 million to 187 million goals as generic explained the matola earnings pool, there was an acceleration in prepaid sports rights costs.
Some front loading capex in Q1, which contributed to this year on year after year decline over the full year confirmed that excluding the effects really look bands in the second half of the yet they expect to deliver full year rebased OCF growth of 1% to 2%.
Spaces on adjusted free cash flow the lower end of that previous 450 to 430 million euros guidance range. This assumes that they will gradually exit will look down spacing in may the gradual economic recovery there often in Switzerland, gpcrs caught up in the continuing trust competition in that market, which resulted in an accelerated.
Decline in consumer and customer all this contributed to a 2.7% decline in revenue.
Also had an acceleration prepaid sports rights costs in the quarter growth accelerated spending capex contributing to a lower tier.
$55 million.
However, based on current expectations around the impact of public we expect cash generation to improve in the company remains on track to producer on hundred $70 million or free cash flow. The full year, which includes central Opex and Capex allocations in home Oedipus Ziggo had a very strong quarter with revenue growth of 3.3% LCF growth.
4.9% and SPF $258 million as they outperformed our expectations in virtually every operating metrics showing the strength to boost converged national FMC champion.
Now expecting stable to modest Rebased OCF growth with full year and maintain their original free cash flow guidance of 400 to 500 million euros potential cash to show. These distributions. So again this assumes no fold deterioration as result of public.
On the page in talking with every day, we set out the key financial metrics Slippages old revenue declined 9.3% for the quarter and improvements over the declines the previous full quarters. Despite the impact of clobbered 19.
Okay, Great also into compared to last three quarters of 29 team amount is 3.6% inline with our pre covered expectations.
FCF continue to improve and excluding lundy construction capex was $593 million for the quarter up from $569 million a year ago, the continuing reduction in Capex intensity contributed this.
Capex as a percentage of sales product lundy construction capex at 19.4%.
Other than the previous full quarters.
Liquidity remains extremely strong cash, including a 2 billion dollar investment in separately managed accounts grew $7.4 billion now as many of you know our estimate is our best given low risk liquid investments with our estimates on money market accounts and not allowed to be invested in government securities as opposed to AAA funds.
We will lead to a reduction in interest income going forward bugs ensure maximum security for the cash will be available revolving credit facilities and operating companies. The group as a whole has $10.3 billion of liquidity.
Each of the ended the quarter was 5.2 times gross and 3.7 times net EBITDA the cost of debt continues to decline as we continued our refinancing program during Q1 and now stands at 4.1% with an average life in excess of seven years.
On the page total adjusted free cash flow, we layout the key components of free cash flow key one offset for London construction Capex was $595 million and on net interest for the quarter was $579 million, we make virtually all our interest payments in Q1 Q3. So this phasing is in line with our exports.
Stations cash tax was positive for the quarter at $5 million and we expect the full year twentytwenty figure to be lower than the full year 2019 figure $358 million, partly due to reduced us tax payments the distributions in the JV in Holland $11 million for the quarter, but we continue to expect full year distributions in 200.
Turning instrument in euros in line with Vodafone Ziggo as recent guidance as is typically the case in Q1 working capital was negative $250 million largely due to phasing of vendor financing program and adjustments when the 19, we continue to target broadly flat net working capital flows to the year adjusted free cash flow before lunch.
Construction Capex was negative $218 million for the quarter and negative $370 million. After construction Capex, which again was in line with our expectations settings. The outlook for the full year, we're still assessing the medium term impact from club at 19, and we'll give investors a further update to Q2 despite the.
In Pensacola, we continue to be encouraged by operating prospects and unless there is another step change in the macroeconomic environment, we don't see a need to change or suspend or routine full year guidance as detailed on the slide and note that our current assumptions is that lockdowns and lifted from Q2, followed by a gradual economic recovery and also with our original one.
On a dollar free cash flow guidance was placed on exchange rates of 1.13 euros to dollars up a 1.3 $3 to plant. Although we don't guide on Rebased revenue growth, we do expect negative impacts to revenue from reduced handset sales and premium video, particularly sports. Both of these are relatively low margin never limited impact on cash flow are.
Turning to monitor the impact to the cross of some of these forecasts and update you further in Q2, so with that I'll turn it back to the operator alluded to address everyone's questions. We will convey off that you keep to one question each.
A question and answer that will be conducted electronically.
Right.
Please.
Hey, Matt Star.
Hi, This is just walk.
In order for everyone, we request that you.
One.
With one clarifying follow up.
Are you.
Please make sure.
Our GAAP for layers of milk Barclays.
Just a moment you get everyone that opportunity.
And we'll go first all or.
Yeah, Hi.
Robert Grindle <unk>.
Robert can go shrunk.
Eric.
Yep. So one question, so I'd like to talk about but JV structure and why you chose bops rather than try a majority folks was the fair and again and Tom or was it as you mentioned about confirming a positive equity value for three months.
What the JV structure, all carbon trusting given youre thinking about an extended fiber builds program, obviously tough got a lot of fiber experience is that something you are aligned bump. Thank you.
Okay. That's three questions, let me see if I can jump into those.
There's always multiple way to approach.
The transaction like that's or or strategic move like this.
But this talk to us like the bad outcome them. The best partner for all kinds of reasons and I talked about those on the remarks I just made though so you heard that and we're comfortable as I mentioned whitney's structures, we have experienced with them. It's worked exceedingly well and Holland with Vodafone has been a break partner.
And so this was the transaction that was presented to us or that we also went out and thought and the one would think will be a you know most accretive and most advantageous. So sure. There's always look different ways to do it had nothing to do with what you're describing the value with the value. What you decide how you're going to approach. The partnership then.
I agree on value, it's not be the way round a I don't think he was driven by value wasn't driven by a anything other than that it wasn't obviously the on the game in town.
There are multiple mobile operators in this market without fixed infrastructure. So clearly there are other options, but again as I said, we thought this was the best option.
And credit to Telefonica for also being quite interested in focused on this.
A little bit the best fit.
Does it change anything with respect to our.
You know the level of excitement we have around project lightning or network extension in the market. It takes nothing off the table.
In fact, I would argue I think took telefonica degree this increases our confidence level in looking at a national scope or extending virgins best in class network. How you achieve that we financed that how we how aggressive we are at all to be determined but I think that.
Main takeaway is it doesn't change our level of excitement it takes knocking off the table I would say only enhances our ability to be strategic you know and.
Financially aggressive and make sense.
In terms of looking at our network.
And the opportunities that we discussed historically.
Okay.
Mhm.
Well go next to a job motor check with pivotal research.
Uh huh.
Good morning, how they look a high how reasonable top is your your operating strategy synergy upside and I think obviously leverage levels.
Vodafones ego that JV to what you sort of expect from this deal and then if I could sneak one in about.
No.
Book, replacing UK, how that's going on ROIC extradition flags.
At least you can prepare for your backlog repricing issue.
It's fine is are in line, but the there there are lots of things that are similar in this transaction to the Vodafone Little transaction, obviously the structure itself, they're often made the differences to of course in terms of you know the size of the market and the competitive.
Landscape that we that we find ourselves and on the other hand, you know it is a similar playbook for US. It's one were quite familiar with so our approach to synergies.
Our approach to integration our approach to strategy to drive revenue.
And convergence are quite similar and you know it wouldn't surprise us it down the road. These two companies together are achieving similar outcomes as possible here, we might even exceed the convergence levels.
That we see today in Holland, which are mid Fortys.
It could be even higher in this market a lot of it has to do with what how the market evolves generally and how competitors react over time I don't believe will be any reaction that's worthy of discussion in the short term or even the medium term, perhaps but how the market evolves over the longer terms, what what's critical I'd simply say were when we put the business plan together at least from.
Our perspective, we were very conservative about a standalone mobile business and the challenges that it might face. When we think we were very appropriately conservative that our own business.
Just to be thoughtful and not a too ambitious and I think when you put those two businesses together he drive synergies through that that business plan. It is a very accretive and quite attractive and that obviously draw the transaction.
So I think I think with very conservative assumptions on either business.
With the synergies, which I think as you point out our prudent probably conservative certainly it's a low at one or less if not the lowest percentage we've seen in.
Eight countries are seven countries, we've been involved and FMC transactions now, but you know there's good reason for that transaction can you got a relatively quickly we wanted to be thoughtful and.
No not over promise, we never missed a synergy budget, you know that Jeff or synergy target back with I think almost in every case, we've exceeded our synergy budget and target. So there should be the same.
On and off contract modification. So we have evolved in the market since February but.
The chart on lateral accepting of what we access for well I'll, Let me cover some of our quality and album Cup the mob besides the leap up.
And then the second you where it's how much. This combs do you have up to keep the coppermark connected and this column we have so far it's only one oh, yes.
So therefore, we get all together light, but 70 ethics.
But the caveat to that is right. We are only six weeks into it and in that quarter and Oh, that's all that was pretty cool that.
And so that might change so therefore, we stay cautious.
But I have to say, although the market was pretty competitive March and in February, but we're doing slightly better than exports.
Thank you.
Our next to David Wright with Bank of America.
Hello.
Thank you jobs for the technical and Mike in a if I could maybe.
Expressed some.
Gratitude I guess more generally for the salary sacrifices et cetera, and lots of covet and my question is just on the we pay a joint venture and spectrum costs arising UK spectrum.
Our auction forecast, which probably should be this year could be next yeah. I should we expect any evidence of any delays that these costs. The telefonica go back or is there a risk that that could drop into the end to JV. Thank you.
Thanks, very much stated.
The probably the press release reference to this but it might not have made out of a chance to we'd get to it or seen it but.
The basic deal is that telefonica will bring to the JV.
So that was the arrangement that we reached early on and that so they'll deliver to the JV at their cost the spectrum when that auction occurs we obviously, we oh, we have not been able to discuss spectrum with them in any detail it with a very.
Complicated and has been quite careful so we don't know what they're doing.
We don't have any real understanding what they may do but but the you know whatever they end up end up with it'll be at their cost.
Mike just maybe extending on your comment Tom on Lightning.
He has been very vocal with a perceived undervaluation of lightning stretched out et cetera.
It's kind of dropping in at 10 times EBITDA and there's still a how did you kind of think about valuing lightning independently as.
The kind of steady state Medicaid or infrastructure.
Yeah. Good question in a look at I think we each had some assets on the east side of the deal that we could have argued for different values are they have of course, there tower interests in the UK, which you know they thought at what point, maybe would be better outside the JV, we had the lightning transaction, but we both agree that this is going.
To be and long term.
Partnership that we should be doing things inside the partnership it makes perfect strategic sense, an operational sense and financial sense. So, let's just say that you know the valuation was you know considered but we didn't get in that kind of granularity when it came to yeah. This is always negotiation in terms of diversifying exactly what light.
He referenced include the doesn't include limited do you did the in a probably approach that similarly on them on their tower for pets.
Thank you so thank you.
Mhm.
Well go next to Michael Bishop with Goldman Sachs.
Yes, Thanks, Justin goats, two very quick questions firstly.
You will now effectively sitting on a large cash balance.
Given the steel.
Considering any of your cash I'd just love to hear your latest thoughts on how you think about managing that cash balance.
With this transaction not consuming cash I'd say for quickly could I just a follow up on the last question clearly you've been.
Great Lightning is going into the JV, but I'm just going to ask a follow up on grew about five.
The company that you've stepped up.
Just I notice that the 10 billion of Capex over the next five years commitment doesn't really implicitly, let's say at least a modeling does that necessarily.
Announcing anything with regard to the 7 million extra orangeade and Quad and also the fiber joint venture on those discussions so I'd have to be quite quickly.
Sure and while the second point, yes.
Together in terms of pace and speed and financing structure and opportunity in the meantime, yeah. We'll continue with lightning in fact, we think we might exceed our budget enlightening.
You know, we can of course choose to spend more or less which you know clothing, just works out and working capital, but I think for the most part you should assume that the JV will jointly address these strategic opportunities and you know capital will come from both parties as a result to that on the cash balance.
I think we'll remain disciplined as we have remained disciplined as I said nobody anticipated. This environment you know we always said.
You never know the future going to bring and you know this was not something any of us.
Hope for and on the other hand, we're thankful to be liquid and we're thankful to have cash and we'll remain disciplined on how we declared a cash.
As I said and have said the first quarter of business is our core markets and where we know and we already operate that will remain the case.
Secondly, we will look you know within the region, we operate in the B.
You know look for opportunities for consolidation or other similar convergent strategy is out there we have as we've talked many times its ventures portfolio not big you know, maybe a billion of interest and listing assets that we own tech and content and so we'll we'll we'll be careful and thoughtful about opportunities to build new.
Revenue streams.
In new investment portfolios in new and new business opportunities, but I think we'll do that carefully and with great transparency and probably wouldn't require the kind of capital that we have so.
You know we're this is that a good problem to have it's a good question to be focused on for us, but it's not something you can give you any more clarity on that as we sit here today, Michael but a enough stated.
That's all.
Now of course I didn't mention in that you know what we have used historically.
Our excess capital for and that is this buybacks I did mention my remarks, this that out as always.
On the list for our Levered equity growth strategy and as we start to drive free cash flow and free cash flow per share clearly you know that an accelerator of free cash flow per share, but you know again, we are ramping and on this call we're not going to be.
You know I.
I can give you any details about that Oxaydo only now we'll let you know.
Oh, I know, we probably got a lot of questions. So just for everybody's benefit and our remarks, when a bit longer were going to keep your line open.
I'm sure you've got plenty of calls to get onto and but I think we'll probably try to keep lineup for 10 15 minutes to be sure we get to a few more question since we.
We were a bit longer in our remarks today. So go ahead operator.
Yes, well go next to Benjamin Swinburne Morgan Stanley.
[noise] that.
[music].
Thanks, Good morning, everybody quoting like.
I wanted to assuming you are somewhere where it's more like checks may not be the case, but and wanted to ask about tax implications of all the stuff that you guys announced you're moving.
Effectively all the UK tax allowances et cetera into the JV.
Yeah, you guys I think originally reincorporated over in the UK police, partly from the tax benefits and just wondering how that.
What the tax structure and tax leakage, if anything of the JV will look like and assuming that may not much anytime soon and then implications if any for the consolidated operations, Switzerland.
Benelux et cetera in terms of tax cash taxes as a result for the steel.
Okay.
There's no implications to other assets a the UK tax losses have always been largely ring fenced within the UK and only usable our UK by UK entity. So no implication that off for the other operations.
I'll simply say on the tax structure wont be surprising to you I think it's quite efficient.
That we don't use a in without getting in great detail you know there shouldn't be any tax implications on formation of the joint venture the losses that exist will be transferred and you know to divest our ability used by the JV. There are some you know as ever some nuances there but for the most part.
It's a very tax efficient.
Transaction really for both parties and typically for us and when we're not we don't see any leakage of the company's Scott.
Okay, and then just a quick follow up on our virginity philosophies on.
What's the pricing environment look like at this point, obviously, you've got a lot of stress in the economy. Just wondering for that could competition point of view of things says Oh, well continue to be as tough as they've been or if we've seen if you've seen any of your or the operators you compete with get a little more rational so to speak given.
Just the focus on the macro pressures on things like liquidity et cetera.
Let's go ahead so.
Yeah. So I think in February and March and maybe because of the startup and the contract with the repatriation I would say that the market was even a bit more competitive so.
When you are compared with <unk>, that's up discount.
A year ago. This comps were 5% to 10% deeper and then now after covert obviously its oh right sales are down.
Not so much so we are still operating or on 80% traits level and sure on when fell on dramatically.
But in this environment. Obviously, you are you are less aggressive.
Promotion.
So I would say it was a bit more aggressive and we kept our strategy right. So you see that we kept our custom up flat, we're looking to create really customer relationship with high value customer.
We went up looking for the lower than the broadband we were not looking for the lower end in the video and so therefore, the service revenue out of that was a up 8% and the opposite.
Warmed up 2% and this is executing those credits.
Thank you.
Well go next to VJ with Evercore.
Hi, Mike I'm just wanted to.
Roughly.
Trucks are now that most of your values are in JV than in the UK and Holland pro forma for this transaction and about a billion of EBITDA on the remaining consolidated assets how in terms of transparency and value recognition, obviously, you make a case for that.
Today's presentation, how are we going to sort of track the performance of the JV then are you.
The risk of getting sort of a discount because most value without an equity stakes and have you thought about.
Tracking stock when it shows that can get up so the value of those assets that you don't try to see on a consolidated basis.
Yes. Good question, we did try to address it a bit in the remarks, but which worth.
Repeating that you know this does change it takes our largest consolidated business in Penn puts it into a JV. So that does obviously have accounting consolidation application. However, because it's our largest business. We will report quite extensively on business and so I don't see any reduction in transparency.
Around the core operating companies. So so please firstly I would say you get you should be able to see through a the structures and we will endeavor to report on the businesses in much the same way with you know arguably as much in more detail. So I think we'll be will be will be focused on transparency for.
That's true on the actual operating businesses, how they're performing and we're quite engaged of course and all these and how they do so that's 0.1.
Point too you know.
You know Virgin wasn't a public company when it was 100% on Virgin to whatever they want maybe is won't be a public company. When we start to JV, but down the road you know there could be opportunities and let's add to create a public listings or.
Structures that that yeah.
Identify and isolate value and I think show value more more creatively more effectively.
Nothing's off the table and you we retain as we you would expect we did retain the ability to perhaps create trackers or things of that nature show in the in the you know Liberty tradition.
All options are available to us to ensure we are getting transparent value.
I will be thoughtful about that overtime. It is the right point, which is why would that be more minutes. It was on the word on structure and value creation and a holding company discount that your expertise.
I don't think so I would argue for it obviously a.
But you know certainly can't and at this point in time.
No we would take a holding company discount if somebody valued stock correctly [laughter].
Yeah. So I think it it's all relative and we'll have to see how we go.
Thank you.
Got it.
Well go next to follow thanks.
Yeah.
Yeah, Hi, It just had one question and that is such a deal with it to preclude you at April Cortile deal or fiber JV with Sky or is this just start priority at the moment like.
Well I don't think but as I tried to say at the beginning of the Q and a.
Nothing's off the table.
So I think the direct answer is no.
We don't believe that.
This transaction either as its pending or or when closed create any obstacles to smart opportunity I'm not going to comment on that one specifically I'll simply say that it doesn't take anything off the table or you know legally structurally we don't believe from a regulatory point of view so there will be.
All the conversations that we were having and all the ideas we were discussing.
I think remain and can be executed on it they make sense. So that goes for the but you know the lighten build out goes for strategic partnerships with other operators if they if they make sense that goes for all the kind of thing that we know can be accretive and strategically valuable for the.
Group, we still believe can be evaluated and considered.
Well I'll just talk by they shouldn't be timing for the deal well touch caused by the time of your why now that you just it just given the courbet 19th situation did something change on your part in terms of whats birds lignite, but the deal or was there change no benefits part maybe it's a color yes, you would imagine it didn't come in there that.
Prices that world facing now and with the pandemic. Obviously is somewhat recent business. These are conversations I go back sometime so.
You know as as discussions and negotiations have momentum you keep the momentum I would say definitely they we didn't see anything in the current environment that suggested we shouldn't continue with this opportunity as opposed to the environment stimulating the opportunity until around opportunity. There was always there and we didnt see anything that.
Created an obstacle or that should slow it down so it's really nothing to do with the current environment. It just the timing is coincidental.
Hi.
Yep.
Well the index files with Soc Gen.
You have to my Charlie I was just a very quick comment on switch conscious. Please do seem pretty well they are pushing pretty weak. This quarter was not just to covert impact maybe with some sports and pay TV.
Tends to one or is that something we should expect sort of for the rest of video there's some pretty structural pricing pressure comes.
I don't know if that pieces on the call yes onto chime in if you want to address that quickly that these crewman disease trinseos was positioned to address.
I'm in Switzerland since February one so should the market stays competitive.
I would try to find the right below the single your value there.
That's the answer that they try to go very clear.
We think we will have a 170 million cash flow out of the this good businesses here and the underlying trends our whole improvement.
Okay on high customer satisfaction now.
Something is going very well to cope with so in that sense. The next quarters, you'll see there.
Couple of that we had a major.
Simplification program launch that will kick in coming quarters.
Thanks very much.
Yeah. Thanks.
That's <unk>.
Hi, guys.
Hi, guys quick one I was not reading anything in the press release on this is actually a break fee agreed and then how how about the brands as well you're planning to you in terms of are we seeing something similar like at Vodafone legal.
No no disclosure on the brands. This is you know to bring it to earlier than to have.
Any discussions about bad or even any you know.
Arena, it's about that so the brands will be determined you know down the road when companies actually do come together and measured as the team and we can have a top of conversation about it so business as usual for now no no update on Brad I'll simply say, we think both brands are really strong and complementary and that's you know that's a good thing going.
Into it no break be disclosing a break the agreed.
Okay, that's very clear thanks.
Now.
Yes.
Right.
Alright, Thanks, guys. Good offering good morning, or did you know one on one point, let's turn back with the practice with great. In can you just kept me like I.
I mean back full to the nursing Overtired, you're talking about backward looking what I'm trying to expect UK, you're starting this year.
Got it combined EBITDA work and 40% lower elaborate a bit I thought you ask Mike go back and looked at the on road that Didnt JP when it closes, but maybe just a quick went under contract because it would your maker content provider UK beat you guys are quite the euro for revenues are zero margin, but that would mean that could be.
Negative margin, if you're not collecting revenues having to pay for them. So are you able to get relief on those forthright well you're not really your customer maybe any help would not be how would be great. Thank you.
Okay, Yeah, let's open it up 42 tranches, yes.
Yeah, I think the agreement at the relief and it was clear the expectation is that we own a you know have leverage in the four or five times range, which will be closer to the high end of that range. When we closed and you know we expect that communicate the market.
You know today is not necessarily ideal moment to get all of the financing lined up normally we would amount and conclude all the financing before even signing a transaction, but we felt like to be too to optimize.
Uh Huh capital the optimize structure, there's no reason to do it all right now.
But the gap of what remains is quite small I think Charlie the only a couple billion.
Sounds really that isn't yet raised or or ready to be transferred over the number more or less so there's not the financing conditions, not particularly important one Michael that's page.
New drive your sports.
Yeah, Yeah on the spot for sure. So we have following it Lee.
Well I M B T hat off of that customer.
So it could be.
For the sports content that picture of my once you too.
And therefore, we are probably position both not to pay for both the not yet decided food or Oh package it without and therefore that is my math in Brooklyn.
Okay. So you are able to your peak you got a degree you know there the wholesale.
For that period of time.
Exactly I mean, we updates me you have to come to an agreement that we end the block that efficacy and then we've got.
And although there do you read our contract with its pretty much like that.
I'm, sorry, if I could come back. The first question then it either go work significantly lowered.
That that concern or would you review it.
At that point.
Well I think the part the partners can always agreed to review it.
You know, obviously reserve that option, but I think I don't believe in Charlie jumping out we don't see any impediments to achieving that level of debt now between now and closing which is one it would likely occur probably on the shorter end of that Charlie on Augusta.
And Steve we've come through and I was going to resurrect would be but he and his.
Steven Monica, So we're pretty comfortable that.
We have built into the school cost there is nothing.
Actually we dealt with our trial.
Very kind of exiting businesses, but that was a true.
I've done it still trending up pretty well I'm very very confident.
And we'll get the remaining couple of Linden remember.
Yeah, but that we have today I would like isn't assets come across with a positive.
That's all girls.
And this is full benefits.
No no question that you can get with that.
And whether it's the right level looked a lot lower.
Steve I wouldn't say amenities of me maybe.
At this cost, which is I think as Mike indicated there might be little conservative.
It gives a lot more credit worthiness word appearance combined companies to stand on companies. So.
We'll see.
I mean, clearly none of us.
And we'll have to Florida, but there's probably another topic.
Okay. Thanks, a lot drugs.
Thank you.
Great.
Yes. Thank you very much everybody it might contain congrats on that the deal I mean, a question on today, probably more for so let's actually just somebody UK performance, which looked pretty encouraging this quarter, which just interested in kind of two specific.
Areas I mean, one with all the extra home walking going on are you seeing signs that customers are actually upgrading their broadband packages as a result, and how supported attached to your ARPU trends and secondly, I mean to what extent have you been benefiting.
We simply from being able to do extra customer in stolz as I understand Openreach has been more limited in being able to do that how much are pretty soon is that providing.
For the current numbers like here.
Yeah, well on on the home working I mean in general or 95% of our customers have hundreds and the speed or mall.
Right and as Mike said earlier on our other students on the 40, Matt. So therefore, our couple must do operate already on a very our country markets not to operate on that are already at very high speed.
And so therefore, we don't see additional demand on top of that currently on the come to an update on the need to be states, we see that where we have a a further.
Demand I ever higher food packaging working from home packaged food pharma <unk> asked about that so that is encouraging and in terms of met Ed.
Right I would say currently we are not that mexichem. So what that means that around our sales are still at 80% and the only online or to market level. Its appeal to you.
More connectivity pool so.
That demand on the view more on brought them fifth girlfriend and also a lock strong.
The story, no and IP business you costs within one can be or you don't want to change. The good then why youre, so reliant on it and second obviously in the market.
You cannot be assured if it's the menu installed its competition, but you could actually installed why we keep on doing that the menu installed as well. So therefore, you're right currently.
Our growing a bit our customer base because of that.
But actually said also Q1, we kept the clock mandates that are we came up Oh.
Our strategy just from a weakness off of a compared to call. So you can expect from us, Florida initiatives to keep that or grow or not.
Great. Thank you.
Well go next to Matthew Harrigan, what benchmark.
Oh, sorry.
Oh, Thank you I realize though over the top his question. If I think he did the right vary from de risking liquidity enhancement ballast point in this environment.
As an extension of the Robert Grindle question on the UN drawn alone will have the opportunity to kind of the ultimate I guess angle cable categories. If you have turned around and bought all though to be CRO habit financial wherewithal to do that 12.7 billion Sterling enterprise value in August 6.7 billion.
Synergies over five year time, it's really wanted to get Machiavellian has developed over time, it really would have some opportunities for some very accretive.
Stock buybacks here for obvious reasons.
Reasons.
That's something you ever would look that you will have less complexity I guess in terms of a.
Financial engineering, but probably in order to email or risk limits and discovered by achieving barman am I reading I realize it's really over the top question, but I thought it run environment, but nonetheless.
Well, Matt I mean, you would know well, we're looking at all options and all alternatives and generally we land on the one we think is the most accretive and creates the most value and this we believe is the one so every markets different every.
Set of opportunities is different and generally speaking were a you know we never take anything off the table, we always look at that they had there.
But in front of us but in this case, we believe this is the right outcome, that's what I'll say.
Okay, perfect, that's where I can congratulations.
Okay. Thanks.
Now were 10 after here, so I guess, Rick or operator, we'll take one or two more and then let people get back to the day.
Okay well go next to if there are one.
With Jefferies.
Thanks very much like.
Thank you highlighted on footprint expansion, Youre and Telefonica shad excitement.
About that makes money that could you comment on the capacity to to pull that off during a period of probably quite integrate lost scary merger integration that same time.
Embarking on accelerated triplex passion potentially I realize you know, helping our clients, but how do you have you look at the actually capacity to two to pull through everything together and Tom. Thank you.
Yes, it's a good question it'll be something that we factor in you know we wouldn't ever make two ships should you be decision that impact.
Ability to execute synergies or integrate businesses and the other hand, we're already out there today every day.
Building extending plant industry. So if we.
If we were able to do it.
Or or see our way clear to doing it you know a standalone company, there's nothing about being in a larger more integrated company that should change that materially, but it's a it's a it's the right question. It's a set of making sure you're prioritizing where you spend your timing where you have you resources focused but as we lay that out on the page.
We'll make a determination, but I don't see anything off the top image you could comment that that would would you know somehow preclude us from having the where with all the resources for the will go ahead and continue looking at a broader.
Network expansion, if it made sense.
And you can always or you know there's lots of wasn't structuring it and financing as well. So I think it's it's the right thing to think about but on the other hand, there's nothing in my but in my mind that says it's not it's not doable have to get there when we get there.
Oh, that's I think that two alpha down even though as I noted child.
Sorry looks.
Well I can I can't get some come off or flavor to that I think what we have done now is we have.
Put really all natural extension so from consumer from due to be from wholesale into the lightning unit.
And they accelerating their network expansion I mean, we have just announced the beginning of two.
You bet, we the mobile backhaul three fell again.
Hi, Gi side from three so therefore, we have security vendor for an acceleration in roll off like we have also closed the couple of electronics and do so therefore, the machine is growing and the machine will I'm also quite independent. So therefore, it's not so much impact.
It's oh by the complexity of an integration.
Got it thank you Linda thank you.
Yeah.
And we'll take our last question from Sam Mchugh from Exane.
Yeah I'm old enough.
Wanting Ivy I, just Arca he's fiber me UK I'm following btds announcement today.
Do you see any kind of strategic needs to move their thoughts are on urinary expansion don't project Lightning haven't got linked to that I think by the end of this year, we need to implement gain a lot switching in the UK I'm not sure if I have any kind of political locations or make 10 patients she's going into it so I would be great. Thanks very much.
Well look at I think you know BT.
Well, we'll make the decision that needs to make and in the context of its own financial picture and I think you know they will build we anticipate they will continue to roll out fiber and they should.
So I don't know that their announcements or commentary today changes anything related.
More or less confirming what they anticipated and you know they should be coming into this this element of their business and I think there no they're probably do that so I don't believe it changes it materially and lives to tackle the second question I'm not sure fully.
Understood It they've got all the details other than they need it.
No I mean, what what we are accelerating its a fixed mobile convergence like the more customers. We have locked in let's fix the mobile or in a bit better position, we are to protect them or some competition.
Right. So we're doing more speed for customers now more fixed mobile convergence.
And network expansion at the moment. The case, you know and we're looking for ways to kind of right.
And it's all of that occurring we are we are operating on our plan and I agree with its Mike I think we haven't seen anything surprising or any acceleration from competing to previous animals.
Okay and with that we will let you get back you Dave always appreciate you just in these calls in the sport.
You know we're excited about this deal that goes without saying you know.
Hey, good creating an FMC championship a champion with incredible synergies these great vote of confidence for us in for telephone in the UK. So we're excited to get it going in I would just last if they stay well stay healthy stay safe and well speeches and.
Ladies and gentlemen, this concludes the Liberty Global first quarter 2020 investor call.
A reminder, replay of the call will be available in the Investor Relations section Liberty Global's website.
There you can also find a copy of today's presentation material.
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