Q4 2020 Liberty Global PLC Earnings Call
Good morning, ladies and gentlemen, and thank you for standing by welcome to Liberty Global's fourth quarter, 'twenty and 'twenty Investor call. This call and associated webcast are the property of Liberty global and any redistribution retransmission or rebroadcast of this call or webcast.
And any form without the express written consent of Liberty Global is strictly prohibited at this time all participants are in listen only mode. Today's formal presentation materials can be found and under the Investor Relations section of Liberty Global's website at Liberty Global the dotcom. After today's formal presentation instructions will be given for a <unk>.
Question and answer session.
Page two of the slides details the key.
Companies the Safe Harbor statement regarding forward looking statements.
Today's presentation May include forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995, including the company's expectations with respect to what's the outlook and future growth prospects and the other information and statements that are not historical fact these forward looking statements involve certain risks that.
Could cause actual results to differ materially from those expressed or implied by the these statements. These risks include those detailed in Liberty Global's filings with the Securities and Exchange Commission, including its most recent filed forms.
10-Q, and 10-K as the amendment.
Liberty Global disclaims any obligation to update any of these forward looking statements to reflect any change and its expectations or in the conditions on which any such statement is based I would now like to turn the call over to Mr. Mike Fries.
Thanks, Operator, and welcome everyone and appreciate you joining us today and this is our year end call. We got a lot of ground to cover and I apologize upfront for the length of the remarks.
All of my colleagues, that's from the line and I'll be sure to get them involved during the Q&A and then as usual Charlie and I will be speaking from slides, which are available on the website. So hopefully you can access those and follow the wrong I.
I'm going to begin on slide four with some 2020 highlights and by any measure. This was an extraordinary year for us for our employees and our customers nobody was immune to the effects of COVID-19, and 2020, including us as Youll see we were lucky Lucky to have some strong antibody so to speak that emanated from the critical role, we play and the lives of our customers and which allowed us to meet or.
Nearly all of our own internal forecast and we established pre Covid families schools Hospital business is big and small saw the reliance on stable and robust connectivity rise to unprecedented levels.
Average upstream and downstream traffic in January we're still 90% and 60% above year ago levels. So, we're still and this and doing quite well.
Prices show many operating lessons were learned for example, the importance of putting our people first with flexible work arrangements constant communication and attention to their wellbeing. We also experienced the goodwill that comes from going the extra mile for our customers and our communities with more speed and more data more entertainment and a central and low cost access plants and we quickly identified the significant.
And if it's of accelerating the digital Roadmaps, we were already on for customer sales came from attention. It's also fair to say the throughout the year. There was an underlying flight to quality and more connectivity customers, which really play to our strength.
Already deliver the faster speeds and the most reliable services and Fitch and at the bundles and better customer experiences and our competition and as the customer puts of higher value and these factors moving forward, we're committed to the investments and the innovation required to solidify that position and you can.
Any of that happening and our fixed mobile transformation, our launch of one gig broadband everywhere, our investments and digital customer journeys and our commitment to new connectivity and entertainment projects, which I'll talk about here.
So with all of that said, perhaps not surprisingly 2020 was the strong year for us operationally and financially.
And then the summary table and the right side of the slide with the key numbers, but I'll just highlight a few things beginning with our significant increase and subscriber growth. We added over 80000, new fixed customers and the year reversing the trend of customer losses, which stood at 74000 last year and broadband net additions, perhaps one of our most important measures of growth with 240.
2000 up threefold from 2019, we even saw growth and postpaid mobile adds to 513000, despite shop closures throughout the year now there were plenty of key drivers behind these results for example, all operations sort of reduce churn and higher NPS and that provided the tailwind. This was particularly evident in the U K, where we didn't.
And consistent growth on our base of your footprint and of course, the Newbuild territories. We also saw consistent sales and net out of proven and Switzerland every quarter continuing the turnaround the began 10 years and quarters ago, Charlie who will take us through the financial results, but the Bottomline is we delivered.
And net out the impact of Covid and things like premium sports and mobile roaming we generated positive revenue while at the same time exceeding our original expectations for EBITDA and operating free cash flow. The standout number from me and I'm sure for you was free cash flow well, we beat guidance with $1 1 billion of this year up nearly 40% year over year and you can do the math against the 580.
Shares outstanding to arrive at free cash flow per share. So it's apparently we're discouraged from doing that for you and you'll see that implied yield and your stock is attractive and moving to the second box. There is more good news here. When you look at our Q4 results, we've been talking about low churn and record NPS most of the year and this continued to drive sales and net adds higher in Q4, making it by far.
Our best performing quarter of the year Virgin media in particular saw its best customer growth and 12 quarters and our Swiss operations. You've missed you delivered positive broadband additions for the first time in 13 quarters and that complement of another strong quarter from Sunrise at the foundation of this customer growth of our key product launches around one gig smart Wi Fi and the advanced Entertainment plat.
And again I'll talk about those and the second despite working from home and all of the related challenges of of pandemic. We made some pretty big strides on our fixed mobile transformation here with two large M&A transactions and Youre aware of these and adjust.
Just referenced the acquisition of Sunrise close in November and I could not be happier with the progress we've already made on leadership integration and commercial planning we've got of Rockstar management team led by Andre <unk>, who was the CEO of Sunrise and including several of the Pascagoula, who launched the UPC turnaround and and now report to Andre and the CEO role.
The Swift synergies have been validated commercial day, one planning is well advanced and the.
Momentum in the meantime continues to accelerate so we should have much more to say about that and our second quarter call an extraordinary Q1 call that's true.
Turning to the U K as we do quite a few times today I'm happy to report that the regulatory review of the joint venture we announced last May between Virgin Media telephony was owed to US right on track and we have been heavily engaged with the CMA and feel really positive about of midyear approval like Switzerland, and everything we've learned in the meantime, just reaffirms our confidence and this comp.
The nation financially and operationally.
Reported the Swiss and U K deals together represent about $12 billion of synergies and an NPV basis, and that's of today's FX rate of around 65% of which should accrue to us and you can do the math on that in terms of potential value creation and also just pointed out and as with.
The Belgian and Dutch integrations, and we have a pretty good track record of under promising and over delivering on synergies.
Probably notice of Vodafone and <unk> reported around the 6% EBITDA growth of $1 2 billion of operating free cash flow for 2020 with all expected synergies achieved a year earlier than planned and as I mentioned on the last earnings call. Vodafone is of Great case study for how fixed mobile convergence delivers growth and stable free cash flow even before the more strategic.
Opportunities are factored in which is of great segue to our 2021 priorities and I'll start with our commitment to two initiatives that are very very important to all of US first of all I'm extremely proud of our work and diversity equity and inclusion of cross Liberty Global and we have been focused for some time on gender equality and supporting the less fortunate and our communities with broadband access.
But we can and we will do more so and established our first global day Eni Council last year was that Codeshare, we ramped up both our internal and external work around five pillars ethnicity, and gender LGBTQ ability and generational equity.
This builds on our programs already in existence, and Turbocharges others, but the bottom line here is that we will hold ourselves and the entire company accountable to greater awareness and tangible goals reflect our culture and our purpose and equally committed to our ESG programs, where we're already a recognized leader most of you know that we've been in the Dow Jones sustainability index for years and.
Currently the number three and the telco media sector were also and the top 15 per cent of S&P and sustainability performance measures among other acknowledgments and like many of our peers. We're squarely focused on our net zero targets, which we will announce later this year and let me quickly hit on five other key priorities for 2021 first of all and you'll see later in the presentation. Each of our core markets is planning to deliver path.
The revenue growth this year, reflecting continued momentum and customer additions expected or announced price rises and progress and or BTB divisions, just to put and that assumes modest not necessarily heroic improvement and the COVID-19 crisis throughout the year.
Second of nearly certain that despite $45 billion of accretive M&A last year 'twenty 'twenty, one will be equally busy and exciting for us on the strategic front and becoming a fixed mobile champions and number one or two of our markets delivers more than competitive stability and long term growth. It also gives us the scale to shape, our markets and drive even greater value.
Creation, which we will do.
Third we'll continue to optimize our portfolio of venture investments and 2020 I wanted to bring greater transparency to the assets and we believe already represent about $4 per share and I'll come back to that and a moment and.
And then fourth we're laser focused on free cash flow growth, Charlie will take us through the guidance in greater detail and a few slides, but I'll steal the headlines would you that we're forecasting a 25% increase and free cash flow over the year and when you factor and our commitment to buybacks with the $1 billion, we purchased last year and about $19 a share and the new $1 billion buyback.
The rosacea and place where this year, we should see an even bigger increase and free cash flow per share now, let's dig a bit deeper on our operational performance on slide five and the <unk>.
Opus years to lay out visually the acceleration of customer growth, we saw throughout the year side by side with the core product innovations that stimulated and supported that growth.
Starting on the left hand side of the slide you can clearly see the significant sequential improvement each quarter and customer and broadband net additions by far and most important measures of growth fixed customer adds went from negative 19000, and Kieran to 56000 and Q4 almost of the straight line.
And we set new highs and broadband with 242000 total AD and it just set up threefold from last year, and again steady sequential improvement quarter after quarter.
Now the biggest contributor to this growth was our biggest market of Virgin media added over 100000, new broadband subs last year, drawing from again, both the day, you would lightning footprint and and the fourth quarter grabbed nearly 45% of all broadband net adds and the market, even though we only reach half the country. So many things are coming together right now and the U K Lutz and his team have done.
Fantastic job, we've seen better base management and record low churn and they brought call centers onshore, but still increase the percentage of digital sales to 50 per cent. The network is resilient and they've rolled out a bunch of new products like one gig fixed mobile bundles five G. P. <unk> hundred 60, and intelligent Wifi and.
And those same growth drivers of being activated across our European footprint, So and the middle of the slide you can see that we doubled the number of homes commercially available for one gig broadband to 20 million at the end of the year with most markets at 100% coverage today, so back of the U K our gig one commercial rollout with $7 3 million of homes by December.
Almost twice the number of BT Openreach and of course, we're only half the market and will be firing up the remaining 8 million gig one homes throughout the balance of 2021 that will significantly widen the gap of BT and provide a great tailwind for Virgin media.
The clear it's early days and the marketing of one gig services for share and you can see that and the middle of the slide, but just under 200000 gigabit subs and our footprint today, but we know speed matters to customers, we know what matters now more than ever today over 90% of our broadband subs, the around 100, megabit or higher service and.
And half of our subs at the 200, Meg or higher level and we've seen this movie the movie before.
Just a matter of time before one gig product gains traction and we will lead the market again now turning to video quickly and the bottom left of the slide you can see the improvement of video of losses from 74000, and Q1 of just 10000 and Q4 total losses of 180000 of the year with 30% fewer than last year and.
Represented around two five per cent of our video base, that's meaningfully better than the U S and we've talked a lot about the differences between Europe and the U S. Many times, we have lower video obtuse of less pressure on subs and we have a stronger free to air broadcast sector, which keeps more eyeballs on linear and time sheets of television.
And we have widely available fixed mobile bundles, where we know the video product is a key component for customers.
On top of that we continue to rollout the most advanced video devices and the market like <unk> hundred 60, which I've mentioned and the U K, which is our latest UI and now shows and NPS improvement of 50 points and our new IP box of we call Apollo which is of for Kate App centric box very inexpensive device it actually fits and your palm and allows us to upsell of the traditional video.
The entertainment roadmap and my opinion has never been more robust with all countries on the same platform for the first time and I'll just close the slide out by saying the momentum and you see building on this chart has largely continued into 2021 with modest price increases continued churn management and product innovation. This should be a strong year from <unk>.
BDC business and of course that assumes the availability of vaccines will reduce the need for for the lockdown as I already mentioned in other words, we do expect the slow, but steady improvement and economic activity throughout the rest of the year by the way just the footnote.
And we've given you an update on each country and the appendix, including data on project Lightning, which you know you're always interested in and I'll. Just say project Lightning continues to perform brilliantly so look for that information and I'm going to end my remarks, with the few words and our ventures portfolio last quarter and provided a teaser for you and the highlights on a handful of investments, but really not much granularity.
And given that we believe the total portfolio is worth $2 $4 billion per day for a little over $4 per share we thought it might be useful to provide a bit more detail on these investments so.
And so on slide six you'll see the four verticals that comprise of the portfolio check content and sports and sort of emerging markets and the catch all really and infrastructure.
And as you'll quickly spot 90 per cent of the value resides in the first two buckets and the left so that's where I'll spend my time, starting with our tech ventures portfolio.
And I will note and we began investing and tech of about 12 years ago with the small dedicated team in Denver, and Silicon Valley, which remains very small today and during that time. The golar has a way, but really we're looking at mostly modest investments and early to mid stage companies that provide products and services, we can exploit and of our operations. Historically of the team has been focused on verticals like infrastructure and cloud and Ms.
<unk> learning with some blue Sky and investments and things like gaming or augmented reality or advanced advertising now of the value. We delivered of the portfolio of company can be significant because we're typically a customer that's why we get has to be and a lot of deals. We don't include the value of that the portfolio of company brings to us and our returns and Trust me there have been many examples where that number of large today, where we have around 250.
Currently invested and 40 plus companies, which we value of nearly four times that amount and this excludes the 180 million that was previously invested and the ventures fund and has already returned $350 million of capital to us, which we just moved into our consolidated cash balance of the team you know they've historically invested around $50 million per year, but they haven't.
It's a really smart bets and makes.
A couple of here on the slide skills. For example is the mobile gaming platform that we invested $14 million and back in 2017, anticipating our role and the mobile business and today is publicly listed with the market cap of just under 14 billion and value of our stake at $450 million clue is of Prince is principally of supplier of smart Wi Fi devices and the home.
That improve or extend reach but also services gateways for device management, we've rolled it out and Europe. Comcast is the largest distributor in the US and we began working with plume of 2014 has the potential supply and ultimately invested $25 million and based on their latest funding round that stakes worth around $170 million and we have an incredibly strong relationship with the strategic vendor.
The host of other examples and the tech portfolio in fact, the team believes we're currently invested in no fewer than nine companies that either are or we think will be unicorns and like any good venture investor We had and we will continue to monetize these positions when the opportunity arises and the return that cash to corporate and the second large bubble represents of our investments and content and spa.
<unk> died at 1.25 billion today, and this concludes our stakes and companies like ITV.
All three media Lions gate and Formula E and I was most of you know we acquired 10 per cent of ITV around seven years ago, and and average cost of 2016 pence not surprisingly and as most of the figured out the fully hedged that position at the time with the color and as those colors will expire soon we have begun unwinding that position and lowering our cost basis and the share.
Currently we're long about 7% of ITV at 75 pence and the stock closed Monday at 113, and the balance remains colored and we may or may not close that out and we'll see we did the same thing with our hedge position and Lions gate when the stock was and the mid single digits or thereabouts and now trades of 13. So let me preempt the question by saying right up front. The these steps do not portend anything.
Strategic with these companies were just taking advantage of market dislocation to materially average down our cost and these positions like any smart investor would do and just a quick one of them formula and what you're starting its seventh season of eight races. Later this month and Saudi Arabia, I don't think I have to explain why this racing series is well positioned right with manufacturers like Mercedes and portion now and.
The series of.
Everyone appreciates the future of driving and racing is electric and we have about $150 million invested and of 32% stake that we conservatively value of $250 million and yes, and he's backs have been circling and we'll see what happens, but the only other thing I mentioned briefly is our growing investment and infrastructure, which we believe holds immense untapped potential.
And for Us and I'm, referring to both our own infrastructure like Cabot is real estate and towers, which were rapidly organizing into separate units where necessary and third party investments in businesses like the edge connect for example, where we rolled our stake in the Eqt's $2 7 billion dollar acquisition of edge connects for of <unk> return and the seat at the table with what is arguably the smartest and.
Nestor and infrastructure in Europe, So there's lots of exciting things happening of the ventures from historically, we've been pretty quiet about our activities and certainly they are not taking resources your focus away from our primary business, but the Israel value here and real strategic connection to our operations and you can expect us to be more transparent moving forward. So let me recap of strong 2020 operationally and financially.
And of Great start to the year, you'll see that are true big fixed mobile combinations, and Switzerland, and the U K are right on track and the 6 billion of liquidity at year, and we continue to invest our capital exactly how we signaled the wood. So first building FMC champions and our core markets we've done that.
The second Opportunistically investing adventures of the both strategic and financially rewarding and you're seeing the fruits of some of that work right now and third buying back our shares which obviously, we believe are undervalued relative to almost any measure so I'm excited to take the questions. The first over to you Charlie.
Thanks, Mike and then turning to our consolidated numbers starting on the page and total underlying revenue statement.
Total group revenue saw a decline of one 5% and Q4, resulting in the full year decline of one of the ups and.
We estimate of the negative impact.
Some of your around $54 million from Q4 and around 200 million net.
The impact of our growth rate by around one point of it.
Without that we'd need the group we can.
Seem positive rebased revenue growth.
And the right hand side of the page, which of the last three quarters you can see the five key areas impacted by Covid.
In general Covid impacted our business much less in Q4, given the pandemic.
Sales in Q2.
The impact of not having access to premium sports and Q2 was $34 million.
And it's probably true turned by Q4, Thanks, I was wondering around $7 million.
And of that sales and other revenues were impacted by the pandemic and.
Yes, Mike contributed to a $16 million drag from Q4, while the.
The impact from our podcasting business since it was around $6 million for the quarter.
There was some impact of our <unk> businesses, we estimate of around $22 million and Q4, but it was largely due to reduced sales and Fortunately to date, we haven't seen the material impacts on bad debt charges and other.
<unk> will consume the businesses and the next slide and provide details of our adjusted EBITDA.
For the full year 2020, we delivered minus three 9% adjusted EBITDA growth, which is the amendment of expectations as we called out in the Q3 results presentation Virgin Media declined 11% Rebased versus Q4, 2019, and this was driven by $7 million of customers too much of it and some other growth investments, particularly $21 million and accelerate.
Digitization and the onshore and the of our customer contact platforms as well as the $19 million increase and marketing mistake of results and the accelerated subscriber growth.
The remaining difference versus Q4 2019 ex the impact of the endo contracts implications net website.
And the deferral of a price rise from Q4 to Q1, 'twenty and 'twenty one.
Swiss trends continued to gradually improve of the seven 9% decline in Q4, partially explained by 4% drag from $10 million of cost to capture our estimate of synergies.
While summarizes rebased results and since completion of enrollment of up to make year on year financials. The spa.
The loan business reported around 3% full year growth based.
Based on the historical Ifr supportive of us chance of operating free cash flow, we delivered 5% operating free cash flow growth from the food, yet which is in line with our guidance of mid single digit growth.
The slide $26 million of cost of the capture of which is equivalent to more than one percentage of price.
Our capital intensity declined 22, 5% from 2020 and $19, 6%, excluding capex amidst the project.
And the cost of capture and Switzerland, all markets with the returned positive the FCS growth year on year.
And that was always a deconsolidation of joint venture and the Netherlands, which grew 9% year on year.
And one 2 billion and operating free cash flow.
Turning to our 'twenty and 'twenty free cash flow results, we delivered 39% growth $300 million compared to 2019 and work.
What was the $1 $1 billion of consolidated free cash flow and about $1 billion guidance.
This was despite some currency headwinds versus the guidance assumptions and so forth.
And and drag from working capital, which we generally believe she will be the telecoms companies such as ourselves.
Our cash flow was further suppressed by the $329 million capital expenditures related to our UK and network expansion project Mike.
And the patient titled 2021 outlet and provide details of our expectations for EPS, it's going forward.
Given that we fully expect improvements will be deconsolidation and the joint venture by midyear and the better things.
And telenet already provide expense guidance going forward, we will provide the key financials and guidance most of the group consolidated basis from each business unit.
At the group of it won't be guarding only to consolidate the free cash flow, which we expect to grow moving 25% to $1 three $5 billion of 'twenty 'twenty, one based on the assumption to the JV.
And the U K and others, we expect to return to top line growth, despite and increased year and impact from and new contracts and best charging applications. Although of course, the capture synergies will weigh on adjusted EBITDA and the west.
For the full year and would expect Standalone.
The decline low single digits across both metrics.
We also expect of a change of revenue growth and Switzerland, the combined UPC Sunrise business and I expect a low single digit adjusted net income decline and a mid single digit decline and that's it.
And because we are spending of 150 million Swiss range of costs the couches sandwiches.
Underlying business growth.
Total net of Belgian operations has got into whether it's 10% adjusted EBITDA.
Growth and continued free cash flow ex.
And to generate 420% of $414 million.
So don't think of a Dutch JV and from two 1% to 3% adjusted EBITDA growth and an increase year on year cash distributions to shareholders and drive it to a range of $550 million to $650 million, 677% from dividend.
And with that operator.
<unk>.
The question and answer session will be conducted electronically. If you would like to ask a question. Please do so by pressing the star or ASIC followed by the.
One on your phone and all.
And there to accommodate everyone.
The request that you ask only one question.
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And that's the reach of our equipment well pause for just a moment to allow everyone an opportunity to.
The joined the queue.
Alright, well ill take the first question from Robert.
Excuse me.
James Ratz Sir.
Pardon me it is going to be from Robert Grindle with Deutsche Bank.
Okay.
Okay.
Okay. That's that's my I think yeah, hi, Bert and how's it going and.
May I ask about the U K.
And I saw the strong lightning take up stops.
But the lightning build was.
Lower than the <unk>.
Previous three years is that is that COVID-19.
Or are you hanging fire a bit pending the <unk> merger or I think you mentioned and the slides batch.
The passive infrastructure access is not really available at the moment is that is that what youre waiting for them and and what's the prognosis there. Thank you.
Well I'll just make a couple of comments and Lutz you can work up a more detailed answer.
If you look at the last four of five years, we've always built between 405 hundred homes and 1000 homes per year of last year. Because you are 126000, and we've got two and $5 million a day I wouldnt read anything into it it's more about just optimizing our overall financial picture could we have built a few more yes.
Could we have both the U S probably the PIH is reducing our costs pretty considerably below six other pal, which is of great thing and the more we use of that of course, it could accelerate both the capital we spend and the number of homes. The bill. So it's all good news there.
No nothing negative.
Our coverage is growing our penetration remains strong the rfps and for all of the returns of high So the lightning project as it sits today and you think.
Certainly.
When the merger closes are the same.
The venture Coles, and we will sit down with Telefonica one of the we're allowed to and really reevaluate the entire picture of around our fixed networks and the U K and specifically the pace of lightning build of circa.
And Lee our broader ambition to expand the network beyond our lightning footprint aggressively while the.
<unk> will take the 10 gig.
And we bring and financial partners Halloween and how are we accretively and aggressively and take advantage of our network leadership and this market and ensure we remain network leaders for some time and Thats a real opportunity here.
Any other color.
And you said it all basically I think the only thing I would add.
That's the lightning and keep them on top to the network of expansion for homes is also not going to connect more and more base stations corporate G. Right. We closed two big deals one with Vodafone.
It's true three gig and obviously you also use and acceleration of that.
And really connecting sockets and.
And so if you take both into accounts.
And then it ran.
And that pace and as Mike said, I think we have true revenue of the strategy together and after the approval of kind of thing.
Thank you.
Oh right. Once again that is star one to ask a question. If you find your question has been answered.
Yourself from the queue by pressing star to the next question is from Christian.
HSBC.
Okay.
Yeah, great. Thank you hi, guys.
I have actually a question on Switzerland.
So it looks like a good outcome, bax, who broke and growth and debt markets on the underlying basis at UPC Standalone.
My question is more on the integration cost and the phasing you mentioned of $150 million can you maybe give us the split between Opex and Capex here and also what do you expect in terms of synergies already in 2020, and it kind of of the <unk>.
And over the next few years of at least broadly speaking that we can model. It properly I think they're a bit more color or guidance around debt would be nice.
Yeah.
Andreas on the Cog and.
Ask him to address the stocks that were being obviously the careful about annual.
Synergy expectations.
I'll tell you that in 2021.
The synergies are expected to be relatively nominal I think maybe 30 million Swiss franc range something like that.
You know against the 150 million cost of capture but it ramped pretty quickly.
You know I think.
In 2022, it's it's it's four of five times that number and then the growth sort of ratably through the 2024 of 2025 timeframe.
And it's not going to look materially different than the Belgium, and the synergy model or the.
Did that synergy model in terms of how much is revenue how much is cost avoided and sounds like she is.
Cost savings based on the 'twenty 'twenty cost based and it's about $85 15 of 15% revenues and those are really in the later years. So the conservative.
And argue.
On the I don't know what other color, we're providing all of those sorts of numbers, but I'll, let you.
Well I think you outlined it well.
And the cost of the catch up of course and tried to be pretty and Frontloaded. We are moving fast integration is progressing quite well and.
And obviously and some of the Opex stuff.
Going first whereas some of the investments are coming later of him as he goes through it.
And I would expect of the largest part of the total cost of catch up it should be done by the end of 'twenty two and in terms of synergy phasing of course, there's always a bit of a question mark around the revenue synergies how quickly the lumps room, but as Mike has pointed out I would probably come from.
And the shape of the trajectory.
Thank you very much.
Alright. The next question is from James <unk> with New Street research.
Yeah.
Yes. Thank you very much indeed question instead of me really was around your cash return thoughts from here I mean, firstly on the buyback I noticed the pace of that seemed to slow in the fourth quarter. So I was wondering if there was any logic behind that and should we expect.
And the pace of buyback to be accelerated during the first half of this year and.
And then given the strong cash flow guidance that youre, giving and the range of buyback I mean, youll still and this year at the current.
And run rate.
And with well over $3 billion of cash on our balance sheet. So I was wondering if you could give any further thoughts around the timing.
Some of that potentially being returned to shareholders. All of the uses of that capital. Thank you.
Well I can't identify any other uses of the capital.
Beyond what I've said generally which is we remain opportunistic around strategic.
The transactional.
Ideas might occur and our core markets.
And maybe continued modest investment debentures nothing else that's jumping out of us at this point for that would require meaningful amounts of capital. So buybacks remain front and center as you said.
Just looking at last year, you'll remember that we started out of.
A normal pace one of course of the stock decline, we ramped up and spot most of our stock and that period of time Q2, but the Q3 and from our perspective, we'll do the same this year. So I think the end of the year was a bit of and odd period, both related to where we were at <unk>, one plans and our.
And the material non public information and having just announced or about to announce the increased authorization and wanted to get through the year. If you will will remain and we had so I think you should expect us to look at the situation.
Dynamically and it.
It wouldn't surprise me, if we ended up buying more stock and the first half and the second half because we believe.
Our operating and financial story continues to look better and better, but let's see how the about how things evolve but.
Got the full 1 billion available yet we have the spending more.
The daily and this year than we were in the.
And the fourth quarter and that Shouldnt surprise, you, but let's see how things evolve can't be more specific than that James.
Great. Okay clear thank you.
Mhm.
Yes.
Alright. The next question is from Michael Bishop with Goldman Sachs.
Thanks very much.
Just try and pull together a couple of things on the free cash flow I died sales like the step up to $1 35 is largely driven by the higher Vodafone the guy of distribution and then obviously that the growth.
The accretion that Sunrise.
Is there anything else you'd call out.
So I think that 135, given it looks like you're guiding the operating cash flow will be and.
The modestly down for a couple of the assets like the U K.
And so it's.
And then the market.
Is it more forward looking question on the cash flow, which is related it sounds like we should take the 135 and then effectively if you will.
And so think about the other.
A run rate basis going forward youll be spending it.
150 million on integration costs, and Switzerland, <unk> and the U K, but then you'll probably spend and some.
So the second half as the deal and the U K clothes and so simple.
Simplistically should we think about the underlying cash flow being quite a bit above $1 billion. Thanks very much.
Good question and started.
I think the U K.
And youre quite right the refill of the acceleration.
And the benefit you think it will continue through the cash machine and the sub.
The acceleration of that you all know and.
And until that based on that guidance.
And the U K, it's more flat part of it.
And because the deal, but also because of the car.
And the capture and also the lightning.
And again I would emphasize that.
Actually the switch off the interest.
And that would increase the free cash flow pretty maturity.
Okay, not kind of thing.
And then and Switzerland, I think you rightly pointed out and we're getting some good free cash flow does not least because we are getting to the financial synergies.
As a result of the transaction. So I think the message is that we've got a real cash flow machine and I think Mike disappointed about the U S.
And then there's about one of the guys.
Yes.
The continued free cash flow growth.
A lot of times those synergies.
And if we see the continued good operations.
In the center out of the UK.
And as I said in my remarks, it's you would already know Mike with the free cash flow per share figure would be even obviously, a more robust and the growth rate basis, just given our.
The repurchase of eight nine and 10% of our GAAP every year, so you're looking at it.
Integrated the free cash flow underlying of.
Operating free cash flow story, as Charlie said and as you pointed out is strong and.
And then we were able to.
The accelerate that on the free cash flow per share basis, just by virtue of our buyback activity.
And my right. So that helped the second half of the new.
So sorry, just to follow up on the second half of the year and the U K some sort of bite the thinking about will be effectively a small net cash outside of the so also and the 135 because that like I say, it's Daniel integration will be more of than the synergy that you deliver.
Well I think that's the way that's all of it.
Sure.
And the way, we actually look at it is its actually broadly flat.
Seasonality and the free cash flow out of the U K.
So and again.
And we'll keep you updated.
And the closing because obviously, we've done of a lot of inside of them.
Opex cash.
If we don't close we'll close it's probably about the type of free cash flow and there's a lot of various other assumptions.
Yes.
Yeah.
Yes.
And you're coming through a little bit plus each other but I think the point was the DSO. The the guidance is provided assuming that the deal doesn't close just to be clear for folks and give them a baseline.
Top of which they can overlay the JV and as Charlie indicated.
<unk>, whether we consolidate.
But of Virgin media for the entire year or just half of the year.
Interestingly the free cash flow number won't be and you could give us because we'd be that distributing that cash and the second half of the year back up to up to the parents and I think you can look at it.
Either way, Michael and Youre, not going to get a materially different number.
And that makes sense.
Yeah, and that's all very helpful. Thanks, a lot.
Yeah.
Alright. The next question is from the Nick Lyall with Boston.
Yeah.
Good afternoon, everybody just the.
And Switzerland, Please Mike if I could just on the the underlying competition still looks a bit tricky and you talked about disk and so I think and the statement again on the from book. So is not doing anything in terms of your plans for price changes could you maybe just discuss of what Paul and Luca.
And you can cope with price changes and also what the plans for the.
The brands and Switzerland as well please.
Sure effect, Andrea what I'll, let you take both of those right go ahead.
Sure. Thanks for the question so.
I would say overall, yes, the market is quite competitive and there is quite a lot of attention from the front book.
Well I would say that those businesses of Sunrise and UPC operating still of majorly independent and Q4, Hep C and one of the best quarters for the year and not only for this year, but growth in the last three years program.
And that is showing that we have the.
The competitive offering no looking forward for us of course, combining fixed mobile convergence is made of the game and we have still of lot of opportunity of both businesses to actually drive more value to our customers, while necessary and not necessarily the destroying value, but while the creating value. So I think that's one key whether it'd be one of the pool.
And in regards to brand consolidation and that's something we are currently looking into most likely will probably the operators two brands. We have seen debt working out quite successfully in the past couple of quarters within Sunrise and it's probably the strategy that we will embrace also for the combined business.
We haven't taken the final decision on what the spreads.
Okay. Thanks very much.
And then.
Alright. The next question is from David Wright with Bank of America.
Yes. Good afternoon, good morning, I should say thank.
Thank you.
Yeah, just on that the U K.
I really don't want to downplay the cadence of lots and team but from.
A lot of the commercial momentum has come with the delay and the price rise.
So I guess the question is to what extent is is that a factor and and as you bring.
Pricing and to the customer base.
And in.
The end of Q1 early Q2 I believe.
How do you think.
That was kpis could respond and this is the commercial activity.
Driven more by price right now and do you think or more by the the.
Quality of service and and the branding and the product. Thanks.
I'd, just say and then I'll, let new to provide a bit more color.
This began building early in the year day in and say if you look at the UK broadband adds you know the first quarters of 8000, and I think second quarter, 33003rd quarter 47004 quarter of 54000.
And it's our view that that that is sort of undeniable at the undeniable strength, regardless of the announcements they're getting out of the data.
Price increases and Mike.
And I mentioned in my remarks lots of positive things.
Driving that and look once you once you flush that out of it more.
Yeah, exactly so I mean, we put together the strategy to get extra of sustainable growth and 2019.
And then fixed mobile convergence won a lot of innovations like Mike has already called out.
Better base management onshoring of customer service.
Huge effort and digital and so this has led to reduced churn and.
Increased sales and Youre right obviously.
Waving the price rise in 2020 has helped here. So if you would have done one of the numbers would be a bit lower the net debt.
Growth however, it would be still substantially higher than 2019.
And.
Maybe I'll give you a bit flavor of the price rise how it's going so I.
I mean, we are we got very rational the reaction from the public so right.
And in the press and and customers it was well received and.
And we in the middle of it at the moment and it seems that the demand for higher speeds and the pandemic, especially right.
Parents walking and stuff you need higher speeds and.
So we offering debt so.
And so therefore, obviously Q1 net that's why the doing a price rise and cannot be higher than the <unk>.
The 55 styles and brought the net debt you have seen in Q4. However.
And not be surprised if we would have still part of the different net debt.
And Pat can I, just ask as a follow on.
And the commentary you made on the demand by the states, perhaps of the logging from Covid et cetera.
Also you have seen some competitors and.
And some fairly substantial price rises and the U K too.
After a couple of choppy is do you feel like the U K market is returning to more rationality Bob's supported by the Covid effect.
Yeah, well I think all of the play of half.
The investment of one.
And tied right and next generation network on the fixed side and five to you on the mobile the tide Sky. That's also a big investment and the content side. So that's one second use debt has increased dramatically as Mike pointed out.
And that means also obviously that all the funding and therefore I think price rises.
And half being done by all of them with everybody IPP CPI plus three benign I think brought up from the same I think just today sky has the amount of debt priced right for this year as well and we have done it in January so and I would say on price rise very rational and I think also.
However by the receipt by the customer as I said before there is still high.
Higher competition from the acquisition Alright, so here and.
Right prices, if you compare of price development.
And our friends and product like in the 66 of them ex space.
The prices are lower.
So that's the dynamic and we.
Haven't followed debt so much of its about the media and we get our fair share.
Very good point.
Yes by the way the prices are lower and those lower tiers, but we're actually offer and generally faster speeds and so you know.
The BT might offer of 38, Meg of Skype and upper 60, Meg product. We're at 100 Meg for that same customer target customer base, so our price per megabit, and thats something well look at as much more attractive.
And as people get smarter and more.
We're focused on the broadband product, that's not even in or out of the relevant stat. We're always faster even if the prices are comparable.
Okay. Thank you.
Yeah.
Alright. The next question is from Polo Tang with UBS.
Yeah.
Yeah, Hi.
Yes, hi, and thanks for taking the questions and so the first one is from Mike you talked earlier about how you'd be busy on the strategic fronts and 2021. So can you maybe just elaborate on those comments and were you referring to completing the UK deal or are you do the new additional things that you may be give.
As you know.
Some sense in terms of the areas that youre looking at and really just of a follow up question, which is really just about sky.
Dana strong, there's obviously seek new group CEO of Sky and she Oxy news approach and media very well. So do you see scope for closer cooperation with Sky going forward. For example, maybe sky kind of investing alongside of you guys in terms of our fiber footprint expansion or maybe doing a cable wholesale thanks.
Well I'll take those.
First of all with respect to data of course, she is very well known to US. He worked for US for me from over two decades.
And sitting here to be and outstanding Exec.
And so obviously, we're happy for her and I think it helps.
The us to have somebody in that seat and we know well and he knows us well and I think who Oh gosh.
Well, so it's a good decision and we're.
Of course, we're in touch with her and looking very closely and a number of things, but she's also quite deliberate and careful so she'll take your time to evaluate opportunities and the marketplace, having said that.
I have no reason to believe she wouldn't be just the strategic as Jeremy was around their long term strategy in this marketplace and what options they have to.
And the secure owner economics of reduce costs since the serve and all of the things that anybody who's doing the business or.
The building of as in some cases, what we'd look to do so.
And you know couldnt be happier with her and we're proud of her on the other hand, and I think it does give us.
A great dialogue and a great opportunity to continue to talk about each of our strategic future share we can't do much until the deal is approved.
Of the badge.
And you are unlikely to read or hear anything between now and debt.
But I wouldn't surprise me if we re engage on the number of topics with Sky, who are a very important partner for us in this market.
On the M&A side of the strategic front and I wasn't referring to anything specific but clearly if I look if I go through those three.
Buckets again.
Core markets ventures and buybacks.
Our core markets.
We've done exactly what we said with the deal and the last five years ago, and something like $80 billion of.
The bigger actually 80 day plus of transactions.
Allowing us to exit markets and double digit multiples, where we didn't have scale and a bed down markets. The fixed mobile convergence, becoming a champion of the markets, where we did have scale and I think we've got it depends on the market and by the exited border of emerged and we think in all cases, we've done the right thing. So we now have.
And the number one or two player and it's in these markets and that gives us the scale to be.
I would say opportunistic and creative so if you. If you are now the number two player and each of these markets relative to the kind of it you're in a different position when it when you look at those core markets strategically just and you could you could imagine what those might of glib, but the markets that we haven't yet done anything in Ireland and Poland. For example of course, we're going to continue to evaluate.
And what the right long term future for those market shares in terms of their strategic footprint and whether there is a fixed mobile opportunity et cetera. So you should assume that that tie and our list.
And it would be surprising to me. If we ended 2021 without the continued transformation even in those two markets whatever that might look like the only other thing you Mike might have heard me referenced indirectly is that we are really excited about the infrastructure space.
Not surprisingly we sit on the massive.
Massive infrastructure ourselves, both fiber base, the towers directly and indirectly.
We have real estate and of Charlie and his team have done a great job extracting property assets for from joint ventures, and op codes, allowing us to look at the future of edge computing. So you should assume that we are being about as creative as.
Opportunistic as we can be and infrastructure you know, we're not going to go compete with.
The big player sale that could say, that's not necessarily what you're referring to but there are going to be opportunities for us to partner and raise capital and monetize them.
And that'll keep us busy because those are you know we know the underlying value of our networks is significant and there is massive amounts of money looking to invest it and other networks. So it will be creative to see of the ways for us to create value you definitely people you know that we're not.
And anything we would do that would be accretive to our base case plans our guidance whatever it might be.
Referring to at the time, but it is exciting to me and something that we'll be working on closely in 2021.
Okay.
Clear thanks.
Yes.
Alright, and I'll take the next question from Steve Malcolm with Redburn.
Yeah.
Yeah. Good morning, guys and thanks for taking the question I'll try and go for a couple of other kind of like the quite quick ones first of all of this couple of other things I guess paradoxically, it's delivering the best and actual numbers and the current.
Operational Kpis are amongst the weakest of all 60 of Titan argued in the last couple of quarters.
Balance right now between volume and price, particularly in and see the KPN runs off of its fiber build over the next 345 years.
And some of your thoughts on that and then.
Swinging back to the U K and it has helped.
And some of the standards and the evolution of the <unk>.
And then walk you through the year of target.
And of the patients get the price rise you've got the.
And the first quarter past power against a lot of I guess moving back and of the year and thank you.
And yet that you talked about you know how should we think about the progress of Latin America and frankly.
Thank you.
[noise] speedier and moving pretty quick on the U K question could you repeat that just the more slowly.
Not all of it just yet.
I, just want to point and stuff.
And we should think about the evolution of the UK office and playing pretty well.
I'm thinking about guidance of about 4% and Q4.
And that sort of indication and it's getting price rise and you get one.
The one and you get the beginning of a lot of the best tariff impact the second half of the year does that kind of.
On the side.
And you've got a number of items stable.
And the growth, but the architecture is a bit Barbara and thank.
Thank you.
Okay and that you want to tackle the outgrew the question and get your two cents on that right in front of the culture. Yeah. Yeah. So I mean, you called yourself the of key deeper so of price right will give us the good.
Tailwind and get the option of growth again, and the other hang tight and there is you will see and then ABP and whatever.
Vacation, which hasn't really kicked in and into 'twenty, and 'twenty, but which will kick in in 2021, So and our plan. We are careful so we have a.
Contributed quite.
And some revenue loss and loss to a VPN.
Therefore, we think we are more coming to up your flipped into 'twenty, two rather than 'twenty, one, but it won't shrink a lot, but it might be a little of it all depends on customer reaction.
Yeah.
Yeah and it.
Dutch market and <unk>.
That's the market I think you.
You Rune and the team and Charlie you can jump in here to have had the figure it out pretty well clearly, it's a competitive market and the KPN has made announcements about.
Getting to corporate.
The 50% reach of fiber, which we always assumed would be the case, but we've now got one gig everywhere of 6 million homes, and our marketing aggressively so I think and suggest that.
Breather, if you will the synergies and the execution has been intense rollout of new products has been successful I think 'twenty one you know.
And is not indicative and we look at it of the longer term.
The opportunity and the marketplace and I think the guidance here just reflects a bit of a breather. If you will not necessarily a discernible trend over the next three years.
And I have confidence in them the ability to optimize price volume to look at these this market dynamically.
They're already I mean, just if you just compare that to KPN.
In 2020, which probably many of you do.
It's not very fair comparison, I mean the tenant.
And the incredible year relative to the KPN in terms of net adds in terms of pretty much almost any metric I think we grew revenue, 2% and EBITDA of 6% keep you and went back 4% and I think four five per cent and we had about 270000 mobile net adds and get and 65, you know their broadband result, with worst but as with any market.
You're going to have ebbs and flows right the keeping the good operator, we're not gonna be.
<unk> down and out forever and everybody comes back punch and so that's the nature of competitive market place and I have confidence that this management team has there.
<unk> is a good strategy in place for the longer term and let's say the medium term and any one year won't be indicative of.
And what you should expect and.
Any color on that journey of especially on the book.
Well I would agree are the other guys.
They've got a great deal and B to B and then if you've noticed that they've moved their market share very materially and PCB.
And there's still a lot of runway to go so well actually and they did a terrific job of sort of execution, perhaps the amongst the best in the group So I can't everything Mike said.
Yeah, Okay and the administration.
And the guidance of what kind of thing as well.
Yeah.
Yeah.
Yeah I did the question Charlie was the decision not to give revenue guidance at Vodafone and you'd probably above that of other things like that.
The cause of the fleet there that you are talking about and giving some flexibility with one of them.
So that's part of the situation.
No I, just think of it could be honest and the revenue guidance of one of the country.
And I think we all of a lot more confidence and the cash flow guidance, because who knows.
And the fourth and whatever.
The company performing well and I think you'll see some pretty good results Mike.
And most of the questions.
And he is putting pressure on that day.
Okay. Okay. Thanks, a lot guys.
You got it.
I think we're at.
The Mark here, Rick or taken another question too.
First of all.
Okay.
The last question is from Andrew Beale with Eric.
<unk>.
Hi.
I wanted to come back to us both on the organic and.
Just ask you about some of your background and thinking around the possible IPO of the.
Obviously, you've just discussed the results and Poland, but I guess, it's the business, that's giving you and continues to give you a large dividends. So just wondering how you thought about the ongoing value from 50% ownership of those dividends and the business you like versus the.
The opportunity, it's a whole lot of equity value and more broadly across your wider group of operations and obviously I appreciate you've got a part of that.
Those things and what you won't be able to talk about but any background around that thinking not just the.
Vodafone and figured out, but the sort of wider outlook for the local ipos.
Yeah, good question and of course.
Theres nothing to reward and could you have a partner they're quite busy right now and the number of other things and doing a great job.
My guess is if you if you're asked each of us the both like this business a lot and not just because it's.
And a three player market and.
And it really.
And in many ways number one in terms of market share and most of the BDC products.
And as great free cash flow profile as you've already indicated.
Is it and IPO candidates potentially.
You could look at that depending on and how the market evolves. This and I think there is a bit of a rotation of occurring.
And long delayed and should be are happening rotation of occurring in the in Europe, because you've got many.
And I think one regulatory regulators and mostly focused on infrastructure and build out and they want to see the.
You know companies and Ah.
Fair bet environment, where at the invest the money to get a return. It's a good thing you might even cheaper of the consolidation of bubble will see and we've already pointed out how COVID-19 can help those who are prepared with great products to grow and consumption is never turning back and the consumption is growing is going nowhere, but up.
Multiples have been depressed for a period of time, there's a lot of of positive things in our sector of course, we will be the outlier because were more entrepreneurial and more profitable and more strategic and a lot of our peers, but nonetheless the sector in general is possibly due for a pretty good a good year here and.
Would it be and opportunity to look at those things I would say, possibly it's not up to us we have to kind of.
And we would want to do that with the partner who was resistant to it.
Longer term you should look at there are built in provisions and these documents for a reason.
Each party and forced and IPL One party can force the sale of the company and they are and therefore, a reason because nobody knows.
Five years six years will look like we're getting to those points and so it's going to be and interesting 24 months.
You know where the.
You know a very solid partnership will have to come together and site and what's the right outcome for each of us in this the particular assets and markets and.
Thrilled the V in that position, where the business that's actually hit the ball the park and achieved everything we thought it was gonna of cheap. So it's all good news, but as Charlie likes to say.
You know, it's delivering cash to the parent really.
Moving to cash and that's something we can bank most and as you look at our free cash flow story.
And that's certainly an important piece to us that business and.
And just wrapping it or impact of the dividend or having a partnership with the the Russell. That's also that's not something we're anxious to do but keep your eyes on it and stay tuned. The next 24 months I think you'll see activity on that front and you know what.
And let you know when it happens.
And you know look I'll close it out just briefly I appreciate everybody joining the call. We felt it was a difficult year for everyone on the planet and we feel fortunate to have come through it with pretty strong operating and financial results and as I mentioned in my remarks results of that mostly have continued through this year. So.
Wasn't.
A one off and our mind Theres a lot of momentum going into 2021, and thus far we're seeing that momentum continue which is a really positive indicators for Q1, and then strategically I think we're focused on the right things you know the ventures portfolio of give it a look.
And it's something we're sharing with you for the because there's nothing else and talk about we really believe that there is underlying value of that made smart investments. All of these are investments that enable our opco and our operating businesses, mostly and that's something to be taken into consideration and and there could be more coming and as ever we're working on the value GAAP do not.
Basketball and execute on the business, but also be sure strategically and financially we're making it clear to the investors, where we see the value of the company. So I appreciate your joining us and we'll speak to you soon take care.
Ladies and gentlemen, this concludes Liberty Global's fourth quarter 2020, Investor call. As a reminder of replay of the call will be available and the Investor Relations section of the Liberty Global's website.
There you can also find a copy of today's presentation of materials.