Q4 2020 Liberty Global PLC Earnings Call
Good morning, ladies and gentlemen, and thank you for standing by and 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 under the Investor Relations section of Liberty Global's website at Liberty Global Dot Com. After today's formal presentation instructions will be given for a quick.
<unk> and answer session.
Page two of the slides details the company's safe Harbor statement regarding forward looking statements.
Today's presentation May include forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995, including the company's expectations with respect to its outlook and future growth prospects and other.
Other information and statements that are not historical facts.
These forward looking statements involve certain risks that could cause actual results to differ materially from those expressed or implied by these statements. These risks include those detailed in Liberty Global's filings with the Securities and Exchange Commission, including its most recent filed forms.
And 10-Q and 10-K as amended.
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 them and apologize upfront for the length of the remarks.
All my can you guys 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 up.
I want 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 and nobody was immune to the effects of COVID-19, and 2020, including assets, you'll see but 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 that we established pre Covid families schools hospital businesses Big and small saw their reliance on stable and robust connectivity rise to unprecedented levels.
Average upstream and downstream traffic and January was still 90% and 60% above year ago levels. So, we're still and this and doing quite well and with any crisis show. Many operating lessons were learned for example, and 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.
And the extra mile for our customers and our communities with more speed more data more entertainment and a central and low cost access plans and we quickly identified the significant benefit of accelerating the digital Roadmaps. We were already on for customer sales came from attention and it's also fair to say that throughout the year. There was an underlying flight to quality and will connectivity customers, what's really play.
To our strength.
Really deliver the fastest speed and most reliable services fit some other bundles and better customer experiences and our competition and as the customer puts a higher value on these factors moving forward, we're committed to the investments and the innovation required to solidify that position and you can see.
And 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 that said, perhaps not surprisingly 'twenty and 'twenty was a strong year for us operationally and financially.
And there is a summary table and the right side of this slide with the key numbers, but I'll just highlight a few things beginning with our significant increase in 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 saw reduced churn and higher NPS and that provided a tailwind this was particularly evident in the U K, where we delay.
And consistent growth on our day of your footprint and of course and Newbuild territories. We also saw consistent sales and net add improvement 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.
Standout number for me and I'm sure for you was free cash flow well, we beat guidance with $1 1 billion. This year up nearly 40% year over year and you can do the math against our 580 million 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 and 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.
Customer growth and 12 quarters and our Swiss operation. You proceed delivered positive broadband additions for the first time and 13 quarters and that coupled with another strong quarter from Sunrise.
At the foundation of this customer growth, our key product launches around one gig smart Wi Fi and and advanced and attendant platform again, and I'll talk about those and a second and despite working from home and all of the related challenges of a pandemic, we made some pretty big strides and our fixed mobile transformation here with two large M&A transactions and Youre aware of this and I just referenced the app.
Acquisition of so much 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 a rock star management team led by Andre <unk>, who was the CEO of Sunrise, and including 70, and if that SKU, who launched the UPC turnaround and and now report to Andre and.
Oh well.
The Swiss synergies have been validated commercial day, one planning is well advanced and momentum in the meantime continues to accelerate and so we should have much more to say about that and our second quarter call and external chemo.
Now turning to the UK as we do quite a few times a day I'm happy to report that the regulatory review of the joint venture we announced last May between Virgin Media Telefonica Zone. Two is right on track and we have been heavily engaged with the CMA and feel really positive about a midyear approval like Switzerland, everything they've learned in the meantime, just reaffirms our.
Confidence and this combination financially and operationally.
Reported the Swiss and U K deals together represent about $12 billion of synergies and an NPV basis, and that's at today's FX rate 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 our Belgian and Dutch integrations, and we have a pretty good track record of under promising and over.
Livery and synergies.
Probably notice of Vodafone and <unk> reported around 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 a great case study for how fixed mobile convergence delivers growth and stable free cash flow easily from the more strategic.
Opportunities per factored in which is a 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 across 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 we established our first global day Eni Council last year was that Codeshare 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 tower 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 are currently and number three and the telco and media sector were also and the top 15% 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 only.
Quickly hit on five other key priorities for 'twenty and 'twenty, one first of all and you'll see later in the presentation. Each of our core markets is planning to deliver positive revenue growth. This year, reflecting continued momentum in customer additions expected or announced price rises and progress and our BTB divisions just to put a note that assumes modest not necessarily heroic improvement and the Kobe.
Crisis throughout the year share.
And 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 <unk>.
And our fixed mobile champions and number one or two and 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 a third we'll continue to optimize our portfolio of venture investments and 2020 I wanted to bring greater transparency to the assets that we believe already represent about $4 per <unk>.
Share and I'll come back to that and a moment.
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 got we're forecasting a 25% increase and free cash flow over the year and when you factor and our commitment to buybacks with $1 billion, we purchased last year and about $19, a share and a new $1 billion buyback.
<unk> and place where this year, we should see an even bigger increase and free cash flow per share now lets dig dig a bit deeper on our operational performance on slide five and the.
Purpose here is to lay out visually the acceleration and customer growth we saw throughout the year side by side with the core product innovations that stimulated and supported that growth. So 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 net.
19000, and Q1 to 56000 and Q4 almost industry line and.
And we set new highs and broadband with 242000 total ads and that 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 and 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 UK alluded to this team have done a.
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%.
Network is resilient and they brought out a bunch of new products like one gig fixed mobile bundles and <unk> G. P. <unk> hundred 60, and intelligent Wifi and.
And those same growth drivers are being activated across our European footprint 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 a 100% coverage today, so back to the U K are good one commercial rollout with $7 3 million 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 gigawatt homes throughout the balance of 2021 that will significantly widen the gap with BT and provide a great tailwind for Virgin media to be clear, it's early days and the marketing and one gig services for share and you can see that and the middle of the slide but just under 200000 gigabit.
And our footprint today, but we know speed matters to customers, we know what matters now more than ever today.
Day over 90% of our broadband subs and around 100, megabit or higher service and.
Half of our subs are up to 200, Meg or higher level and we've seen this movie before it's just a matter of time before one gig product gains traction and we will lead the market again, turning to video quickly and the bottom left of the slide you can see the improvement and video losses from 74000, and Q1 and just 10000 in Q4 total loss.
<unk> of 180000 in a 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 or Bruce or less pressure on subs and we had a stronger free to air broadcast sector, which keeps more IV.
And on linear and time shifted TV.
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 teenagers and 16, which I've mentioned and the UK, which is our latest UI and now shows and NPS improvement of 50 points and our new IP box will be called Apollo, which is a four K app centric box very inexpensive devices actually fits and your palm and allows us to up sales of traditional video.
Alex.
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 this slide out by saying the momentum 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 for our BDC business.
And of course that assumes the availability of vaccines will reduce the need for further lockdowns as I already mentioned in other words, we do expect a slow but steady improvement and economic activity throughout the rest of the year by the way just a footnote.
And we've given you an update on each country and the appendix, including data on project Lightning, which I 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.
And my remarks, with a few words and our ventures portfolio last quarter, we provided a teaser for you and me.
Highlights and 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 more detail on these investments.
So on slide six you'll see the flow of verticals that comprise the portfolio check content and sports and sort of emerging markets and a 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 thats, where I spend my time, starting with our tech ventures portfolio.
And we will know and began investing and tech about 12 years ago with a small dedicated team and Denver and Silicon Valley, which remains very small today and during that time. The Golar has no way, but really we're looking at mostly modest investments and early to mid stage companies that provide products or services, we can exploit and our operations. Historically the team has been focused on verticals like infrastructure and cloud and Ms.
<unk> learning with some blue Sky investments and things like gaming or augmented reality or advanced advertising now will the value we deliver to the portfolio 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 that the portfolio company brings to us and our returns and Trust me there have been many examples where that number is larger today, we have around 250.
Currently invested in 40, plus companies, which we value at 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 would just moving to our consolidated cash balance and the team they've historically invested around $50 million per year, but they have now.
And some really smart bets and thanks.
A couple here on the slide skills. For example is a 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 a market cap of just under $14 billion and value of our stake at $450 million plus is a prince it's principally a 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 and U S. And we began working with planned in 2014 as a potential supplier 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 this strategic vendor.
A host of other examples and the tech portfolio in fact, the team believes we're currently investing 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 our investments and content and <unk>.
<unk> died at 1.25 billion today, and this concludes our stakes and companies like ITV.
All three media Lions Gate 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 pets, not surprisingly and as most of the figured out we fully hedged that position at the time with a collar 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 in the mid single digits or thereabouts and now trades at 13th So let me preempt the question by saying right up from the day step to 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 word on formula and what you're starting its seventh season of eight races. Later, this month and Saudi Arabia and don't need to have to explain why this racing series is well positioned right with manufacturers like Mercedes and portion now and.
The series.
Everyone appreciates the future of driving and racing is electric and we have about $150 million invested and a 32% stake that we conservatively value at 250 million and yes, and he's backs had been circling and we'll see what happens, but the only other thing and I'll mentioned briefly is our growing investment and infrastructure, which we believe holds immense untapped potential.
For us and I'm, referring to both our own infrastructure like Cabot as real estate and towers, which were rapidly organizing into separate units, where necessary and third party investments and businesses like <unk> X. For example, where we rolled our stake is eqt's $2 $7 billion acquisition of <unk> four to <unk> return and a seat at the table with what is arguably the smartest and.
And infrastructure in Europe, So there's lots of exciting things happening and ventures from historically, we've been pretty quiet about our activities and certainly they are not taking resources or focus away from our primary business, but there is real value here and real strategic connection to our operations and you can expect us to be more transparent moving forward. So let me recap our strong 2020 operationally and financially.
And a great the year, you'll see that our.
Our two 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 we would so first building FMC champions and our core markets we've done that.
And second Opportunistically investing and ventures that are both strategic and financial and rewarding and you're seeing the fruits of some of that work right now and they are buying back our shares which obviously, we believe are undervalued relative to almost any measure. So I'm excited to take your questions, but first over to you Charlie.
Thanks, Mike turning to our consolidated numbers starting on the page entitled underlying revenue statement.
Total group revenue saw a decline of 5% and Q4, resulting in a full year decline offset.
We estimate the negative impacts of Covid.
Can be around $54 million from Q4 and around 200 million simple.
Yes.
The impacted our growth rate by around one eight per cent.
We believe we can see and positive rebased revenue growth.
And the right hand side of the page, reaching about three pools and you can see the five key areas impacted by Covid.
In general Covid impacting our business much less in Q4 and then.
And when the pandemic first hit in Q2.
The impact of not having access to premium sports and Q2 was $34 million and it is.
<unk> started to turn by Q flow downside and semi around $7 million.
And asset sales and revenue revenues were impacted by the pandemic and we estimate contributed 260 million total drag in Q4.
The impact from our podcasting business was around $6 million per quarter.
There was some impact on our <unk> businesses, we estimate around $22 million and Q4, but it was largely due to reduced sales and Fortunately to date, we haven't seen a material impact from bad debt and late charges and other.
Europe, ETP will consumer businesses and the mix.
Slide and provide details of adjusted EBITDA.
For the full year 2020, we delivered minus three 9% adjusted EBITDA growth, which is in line with expectations as we called out in our Q3 results presentation Virgin Media declined 11% Rebased vs. Q4, 2019. This was driven by $7 million of customers from year to budget and some other aggressive investments, particularly 'twenty, one moving dollars and accelerate.
Digitization and onshore and about customer content platforms, as well as and $18 million increase and marketing interesting results and the accelerated subscriber growth.
The remaining difference versus Q4 'twenty from team is being impacted and the contracts integrations and that West, Texas and Colorado.
And the price rise from Q2.
Q1, 'twenty and 'twenty one.
So those trends continue to gradually improve seven 9% decline in Q4, partially explained by a 4% drag from $10 million from cost to capture our estimate stages.
While summarizes rebased results and since completion consortium, and personalize and get financials Standalone business reported 3% growth.
And based on historical Ifr supporting cross channel into operating free cash flow, we delivered 5% operating free cash flow growth for the food, yet which is in line with our guidance of mid single digit growth.
Despite $26 billion across the capture and which is equivalent to more than 1% of growth.
Our capital intensity declines of 22, 5% from 2020 from 19, 6%, excluding capex related to project one day.
And of course, the capture and Switzerland, all markets with return and posted oses growth year on year.
Standout result, deconsolidation joint venture and the Netherlands mixed from 9% Euro and yen.
And $1 2 billion and operating free cash flow.
Turning to our 'twenty and 'twenty free cash flow results, we delivered 39% growth.
And compared to 2019 and work.
And $1 $1 billion of consolidated free cash flow and about $1 billion guidance.
And this was despite some currency headwinds versus the guidance assumptions and this before.
And and drag from working capital, which we generally believe she will be telecoms companies such as ourselves.
Our cash flow was further suppressed by $329 million capital expenditures related to our UK and network expansion project Mike.
Operational total 'twenty 'twenty, one outlook, we provide details of our expectations from our key assets going forward.
Given that we fully expect to UK business will be consolidated into joint venture.
And with Vodafone Zika and Telenet already per box.
Guidance going forward, we will provide our key financials and guidance nothing a group consolidated basis.
Each business unit and.
Great.
Regarding only to consolidate and free cash flow, which we expect to grow moving 25% to $1 $35 billion for 2021, thanks to my assumption that the JV closes at midyear.
And the U K and others, we expect to return to top line growth, despite and increased U and impactful and a contract and best telecommunications. Although of course, the cash is going to just rely on adjusted EBITDA and the west.
For the full year, we would expect standalone.
Low single digits across most metrics.
We also expect and would change of revenue growth from Switzerland and volumes you can see some nice business.
A low single digit adjusted net.
And a mid single digit.
And that's because we're spending over 150 minutes with strength of costs to capture synergies.
And the underlying business.
Yes.
Total net a Belgian operations has got into rose, 10% adjusted EPS.
And growth and continued free cash flow growth.
And to generate 420 to 414 million euros.
And think about Dutch JV and from two 1% to 3% adjusted EBITDA growth.
And we increased cash distributions to shareholders and you guided to a range of 550 to 650 million euros $677 million to $800 million.
And with that operator open to questions.
The question and answer session will be conducted electronically.
Mike to ask a question. Please do so by pressing the star or ASIC.
Followed by day.
And one on your phone and <unk>.
And there to accommodate everyone.
We request that you ask only one question.
Moving to speaker phone. Please make sure your mute function is turned off.
And not to reach our equipment well pause for just a moment to allow everyone an opportunity to.
And to join the queue.
Alright, well take the first question from Robert.
Excuse me.
James Redfern.
And <unk>.
Pardon me it is going to be from Robert Grindle with Deutsche Bank.
Okay.
Yeah.
Okay.
Okay. That's fair that's me and I think yeah, hi, How's it going and.
And I ask about the U K and I thought would be strong lightning and take up stopped them.
But the lightning build was.
Lower than the.
Previous three years is that is that COVID-19.
Or are you hanging fire a bit pending the O two merger or I think you mentioned and the slides that.
Passive infrastructure access is not really available at the moment and does that.
Is that what you're waiting for 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 or five years, you've always dealt between 405 hundred homes and 1000 homes per year last year, we did 426000, and we've gone through and that $1 billion a day I wouldn't read anything into it it's more about just optimizing our overall financial picture could we and built a few more yes.
Could we have a few less probably the PIH is reducing our costs pretty considerably below 600 mile which is a great thing and the more we use of that of course, it could accelerate both the capital we spend and the number of home free Bill. So it's all good news there.
No nothing negative.
And our coverage is growing our penetration remains strong and Rfps are strong and the returns are high and so the lightning project as it sits today is it.
Certainly.
When the merger closes.
And venture closes we will sit down with Telefonica global allowed to and really reevaluate the entire picture around our fixed networks and the U K specifically the pace of lightning build.
Lee and our broader ambition to expand the network beyond our lightning footprint aggressively.
<unk> will take the 10 gig.
And we bring and financial partners. How are we how are we accretively and aggressively and take advantage of our network leadership and this market and a chair.
And network leaders for sometime and Thats, a real opportunity here.
Any other color.
And you said it all basically I think the only thing I would add to that.
And the lightning and keep them on top to the network of expenditure and for home is also now going to connect more and more base stations for price G. Right. We closed two big deals one with Vodafone and one way.
And it's true <unk>.
And obviously, you also youth and acceleration of that.
And really connect and circuits and so if you take those into account and then.
And it runs at pace and as Mike said I think we have two revenue of this strategy together and ask about approvals telephony.
Thank you.
Once again that is star one to ask a question. If you find your question has been answered you may remove yourself from the queue by pressing star two.
Next question is from Christian.
HSBC.
Yes.
Yeah, great. Thank you hi, guys.
I have actually a question on Switzerland.
So it looks like a good outcome <unk> broadband growth and net buckets and then underlying basis.
<unk> stand alone.
And my question is more on the integration cost and the phasing you mentioned 150 million and maybe give us a split between Opex and Capex year and also what do you expect in terms of synergies already in 'twenty, and 'twenty and kind of the phasing over the next few years at least broadly speaking that we can model it properly I think.
And more color or guidance around that would be nice.
Yes.
Andres on the call and.
And to address he starts data and we're being obviously low careful about annual.
Synergy expectations.
I'll tell you that in 2021.
Synergies are expected to be relatively nominal I think maybe 30 billion Swiss franc range something like that.
You know against the 150 million cost to capture but it ramped pretty quickly. So you know I think in.
And 2022, it's it's it's four or five times that number and then a growth sort of ratably through the 2020 for 2025 timeframe and.
It's not going to look materially different than the Belgian and synergy model or the.
The Dutch synergy model in terms of how much revenue how much is cost of weighted and so how much is cost.
Cost savings based on 'twenty, and 'twenty cost base and it's about 80 515, 15% revenue and those are really in the later years. So it's a conservative.
And <unk> and argue.
And I don't know what other color, we're providing all those sorts of numbers and I'll, let you.
Well I think you outlined it well I.
And I think on the cost and kept drove cost and tried to be pretty and Frontloaded. We are moving fast integration is progressing quite well.
And obviously some of the Opex stuff.
Going first whereas some of the investments are coming later on as he goes from it.
And I would expect that the largest part of the total cost and kept 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 they are going to run through but as Mike has pointed out I wouldnt really come from.
And the shape of the trajectory.
Thank you very much.
Alright, and 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's any logic behind that and should we expect.
And the pace of buyback to be accelerated during the first half of this year and this is.
And I mean, given the strong cash flow guidance that you're giving and the right to buy back on and you'll still and this year at the current 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 timing.
I'll start and potentially being returned to shareholders or other uses of capital. Thank you.
Well I can't identify any other uses other capital.
And what I've said generally which is we remain opportunistic around strategic.
Transactional.
Ideas might occur and our core markets.
And maybe you know continued modest investment debentures and nothing else that's jumping out at us at this point for that would require meaningful amounts of capital. So buybacks remain front and center and as you said.
Just looking at last year, you'll remember that we started out at.
A normal pace one of course, the stock decline, we ramped up and most of our stock in that period of time Q2, but Q3 and from our perspective, we'll do the same this year. So do you think the end of the year was a bit of and odd period, both related to where we were and are kept at that one plans and our.
Material nonpublic information and having just announced or about to announce the increased authorization and wanted to get through the year. If you will remain and we had so I think you should expect us to look at the situation.
Dynamically and 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 about how things evolve but.
The full 1 billion available yet we have been spending more.
Daily and.
This year than we were.
And the fourth quarter and that shouldn't surprise, you, but let's see how things evolve can't be more specific than that James.
Great. Okay clear thank you.
Okay.
Yeah.
Alright. The next question is from Michael Bishop with Goldman Sachs.
Thanks, very much and let's just try and pull together a couple of things on the free cash flow guide and sales like the step ups are 135 is largely driven by the higher Vodafone and they go and distribution and then obviously that the growth.
And the accretion that Sunrise, Greg is there anything else you'd call out.
And that's driving that one <unk> given it looks like Youre guiding net operating cash flow will be and.
And modestly down for a couple of the assets like the U K.
And so and then if I could ask.
And then hope more forward looking question on the cash flow, which is related it sounds like we should take at one point and three five and then effectively if you will.
And so think about the other.
A run rate basis going forward youll be spending.
At least 115 million on integration costs, and Switzerland, and 15 in the U K, but then you'll probably spend some.
The second half as the deal and the UK clothes, and so simplistically should we think about the underlying cash flow being quite a bit above $1 billion. Thanks very much.
Good question Charlie.
I think the.
Youre quite right and we saw the acceleration and.
And I think it was continued through the cash machine and the solid acceleration that you want to add.
And until that based on that guidance.
And the U K, it's more flat volume.
And because the deal close.
To capture and also the lightning build.
And besides that.
Actually you can switch off the interest.
And that would increase our free.
Free cash flow pretty maturity.
No.
And then and Switzerland, I think you rightly pointed out and we're getting some good free cash flow thats not least because we are getting from financial synergies as a result.
And so I think the message is that we've got a real cash flow machine and I think Mike made the point.
Let me go from here, we would expect continued free cash flow growth as we monetize those synergies.
And I was wondering if we see a continued good operations.
And the UK.
And as I said in my remarks, you would already know Mike what is the free cash flow per share figure would be then obviously.
And a more robust growth rate basis, just given our.
Purchasing eight nine and 10% of our.
Every year, so if youre looking at it.
Integrated the free cash flow underlying operating free cash flow story, as Charlie said and as you pointed out is strong and that would be.
We're able to do you.
Accelerate that and our free cash flow per share basis, just by virtue of our buyback activity.
Thanks, and my right.
And second half a day.
So sorry, and just following on the second half of the year and the U K SAR and sort of rights and thinking that that will be effectively a small net cash outside of this also and the $1 35, because benelux, Switzerland and integration will be more than the synergy that you deliver.
Well, let me go through it.
And that's really what you thought.
Joe.
Good day.
And when we actually look at it and it actually broadly flat.
Seasonality and the free cash flow.
Hey.
So and again, we think we're doing plug and.
And we'll keep you updated.
And we closed it because obviously, we don't have a lot of inside of them.
And our best guess.
If we don't close we'll.
Clothes, that's probably about as equity cash flow, there's a lot of very good index assumptions.
Yes.
Yes.
And.
And you are coming through a little bit about each other but I think the point was the DSO and the guidance is provided assuming that the deal doesn't close just to be clear for folks and give them a baseline.
Of which they can overlay the JV and as Charlie indicated inter.
Interestingly, whether we consolidate.
And a Virgin media for the entire year or just half of the year.
Interestingly the free cash flow number won't be maybe you could give up because we'll be 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.
Makes sense.
Yeah, and also very helpful. Thanks, a lot.
Yeah.
Okay.
Alright. The next question is from Nick Lyall with Boston.
Yeah.
Yeah.
Yes, and when you have a weighted.
And one Switzerland, please Mike if I could just on the underlying competition still looks a bit share.
And you talked about discounts I think and the statement again and the from boots. So is not doing anything in terms of your plans for price changes could you maybe just discuss at what point do you think the new company can cope with price changes and also what are the plans for the brands and Switzerland as well please.
Sure and fact, Andre but I'll, let you take both us since Youre right Greg.
Yeah 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 Sunrise and UPC operating still majorly independent and Q4 Hep C and one of the best quarters for the year and not only for this year before from the last three years program.
And that is showing that we have a very competitive offering no looking forward for us of course, combining fixed mobile convergence is made off the game and we have still a lot of opportunity on both businesses to actually drive more value to our customers, while necessary and not necessarily and destroying value, but rather creating value.
And that's one key whether it'd be one of the pool and we've.
Got two brand consolidation and that's something we are currently looking into most likely we'll probably operate as two brands. We have seen that working out quite successfully in the past couple of quarters within Sunrise and.
And it's probably a strategy that we will embrace also for the combined business.
We haven't taken a final decision on what those spreads come in.
Yeah.
Okay. Thanks very much.
Mhm.
Alright. The next question is from David Wright with Bank of America.
Yeah, good afternoon, and good morning, I should say.
Thank you.
Yeah, just on that day U K.
And I really don't want to downplay the achievement and Watson team, but.
A lot of the commercial momentum has come way.
The delay and the price rise.
The question is to what extent is that a factor and as you bring you know pricing into the customer base.
And in.
And if Q1 early Q2 I believe.
How do you think.
Those kpis could respond as the commercial activity.
Driven more by price right now 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 lutz provide a bit more color on.
This began building early in the year and it's if you look at the U K broadband adds and first quarter was 8000, and I think second quarter, 33003rd quarter 47004 quarter 54000.
And it's our view that that that is sort of undeniable at an undeniable strength, regardless and any announcements and they're going out.
And on price increases and.
And in my remarks lots of positive things.
Driving that and look once you once you flesh that out a bit more.
Yeah, exactly so I mean, we put together a strategy to get back to sustainable growth and 2019.
And fixed mobile convergence won a lot of innovations like Mike has already called out.
Better base management onshoring of customer service, a huge effort and digital and so this has led to reduce churn.
And and increased sales.
And you're right obviously.
And waving a price rise in 'twenty and 'twenty has helped here. So if you would have done wrong the numbers would be a bit lower the net growth. However, it would be still substantial though higher than 2019.
And.
And maybe it gets a bit flavor of the price rise, how it's going so and I.
I mean, we are we've got very rational reaction from the public so and <unk>.
And in the press and and customers it was well received.
We and the middle of it at the moment and it seems that the demand for higher speeds and the pandemic, especially right and if.
Increasing when you have to do and homeschooling.
Parents walking and stuff you need higher speeds and.
So we are offering that.
Therefore, obviously Q1 net adds why youre doing a price rise and cannot be higher than the 50.
And 55 styles and bought the net that you have seen and in Q4, However, I would not be surprised if we would have still a positive net debt.
And can I just ask as a follow on.
The commentary you made on the demand.
And it's perhaps deriving from Covid et cetera.
Also you have seen some competitors announced and fairly substantial price rises and the UK too.
After after a couple of choppy is do you feel like the U K market is returning to more rationality, perhaps supported by the Covid effect.
Yeah, well I think.
All the players.
Big investments.
And tie it right and next generation networks on the fixed side price.
And the mobile side Sky.
And also a big investment on the content side. So that's one second usage has increased dramatically as Mike has pointed out.
And that means also obviously that all income funding and therefore I think.
Price rises.
And I have been done by almost everybody IPP CPI plus three benign I think brought up from the same I think just today sky and hopes and all that price rise 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, whether receipt by the customer as I said before there is still high.
Higher competition from the acquisition side, Alright, so here and right.
Right.
Price is if you compare price developments for friends and products like and the 60 60, Mike space.
Prices are low.
So that is dynamic and we.
Haven't followed that so much it's about the media and we get our fair share.
Okay. Good.
Yes by the way that prices are lower and those lower tiers, but we're actually offer and generally faster speed.
And the BT might offer us.
38, Niagara scribe 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 and it's much more attractive.
And as people get smarter and more.
Focused on the broadband product, that's not in and around the relevance that we're always faster even if the prices are comparable.
Okay. Thank you.
Yep.
Alright. The next question is from Polo Tang with UBS.
Yeah.
Hum.
Yeah, Hi, 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 front and <unk>.
<unk> to 'twenty one so can you maybe just elaborate on those comments and were you referring to completing the UK deal or are you getting new additional things that you may be give us.
Some sense in terms of the areas that youre looking at and you really just have a follow up question, which is really just about sky.
And again as strong as obviously seek new growth 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 co investing alongside you guys in terms of our fiber footprint expansion or maybe doing a cable wholesale thanks.
Okay.
Well I'll take those and.
First of all with respect to data of course, she is very well known to US. He worked for US for me for other two decades and I can.
And here to be and outstanding Exec.
So obviously, we're happy for her and I think it helps.
For us to have somebody in that seat, who we know well and who knows us well and I think who knows well. So it's a good decision and we're.
Of course.
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.
You know I have no reason to believe she wouldn't be just as strategic as Jeremy was around their long term strategy in this marketplace and what options they have to.
Our secure owner economics, and reduce costs to serve and all the things that anybody who is building a business or.
You're building a day in some cases, what we'd look to do so.
Couldn't 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 great opportunity to continue to talk about each of our strategic future share we can't do much until the deal is approved.
And the badge.
And you are unlikely to read or hear anything between now and then.
Wouldn't surprise me, if we re engage on a number of topics with Sky, who are a very important partner for us in this market.
On the M&A side of the strategic dropped I wasn't referring to anything specific but clearly if I want if I go through those three.
Buckets again.
Core markets, you know ventures and buybacks.
Our core markets.
We've done exactly what we said, we would do and the last five years ago, and something like $80 billion of a bigger actually 80 day plus of transactions.
Allowing us to exit markets and double digit multiples, where we didn't have scale and bed down market for fixed mobile convergence, becoming a champion and markets, where we did have scale and I think we've done it depends on the market and your other exited border emerged and we think in all cases, we've done the right thing. So we now have.
And the number one or two player in each and 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 Covid youre in a different position when it when you look at those core markets strategically just and you could you could imagine what those might include in 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 theres, a fixed level 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 continued transformation even in those two markets whatever that might look like the only other thing you'd Mike might have heard me referenced indirectly is that we are really excited about the infrastructure space.
Not surprisingly, we sit on that massive infrastructure ourselves both fiber based powers directly and indirectly.
We have real estate and with Charlie and his team have done a great job.
<unk> property assets 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.
Opportunistic as we can be and infrastructure.
And I'm going to go compete with.
The big player sale that could say, that's not necessarily what I'm, referring to you, but there are going to be opportunities for us to partner raise capital and monetize them.
And that will keep us busy because those are and we know the underlying value of our networks is significant and there is massive amounts of money looking to invest at those networks. So it will be created to see if there are ways.
Waste for us to create value and that's what we do you know that we're not.
And anything we would do though would be accretive to our base case plans our guidance wherever you might be referring to at the time, but it's exciting to me and and that's something that we'll be working on coffee and 2021.
Clear thanks.
Yes.
Alright, well take the next question from Steve Malcolm with Redburn.
Yeah.
Yeah. Good morning, guys and thanks for taking my question and I'll try and go for a couple of other kind of like the global ones.
And I was just a little Vodafone paradoxically, it's delivering the best financial numbers and the correct.
Operational Kpis are amongst the weakness the golf 60 archives and argued in the last couple of quarters do you feel from a balance right now between volume and price, particularly in and see that KPN ramps up its fiber build over the next 345 years.
And that.
And just swinging back to the U K.
Help us understand and sort of evolution of the Arabian Gulf and through the year, Obviously, you guys talk and of the patients get the price rise.
And the first quarter best price against the lap I guess moving back and of the year.
And again that you pay off the back.
How should we think about day progress a lot number of any price.
Yeah.
[noise] speedier and moving pretty quick on the U K question could you repeat that just more slowly.
Not all of it.
Got it.
Hi, Jeff.
And you should think about the evolution.
Thanks, Mike.
Goodbye.
And it's about 4% and Q4.
And he's getting price rise and you get and price.
And you get and begin to lap and the best tariff impact and stuff.
Yeah.
But when you think you'd get that number back from stable.
But the architecture and thinking about <unk>.
Alright.
Thank you.
Okay, and if you want.
The IPO question and get your two cents on a like for agriculture, Yeah, Yeah. So.
I mean, you called yourself the acute either.
So price right will give us a good.
Tailwind.
Get the option growth again on the other hand tight and there is you would see and then ADP and whatever.
Vacation, which hasnt really kicked in and into 'twenty, and 'twenty, but which will kick in in 2021, So and in our plan. We are careful so we have a contributor at quite low.
And some revenue loss and loss to ATM.
So therefore, we think we are.
More coming to op, you flipped into 'twenty, two rather than 'twenty one.
And it won't shrink a lot, but it might be a little it all depends on customer reaction.
Yeah.
Yeah and index.
And that's market.
And if that's the market I think.
And you Rune and the team and Charlie you can jump in here to have had it figured out pretty well clearly, it's a competitive market and KPN has made announcements about.
Getting to and we put roughly 50% reached with fiber, which we always assumed would be the case, but we've now got one gig everywhere 6 million homes and our marketing aggressively. So I think and this is just a breather. If you will the synergies and the execution has been intense and rollout of new products has been successful I think 'twenty one.
One.
It is not indicative and we look at it over the longer term.
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 and their ability to optimize price volume and to look at these this market dynamically.
And they're already I mean interest if you just compare that to KPN.
In 2020, which probably many of you do it's not very fair comparison, I mean net had an incredible year relative to J P and in terms of net adds in terms of pretty much almost any metric I think we grew revenue, 2% and EBITDA six per cent PPA and went back 4% and I think four and 5% and.
And about 207000 mobile net adds and we had 55 other broadband result with war, so but as with any market, Steve you're going to have ebbs and flows right.
Good operator, we're not gonna be.
Down and out forever and everybody comes back punches and so that's the nature of a competitive marketplace and I have confidence that this management team and is there.
That's 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 what you should expect any color on that journey and this isn't you know that growth.
I would agree with the other thing.
They've done a great job and PDP and then if you've noticed that they've moved their market share very material and b to b.
And the school and a runway to go so well actually and they did a terrific job of execution and perhaps are amongst the best in growth.
Well, thank you everybody likes it.
Yeah, Okay and administration.
We got on the guidance and what it comes and goes.
And so.
Yeah.
Yeah. Good question Charlie was the decision not to give revenue guidance at Vodafone you'd probably about that Vodafone.
Because of the free there that you're talking about and giving some flexibility at this point.
And situations.
No.
Obviously, the revenue guidance and a world of Covid.
The easiest thing I think we all have a lot more covenants and.
And cash flow guidance, because he knows and baidu.
And sports and whatever and that this is this company is performing well and I think you'll see some pretty good results Mike.
And that's the question.
He is putting pressure.
Okay. Okay, that's all day.
You got it.
I think we are at.
Mark here, Rick or we take another question and answering.
Last one.
Okay.
The last question is from Andrew Beale with Eric.
Assets.
Hi.
I wanted to come back to us both in New York and actually.
And just ask you about your background and thinking around a possible IPO.
Obviously, you've just discuss the results and Poland, but I guess, it's a 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 a business you'd like versus the other.
It's a whole lot of equity value and more broadly across your water group operations and obviously I appreciate you've got a part of that.
There are things that you won't be able to talk about but any background around that thinking.
And as they go but.
This is a wider out and look for political ipos.
Yes, good question and of course.
And there's nothing to report, but do you have a partner they are quite busy right now and a number of other things and do a great job. My guess is if you if you're asked each of US we both like this business a lot and not just because it's a you know and.
And 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 has great free cash flow profile as you've already indicated.
Is it and IPO candidate potentially.
You could look at that depending on and how the market evolves. This and I think there is a bit of a rotation occurring.
And long delayed and should be or how big rotation occurring in Europe, because you've got many.
Tailwind I think one regulatory regulators are mostly focused on infrastructure and build out and they want to see.
And you know companies and <unk>.
Fair bet environment worth investing money they get a return it's a good thing you might even see further consolidation of global 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 that consumption is growing is going nowhere, but up.
Multiples have been depressed for a period of time and see a lot of positive things in our sector of course, we would be an outlier, because where we feel 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 listening I would say, possibly it's not up to us and you have to kind of.
And we would want to do that with a partner who was resistant to it.
And longer term you should look at there are built and provisions and these documents for a reason.
Each party can force and IPL, One party can force a sale of the company and they are and therefore, a reason because nobody knows what five years six years will look like we're getting to those points and so it's going to be an interest in 24 months.
Where we.
You know a very solid partnership will have to come together and site and what's the right outcome for each of US and this particular assets and markets and I'm thrilled to be in that position with a business. That's actually hit the ball of the park and achieved everything we thought it was gonna cheap. So it's all good news, but Australia and likes to say.
You know, it's delivering cash to the parent really.
Meaningful cash and that's something we can bank on.
And as you look at our free cash flow story.
You know, that's certainly an important piece to us that business and and.
And just wrapping it or impact of the dividend or having a partnership with EBIT. Russell. That's also that's not something we're anxious to do but keep your eyes on it and stay tuned and X 24 months I think you'll see activity on that front and you know well.
And let you know when it happens.
And yes look I'll close it out just briefly I appreciate everybody joining the call. We felt it was a day.
Difficult year for everyone on the planet and.
And I feel fortunate to have come through it with pretty strong operating and financial results and as I mentioned in my remarks results that mostly have continued through this year. So.
Wasn't.
A one off and our mind Theres, a lot of momentum going into 'twenty and 'twenty, one and thus far we're seeing that momentum continue which is a really positive indicator for Q1 and.
And strategically I think we're focused on the right things you know the ventures portfolio give it a look so that's something we're sharing with you for just because there's nothing else and talk about we really believe that there is underlying value we've made smart investments.
And investments that enable our op codes and our operating businesses, mostly and that's something to be taken into consideration and there could be more coming and as ever we're working on the value GAAP to what our basketball and execute on the business, but also be sure strategically and financially, we're making it clear to investors and where we see the value and the company. So appreciate your joining us and we'll speak.
Take care.
Ladies and gentlemen, this concludes Liberty Global's fourth quarter 2020, Investor call. As a reminder, a replay of the call will be available and the Investor Relations section of Liberty Global's website.
Sure.
And you can also find a copy of today's presentation materials.