Q1 2020 Earnings Call - Liberty Global plc and Telefonica SA Joint Venture Call
Scripted 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.
Got to 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.
Again, that's just an objective another.
We don't assign a specific value to our interest in Holland and Switzerland on this page, but we do provide and that's a certain metrics for others to do that pretty easily.
You can choose your methodology there are plenty of comparable to measure again.
But we think you can get the five to $7 per share pretty easily for our interest in these two markets that supported by a 14 multiple onco FCF at the low end, a 10% free cash will yield the high end and if you will use telenets multiple dose you have to get somewhere to metal. So again, many we'll find a round numbers here.
What are the point those at our current trading levels are and $21.
Plus minus 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, 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 had our 50% of the estimated synergies, which added to about $6 per share and finally, theres imply transaction value for the underlying Virgin media business when we combine.
And we know to greater than 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.
Sure so might argue that the implied value the Virginia deal and as a combination is you know a challenging one or not acceptable. We don't agree with that of course, but if you want to haircut the deal multiple by 20%.
But it put us 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 and we just wanted to give you those components and hopefully clarify what we've been talking about for sometime now.
I don't want more slide here the immediate out round out the operating update I'll pass it to traits.
Okay. There are more operating update slides like this in the back when their assets, but we'll see that we we tried to focus here on the data that we believe is most important for tracking progress in our core market, namely winning entertaining customers across our fixed mobile BT business definitely growing ARPU, the 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 fact on the cost efficiency side, we've been forced to accelerate into the transformation in our care and sales capabilities to be more digital to operate more efficiently and that's going to pay dividends on either side. There are few good visuals in the middle two problems here, we'll see a first of 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 offset by the customer losses in the being used footprint, but the numbers are not significant another direction you can obviously, a strong customer ARPU trend the last five quarters.
We won't by 2% growth year over year as in the first quarter and this is driven largely by price increases and again cross sell upsell, but also underpinned by product innovation is improved base management, we are continually seeking to enhance the value for money proposition to customers in this market with things like our next Gen. BC Vsix set top box in broadband speeds.
The past quarter, we boosted over 1 million customers to 100, megabit broadband speeds, bringing our average speed across our base average speed to 140 Megabits.
Just by reference for reference there versus the rest of UK market is averaging consumer speed of 30 megawatts second. So we are our average virgin customers getting robin speeds four to five times faster than the rest of the market.
As you point out often 95% of that UK network is already will get ready 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 earlier Theres enough said there.
Now there is the team has also been already focusing on the cross selling to mobile globally to the fixed base at following the launch of to virtually almost a year ago and UQM postpaid net adds were good at 72000 to fixed mobile convergence is already working at Virgin were 22%.
Fixed mobile convergence ratio with plenty of runway remember telenet voted from zero in the mid 40, so as we all know fixed mobile convergence drives higher NPS and low churn as the fundamental rationale for the deal we announced today. So it all now as a good start to the year for there to media even in light of the pandemic LMCFT margins are strong at 23% before lightning.
The teams and after our sole customer base grew 7% and the team is managing through the headwinds we identified at the beginning of the year the increase in network taxes and the contract modification approach Burger because we've been managing through those very very well.
MPS is up and as noted turns down the I think the group is really well positioned to come out of this coated period is very very strong so enough for me.
Ill pass it over Charlie and then we look forward to get your questions. Charlie Thanks, Nick a normal pace with divisional overview, Mike is giving you the key operational highlights the Virgin media and then the appendix we've introduced similar pages showing the key operational driving Spiro other major fixed mobile convergence businesses in interest of time, we're not going to review these pages in Europe.
Thanks, David Please do contact VR team, if you want to discuss the building on this page we set up the key financial metrics, which we are using two if the performance of these national FMC champion.
Focus continues to be to drive Seattle, Rcs minus accrued capex on free cash.
Mockups mature in terms of broadband penetration.
Now for reference we also included a page in the appendix Stuffy NFL view 2000 month, you free cash flow through each of our divisions of the allocation of interest and the central technology integration Capex over the course or Miss side I will focus on the underlying CF trends year on year revenue in the UK and on and slightly down 4.6.
Ascend wealth AOCF to come through the whole percent FCF before lightning construction capex increased $18 million to 372 million goes for the quarter, we increased our investments in lightning compared to 2019, Q1 and spent $99 million from 93000 earnings release during the quarter revenue.
Growth in Belgium was slightly down at no, 0.4%, we don't see if a 0.6% and year on year, FCF down $10 million to $187 million as generic explain them opponent earnings pool. There was an acceleration prepay sports rights costs on some truck loading of Capex in Q1, which contributed to this year on year Alexia.
Fine so for the full year confirm that excluding the effects. When you look bands in the second half of the yet they expect to deliver full year Rebased CF take 1% to 2% for the rest basis and adjusted free cash flow. The lower end of the previous 415 performed in 13 million euros guidance range. This assumes that there.
Thank you exit locked down starting in May.
General economic recovery, there often in Switzerland, Gpcrs close up in the continuing trust competition in that market, which resulted in an accelerated decline in consumer and customer off this contributed to a 2.7% decline in revenue. They also had an acceleration of prepaid sports rights costs in the quarter as load accelerated spending capex.
Contributing to a lower tier with $55 million.
However, based on current expectations around the impact to public we expect cash generation to improve in the country remains on track to producer on hundred $70 million of free cash flow full year, which includes central Opex and Capex allocations in home because they've got a very strong quarter with revenue growth of 3.3% our CFO.
The 4.9% and FCF $258 million as they outperformed our expectations in virtually every operating metrics showing the strength of these converged national FMC champion.
Now expecting stable to modest Rebased OCF growth with full year other maintain their original free cash flow guidance of 400 to 500 million euros potential cash to show the distributions.
Again, this assumes morpho deteriorations, resulting forward.
On the page in talking with equity indices have the key financial metrics liquid as a whole revenue to time, no 0.3% for the quarter and improvements over the declines the previous full quarters. Despite the impact of covered 19 AOCF growth also into compared to the last three quarters between 19 amount of 3.6% in loan with a pre filled with experts.
Patients.
FCF continue to improve and excluding London construction Capex was $593 million for the quarter up from $569 million a year ago, continuing reduction in capex intensity contribute to that.
Capex as a percentage of sales product lundy construction capex at 19.4% lower than the previous full quarters.
Liquidity remains extremely strong cash, including our 2 billion dollar investment in separately managed accounts with $7.4 billion now as many of you know our estimates are invested in low risk liquid investments quicker estimates on money market accounts allows the investment in government securities as opposed to AAA funds.
Which will lead to a reduction in interest income going forward.
Your maximum security for the cash will be available revolving credit facilities in the operating companies. It group as a whole has $10.3 billion of liquidity leverage at the end of the course. It 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 on on net interest for the quarter was $579 million, we make virtually all our interest payments in Q1 in Q3. So this phasing is in line with our export.
Stations cash tax was positive for the quarter $5 million and we expect the full year twentytwenty figure to be lower than the full year 2019 figure up $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.
Let's turn instrument in euros in line with Vodafone Ziggo as recent guidance as is typically the case in Q1 working capital was negative in terms of $2 million lowest features the phasing will then the financing program and as many 19, we continue to target broadly flat net working capital flows the year adjusted free cash said before lunch.
In 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 fiscal year, we're still assessing the medium term impact from club at 19, and we'll give investors a further update to Q2 despite.
We intend to cobot, we continue to be encouraged by operating prospect and unless there is another step change in the macroeconomic environment, we don't see a need to change or suspend or reaching full year guidance as detailed on the slide and note that our current assumptions is that knockdowns are lifted from Q2 total by gradual economic recovery and also with our original one.
Billion dollar free cash flow guidance was placed on exchanges of 1.13 euros to dollars up 1.3 $3 to plant well then we don't guys on Rebased revenue growth, we do expect negative impacts to revenue from reduced handset sales and premium video, particularly sports, but both of these are relatively low margin never limited impact on cash flow we will come.
Turning to monitor the impacts of across 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 will be conducted electronically.
Please.
Hey, Matt Star aspect.
Just walk.
In order for everyone. We request that you asked one.
With one clarifying follow up.
Are you.
Please make sure.
Our GAAP.
Good luck with Barclays.
Just a moment you get everyone an opportunity.
Yes.
And we'll go first caller.
Yeah, Hi.
Robert Grindle.
Robert from Deutsche Bank.
Hey, Rob.
Yeah. So one question so I'd like to talk about JV structure, and why you chose bops rather than try a majority of which was the fair and again and Tom or wasn't as you mentioned about confirming a positive equity value for three months or what the JV structure, all carbon truck thing given youre thinking about I'm extended fiber goes program.
Obviously talk 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 buy jump into those.
[music].
There's always multiple way to approach.
The transaction like that's or or strategic move like this.
But this popular like the bad outcome them the best partner for all kind degrees talk about those on the remarks I just made though.
I heard that and we're comfortable as I mentioned with the structure, 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 sought 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 was the value what you decide how you're going to approach the partnership venue.
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.
Was it obviously the only 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 be quite interested in focused on this ability, but the best fit it 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 it takes nothing off the table.
In fact, I would argue and I think telefonica degree this increases our confidence level in looking at a national scope or extending convergence best in class network. How you achieved that but we financed that and how we how aggressive we are at all to be determined but I think them.
Main takeaway is it doesn't change our level of excitement it takes knocking off the table I would say it only enhances our ability to be strategic.
You know and.
Financially aggressive it makes sense.
In terms of looking at our network.
And the opportunities that we discussed historically.
Okay.
Mhm.
[noise], we'll go next to that job motor check with pivotal research.
Okay.
Good morning, how we look how reasonable comp 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.
On the back book, replacing UK, how that's going on relative to expectations. Thanks.
And let you can prepare for your backlog repricing issue.
Fine is in line, but the there are there lots of.
I think that are similar in this transaction to the Vodafone debit transaction, obviously the structure itself.
There are often made big differences to of course in terms of you know the side of the market and the competitive landscape.
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 that 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 for.
Our perspective, we were very conservative about a standalone mobile business and the challenges that it might take some we think we were very appropriately conservative about 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 present, probably conservative certainly it's a low at one of the lowest if not the lowest percentage we've seen in.
Eight countries or southern company. He didn't involve the FNC transactions now, but you know there's good reason for that transaction can you got a relatively quickly we wanted to be thoughtful and.
You know not over promise, we never missed a synergy budget, you know that Jeff or synergy target that would not make 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 other than the market since February but.
The chart on lateral accepting of what we access for Oh, I'm going to complement our colleagues and almost cut the mob. Besides the leap up and then the second lever it how much. This combs do you have to keep the Cup tomorrow.
Connected and this column, we have a profile it's only one third of what we have some school. So therefore, we put it all together slightly better than we ever expected.
But the caveats about it like we are only six weeks into it.
During the quarter and Oh, so 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 in March and in February, but we're doing slightly better than experts.
Thank you.
The next to David Wright with Bank of America.
Hello.
Thank you jobs for the technical and are making a if I could maybe.
Ah Express some.
Gratitude I guess more generally for the salary sacrifices et cetera, and lots of covet and my question is just on the UK, our joint venture and spectrum costs arising UK spectrum.
Our auction forecast, which probably shouldnt be this year could be next yeah. I should we expect any amount of any delays that is cost the telefonica pullback or or is there a risk that that could drop pennsylvania into the JV. Thank you.
Thanks, very much David.
The probably the press release reference this but it might not have went 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.
The spectrum that we both believe is necessary to achieve the plan at their cost.
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 and we obviously, we oh, we have not been able to discuss spectrum with them in any detail 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.
I might just maybe extending on your comment on lightning and.
You know you've been very vocal with a perceived on devaluation of lightning.
Stretch it out et cetera.
It's kind of dropping in at 10 times EBITDA and there's still a how to keep kind of think about valuing lightening independently of the kind of steady state that cable 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 gonna be and long term a.
The 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 you know this is always negotiation in terms of diversifying exactly what.
Lightning referenced includes the doesn't include limited use it in a probably approach that similarly on them on their tariffs okay.
Thank you so thank you.
<unk>.
Well go next to Michael Bishop with Goldman Sachs.
Yes, Thanks, Justin goats, two very quick questions firstly.
Now effectively sitting on a large cash balance given the steel.
Got it considering any of your cash I 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 the quickly could I just a follow up in the last question.
Really you've been create a lightning it's going into the JV, but I was just going to ask a follow up on grew about five or.
The company that Youve stepped up.
Just I notice that the 10 billion of Capex over the next five years commitment doesn't really implicitly, saying at least a model that.
Sadly.
Announcing anything with regard to the 7 million extra orangeade identified and also the fiber joint venture on those discussions so any update there right.
Sure and while the second point, yes, you know any any thing we pursue or anything they pursue that would normally be considered a JV activity is likely going to be a JV activity. So so liberty fiber, who as you described it. It is certainly something we will pursue through the joint venture and I think as Jose Maria said on his call either.
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 on lightning.
You know, we can of course choose to spend more or less between Alco. They 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 there 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 and you know this was not something any of us.
Hope for and on the other hand, we're thankful to be liquid in the thankful to have cash and we'll remain disciplined on how we declared a cash.
As I said and have said the first order a business is our core markets and where we know and he 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, though today, we had 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 we can give you any more clarity on that as we sit here today cycle, but a interstate Jim.
That's cool.
Yeah of course I didn't mention in that you know what we have used historically.
Our excess capital for Natus is buybacks I did mentioned in my remarks that that out as always.
On the list or 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 Uh Huh, Patrick will give you any details about that oxaydo.
Well, let you know.
Oh, I know, we probably got a lot of questions. So just for everybody's benefit in our remarks, when a bit longer were going to keep your line open.
So you've got plenty of calls to get onto.
And but I think we'll probably try to keep lineup for 10 or 15 minutes to be sure we get to a few more question since we.
We were a bit longer how remarks today. So go ahead operator.
Yeah, well go next to Benjamin Feinberg with Morgan Stanley.
[noise] that.
<unk>.
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 is no implications to other assets or the UK tax losses have always been largely ring fenced within the UK and only usable our UK by UK entities, so no implication that off or 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.
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 you know, it's a very tax efficient.
Transaction ready for both parties and so for us and we're not that we don't see any leakage of the can you 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 correctly competition point of view of things is what is it continued to be as tough as they've been or if we've seen if you've seen any of your of the operators you compete with get a little more rational so to speak given.
Just the focus on the macro and pressures on things like liquidity et cetera.
Let's go ahead so.
Yeah. So I think in February and March maybe because of the startup and of contract would do the patient I would say that the market was even a bit more competitive so.
When you compare that that's up discount.
A year ago. These comps were 5% to 10% deeper and then I'll offer Cougars, obviously, its oh right failed AR balance I mean, but not so much. So we are still operating or on 80% traits level and sure.
And then fell on dramatically, but in this environment. Obviously you are you are less aggressive in terms of 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 you are 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 Ooh warmed up 2% and this is actually almost credits.
Thank you.
Well go next to VJ with Evercore.
Hi, Mike I'm just wanted to.
Okay.
The structure now that most of your values are in JV than in the UK in Holland pro forma for this transaction and about a billion of EBITDA on the remaining consolidated assets. How you know 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.
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 Fianna 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 and Penn puts it into a JV. So that does obviously have accounting and 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 I saw so personally I would say you get you should be able to see through.
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 I think we'll be will be will be focused on transparency for investors on the actual operating businesses, how they're performing and we're quite engaged of course and all these and how they do so thats 0.1 point.
Do you know.
You know Virgin wasn't the public company when it was 100% on Virgin to whatever.
And then what maybe is won't be a public company when we start to JV, but down the road you know there could be opportunities in that said to create.
The public listings or.
Structures that that yeah.
Hi, identify and isolate value and and I think show value more more creatively more effectively.
Nothing is off the table uneven retain as we you would expect you 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 over time. It is the right point, which is why would that be more minutes and on what on structure and value creation and a holding company discount that's your expertise.
I don't think so I would argue for it obviously a.
But you know certainly can't at this point in time.
No we would take a holding company discount if somebody valued the stock correctly [laughter].
So I think it's a it's all relative and we'll have to see how we go.
Thank you.
Got it.
Well go next to follow thank you.
Yeah.
Yeah, Hi, It just had one question and that is such a deal with it too quickly doing a cable hotel deals or fiber JV with sky or is this just our priority at the moment like.
Well I don't think but as I tried to say at the beginning of the Q a.
Nothing's off the table.
So I think that 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 up 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 that we were discussing.
I think the main and can be any executed on it they make sense. So that goes for the by that you know the lighten Buildout goes for strategic partnerships with other operators if they if they make sense that goes for all the kind of things that we know can be accretive and strategically valuable for the.
Group, we still believe can be evaluated and considered.
So I'll just talk by they shouldn't be timing for the deal that's caused by the Palestinian why now that you just it just given the could that 13 situation did something change on your part in terms of whats birds Lilly's nights when the deal was that change no bonuses or maybe it's a color. Yes, you would imagine it didn't come in there that.
Does that world facing now and with that endemic obviously is somewhat recent this is 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 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 just the timing is coincidental.
Hi.
Yep.
Well go next file with Soc Gen.
You asked me Mike Charlie I was just a very quick on me they'll switch crosses please do seem pretty well they are producing pretty weak. This quarter is not just to covert impact maybe with some sports and pay TV.
Instrument or is that something we should expect sort of for the rest of video to some pretty structural pricing pressure teams.
I don't know if that pieces on the call yes onto chime in I ask you on I guess that quickly that these crewmembers need for T O systems as well just yeah, I mean, Switzerland since February one so so the market stays competitive.
I would try to find the right below that can go a little value there.
That's the answer that they try to go very clear.
We think we will have a 170 million cashcall thirtys her business this year and the underlying trends I will improve it you know all time high customer satisfaction now.
Companies are going very well to cope with some that sends the next quarters, you'll see there.
On top of that we had a major.
Simplification program launch that will kick in coming quarters.
Thanks for the much.
Yeah. Thanks.
That's <unk>.
Yes, hi, guys.
Hi, guys. They're a 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 use some but are we seeing something similar like waterfront legal.
No no disclosure on the brands. This is you know to probably too early than to have.
Any discussions about that 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 disclosed and number three agreed.
Okay, that's very clear thanks.
No.
Yes.
Right.
Alright, Thanks, guys and good afternoon and good morning.
Did you hear on throughput on one point.
Back in practice with great in can you just start checking your line.
He Mac tools is in there I mean over to your you're talking about backward looking what.
Okay, Yeah, starting this year.
Combined EBITDA work and 40% lower unlevered, but I thought it might go back and looked at the overall that didnt JP when it closes maybe just a quick what I'm the contract because it can move your maker content providers UK BQ God I pay the point that you're a sport revenues are zero, Martin, but that would mean that could be.
Negative margin, if you're not collecting revenues down to pay for them. So are you able to get relief on those forthright or you're not really your customer maybe any help would not be how would be great. Thank you.
Okay, Yeah listen that sports you two tranches, yes.
I think the agreement and the relief and it was cleared the expectation is that we own a you know have leverage for the five times range, which will be closer to the high end of that range.
When we close 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 now 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 only a couple billion.
Sounds really that isn't yet raised or or ready to be transferred over that's the number more or less so there's not the financing conditions, not particularly important one michael that stage.
Neutral hydrogen sports.
Yeah, Yeah on the spot for sure. So we have following exactly.
Well I M B T hat off of that customer.
So it could be.
All the sports content that picture of them I wanted to.
And therefore, all yelp on the position both.
Not to pay for both the Mark you have decided to or Oh pick it took without and therefore that it might not be Brooklyn.
Okay. So you are able to beat you got a degree you know there the whole so.
Over that period occurring.
Exactly I mean, we updates me you have to come to agreement we entered the look back at with the and then we've got.
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And although when you read our contract it's pretty much like that.
Okay and started bikes that come back the first question and maybe the go work significantly lowered.
That that concern or would you 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 why would likely occur probably on the shorter end of that Charlie you want to better.
And Steve we've come through but I was going to resurrect could be.
Pretty good and.
Steven Monica, So we're pretty comfortable that.
Built into the full cost.
There is not a.
I actually would that we've had tried.
Okay, very kind of exiting businesses.
Sure.
I've done it still trending up pretty well I'm very very confident.
And to get the remaining couple of billings on remember.
But that we have today I'm going to kids and assets come across multiple customers.
So it's all girls.
And then school, but interest.
Hi, I'm not I'm not question that you can get with that but whether it's the right level looked a lot lower.
It's the only I would say the entries of me baby.
Just cost, which is I think as Mike indicated they might be little conservative.
It gives a lot more credit spreading the word parents combined company to two standalone companies. So.
We'll see.
I mean, clearly none of us.
But.
And we'll have to find out but first let me just happy with.
Okay. Thanks, a lot guys.
Thank you.
Great.
Yes. Thank you very much everybody it might contain congrats on that the deal I'm just a question on today, probably more for so let's actually just from the 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 extra customer in stolz as I understand Openreach has been more limited in being able to do that how much are pretty said is that providing.
So 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 Mac. So therefore, our couple must do operate already on a very our country markets not to operate or already at very high speed.
And so therefore, we don't see additional demand on top of that currently and become too much.
On the need to be state you see that but we have a further or demand I ever higher packages working from home packages or asked about that so that is encouraging and in terms of net add.
Or youre right I would say are currently we are not that mexichem. So what do I mean that or fares are still at 80% and the only online or to market, though its appeal to you a more connectivity.
Cool so less demand on video war on broadband fixed broadband and also a lot strong.
Let's start with no I'm happy with it because they want give me a 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 a menu installed its competition, but you could actually installed why we keep on doing that the menu installed as well.
Therefore, you're right currently we are growing a bit our customer base because of that.
But suits that also Q1 will be kept <unk> customer base. That's why we came up on.
Our strategy to jump on the weakness or or or compared to call. So are you can expect from us, Florida initiatives to keep that all grow all consumables.
Great. Thank you.
Well go next to Matthew Harrigan with benchmark.
Oh, sorry.
Oh, Thank you I realize though over the top of course to move I think you did the right thing from de risking liquidity enhancement.
Yeah I was born in this environment.
An extension of the Robert Grindle worsening I mean, you and John Malone, we'll have the opportunity to kind of the ultimate I guess angle cable Cowboys.
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 really wanted to get Machiavellian has developed over time, you really want to have some opportunities through some very accretive.
Stock buybacks here for obvious reasons.
Reasons.
That's what do you ever would look.
You will have less complexity I guess in terms of a.
Financial engineering, but probably in order to know a real screens and discovered not seen environment I realize it's really over the top question, but I thought it run at body, but nonetheless.
Well, Matt you 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.
Our set of opportunities is different and generally speaking were a you know we never take anything off the table, we always look at 50 at the.
But in front of us but in this case, we believe this is the right outcome, that's what I'll say.
Right, Okay, that's right and congratulations.
Okay. Thanks.
Our 10 after here, so I guess, Rick or upper let's take one or two more and then let people get back to today.
Okay. That's too if there are one.
With Jefferies.
Thanks, very much might you highlighted on footprint expansion Youre and Telefonica shad excitement.
About them next on the like could you comment on the capacity to to pull that off during a period of probably quite integrate large scale merger integration that same time embarking on accelerates the triplex passion potentially I realize that Jonathan I'll try and how do you have you look at.
There's a capacity to two to pull through everything together and Tom. Thank you.
Yes, it's it's a good question and it'll be something that we factor in well you know we would ever make to see how should you be decision that impact our ability to execute synergies are integrated businesses on the other hand, we're already out there today every day.
Building extending plant in the street, so if we.
Sure if we were able to do it or or see our way clear to doing it you know as a standalone company, there's nothing about being a larger more integrated companies that you 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 yes.
We lay that out on the page you will make a determination, but I don't see anything off the top and as you can comment that that would would a you know somehow preclude us from having the where with all of 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 ways of structuring it in financing as well. So I think it's it's the right thing to think about but on the other hand.
Nothing in my but in my mind that says it's not it's doable have to get there when we get there.
Oh, that's I think that you're also down even though as I noted child for sorry looks.
Well I can I can't give some come off a a flavor to that I think what we have done now is we have.
It's really all natural extension so from consumer drum beat to be from wholesale into the lightning unit.
And they accelerating their natural extension I mean, we have just announced the beginning of the route that we the mobile backhaul three fell again.
Oh Gee side from three so therefore, you have security vendors for an acceleration in roll off like we have lots of claws, a couple of electronics and deal fell back or the machine is growing and the machine will I'm also quite independent. So therefore, it's not so much impact.
Oh by the complexity of an integration.
Got it thank you last night.
Yeah.
And we'll take our last question from Sam Mchugh from Exane.
Yeah, I'm going up.
I want to guide just arkady to fiber in the UK I'm following btds announcement today.
Do you see any kind of strategic needs to move their thoughts are on your own American assumption, you don't project Lightning and I 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.
<unk> more or less confirming what they anticipated and you know they should be leaning into this this element of the business and I think there no they're probably do that so I don't believe it changes it materially and moves to a type of the second question I'm not sure fully.
Understood it or got all the details other than they need it.
No I mean, what what we are accelerating is a fixed mobile convergence like the more customers we have locked in six the mobile.
In a bit better position, we are to protect them or some competition lights out. So we're doing more speed for a couple months now more fixed mobile convergence.
And network expansion at the moment that takes you know and we're looking for ways to accelerate.
And with all of that occurred and 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 from BP to previous themselves.
Okay and with that new we'll let you get back you Dave always appreciate you participating these calls in the sport.
You know we're excited about the steel 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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