Q4 2021 Liberty Global PLC Earnings Call
[music].
Good morning, ladies and gentlemen, and thank you for standing by and welcome to the Liberty Global's fourth quarter 2021, Investor call. This call and the associated webcast at the property of Liberty global and any redistribution retransmission or rebroadcast.
<unk> of this call or webcast.
The form without the express written consent of Liberty Global is strictly prohibited.
At this time all participants are in a listen only mode. Today's formal presentation materials can be found under the Investor Relations session of Liberty Global's website at Liberty Global Dot Com. After today's formal presentation instructions will be given for a question and answer session.
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 expectation with respect to its outlook and future growth prospects and other information and statements that are not historical fact these.
These forward looking statements involve certain risks that could cause actual results to differ materially from those expressed or implied by these statements. Please.
These risks include those detailed in the Liberty Globals filings with the Securities and Exchange Commission, including its most recently recently filed forms 10-Q and 10-K as amended.
Liberty Global disclaims any obligation to update any forward looking statements to reflect any change in 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.
Hello, everyone and thank you for joining US today, we've got a lot of ground to cover so I'm going to skip the intros and get right into it as usual, we'll be referencing slides that have been posted on the website beginning with slide three which introduces five key headlines for the past year and before we get into these highlights I'd just offer perhaps the most important.
Takeaway here and what has been an extremely challenging two years for everyone across industries and markets. We've been fortunate that our people our networks and our business have performed really well over this period, we've retained and even expanded our talent pool. Despite hybrid working conditions are broadband and mobile networks delivered outstanding.
Being service despite massive increases in the demand for bandwidth.
For two years in a row, we have exceeded even our own internal budgets. Despite a global pandemic Thats up ended most industries I, just couldnt be prouder of our company and our operating businesses and I think the results, we'll be sharing today as well as the strategic plans that underlie our guidance and our path forward reflect that confidence and that enthusiasm so consistent with those thought.
You won't be surprised to have learned that we hit our 2021 guidance across our FMC portfolio as well as our group free cash flow target, which we actually raised last November on our Q3 earnings call and supporting this financial performance is strong commercial momentum that we experienced across broadband and mobile services with the demand for connectivity continues.
<unk> to exceed our expectations.
But our FMC champions are delivering.
We added over 1 million broadband mobile subs in the year across our footprint with a solid fourth quarter convergence continued to drive higher sales and NPS and reduced churn with the number of broadband subs, taking a mobile product from us now nearing or even above 50% and our for converged assets and our track record of nailing merger.
<unk> is helping us produce synergies in the UK and Switzerland that total around $14 per share on an NPV basis.
Adjacent to our core operating platforms, we continue to invest in our ventures portfolio, which now stands at $3 5 billion or about $7, a share and that increase of 46% or $1 1 billion year over year is almost entirely attributable to appreciation in the value of our portfolio investments with new investments net of distributions totaling only around three.
<unk> hundred million dollars for the year and then finally total buybacks in 2021 totaled $1 6 billion.
Equivalent to 10% of our shares outstanding we are committed to doing that again in 2022 and 2023.
Which is a great segue to slide four I think it's always good to step back and refocus investors attention on our core value creation strategy. We are pursuing this is the narrative that defines what we're doing and why we're doing it and that Big picture. If you will consists of three pillars. It starts on the left of this slide with our FMC champions I just talked about.
Those these converged and highly profitable operating companies are the foundation of our bedrock for value creation and as you know by now.
We had to get smaller to get bigger divesting half our markets are putting our attention and capital into a handful of operating platforms that now reach over 85 million fixed and mobile subs and our other number one or number two in every country.
As I've said before this convergence drives the scale, we need to challenge incumbents to negotiate with suppliers to hire the best talent and shape. The markets. We operate in convergence also delivers massive synergies to accelerate value creation and support investments I think you know that at the same time convergence.
Or is the brand that the products and the market share to drive organic growth in customers revenue and ultimately free cash flow, which for us by the way was up nearly 40% last year.
And convergence delivers great strategic optionality to consolidate horizontally or even vertically to monetize hidden assets like towers and to control the future of networks in an accretive way.
Those are the <unk> that were writing, but theyre also some strong structural tailwind in the European telco side that are worth mentioning first the demand for connectivity has created commercial momentum in pricing power that should support growth in broadband mobile and BTB for some time, especially in markets like ours that are rational with strong consumer trends.
Second regulators seem less focused on us these days, which is a good thing and thats fueled much needed consolidation and paved the way for greater investment in and monetization of our infrastructure and then third.
With the current wave of fiber and <unk> capex set to slow down over the next couple of years private equity capital is swarming the sector and in anticipation of significant free cash flow growth in the future.
The second leg of the stool is our growing ventures platform I, just spoke about that and Charlie you're going to spend a few minutes on this in his section. The key point is that all three strategic pillars of our investment strategy Tech content and infrastructure are strategically aligned with or adjacent to our broadband and mobile businesses and they have proven to be a great source of value.
Creation of even dividends to the parent company and then finally, the flywheel to both of these pillars is our levered equity model of long term fixed rate debt strong free cash flow and consistent stock buybacks again, $1 6 billion last year and another 10% of the shares outstanding this year and next and since we're funding that buyback with cash flow generated by operating <unk>.
As we continue to have over $4 billion of cash reserves to put to work in either a core markets ventures or additional buybacks.
Charlie is going to present financial results.
I just wanted to comment briefly on our top line performance, which has been stable to improving across the group. So in the top right of slide five you will see our two most developed fixed mobile operations, Vodafone <unk> and Telenet, both of which have benefited from fully converged fixed and mobile operations and product offerings.
Now Vodafone <unk> delivered its third year of consecutive revenue growth throughout 2% anchored by mobile and BTB growth and despite an increasingly competitive broadband market. The Dutch market remains largely rational with two fixed line players and three mobile operators Telenet returned to topline growth in 2021 of about 1% supported by subscription revenue and modest.
<unk> growth and more broadly the Belgian market also remains rationale with both proximate in orange, taking healthy price increases, which is a good precedent for telling it's one price increases that occurred generally over the summer.
The two bottom chart show revenue growth for two more recent fixed mobile combinations in Switzerland, and the U K.
Semi as you can see at the bottom left returned to revenue growth throughout 2021 with 1% in the fourth quarter compared to negative four 5% in Q4 last year. So a big turnaround in the first year of integration, which was just solid execution by the Swiss management team inflation remains relatively low in Switzerland. So we're not expecting significant price rises but any of the operators this year in <unk>.
<unk> also saw steady topline performance basically flat revenue for the second half of the year versus negative growth in the first half of.
<unk> is a large operation remember with $10 4 billion pounds of revenue and some year over year comparison issues and BD being mobile, which Charlie will address.
But the U K has seen a significant rise in inflation and operators have followed suit either based upon contractual increases of RPI, plus three 9% or on a discretionary basis. For example, PT rates contract prices over 9% and we announced the discretionary increase of six 5% on our fixed business in a contracted increase of 11%.
<unk> on the <unk> mobile Bay, so those should provide a tailwind for 2022, along with continued fixed mobile convergence cross sell and upsell offers aside six provides a market by market look at quarterly subscriber growth over the last two years I think the main message here is the relative consistency of growth throughout the period on the top left.
Box, you will see that Virgin media had another strong fourth quarter with 189000 net adds we outperformed the market again on broadband supported by a nationwide one gig speeds at record low churn and the seventh straight quarter of broadband growth in both the lightning footprint and our existing footprint, that's really strong and mobile growth was.
Also saw on the back of the lowest churn in the market and our compelling FMC bundles, so to talk about in a second.
The top right box shows subscriber results for summarize UPC, Switzerland, where we added 57000 fixed and mobile subs in the fourth quarter fueled by record high sales in over 200000 for the full year, we continue to add market share in broadband relative to our peers in Switzerland, and we lead the market in mobile additions with the best <unk> network and looking forward.
We'll keep momentum in Switzerland with brand consolidation on the premium services under Sunrise and a more complete low price brand, we call yellow, which will offer a full bundle of services for the first time that <unk>.
On the bottom left continues to add broadband subs at a steady clip with some of the lowest fixture than we've ever seen around 8% per annum and postpaid mobile adds picked up in the fourth quarter helped by their one FMC bundle.
And then finally, the bottom right shows Vodafone Zika will remain the broadband market share leader, but have seen modest erosion in the broadband base over the last six quarters. We think this is attributable to a number of factors, namely promotional activity. The recent loss of some content rights and fiber competition, probably the only market, where we're seeing any impact from fiber the teams have been address.
Each of these issues with the completion of the one gig rollout this year.
Continued rollout of smart Wi Fi plume pod and over $1 billion installed to date and these efforts are paying off Zynga was just named the number one broadband provider in Holland based on download upload and latency and Vodafone the mobile platform has the highest NPS of any operator in the Dutch mobile market.
Just a quick look at our fixed mobile convergence results on slide seven Youll see on the left that we're approaching around 50% convergence in the UK, Belgium, and Holland, where one of every two broadband subs, let's taking a mobile product from us and closing in on 60% and Switzerland that we've talked about the NPS insured benefits.
Of convergence those are well understood, but these bundles also drive the sales engine for example, the launch of bolt in the UK is off to a great start and is really supercharge the brand in our portfolio, bringing together the best of one gig fixed <unk> mobile along with World Class Entertainment services, we estimate that around $2 million owed to customers on.
The Virgin media footprint use someone else's broadband and the goal will be to convert them over time to the <unk> bundle. It's the same strategy in Switzerland, where we estimate less than a third of the combined customer base fixed and mobile it takes a converged bundle today and the new Sunrise, we portfolio drove record high sales in the fourth quarter, and we will see additional product rollouts this year.
<unk> as we converge under one premium brand.
My remarks, with an update on our fixed network strategies across all five markets.
As you can imagine we are spending quite a bit of time fortifying our lead and one gig services across the footprint and finalizing our roadmaps to 10 gig and you've seen a version of this chart before now with some updated stats in a status report by market first you'll see again with the orange bars that across our 30 million home footprint.
We have already upgraded to one gig speed everywhere with the exception of Holland, which will go from 73% to 100% this year.
We can't overstate how important it is to have speed two to four times faster than your average competitor and to be able to offer those speeds to all households.
<unk> remained committed to their own network upgrades, not surprisingly and Youll see in the first gray bar below that at year end their fiber reached around 30% to 40% of our homes, except in Belgium, where it's only mid teens.
Even when you add <unk> to the picture those numbers don't move much at least not on our footprint.
Beneath these bars, we've provided a quick update on our own plans and strategies by market and I'll start with the U K, which is on the top of everyone's mind I'm sure three key developments here first of all as our base case plan. We are accelerating our lightning build program in 2022 from around 330000 homes last year to over 500000 homes. This year we continue.
To see cost per premise declined to below 600 pounds per premise as we use more bt's passive infrastructure and that only improves the significant return on capital we're already seeing from this investment second we.
We completed the 50000 whole fiber to the premise trial that supports our previously announced intentions to upgrade our entire 15 million homes to fiber by 2028 really important here everything is checked out and we remain confident about the technology, our suppliers and the estimated cost of the project and then third and perhaps most importantly.
We've recently launched a process to establish and capitalize our new fiber netcode together with financial partners that will build up to 7 million new Greenfield homes outside our current footprint eventually, bringing our total fiber footprint to $23 million, that's essentially 100% of the urban UK market now what makes us an attractive opportunity to <unk>.
<unk> partners three things in particular, one <unk> will commit to be an exclusive anchor tenant of the network with its proven track record of achieving 30% penetration in newbuild areas with demonstrated that two will open their network up to other Isps on a wholesale basis further increasing utilization improving financial returns and three we have.
Proven capability to rollout new networks on time and on budget, having already built $2 7 million homes through lightning.
Now turning to our markets quickly in Ireland, we began our fiber to the premise upgrade in the fourth quarter and we're getting close on agreements to wholesale that network remember here like the UK or upgrade cost compare really favorably to DOCSIS four so we've gone the fiber route Sunrise UPC I never have we will pursue a hybrid approach using DOCSIS three one DOCSIS four <unk>.
Other peoples fiber networks, and some perhaps of their own.
And then just signed new agreements with Swisscom, and SFM, which will give them a real advantage. We will have one gig everywhere today and access to 10 gig wherever and whenever it's bill.
Telenet is making good progress with <unk> on a fiber net till I think you've heard about that from John and the team.
They should have agreements finalized this spring and services launched in the third quarter remember was 70% utilization day. One this will be the de facto leader in wholesale access in Belgium in Flanders, and my guess is youll see a strategic shift in the market towards Telenet as a result, theres just not enough market share left to support alternative network plans and finally Vodafone.
<unk> continues to pursue an HFC solutions supported by best in class speeds and capacity, but we will evaluate other options and opportunities as they arise.
Now as Charlie will discuss in a moment 2022, we'll see a step up in our fixed and mobile capex that shouldnt be surprising to drive the strategic and operating growth plan and we will also see a peak year for cost to capture in 2022 in order to achieve the synergies that we have planned for 2023 and beyond.
That's a good hopefully update and overview of our operations and I will turn it over to you Charlie.
Thanks, Mike I'm, starting on slide named back to stable and growing revenues full year 2021, Rebased consolidated revenue growth for the group was one 5%.
Now in the UK market Virgin Media <unk> revenue declined by one 1%.
On the <unk> pro forma basis as growth in consumer fixed was offset by declines in mobile and b to be fixed performance.
In Belgium, Telenet delivered 7% of revenue growth in 2021, driven by higher subscription revenue and in Switzerland, Sunrise UPC delivered revenue growth of 5% in 2021 with high consumer mobile and <unk> revenues, partially offset by a decline in consumer fixed revenues.
Finally, <unk> continues to maintain revenue growth momentum achieving an increase of one 9% in the year and delivering an 11th consecutive quarter of revenue growth.
Moving to the next slide consolidated adjusted EBITDA declined by one 4% in the full year 2021 impacted by increased cost to capture in Switzerland without those costs. It would have been broadly flat.
<unk> EBITDA increased by 1% in 2021 for us pro forma transaction adjusted basis, including cost to capture costs of $81 million.
<unk> achieved one 2% growth in EBITDA in 2021 as its organic revenue growth was enhanced by cost discipline with operating expenses remaining stable throughout the year.
Summarize UPC declined one 8% in 2021, but did include $29 million of cost to capture.
Excluding these costs EBITDA was stable and in the Netherlands, Vodafone zygote posted a 2% increase in 2021, driven by strong revenue growth as well as good cost discipline.
Moving to the next slide at a group level consolidated adjusted EBITDA less PMA additions declined two 7% in 2021 with $126 million of Costa capture weighing on our full year performance.
I'll, let Jimmy throw two so for us pro forma transaction adjusted EBITDA less PMA additions declined primarily due to a step up in capex as the JV continues investment in mobile and fixed infrastructure. In addition to a $194 million of Costa capture expenses.
Telenet and Switzerland, both saw small declines in 2021, both driven by higher growth related investments.
Some of it goes at a $109 million of cost to capture which reduces 2021 number to $548 million.
But if I just think I saw 6% increase in adjusted EBITDA less PMA additions as its adjusted EBITDA growth was partially offset by an increase in <unk> additions, which was largely due to increased investment in its customer experience with an upgrade of the customer premise equipment as well as the capacity of the fixed and mobile networks.
On the next slide we set out our free cash flow, we achieved a free cash flow guidance for the year, which we upgraded at Q3 with a nearly 40% growth in adjusted free cash flow to just under $1 5 billion under our guidance definition of free cash flow now, we're not changing our definition of adjusted free cash flow to now and prospectively include direct acquisition costs.
<unk> as we call it <unk>.
Inclusion of direct acquisition costs represent cost that we incurred relative to acquisitions and disposals, such as corporate advisory and banker fees and under this revised definition adjusted free cash flow in 2021 was $1 4 billion.
Now, we're clearly highlight deck as a line item to ensure compatibility going forward in our reporting.
The next slide sets out some details on our ventures portfolio, which has seen a step up in fair market value to $3 5 billion.
This slide is aimed at giving better visibility on the key movements as ventures continues to go from strength to strength.
As you can see our content portfolio is now worth around $2 billion, including a stake in ITV around $600 million formulary, all three media and an increased valuation for Univision following the completion of its merger with Televisa.
Tech is now worth around $1 billion, including a recent uplift in valuation for <unk>, which is a cloud security service provider and in <unk>. We continue to see this as a key growth area and in Q4 made a move in the energy space with the launch of our smart energy offering under the name egg focusing initially on a subscription based EV home charging solution gives them.
Adjacencies lost smart digital home products, we see this as broadening opportunities to sell services to our customers leveraging our existing operating infrastructure.
Moving to the next slide as you can see from the chart on average we have repurchased around 7% annually of our outstanding shares every year from 2016 to 2020 and 10%. If you include our 2019 tender following the sale of our German and central European assets purchasing in total around $11 billion of stock.
We are now increasing our returns to shareholders and are committed to buy annually, 10% of the shares outstanding from 2021 to 2023.
And in 2021, we started this program and repurchased $1 $6 billion of Liberty stock in the year or around 11% of our year end 2020 equity value.
In 2022, and 2023, we will continue to execute against this 10% buyback commitment.
22 will target by 10% of the shares outstanding at year end 2021 or around 50 million shares.
Our balance sheet continues to remain strong with our total liquidity, arriving at $5 3 billion.
Our debt position remains very strong with average debt maturity of six years or longer at every operation.
All our debt continues to be hedged into the currency the underlying cash flows of virtually all of it is fixed at a blended cost of around three 4% across our consolidated debt silos and around 4%. If you include Vodafone zero in Virginia to.
As interest rates rise this should be a source of value to our shareholders.
As part of our ESG agenda, we also refinanced over $2 billion of debt and Vodafone Zico, using a new innovative sustainable finance framework.
Other ESG initiatives into the launch by Sunrise, and UPC ESG strategy, including net zero scope, one and two direct and indirect by 2030.
So together with ventures initiatives like edge and Liberty charge, our public EV charging joint venture in the UK. This is all part of our ongoing ESG agenda and in 2022, we will look to finalize on net zero commitment including scope three.
On the last slide we summarize our outlook for full year 2020 to.
Starting with Virgin media ROE to guidance on an IRS basis, we expect to achieve improved revenue growth mid single digit transaction adjusted EBITDA growth supported by improved top line and Opex synergy delivery benefiting from early synergy wins like the Virgin mobile Nbn migration to the <unk> network.
This is excluding cost of capture for the year of which we expect to incur opex and capex cost to capture of around 350 million pounds, which is within our aggregate guidance of 700 million pounds.
On cash distributions to shareholders, both Jimmy <unk> is getting to around $1 6 billion pounds, including those from recapitalizations as we aim to stay towards the five times leverage target given this positive outlook in the credit markets.
Turning our attention to Switzerland, we expect stable to modest rebased revenue for the year, along with stable adjusted EBITDA, including cost to capture them.
We got our property and equipment additions as a percentage of sales to be 18% to 20% again, including cost to capture spend.
Cost to capture spends will be 150 million Swiss francs across the year and a third of that spend bucket will be attributed to opex.
The outlook for Telenet as revenue and adjusted EBITDA growth of around 1% and property and equipment additions as a proportion of sales are expected to be around 25% with stable adjusted free cash flow in the year.
Finally, our Dutch JV is guiding to stable to modest adjusted EBITDA growth with PMA additions to sales of 22% to 24%, reflecting a modest step up in capex related to capacity and customer related spend.
Full year shareholder distribution guidance is 550 to 650 million euros of cash returns for shareholders.
Stable versus 2021.
Finally on group cash flow guidance regarding to $1 $7 billion of distributable cash flow in 2022 represent.
Representing another year of growth now. This does include an assumption for <unk> to remain at the same level of 2021 that it could change depending on the level of M&A activity.
And this is despite a $200 million year on year increase in our cost of capital spend in the UK and Switzerland, and the commitment to investing in our networks that Mike set out earlier.
We're now guiding to a new term could distributable cash flow.
Which is made up of the free cash flow that we receive from our consolidated operations as well as dividends from our joint ventures, including the proceeds that we expect to receive from any debt recapitalization Birgeneau two wells.
Whilst remaining within its five times leverage target.
Because of these high return investments adjusted free cash flow will be done in 'twenty to 'twenty to 'twenty one.
And with that operator time for questions.
The question and answer session will be conducted electronically. If you would like to ask a question. Please do so by pressing the star our Aster key followed by the digit one on your phone.
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Pause for just a moment to give everyone an opportunity to join the queue.
Your first question comes from the line of Robert Grindle with Deutsche Bank. Your line is open.
Robert.
Your line is open.
And if you're on mute please UN mute your line.
And I will proceed we wanted to try another one operator, yes, I will proceed with that backdrop.
Our next question comes from the line of Polo Tang with UBS. Your line is open.
Yes, hi, Thanks for taking the question just have a question in terms of U K footprint expansion, you've made it clear that youre talking to financial partners about a deal but can you comment on whether you've had any interest from strategic partners to be involved in the project and also a number of potential financial partners already have existing fiber assets.
In the U K, therefore would you consider partnering with an existing ultimate.
Hi, Pablo good questions.
I guess the answer to them.
Yes, we would and are in discussions with.
All of the above.
I think the process that we initiated here to seek out financial partners is the right next step as you point out there are.
Few involved today, but more importantly, plenty of capital and plenty of interested parties period, and we think are this opportunity stands out perhaps the best.
Youre going to find in this market principally because it.
Involves an existing operator like Virgin media to that Ken.
Pretty much guarantee utilization.
And at some point you could easily see it folding into our other.
15 million homes. So I've mentioned, the 22 million home footprint will nobody none of the outlets and then alternative providers are looking at a 23 million home footprint. So I think it's.
The winning.
Opportunity and platform that's for sure and you should assume we're talking to financial strategic and perhaps even existing partners in the market.
And can I ask a follow up question in terms of UK price rises what's been the customer reaction to the six 5% price increase and given that it's lower than that nine 3% increase followed by beauty you, maybe skip to gain market share.
So far so good that Luke you want to address that.
Yeah, so customer reaction on our price increase as planned.
It is also a bit higher than the year before.
But.
You see that we are operating on a very low churn.
The price increase from BT customers is just lending in the market right. So it's too early to tell if there will be more churn and therefore more custom lots available.
Let's see.
Thanks.
Your next question comes from the line of David Wright with BLA. Your line is open.
Thank you very much and I hope you guys can hear me.
Yes.
Maybe looking over to Holland and the guidance outlook.
Got it.
It's a little bit.
Yes.
Underwhelming.
Is it safe to say that.
A great business, but the guidance is a little bit underwhelming. After some of the momentum we have may be seen bill.
Building.
Could you just sort of talk us through how you are looking at that business.
And why perhaps its not really pushing ahead.
And obviously the question that I think you often get is.
Could you guys perhaps.
That business in totality I think Vodafone has made it very clear that it's open to business.
It's.
On potential restructuring of its asset base right now.
Just some thoughts around but it sounds like it would be really appreciate it. Thank you.
And sure Sheridan.
Start on the second part of your question.
As everybody would know we have been in this JV for quite some time with Vodafone that have been fantastic partners I hope they would say the same of us.
We work really well with management and we built together a business.
That has achieved pretty much everything we set out for it to achieve solid and steady EBITDA growth significant free cash flow and distributions to shareholders a market leading position in broadband and really <unk> generally and if you just look at 2021 and you compare Vodafone zygote to KPN I don't think Theres a singer.
<unk> metric with the exception of possibly broadband additions, where we have an outperform KPN pretty pretty impressively. So so it's delivered everything we hoped it would.
In our opinion.
One of the best businesses in Europe for all those reasons.
In terms of the guidance listen it depends on which particular aspect of the guidance Youre asking about.
The cash distribution will be roughly equal to what we had last year. So that's a proxy for free cash flow a little bit more capex as they intend to invest more significantly in both the mobile and fixed networks period, and that's pretty important.
You should expect that that's something all operators are focused on.
Competitive market, so that would drive a slightly lower result in operating free cash flow, but theyre, making up for that in terms of the underlying free cash flow figure and the EBITDA stable to modest.
Is not surprising given the business that has to invest in both.
New products, and new services as well as ensuring customers see them as the.
The winning solution in the marketplace, it's a rational market, but a competitive market. So we think it's the right guidance and we think that the investment they're making in fixed and mobile.
Is the right investment and we think that their investment in customers, which lead critical in this market is also the right investment.
We had a bit of an inflection point in terms of what each party will do I think you'll have to ask Vodafone what their intentions are we're happy with the business I think the management team is doing a fantastic job Ritchie. The CFO is on the call you want to add anything to the guidance point you Richie.
No I think it's well said Mike in IBD, So it's not a structural.
We are investing a lot to make sure we keep on being the winner in the Dutch market.
Okay.
Yes.
Smart investment Okay. Thanks, guys.
You got it.
Your next question comes from the line of James Ratz, Sir with New Street Research. Your line is open.
Hi, Yes. Good morning, Mike just had a couple questions just coming back please to the UK fiber.
<unk> venture I think in the past it had been talked about doing this.
But to landfill and it now looks as if youre shifting this to.
Parent company investment jointly with Telefonica I was wondering kind of firstly why you were considering that change.
And then secondly, as part of the agreement has Woodford to give any volume commitment to the new JV as an anchor tenant.
And can you give us any indication on what wholesale rates the new joint venture would be looking to charge. Thank you.
Yes, I mean, I'll just quickly say on the second two points. That's all work in progress and we haven't gone out with an official investment memorandum, yet that'll happen. Shortly so we're going to.
Hold back on any specifics around wholesale commitments and pricing.
As we get deeper into the conversations with investors before that comes out.
In terms of why this would be a partnership between Telefonica and Liberty global with financial investors. It's our view that that creates a fair amount of flexibility for all parties. So with respect to <unk> they'll be able to.
Have this off balance sheet that's important.
And it provides them with the comfort they need that the business that this particular project will be financed and that they will have the benefit of the growth and the opportunities at the project provide as if they were an owner without happen to be one.
And the capital would come from the parent companies us and test as well as the private partner whoever that may be.
So we thought it was just simpler and cleaner and also provides greater optionality for the shareholders themselves in terms of what we may ultimately do with our infrastructure businesses and assets I think from an investor's point of view, it's really it's a non issue because we are the owners of the <unk> will be the essentially.
Builder and operator of the network it'll be a very like.
Our net co it won't have to do all the things that other net goes youre doing with startup costs.
Large management teams and all of that stuff, we will rely on BMO to essentially supercharge lightening, if you will and <unk>.
Essentially can start redirecting lightning resources to this net co.
It seems like a really simple way to proceed and I think we all feel pretty positive about that approach.
Okay.
Thanks, Michael could you give I mean at this stage any indication on how you might then consider funding the entity I mean could you replicate our model we saw with Deutsche Telekom why you want to say maybe sow.
<unk>, 50% stake in this joint venture to a financial party in those proceeds would actually fund any contributions you'd have to make so this could be cash flow neutral.
The parent company.
Few years as the build out.
Yeah. Good question that'll be all that will all be resolved in the process of negotiating with partners. We believe that the project has.
Fundamental value today before the first half is built given the the ready made nature of this particular opportunity and we will seek obviously to convince private investors that Vodafone.
Vodafone I'm, sorry of <unk> ability to penetrate.
The speed at which we can get rolling.
Should generate or result in a chip.
Our private market value for that asset even before we begin we may not and we will see that has a lot to do with wholesale rates and utilization rates, it's really an economic equation and a lot of that will be negotiated so let's see it's possible, but we're not right.
We are ready to write a check if that were necessary and we will.
Now what that number is and it's not substantial relation to our cash balance it's not substantial in relation to telephonics cash balance so either way. This is moving forward.
Great. Thank you Mike.
Yes.
Your next question comes from the line of Robert Robert Grindle with Deutsche Bank. Your line is open.
And Robert you may want to pick up your handset. Please.
Hi, sorry can you hear me now.
Got you.
Yeah, I'm, having trouble today apologies for earlier.
Math about ventures, where you've had some amazing.
Value appreciation.
Can I clarify.
Everything you're saying your diverse content assets and redeploy that into infrastructure and technology, you can either buy and sell it and you won't have to put your money.
Are you thinking about it.
The main pillars going forward is infrastructure. Thanks.
Yeah, Hi.
No I wouldn't be that.
It wouldn't be that concrete about what you've just said I think what we said in the past is that our content investments which are.
Substantial.
Could we will look at them carefully to determine whether we want to increase those investments monetize those investments or do something with those investments of a strategic nature.
And they are large and the portfolio itself is the largest of the three.
Element. So I think it's safe to say, we will be opportunistic around content portfolio and what we'll do with either of those public or private interests.
Does it mean, we'll never do another content investment no. It doesn't mean that it doesn't mean that we will do that so that means we will be creative and opportunistic with those which about $1 billion 6 billion seven of value that we could look at in terms of the content portfolio.
We've said historically that the Tech ventures group, which is about 1 billion plus generally distributes to us.
$2 million to $300 million a year.
And or less or more depending on exit so it could largely fund itself given the amount of capital we're putting into tech annually. We would expect that the tech platform could be self funding if you will.
But that may be the case in most years. It may not be the case, if a particular deal comes around but I think thats a safe assumption.
The side of the pillar that does require capital and it looks to be.
Very exciting to us is the infrastructure side and those are usually larger investments, you've you're building fiber or data centers or new.
Startups less Charlie described those can be a bit more expensive in some respects and so I think that'll be a net.
User of capital since its very early stages for infrastructure, so that'll be a net user of capital.
Going forward.
Hope that helps.
Got it thank you.
Okay.
Your next question comes from the line of Carl Murdock Smith with Baird. Your line is open.
Yeah.
Alright, Thank you for the question.
Just wanted to ask about.
The kind of 2027 target for the.
Additional 7 million times Rollouts.
On the back of an envelope I calculate without roughly means kind of doubling or even tripling the pace of lightning currently.
Just wondering if you could kind of help us think.
The pace at which we should expect you will roll out in situ accelerates and also what gives you confidence that you can accelerate that much given the historic issues that you have faced with the pace of project Lightning rollout.
Yes, I'll, let new tests that I will simply say, we haven't really faced any issues that would deliver between 345 600000 homes for the last four or five years. So other than I think many years ago. When we first started the project maybe you were referring to but I don't know how many years, we have to hit the numbers to have that particular issue, we built $2 7 million homes.
Over half of them are fiber homes were consistent and steady suppliers want to work with us we pay our bills, we're predictable, but I think Lutz why don't you address that more specifically.
Yeah. So.
We have been a bit light.
Last year, but that is because of the pandemic.
We have guided that we would build more than 500000 homes. This year.
We have actually ensured supply for a higher number than that.
We are also in sync with these private company to build in.
<unk> tier one vendors.
And there isn't appetite to further accelerate rollout with us I think what we have to offer is right.
BMO too we have a history of building $2 7 million homes.
Every second household is comfortable for us now.
And so if a tier one.
Supplier gets our midterm commitments.
That drives interest right.
I just want to balance your.
Clients being a supplier between ordinance, which maybe a bit more uncertain.
And the market. So yes, you are right we plan for an acceleration.
Yes.
We are confident that we can ensure that switch.
That's great. Thank you.
Yes.
Your next question comes from the line of Nick Lyall with Chen Your line is open.
Yes, Hello, Mitel, Charlie It was done a couple of questions on the UK. Please Mike just didn't.
In the cable footprint, how much of the $2 1 billion Capex.
For 2022, VM opportunity is going to be on fiber. Please.
How many homes do you think thats going to get you to with five but just to get an idea of the sorts of things.
The fiber rollout as possible and then second I think you said last quarter.
<unk> 2 million homes.
With fiber and cable footprint. So have you seen a big acceleration in that number is that you start to ramp up in the numbers and how you're competing.
$2 million or 2 million plus homes. Please thank you.
Yes Luke.
Can you can prepare for the second question on the first one I'll just.
I'll tell you, we're not providing detail around the build.
Estimates there. So we have said will Billboard Lightning homes, you can do the math on that you did.
330000 in 'twenty, one we're going to ramp that to above 500000, so that will clearly be a portion of the incremental capex at the base case guidance, but.
But we haven't been specific about how many homes, we will upgrade fiber.
We have told you what that will cost, but we haven't told you how many I think thats.
Design.
And then that does not include the Capex estimate provided does not include any cost associated with this recently announced financing that we just spoke about a moment ago.
Not that that would create significant cost because the MLP would be reimbursed for any cost it provides services for but.
It does not include that so I think that's the right answer what we'll provide more guidance on the fiber upgrade.
And as we get into it but the only message we're providing today is that we did the 50000 home trial and at checkout.
Really well so Luke you want to address that question.
Yeah. So.
And rich cover is now roughly one third of our network a bit less.
And we are carefully looking at it.
The impact in terms of customer churn.
And so far we see very little impact now obviously, we have invested.
Money into high speed.
So sitting on.
Much better customer service of common complaints went down 93%.
More and more customers are also adding mobile was up 45%.
And we have a lot of good content. So therefore, we do.
And then two obviously.
Thanks Keith.
It's possible to ourselves.
At the moment.
The numbers we see.
We are losing it's really low.
The other thing we also have to take into account is the pandemic right. So a customer might be a bit more careful at the moment switching their connection to the outside world during the pandemic than they would do afterwards so there.
Therefore, we do everything we can to keep.
NPS growing and turned down and so far we see better than that.
Okay.
Just to clarify.
Okay.
$5 million.
Overlap at the moment in the cable network is that.
Openreach and all that but I think it's something in that.
Magnitude.
Okay. That's great. Thank you very much.
Okay.
Your next question comes from the line of James Ratcliffe with Evercore ISI. Your line is open.
Thanks for taking the question.
I think a little more into strategy and ventures. When you talk about infrastructure investments can you give us any idea of any particular areas. You are focused on what sort of deals are you.
What needs to be a minority investor or controlling investor and I were just talking about Europe or globally. Thanks Charlie.
Charlie you want to take that one.
Sure I think the rationale for infrastructure as we already have a bunch of infrastructure assets that are probably mispriced in a conglomerate telecom structure.
Example, is our hub sites, which are clearly very high quality technical sites, which if they were a sort of a technical REIT would probably be something like 20 times cash flow and that was indeed the transaction, we did buy emerging that in-kind asset with our private equity partners who've been excellent by the way digital bridge. So we're going after the edge cloud computing and the reason that's a good deal for US is that obviously there is a long.
Term growth drove all of that and we have the option to buy out our partner down the line itself. When it comes to an end, but also as far as logistics of our businesses. There's a lot of increase in fiber connectivity that comes from that.
Cloud computing platform.
As we think about the infrastructure those kind of opportunities in the key areas that we thought about leveraging our expertise in being able to build fiber homes. So.
Excellent job, Robert Dunn, who was the old CFO of Virgin.
The charge at looking at places, where we can partner up and leverage our expertise in building homes at scale and I think I would actually well, let's say that we actually with the best in the U K a building that's got in many respects.
Third big area for Us as energy.
Rami, where big consumer of energy and rightly or wrongly.
Yeah.
Like everybody else working through that process of making the transition to net zero, whether it would be.
Vehicle charging electric vehicles, and solar panels and all at all and if you think about it we have enormous field operations, who are very experienced in getting into homes, and we see a big opportunity to leverage that expertise.
Building, a new business and again, we tried to do that with partners. So we have an excellent property.
The partner for a public charging network consume capital in that business is doing very well getting a lot of very good wins of local authorities in the U K.
And then we've also launched and will consume a fair because thats the exiting I talked about it I mean, clearly the plan will be to take that across Europe .
The Benelux, Switzerland, initially and leverage our experience of subscription based customer relationships and how you finance them and how you manage them and how you leverage call centers. So.
So thats the Adjacencies, we're thinking about as we go into this infrastructure.
Space.
Alright, thank you.
Your next question comes from the line of Maurice Patrick with Barclays. Your line is open.
Thanks for taking the question.
Yes, a question on Switzerland, I Wonder if you could walk us through the moving parts on the on the EBITDA.
2022 on 21, I'm, assuming that's probably a reasonable slug of synergy delivery.
In the year, probably offset by higher cost of capture has signaled but again to get to flattish EBITDA.
Helpful to get some color in terms of the moving parts.
Related I mean on your first slide slide three you talked about $14 a share of synergy value just curious as to how much would have been captured by the end of 'twenty to say thank you.
Yes, good question.
And Andre I'll, let you.
Prepare for that the first part of that I would say if you look at the two assets.
We gave you synergy estimates for both of them.
In the order of I think 530 million pounds, plus or minus for the UK and when I say 330 million Swiss francs, those would be sort of run rate synergies.
Synergy estimates.
For each of the businesses.
We're reasonably far along I don't know that we're getting I'm not sure we are prepared to give exact.
Specific numbers, but we're making great progress.
I know that this year in Switzerland, as a peak funding year sow cost to capture year, So, whereas last year I think we said we spent in Switzerland around $160 million to capture synergies this year that will.
Go up to about $180 million, plus or minus and that'll be a peak year, but in this particular 'twenty two we expect to almost breakeven between synergies and cost to capture which means 23 will be.
Pretty substantial in 'twenty four 'twenty five we'll be pretty substantial.
Positive synergy gears and BMO to was about a year behind right. So study started almost a year later so there.
We are giving you the numbers for cost to capture I believe in the press release. So you can see what those numbers are.
Twice, what they were in 'twenty, one, but not quite breaking even yet on synergies in 'twenty two when that will happen obviously over the next two.
3% to 26, when we hit that $5 $35 million to $40 million run rate. So.
Big picture.
Target Andre you want to talk about the EBITDA.
Sure Yes.
Touched on it Mike.
Yes, it's true we are having many moving parts in the integration.
Investing a lot of cost to capture to build the business to set the foundation for growth we talked about it we are consolidating our brands among premium brands that we have a second brand with yellow.
Also help us to take the market from both angles from a premium perspective, but also from a no frills perspective, which I think will give us continued momentum plus also good growth on <unk>.
22, obviously as the year.
Heavy exposure to close to capture we are ramping up and most of the initiatives that we have started already in last year.
And as such we also see that the impact on EBITDA in terms of constant capture is more or less going to roughly $50 million plus then also synergies coming in and increasing but on the other hand side also we have on the Opex line items for launching the new brand. We are also engaging in a new sponsorship with the Swisscom.
<unk> Association, which puts our brand on a stronger footing. So many moving parts and that is why you see not yet the full power of our business really materializing in a strong EBITDA growth. It's up to you to all of those integration efforts, but underneath the surface. I think you can see also the physical performance of the <unk>.
Are you the kpis on customer numbers as such.
We are on a good trend to drive market share growth in all of our segments.
I just wanted to try to continue to bring the business onto a footing that helps us to drive not only top line, but also bottom line growth in terms of EBITDA and free cash flow growth in the following years.
Okay. Thank you.
Your next question comes from the line of Matthew Harrigan with benchmark. Your line is open.
Thank you.
Especially in the context of BMO too can you talk about how all fiber or do you keep your costs over time customer touch points.
At least one company in the U S is really talking 30% even 40%.
And then the flow through on the long term capital intensity and I guess.
Just lastly.
Optionality it opens up on the commercial services side, having that that.
Capability as well I know you have a lot already but it feels like there's still some headroom there. Thanks for taking the question.
Mike.
Maybe we have sorry.
Yes, there's a lot of is that the horizon a moment Mike.
The moment yeah, there we go.
A lot of benefits to fiber upgrade Matt.
Obviously, having the ability to provide.
More sophisticated and competitive services in the enterprise space.
Potentially offering wholesale revenues.
And just being a more marketable to some extent.
<unk> proposition.
And so we think there's benefits across the board beyond just simply haven't gotten more robust network to compete against existing operators an incumbent on the fiber cost point.
We are I think we've said this before.
It's a relatively long build process, we don't intend to shut down the HFC network and.
In fact, it wouldn't be surprising to me if the HFC network, we're operating for quite some time and it's sort of a dual mode. Because we don't want to force migration to fiber, we don't need unlike the phone companies that have copper lines.
<unk> migration to fiber allows them to dismantle their copper infrastructure in our case.
We'll migrate people to fiber, who want 123, 10 gig, but if youre happy with your 500 magnitude 50, Meg we may or may not incur the cost it might get you to fiber because our network is really robust on its on its surface on the space. So we're going to run two networks. If you will for a period of time, which is the best of both worlds one gig avail.
<unk> everywhere and then as we roll the fiber out 10 gig and other advantages where it becomes available. So there will be cost savings over time.
But I think for the foreseeable future, we're going to run two networks.
Thanks, Mike appreciate it.
Yes.
Your next question comes from the line of Sam Mchugh with BNP Paribas. Your line is open.
Yes. Thank you very much just on the UK again, I'm, sorry to labor desktop.
<unk> talked about the Armageddon scenario of U haul, having dual network that.
That big customer.
So when youre talking to potential industrial partners. What does that you think you bring to the table differently to openreach.
Do you think it would make them, but some of your theoretical.
Partners have skin in the game in the network.
Alignment of interests savvy upside with you on any network build.
Okay.
Well look I'll, let you think of some suggestions here too I'll, just make one point, which is.
The main difference is there.
That we're envisioning.
A full fiber network of 23 million homes by 2027% 28.
Those homes will represent.
Almost 100% of our urban markets.
And it'll be the first time.
This country has ever seen a competitive.
Provider of wholesale if we go that route so the idea that that openreach will retain 100% of wholesale revenue whether it's.
Either it's us or Alt nets competing is zero.
There is zero chance that BT will retain 100% of wholesale revenue in the next five years, how could it possibly do that with all the capital being invested in competitive infrastructure. There is.
Zero chance of that so we think if you look at the prospect for <unk>.
Penetrating some of that revenue certainly Virgin media would be the number one.
Choice because of our scale our reach.
And our ability to deliver so that's the broadened narrative, it's not that complex.
And the notion that there'll be Armageddon I think is foolish I don't believe you really means that.
I don't know why you would say that I'm not sure I did say that but if you did say that.
Certainly not.
Smart thing to say.
If you're already sort of a monopolist.
There is going to be.
Here in the U K and it's got to be competitive infrastructure in the U K we are.
The single greatest source of that competitive infrastructure.
We're pretty excited about the opportunity you want add anything to that.
Yes, I mean.
Alright.
Future.
ISP is the chart between two national networks, instead of one and if you would be in ISP Im sure you would use Bose. So this is what you said might be and then also what we have to offer well it depends.
Quickly, we are able to close some of these deals but.
We are sitting today on the fastest gigawatt largest one big network in the country by far so.
Also there is some appetite to.
Some other Isps to leverage that so I think we have a lot to offer we are challenging the market is competitive.
And so let's see.
So you've got some guys. Thank you very much.
Our last question comes from up Arena Okay.
Our next question comes from the line of Andrew Beale with Arete. Your line is open.
Hi.
Wanted to build on that question about the.
The JV on the wholesaling.
I guess I'm, just asking how are you going to subcontract of BMO.
The ramp.
And eliminate duplication.
Whether the new Mexico JV also.
<unk> directly with new construction partners.
The peso.
Doug.
And then when you're a home setting.
Will that be both from BMO to amplify the JV. So you offer the.
The full 23 million footprint that you just mentioned growth in just the seven.
And finally, we will be able to.
Also wholesale.
Openreach or others to take its longtime footprint up towards 30 million full coverage.
Three very good questions.
And if I can.
This can address the first one I think.
In terms of lightning essentially being.
Transferred into the <unk>, the new network JV all of that field capacity build relationships supplier relationships activity would essentially be transferred so.
You can easily see BMO to redirecting its forces into the network JV and achieving pretty substantial growth remember our pace of lightning build has been.
Not a function of our ability or willingness or capability to build it's been more or less trying to drive our free cash flow and financial outcome for the company.
<unk> comes to me every year and says I want to build more than we say, yes, but we want to generate free cash, let's find a happy medium. So theres never been an issue of capabilities. It's always been financial management, which is what which is what you want us to do is managing the pluses and minuses. So.
I think we're all convinced that if we set lutz and his team create a billboard they could build more it's just a matter of the capital and you hit the nail on the head in terms of the 22 million homes sure.
That will be and should be a combined approach if we get to that point and you would see BMO through managing that wholesale activity.
In terms of the third point, we havent worked much on that that you can if you can.
And on that we haven't really modeled much access to third party networks, but you want to add anything to that Luke.
Yes, maybe right to support your first two points right at the end we are leveraging the built machine and then also the wholesale machine. We are currently building for that new fiber co.
And if you're an ISP for you it's easier to contract.
423 million homes in desktops during two contracts why would you do that.
And I think in terms of what you said Lightning Lightning machine will absolutely work, then or that harbor coal.
Who owns the contractual relationship with the suppliers. It's a different question right and we are fitting obviously today on on great contracts like that.
So we have to consider that but I think both those machines would work for that.
One.
What are our plans to wholesale and Openreach network.
So in general.
We only would wholesale on fiber right and not on corporate and obviously also openreach is first focusing on urban areas as we do so so therefore.
Bill to be expected on the 7 million homes from Openreach.
Other pieces simply right we.
We are integrating two companies.
We have a lot on our plate.
<unk> like.
That's not to be too ambitious and do everything at the same time. So therefore, we see that as a as a second priority maybe we'll do it later, but not in scope at the moment.
Great Alright.
We're a little bit over appreciate you hanging on if you still are still on.
I guess just three one.
We are seeing a continuation of the commercial momentum.
Over the last 24 months and our cooperations that is critical I think thats really the most important piece of the puzzle is that we continue to grow organically and then secondly, as you've heard and understood, we're making smart investments both in cost of capture which will pay off.
In immediate future.
Those are investments you want us to be making and then in some instances our networks, particularly in the U K, where we've spent quite a bit of time today talking about the opportunities that that presents.
And then thirdly, we've got some exciting catalysts, whether that's ventures or towers or buybacks. All three of those things act as sort of a catalyst to what we think.
Great fundamental story, so appreciate your support and we.
We'll be talking to you soon thanks, everybody take care.
Ladies and gentlemen, this concludes Liberty Global's fourth quarter 2021, Investor call. As a reminder, a replay of the call will be available in the Investor Relations section of Liberty Global's website. There you.
You can also find a copy of today's presentation materials.
Okay.
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