Q1 2022 Liberty Global PLC Earnings Call
[music].
Yes.
Good morning, ladies and gentlemen, and thank you for standing by welcome to Liberty Global's first quarter 2022 investor call. This call in the associated webcast are the property deal for the Liberty global and any redistribution retransmission or rebroadcast of this call or webcast in any form without the express written consent of Liberty.
<unk> 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 section of Liberty Global's website at Liberty Global Dotcom.
After today's formal presentation instructions will be given for a question and answer session.
Today's presentation May include forward looking statements within the meaning of the private Securities Litigation Reform Act of 1095, including the company's expectations with respect to its outlook and future growth prospects and other information and statements that are not historical fact.
These forward looking statements involve certain risks that could cause actual results to differ materially from those expressed or implied by these statements.
These risks include those detailed in Liberty Global's filings with the Securities and Exchange Commission, including its most recent filed forms 10-Q and 10-K as amended.
Liberty Global disclaims any obligation to update any of these forward looking statements to reflect any changes in its expectations or any conditions on which any such statement is based I would now like to turn the call over to Mike.
Okay. Thanks, operator, Hello, everyone. We appreciate you joining us today for our first quarter results call as usual I've got a number of folks my leadership team on the call with me here and I'll be sure to get them involved in the Q&A as needed.
First Charlie and how you're going to run through the slides that we've posted on our website hope you've found those slides. We've added a few more of the finance section should Charlie's work and a little harder today and I'm starting on slide three with some key highlights from the quarter first of all like each of you we remain extremely troubled and concerned about the war in Ukraine, and our thoughts and prayers go out to everyone impacted by this crisis.
I have to say I'm, particularly proud of how our operating companies and employees have stepped up to support those in need.
Things like free or reduced connectivity costs humanitarian aid and programs to hired Ukrainian refugees. We also signed a joint statement by EU and Ukrainian telco operators to reduce wholesale roaming in termination rates between the EU in Ukraine in order to ensure communication remains cheaper and easier for Ukrainian inside and outside the country.
At this more broadly every European company has addressed how the current macroeconomic environment has affected their operating results and Charlie's going to do that in a few slides the punch line for US. However is that we've been able to manage well through the current environment of higher inflation and declining consumer confidence anyone who has followed our industry knows that we are highly resistant to economic volatility.
Since connectivity is one of the most important services consumers buy and while our markets as a whole experienced a slowdown in sales in Q1, which is not atypical for the first few months of the year, our disconnect or churn rates remain very low.
Charlie will walk through how we're responding to cost and supply side factors, but it's worth pointing out right up front and we've been able to minimize the financial impact with the reasonable price adjustments pretty much across the footprint.
Just one reason why we're able to deliver stable to growing revenues across our FMC operations in the first quarter and importantly, strong EBITDA growth in our core markets.
There's been a lot of talk lately about the role of M&A in the European Telco sector. I think it's fair to say this is an area. We've consistently over achieved so far this year, we closed on the sale of our Polish business to Iliad for $1 7 billion or nine times EBITDA and as reported telling it very effectively monetize its tower portfolio for 745 million euros or <unk>.
Five times EBITDA I have to say given current prices. This may be the largest gap between public and private values that I've ever seen with no discernible decline in private market demand for telco assets and not surprisingly, we've accelerated our buyback program, which as Youll recall was targeting a minimum of 10% of the shares this year, we're already 50%.
Cent of the way there through today and will continue to take advantage of current prices as long as we can and finally as Charlie will explain more fully we are reiterating our 2022 guidance today, including our $1 7 billion of distributable cash flow and more details on that in a minute. So we certainly have a lot to be confident about as we look to the balance of the year with things like integration synergies in the U K.
Switzerland strong cost controls and the expected benefits from price rises supporting our growth targets.
Now turning to slide four we try to simplify the presentation a bit with just one operating slide it shows our connectivity trends for broadband in postpaid mobile over the last nine fiscal quarters. The main takeaway here is that despite a softer sales environment in many of our markets and announced or implemented price increases we had a good first quarter the only standout as Virgin.
<unk> or broadband in postpaid mobile adds were flat for the quarter and there are some very good explanations for the results starting with broadband with three things impacted <unk> net adds in the first three months of the year.
To begin with as you know BMO to implemented its largest price rise since 2014 with the six 5% discretionary increase across the board of course, we took no price increases on broadband in 2020, and a 4% rise in Q1 of 2021 and typically gross flows in the quarter. When we take price rises the good news is that customer.
Reaction to the increase in Q1 measured in churn and NPS is exactly where we expected it to be the unexpected news is that broadband sales in the U K market as a whole were down in the first quarter, reflecting the end of lockdowns, perhaps in consumer attention being redirected to other costs like utility bills and for BMO to gross adds this was <unk>.
Compounded by reduced marketing and promotional activity in January and February while the price rise was landing with customers I.
I think it's also important to point out that we do not see any noticeable impact from fiber overbuild, which shouldn't be surprising because we're already marketing one gig services to 100% of our homes and continue to see meaningful increases in average customer speed in our network, which now exceed 230 megabits per second up 24%.
<unk> networks is a quick update on our fiber expansion plans in the U K. The fiber rebuild is on track and we should have the goals achieved by year end that we set for ourselves and we received strong interest from the financial community on our plans to build an additional five to 7 million Greenfield fiber homes with concrete discussions underway as we speak and sticking with the U K.
Postpaid mobile growth for BMO too was a tale of two brands really are volt launch drove great Oh, two mobile games, even with the announced average price rise of eight 8%. This has certainly proven the magic of convergence. If you will but we did see a drop off in lower ARPA Virgin mobile subs as we implemented the new terms and conditions for them.
As well as we lost some Virgin Sims as folks subscribe to the bolt bundle.
Several things give lutz and his team confidence that we'll see an acceleration in broadband and mobile for the balance of 2022, including product innovations like TV stream continued footprint expansion to our lightning program and of course, the benefits of digital I'll just hit the other markets briefly since results were strong in each case, our semis UPC had a good.
Broadband and postpaid mobile growth in the first quarter totaled 56000, and broadband was supported by the new full service offering from yellow, that's our discount brand in Switzerland, and postpaid mobile net momentum was driven by premium and challenger brand segmentation, despite a relatively competitive market.
Other off point in Switzerland, we remain confident in the hybrid network strategy, which gives us access to the best networks wherever we are including Swiss comes fiber, where we just signed a new wholesale deal. We also launched Sunrise moments, which is a loyalty program that provides reward packages and exclusive access to cool concerts and live experiences. So far a great response, and then last.
But maybe not surprisingly sunrise outperform swisscom in Q1, I'm pretty much every key financial and operating metrics now.
Now Vodafone single loss broadband subs in the quarter, which they attribute to both the continued competitive pressure from KPN and the launch of the new F. One season on the via play platform, which KPN basically gateway for free to their customers.
Postpaid mobile adds of 37000 were attributable to a softer BDC market, but Vodafone outperform KPN again, and regain the leading NPS position across both fixed and mobile.
Convergence continues to pay dividends in Holland for a total of $1 5 million FMC households, now, where mps's 19 points higher and customers are 50% less likely to churn not much to report on Telenet that John didn't already cover in his earnings call generally low churn and low gross adds means there are simply less flux in the market and <unk>.
It delivered positive broadband in postpaid mobile adds regardless and that was helped of course by the one product that they are marketing today.
Now two more slides from me before we get to Charlie's finance presentation as I mentioned in my opening transformation through M&A seems to be a hot topic. These days in Europe . So I thought it might be useful to refresh oaks on our journey from a cable company operating in a dozen European markets, just five or six years ago to a fixed mobile champion operating in a handful of Europe's most attractive.
Markets. Today. This is a great example is getting smaller to get bigger if you look at the left hand side of the chart you can see that we reduced our footprint from 12 countries to essentially five today exiting markets that private market values that range from nine to 12 times EBITDA, you'll all remember those deals at the same time, though through fixed mobile mergers or acquisitions with.
Increased our subscriber base for 58 million fixed and mobile connections to $85 million with Fitch, becoming a much smaller part of the equation at the same time, while consolidated revenue declined from 17 to 8 billion. We gained exposure to a much bigger revenue base of $19 billion through our 50 50 JV is in the U K and Holland So AG.
Again revenue if you will expanded 6% to 27 billion and they were for great reasons to do this and they're laid out pretty clearly on the right inside of the chart first it's all about national scale in our connectivity business and we're now number one or number two in just about every market right behind the incumbent who is generally slower less agile and less entrepreneurial.
Secondly, the synergies in fixed mobile mergers are substantial with low execution risk you know our success in Belgium, and Holland, where we generally exceeded targets are achieved the goal earlier than forecast and our recent combinations in UK and Switzerland are tracking right on course with the expectation that total synergies will reach 11 billion on an MPV basis.
Of which about 8 billion will accrue to Liberty Global proportionately you can do the math yourself on a per share basis.
And then third the strength of these businesses lies in the power convergence already at or approaching 50% FMT penetration with fixed mobile bundles that provide faster speeds more data smarter video solutions and entertainment perks.
As we've already demonstrated the benefits to <unk> churn and NPS allow for sustainable growth and what we believe are Europe's most rational market.
And then finally as we discussed many times scale and competitive strength give us strategic optionality and confidence to shape, our markets and make decisive moves on networks content and capital structure that simply wouldn't be possible as a smaller operator, so you're familiar with all of those projects at the bottom of the slide and the opportunities we're focused on including fiber expansion wholesale revenue in <unk>.
Infrastructure modernization now and on a slide entitled allocating capital efficiently and this might be the most important slide today, we've demonstrated a willingness and an ability to transact when it matters of showing you that the transformation, we underwent with divestitures acquisitions and JV involved 11 different European markets over basically <unk>.
Five years.
I'd also reiterate the strategic and operating rationale for those decisions, where we prioritize national scale executable synergies competitive strengths and control over strategic market development, that's half of the value creation story.
The other half is what we do with the capital, we realize or upstream from divestitures Jv's operating subsidiaries.
This slide chosen left in the last six years, we've generated $22 billion of cash to the parent company.
<unk> $12 billion in net proceeds from those asset sales 2 billion of net proceeds upon the formation of our JV in Holland, and the U K and an additional $8 billion in free cash flow during that period over that same timeframe, we've allocated $18 billion of that capital into three value drivers by far the largest investment.
$13 billion or 72% of that has gone right back into our own company in the form of stock buybacks 4 billion or about 22% has been used for mobile acquisition in Belgium, and Switzerland deals that position us as a fixed mobile champion in those markets and about 1 billion, 5% has been used to expand our ventures platform.
Which as you know we valued today at over $3 4 billion or $7 a share all of that leaves us with roughly 4 billion on the balance sheet today.
Now I'll address right now it is likely to be the first question. How you allocate the $4 billion and also give you the answer that normally get which is at our future investment of cash is unlikely to look meaningfully different than what you see on this slide we will continue to prioritize stock repurchases, while keeping an eye out for direct investment opportunities either.
<unk> or around our core FMC operations Nobody is pleased with the stock price today, you can put John and me at the top of that list when.
When we look at the European Telco space, we see headwinds in tailwind for the sector at large, but our tail winds are enhanced by having national scale and the best and most rational markets by having unrealized synergies by having the willingness and ability to be strategically agile and opportunistic when it matters.
And by running a levered equity capital structure that prioritizes buybacks and value creation, especially on a free cash flow per share basis, obviously, we're ready and excited to invest in those tailwind, especially at these prices Charlie podium.
Thanks, Mike I'll begin by discussing our revenue performance in Q1.
Overall, it's been a strong start to the year with a core asset delivering stable to slight growth with more support from pricing to come from Q2.
So two meter or two delivered stable topline growth, including stable mobile revenues excluding handsets.
Being driven by a tough <unk> comp, which we expect to ease throughout the year.
We expect revenue trends to recover throughout 2022 is the impact of price rises land from Q2.
Moving to Switzerland, which delivered continued revenue growth of 1% driven by metal subscription revenues in <unk> in particular wholesale voice.
We continue to execute on brand segmentation with reduced discounting to drive an improved our payer mix.
In the Netherlands, we saw stable revenue growth supported by mobile subscriptions, which reached a five year high in Q1, we.
We continue to see fixed up with growth of 2% and effective from July 1st we will implement a price rise of 3%.
And in Belgium, topline growth of 7% was driven by growth in mobile and <unk> subscriptions. In addition to wholesale roaming revenues.
Tom It's pulled forward as price increase of four 7% to June given the existing inflationary pressures, which should benefit revenue performance in the second half of 2022.
And now moving to EBITDA.
I'll start with budget meter or two where we delivered over 2% EBITDA growth, which was slightly better if you exclude cost of capture costs.
This was driven by strong cost control, including the benefits of migrating the Virgin mobile MBNA from AE to Vodafone lower sales commissions and deal related cost synergies.
We continue to expect EBITDA growth to accelerate through the year <unk> given pricing moves on further synergies.
Sunrise UPC delivered close to 10% EBITDA growth in the quarter. This was flattered by the phasing of course, the capture cost which were lower in Q1 2022 compared to Q1 2021.
The strong underlying EBITDA performance was driven by the increasing <unk> synergies as we migrate EPC mobile subscribers to Sunrise.
It was also impacted by the phasing of our marketing spend from Q1 to later in the year because of this revising our full year guidance of Switzerland remains the same despite the strong Q1 result.
Vodafone Zynga reported healthy, 2% EBITDA growth in part driven by a 4% decline in operating costs. It was also impacted by the end of the Formula one contract in particular sports, which although it contributed to lower topline growth was more than offset by the associated content cost savings.
Telenet reported a modest decline in EBITDA of minus one 7% driven by the impact of wage inflation and higher network costs, plus a tough comparison compared to a refund in the prior year.
So overall, the consolidated group reported a 2% Rebased EBITDA growth.
Moving to free cash flow and the key drivers, we delivered $137 million of full company free cash flow on an adjusted and distributable basis. Despite the phasing of interest payments, which fall predominantly in the first and third quarters of the year.
Capital intensity has remained broadly stable in Q1 year on year, we made the 2022 telenet tax payment of $92 million a quarter earlier than last year.
We received dividends and loan interest in the quarter of $109 million from our Dutch JV.
As we highlighted at year end. We now include direct acquisition costs in our definition of adjusted free cash flow, which is how it is presented on this slide we incurred $17 million of direct acquisition costs outflows in the quarter, leading to adjusted free cash flow of $137 million.
Because the UK JV recapitalization is expected towards the latter end of this year. This means our distributable free cash flow is the same as our adjusted free cash flow for this quarter.
Moving to the next slide I wanted to address key inflation and macroeconomic challenges that we are facing across our core operations as.
As everyone knows we've seen inflation has picked up materially in UK and Europe , albeit not much in Switzerland. This impacts our business in a number of ways, including our pricing actions, where we have in some cases go forward an increased price rises and also where we benefit from direct inflation links such as the one we have without too in the UK.
Secondly, we see a number of impacts within operating costs, and Capex, which I will discuss starting with energy across our four largest fixed mobile convergent assets, we typically see energy accounting for low single digit percentage of operating costs.
From a hedging perspective, we typically target hedging 12 months out but for 2022, we do have a degree of unhedged exposure of Virgin media to run just under half of the total cost, but if I had to go and tell them that to manage through the remainder of the year.
Secondly on wages, we see different impacts, but overall, we only have direct links to inflation in Belgium, and a wage increases have largely been agreed but 2022 in line with budget.
Thirdly, we see continued bottlenecks in supply chain, which to date has had limited direct impact on CPE and network projects, but it is something we continue to try and manage as best we can leveraging our scale.
Despite these macro inflationary headwinds and based on today's energy prices, we're still reiterating all of our full year guidance targets.
Turning to synergies and the cost associated with capturing them. We've included the next slide to add visibility on the key projects underway through 2022, and also to recap on overall cost of capture which are peaking in 2022, particularly in Switzerland.
Starting with Sunrise UPC in Switzerland, we continue to expect to deliver $3 7 billion Swiss franc NPV of synergies and 400 million Swiss francs of onetime cost to capture them.
Over 150 million Swiss francs of cost to capture expected in 2022, which is approximately one third opex on the balanced Capex, we continue to benefit from the early execution on the <unk> synergies, particularly in the first half and also head count synergies. We also expect DSL migrations synergies to start to build.
During the year.
Moving onto Virgin media to where we expect to deliver $6 2 billion pounds of NPV synergies, we expect roughly a third of synergies to come through in the first 18 months, we expect 2022 to be a peak year for cost of capture with over 300 million pounds of a total of 700 million pounds of expected cost to capture so we spent this year.
Key synergy projects underway for 2022 include the MD&A migration initiative, Vodafone and then ultimately to the <unk> to network network synergies head count and executing on revenue synergies, including volt.
The next slide is our standard overview of our capital allocation framework, starting with the buyback.
We accelerate the execution of our annual 10% target during the first quarter and year to date, we've completed around 50% of the buyback or 27 million shares through seventh of May that's been taking advantage of some dips in the share price, which we continue to view as undervalued.
Our balance sheet position remained strong with total liquidity of $4 $7 billion, including $3 $2 billion of cash performance of the <unk> proceeds received in April we continue to expect to end the year with around $4 billion cash balance. Although this will be impacted if we increase the buyback.
Our debt position remains very strong with average debt maturity of six years or longer in every operation all of that continues to be hedged into the currency. The underlying cash flows and virtually all of it is fixed at a blended cost of around three 4% across our consolidated debt silos around 4%. If you include Vodafone Zico in Virginia.
As interest rates rise this should be a source of value to our shareholders.
And lastly, turning to ventures with a fair values fell slightly to $3 $4 billion, driven primarily by the fall in the ITV share price during the quarter.
There is more detail in the appendix, but net investments in the quarter were around $65 million.
Turning to the next page we are confirming our 2022 distributable free cash flow guidance of $1 7 billion at the guidance FX rates. This.
This is despite the higher energy and inflation costs that we are now experiencing.
We're also reconfirming all of our Opco guidance targets shown here on the left hand side.
From a foreign exchange perspective, the stronger dollar year to date, particularly against the pound does drive a headwind to our reported free cash flow with around a mid single digit percentage headwind from the currency assuming current spot rates.
We anticipate being able to limit that relative to the $1 $7 billion, but clearly currency remains volatile.
As a reminder, distributable free cash flow is a new metric. We use that includes both our free cash flow is historically defined and additional cash that we received from our joint ventures for recapitalization.
Distributable 2022 free cash flow forecast does include cash that we expect from a debt raising up Virgin media or two later in the year as part of that $1 6 billion pound overall shareholder distribution guidance.
Further credit market volatility, we remain confident that the credit markets are open to support this financing.
We'll still be by historic standards very attractive rates.
One final housekeeping item to flag is that from the second quarter, we began reporting EBITDA, which is EBITDA of the leasing expenses.
Many of our European competitors report EBITDA due to the significant difference in lease accounting between U S GAAP and I for us.
We believe this metric will provide a clear and comparable approach to our European competitors, particularly reflecting the impact of tower transactions of course, we will still continue to report adjusted EBITDA and with that operator can we hand over to questions.
Operator.
Thank you so much and the question and answer session will be conducted electronically. If you would like to ask a question. Please do so by pressing the star or ask any scheme, followed by the digit one on your phone.
To accommodate everyone may request that you only ask one question. If you are using speaker phone. Please make sure your mute function is turned off.
To allow your signal to reach our equipment, we'll pause for just a moment to give everyone an opportunity to join the queue.
Your first question is from the line of movies, Patrick with Barclays. Your line is open.
Oh, Hey, guys, yeah. Thanks for the chance for asking the question if I could ask a big picture one please Mike.
Some of the European Telcos that made a big sort of lumping points around.
I'm, hoping to recoup some of the network costs from some of the streamers, given the sort of 70% of our traffic comes from.
Data streaming these days.
Study funded by some of the larger telecom I just wanted to also take in terms of that debate the ability to I guess.
He has provided to try and recoup some of your.
Catastrophe costs from the big taken whether you'll be you'll be joining that joined that sort of lumpy assets. Thank you.
Thank you listen.
As many of you would know.
No. This is a long standing debate.
The European telco sector.
Among operators.
<unk> and the Big Tech companies.
I'm not convinced that it will be successful. However, if it were to be successful we would gladly.
Benefit and participate in any regulatory <unk>.
Is that supported it.
It's a difficult tissue.
We are all benefiting from.
This ecosystem.
Delivering high capacity high quality networks that provide the connectivity consumers want and demand.
And big Tech companies and streamers are providing the content and the experiences that drive consumers to our network. So.
Thus far I think the focus.
And it's worked well however, as we saw through the pandemic.
There were material increases in data usage and broadband capacity.
Capacity utilization anywhere from 30% to 40% a year either both on mobile and on fixed.
And so we will bear the burden of <unk>.
Increasing investment in our network and.
It certainly has had some impact on our decisions in certain markets due to invest in fiber.
So I'm not really going to weigh in specifically on this call except to say we watch it closely we haven't yet.
Made a public announcement on our position, but we will watch it closely.
And if you could posted on what happened there.
Thanks, Mike.
Operator.
Thank you. Your next question is from David Wright with Bank of America. Your line is open.
Yes, Thank you guys.
Yes, Kelly I picked up on what you mentioned on the buyback unless you increase it.
I guess you guys are running ahead of the.
The curve at the moment on the 10%.
What would be the basis for increasing you've obviously been able to go on ahead of the curve without.
Without impacting liquidity. So can we kind of take that first five months of the room rates and I'm, just trying to kind of comment a little bit ahead of the 10%.
Just on the basis of having cash to spend if I might just add walnuts conversations I think one of the communications that you guys have given them Vodafone this given all the funds they go.
On the potential ownership with that is that.
The asset is doing great and obviously the EBITDA was powering ahead, but.
The last couple of quarters has definitely been a little bit more.
It's it's come under a bit more pressure and maybe some of the low hanging fruit on the monitors.
That's being taken now so I'm just wondering has the time come to maybe approach clarifying again start discussing between the.
It's a whole lot of nerve that asset. Thank you guys.
Well listen on the buyback okay. Thanks, David on the buyback.
We remain opportunistic and that has been our posture on buybacks from the beginning so clearly with our stock.
Where it is.
Are going to be looking aggressively.
At buying back stock you would expect us to do it and we are doing it.
I can't predict what the stock will be in the second half of the year. So it's difficult as we sit here today to tell you what that absolute figure will be in terms of cumulative buyback for.
For the full year, but I would suggest that in the second quarter call, which will be just.
In August early August .
Clearly our end of July we're clearly be able to give you a better read on both what we've done through that period of time and how we see the rest of the market. So probably best not to be more specific than that except to reiterate that we are opportunistic.
And when the stock is cheap we buy more as you might expect us to do on the Vodafone <unk> question, there's really not much to say I mean, we believe the business remains.
A very very successful FMC champion, it's delivered everything that we at Vodafone are passed.
Them to deliberate on the phone call you can speak to that itself, but.
It's been almost a poster child for the success of convergence.
Both in terms of sustainable revenue and EBITDA growth.
As well as more importantly, delivering free cash flow and distributions to shareholders, which we see continuing.
There are.
All of the issues that we referenced during the quarters, whether that's sports.
Formula one or impacts of broadband competition, yes, we report on regularly but hasnt changed.
Our overall perspective on the business, which is extremely.
Rational market with a strong management team.
In a great position needs to be the incumbent and all sorts of opportunity in terms of what we and Vodafone will do that.
That's something we can comment on in this call.
Thank you guys.
Your next question is from the line of <unk> <unk> with Jefferies. Your line is open.
Yeah. Thank you my question is let's play.
So the minus 1000 broadband net adds.
<unk>.
Could you comment a little bit on how this looks and there'll be a new footprint compared to the new footprint.
Are you seeing Disconnections also in the newfield footprint potentially on price rises whether that sort of normalizing or approaching.
Your footprint and also whether you do see at all a difference.
Disconnections, where you are actually facing openreach fiber, that's being actively marketed and those areas where you do not.
Thank you very much.
Okay.
Yeah, So right I mean, I need to put it in context, we've done a price rise.
605%.
And the number of Disconnections in 'twenty, two hasnt been higher than the year ago Alright.
I think this is important.
Now we are obviously.
In terms of net debt.
Right.
All the quarters before to also have positive net debts in the existing coverage.
Business as usual.
Coverage now.
Now we are negative.
We don't see any.
CVA deviations.
Cros.
Lightning homes.
<unk> homes and also homes that are covered by Openreach. So actually we are.
As you can expect us to do we are monitoring the churn.
Overbid area, which are now according to our numbers, 30% very closely and we don't see higher churn and we also don't see less.
Penetration growth in licensing.
So that's.
Obviously might change one day.
Right.
Serving one dot one gig across our entire footprint. So there is no speed advantage from openreach customers only which.
Because we have to satisfy them.
I hope that helps that's helpful. Very helpful. Thank you very much.
Your next question is from the line of Robert Grindle with Deutsche Bank. Your line is open.
Yes.
It's a follow up question on <unk> actually on your on your broadband subs.
Presumably your competitors should suffer some churn that price rise has happened since the end of the quarter, whereas yours were.
Earlier in Q1 are you seeing an increase in customer inquiries. Since then is that the opportunity behind the thinking on the recent saw us broadband.
Standalone initiative, and if I may what's the customer reaction so far on the 9% price increase.
Two customers. Thank you.
Okay.
So.
Yes.
9% price increase.
<unk> landed as planned.
So we kept the churn rate stable.
9%, which is market leading so therefore.
And this was very very important for us probably the most important thing in Q1, we landed both price rises.
In fixed and mobile.
And that's been massive and therefore, you can expect us to see the translation into new growth in the coming quarters.
Your question on the acquisition market.
According to our data acquisition market in broadband in Q1 has been much smaller.
And especially very small in the month of March.
Now the way we dealt with it was one we did less promotional activity.
And also we did generate less gross debt for the delta in net debt.
Compared to.
The quarter a year ago comes out of the acquisition.
And do we see a recovery.
In April we see a recovery.
From now on from the price rise fast, maybe yes, but we don't know exactly.
So.
And I mean solar approach.
So we always selling Colo right I mean look at it.
We have not invented the new product.
What we are doing is we are.
Doing different market tests at the moment right.
And I think the idea is to obviously have one hand tied to grow net debt.
But without jeopardizing price rises in the customer base.
Current approach to it and you can expect us to test learn and optimized to support me.
Okay.
Thank you.
Your next question is from the line of Nick Lyall with Socgen. Your line is open.
Pollard.
Alright.
To Vodafone gigabit if that's okay.
And you broke down a pretty weak again this quarter as David alluded to in his <unk>.
Question. So you've mentioned this one so as that comes off do you expect a bounce back in the subs numbers into second quarter second half or is the price rise.
Tickets told you think could you give us an update on how you think that business is going to it's going to trade and what youre seeing from the pressurized comments to customers and the second thing when do you expect to network decision on Vodafone singles as well and is there anything holding you.
Waiting for the ACM decision.
Waiting for Vodafone in terms of networking capex or is there a disagreement about future dividends, how does that how does that sort of work itself out.
Thanks.
Yeah, great. Thank you really is on I'll, let him address the first question around.
Broadband in particular, and what we're seeing in the market.
But as it relates to the network.
We have a what we believe today is a very strong network strategy.
Focused principally on capacity expansion.
CPE swap outs.
And where it makes sense investments in fiber both in <unk> and the new build.
Because our research says that that's the principal issue, it's not so much headline speed, it's all about quality of service.
And that customer experience. So we're at one gig I think the 80% of the footprint today and continue we will get to one gig I believe by the end of 2022 everywhere if not sooner.
And really investing in DOCSIS three one with the migration plan adoption for which you might have noticed telenet just tested successfully recently.
Exactly two delivered exactly what we hoped it would deliver so a lot of things happening on the network side debt management, we view at base case strategy and which they certainly believe we'll have the desired effect of.
Improving the broadband experience for customers as well as broadband.
Sales and net adds do you want to expand on that here.
Yes, I'd be happy to Mike. Thank you.
To your specific questions by broadband.
For this quarter, we can see things coming together.
And the big difference with the last quarter.
The main reason its formula one.
So we lost the rights to Formula one so via play as long as total fleet in the market KPN has taken the opportunity to quite aggressive market. This to new customers with an offer for full year free.
We've taken a very different approach, we have decided to go for an existing customers, primarily and therefore, its something to both our existing and our new customers. So if you look at the step up in customer losses in broadband in the first quarter is almost entirely explained by the loss of Formula one.
If I can put it all in perspective, you can see KPN has accelerated their fiber build quite significantly and despite that.
The broadband performance the fixed performance has been trailing consistent with the previous periods and that's not really surprising if you look at the investment in our fixed network as Michael has already we're talking about we currently have 80% of our footprint, which is basically the all country, 80% of the country comfort with DOCSIS three one.
With enough capacity and a modernized network, which means we offer up to one gig speeds, which indeed as Mike said before the end of the year, we expect that to be 100% of our footprint. So we have enough capacity, we have modernized we have switched off.
And we will completely to give us the capacity the speed as Dan of stability there.
And I'm talking about we have rolled out up to now 40% of our households, with smart Wi Fi because the reality is customers don't really go for pure somewhat headline speeds they want.
A combination of speed stability capacity, great Wi Fi and in our case also the content and the FMC proposition. So we're very comfortable that we are in a good position. Despite the fact that the market is competitive.
That's great. Thank you.
Your next question is from the line of Andrew Lee with Goldman Sachs. Your line is open.
Yes, hi, everyone.
A question on your updated thoughts on your ability to mitigate cost inflation or more precisely to.
Pass through higher costs to the.
The customer in the context of what you've seen so far in the UK, but also across your other core markets.
Just an update there would be really helpful and then.
If possible second question, just Mike something it <unk> a loss on the gap between public and private valuations is there any updates in your thoughts on.
How best to try and bridge that obviously, you've got the buyback.
<unk> discussed in the past the potential to spin out.
Is there any shift in your view spinning out.
Public markets private markets that'll be really helpful schedule. It Lisa Thank you.
Thanks, Yes on the first question I think Charlie had a good slide up where he showed the price increases we're taking in pretty much all of our markets with the exception of Switzerland, where in fact inflation is quite low remains quite low but anywhere from three 5% in Holland.
The four 7% in Belgium that almost 9% on mobile in the UK and six 9% on broadband in the U K puts.
Putting those price increases through clearly is the best way.
Most direct way to mitigate the impact of inflation on your core business.
And I think as Charlie also mentioned wage increases generally have been in the <unk>.
Low single digits, so not new added placement levels and then we manage the energy.
And the other costs and supply chain issues as best we can but your best course.
To stay efficient obviously in your costs to be vigilant in terms of how you manage.
Energy and supply chain related cost factors, but also to be.
<unk>, but appropriately.
Fair and aggressive in how you push price increases through to customers.
As your cost go up as well so that's what we've done and I think it's most of those price increases will hit in the second half of the year.
Early Q2, so you'll see the benefits of those.
And the broader financials through the course of the year, but that's the primary I'm Charlie I'll, let you think through if there is another answer to that.
Or go ahead and offer it up right now quickly again.
Yes, I don't think theres any anything else.
But everything I think the real question of course is the success of these processes and let's maybe than others, who have more of a view on that but we are a consumer facing business, we have a very sticky product.
We are very optimistic.
And then on the gap between public and private values as indicated it's quite large.
And not the first time, we've seen this sort of gap.
What changed what we do on a day in day in day out basis not necessarily.
It doesn't change how we run our business, but it does make us more aware and more focused on opportunity whether that.
In the case of Poland, where we thought it nine times, so that business was something we needed to look seriously at.
And that should just btu, an indication of how we look at value and strategy.
Also.
The fact that we're willing to be aggressive.
It makes sense and to respond where it makes sense.
I think our track record on this issue is.
<unk>.
We generally don't talk about M&A ahead of M&A, but if you look back at our track record we have been extreme.
Extremely successful at taking advantage of opportunities both as.
In terms of dispositions and acquisitions and joint venture. So you should expect that we're on our front foot. There that we're always focused on opportunities to close the gap and especially opportunities that create long term value for us is that our track record. We think is exceptional and we're not going to get ahead of ourselves by promoting.
One or another strategy our market opportunity that Jimmy just work, but we'll certainly I would say.
Surprising delight you to the upside if and when opportunities arise. So I'll just keep it at that.
Thank you.
Okay.
Your next question is from Matthew Your line is open.
I assume you said Matthew Harrigan.
I'm curious what your view is on the venture portfolio, a very slight novel decline and where youre, marking yet, but and I know the private valuations have come in that much but what do you think the opportunities are for Adjacencies you know moving forward.
Financial conditions persist.
And then secondly, your Denver compatriot Charlie Oregon spent a lot of time talking about parts of the enterprise private networks and the opportunities. There I know Europe is a little bit behind the U S. But if you could just touch on that briefly I know a lot of it is very open ended and longer term, but it sounds like it could be a decent.
Decent pool of dollars that are euros there.
Sure I'll, let Rick gave prepare an answer on the <unk> enterprise question on ventures, Matt listen, we'll continue to report on a quarterly basis, what we're doing what we are seeing Fortunately for US most of our tech deals are in cloud based services applications software, we're not heavily exposed to the sort of tech investments that I would say our.
One experiencing issues in the market as we speak but too.
Flashing banner or.
Moon shot type of opportunities most of our tech investments are strategic in that they involve businesses, where we can be a customer which is a good thing too.
Yes.
I would say more down the middle in terms of the kinds of services applications or solutions that theyre addressing and I think that makes it a little less volatile.
Then most infrastructure, which we've been pretty soon.
Successful with is obviously an area that's going to be creating long term investment opportunity for us. So you are not going to see volatility in that.
Content investments hasnt been meaningfully volatile because if anything there on the upside in the 19 to get good results today and other.
Other investments I think are more stable. So I don't think you'll see great volatility in that portfolio, but youll see is obviously continue to make investments.
I'll make it one of <unk>.
Yes.
Private mobile networks is clearly a good opportunity to to grow the services and appropriately the revenue.
We can get from our <unk> upgrades. The good news for US is that the way. These <unk> networks are built.
You mentioned charges program as an example, the way.
Networks are built.
More and more the modularity of the software let's us.
Bill functionality like mobile private networks.
As we go if you will as opposed to one big investment.
So we are we clearly are going to be testing that we're going to see the reaction in the market and I do expect it will become an important element of oversight deployments.
Thanks, Mike.
In that context in.
In the contact flipped here right, we have just launched.
For a multi site private network with British sugar. So we are doing exactly what you are talking about and obviously this is one area, where we absolutely see growth.
Your next question is from Tim Mchugh with Bnb Bank. Your line is open.
Thank you I just wanted to go back to the UK. Please.
You could expand on your commentary about the you can't go by the acquisition market do you think broadband market as a whole grew in the first quarter and then how confident are you that youre not missing baked from mobile only households.
By the disclosure is quite full.
Or maybe put another way is you see a change in your disconnect and comfortable.
Losing people to BT sky in the same proportion of the path.
And the fact that this is may be changing thanks.
Okay.
So.
I mean.
Mobile broadband acquisition market.
Right.
<unk> smaller than a year ago. According to all of it in Q1.
So, but obviously that base.
There is acquisition volume there, but it has been smaller.
I mean at the end of the pandemic people have been looking at other stuff being more upside do you see that also in the channel mix. According to our information.
The online channel.
It's being used less and the physical channels to get more traffic again.
Now how does this evolve through the entire year, let's see yeah.
The thing is that obviously British households, careful other things at the moment.
First and foremost.
<unk> builds and all that stuff and not brought them and they have been carrying a lot during the pandemic to make sure that sit on the best timing.
Now you see that in the price elasticity right with the flexible way of living now and a flexible working that they still value of that clinic.
So therefore, we see still a very interesting acquisition market and we will take our fair share out of it.
But it has been smaller in Q1.
I think on your chair.
A question.
Is it linked more to mobile.
Right I mean, the most important customer base for us is to go to postpaid.
And.
Maybe a good proxy.
How are we doing on Sean.
Are we a net winner on that Aldo.
And we get the data out of private although number portability.
And here.
The development is encouraging.
So we had net winner.
And.
Right I mean, we have only started to leverage so I think thats more to come.
Thank you. Your next question is from Carl Murdock Smith with Baird. Your line is open.
Good morning, Thank you.
Looking at the proxy statement ahead of the AGM.
Net promoter score last year missed these targets leading to only a 61% payout on that metric can you talk a bit about NPS by geography.
Price is not quite where you want it and what do you think six months. Thank you.
Yes, great question.
I think it was a difficult year in 'twenty, one for all operators.
With the pandemic.
With XP.
Expectations in.
And challenges that consumers were experiencing.
And it varies by market I know in Holland. For example, we just become I think number one again in NPS or certainly had been improving NPS substantially in fixed and mobile, but I'll, let maybe Andrea why don't you address NPS in the Swiss market as an example.
Yes, the switch market is operating on a relatively high level in terms of NPS, but last year, while we were doing quite many migrations. We had also some operational challenges that customers were feeling and as a result, we have been just shy of our target for from last year. Nevertheless, I would say the operator.
<unk> in positive territory in terms of NPS resides.
I think in a cross comparisons on a high level and we are seeing the numbers improving again since then.
So therefore overall I think last year was not exactly what we were hoping for but to a certain extent understandably again.
Driven by the things that we were changing towards our customers.
Operating in a much better environment.
So improving the numbers what I was speaking.
Yeah, and just to round. It out we do have that same sort of customer focus in our 2022 bonus programs. Each opco has their own specific approach to customer.
Results, if you will involving NPS and other factors and then we roll those up.
At the parent company, so everybody even at the corporate level is.
Pat did by how well we do so we're all focused on it but it's a fair question and it's something we continue to stay vigilant on for sure.
That's great. Thank you very much.
Yes.
Your next question is from Polo Tang with UBS. Your line is open.
Hi, Thanks for taking the question. This is actually a question for Andre on Switzerland can you maybe just comment on the competitive environment. So we hired from Swisscom. The other week, you noted that competitive like IMAX, where calm during Q1.
Quite cautious that Sunrise would get more promotional so how would you describe competitive dynamics in the Swiss market and if you look at historically.
Sunrise has really come from driving volumes and taking share rather than increasing prices.
Do you see the growth drivers for.
For Sunrise UPC going forward.
So firstly I would comply with what the system has been saying we were coming off a very heated promotion environment in Q4, where we have seen promotions going to a level, which was not sustainable.
And we have seen a more rational environment in Q1.
The less you can see from our results that despite a bit of a cooling down on those promotional activities we were still taking.
Fair share from the market in fact outperforming our competitors. So that rationalization has not driven any any performance downside at the moment.
Looking forward clearly there is a big change of course for us.
Switzerland, given the fact that it was a combination of the two businesses our back book.
They have a different structure and different challenges than previously and as a result of course, there is more of a balance between volume and value that is becoming important for us.
So we will only do promotional activities and volume intake.
In a very balanced way looking also at the impact that it could cause on our customer base.
So I would expect the market to become probably a bit more rational.
At least it will be true for us maybe for Swisscom cant really speak about.
Salt, but I think also.
They are not ruling the market as you can see from the numbers. So it is really about how.
We are coming to us are behaving and what we are doing and they are clearly the indication is a bit of a rationalization in Q1.
Yeah.
And some of the drivers you've got this year, obviously, the Swiss ski partnership you've got the Sunrise wheat product rebranding most likely coming.
The.
Number of things summarized moments that are going to really push the brand push the product push the convergence strategy in a very.
Clear.
Consistent way that I think will be a big.
Momentum builder for the second half of the year.
Yes, absolutely I mean, yes.
Things coming.
Yes.
Yes.
Okay.
I don't know if there is one more question operator. Please rapid do you know can you jump in here quickly.
Yes, we have the line of James Ratz are open from this opportunity.
Alright.
Alright last question go ahead.
Great. Yes. Thank you Mike can take last question here. So a question I think maybe more for.
Look.
Page, but just love to hear a bit more about the.
<unk> gross margin.
Going forward in the U K and I mean, specifically I'm thinking you've got a price rise coming on the main product, which is clearly off to accretive in gross margin accretive than at the same time.
Seem to be leading TB, Archie use and telephony Archie use on the base, which.
You're going to be off to negative, but may be gross margin accretive interest to get your thoughts on that and then maybe you are starting to push some of our lower end broadband products a bit more so just love to hear about how youre thinking.
About.
Our <unk> gross margin and if it is the last question just a couple of housekeeping issues. Please.
On slide five strategic options in the U K you didn't include tower monetization, but it is obviously Intel enacted in Vegas, and Zika are you still thinking about <unk> and on the fiber joint venture I think you initially said up to 7 million homes.
And then Mike I think in your prepared remarks, you mentioned five to seven.
Is that just semantics or are you now thinking about potentially lowering.
The size of the new fiber joint venture slightly thank Keith.
Well I'll address those quick just as quickly while lutz prepare to answer on the Oxford gross margin but.
On <unk>.
It is absolutely an opportunity.
Frankly, just maybe ran out of space, but it's certainly on the list of things that we would and should consider with our partners.
But maybe a little early to signal that we don't have any active discussions, but as you know <unk> was.
Essentially put into a position.
Structurally and with all the proper agreements to be easily monetize if we chose to so a fair call out.
Didn't mean to exclude as such but it's certainly not center as we sit here at this moment.
And then on the five to seven night get more semantics, we sit up seven.
We prefer seven but were being <unk>.
<unk> typically a range.
But I think that yes, I wouldn't read too much into that.
Yeah, so on the op Hugh.
A lot of puts and takes.
But overall.
We are confident that first of all.
We are able to generate a growing option right. So that's number one what are the puts and takes so we are able to sell higher speeds into our customer base. So the average.
<unk> speed has been growing 24% during the last.
12 months.
We are also obviously, having the price rise which is increasing <unk>.
Now telephone need is.
I mean, if it's an odd to you or not doesn't make a difference because the price between.
Broadband only and broadband and telephony.
Isn't it isn't.
However, we see less.
Telephone usage now after the pandemic now, but not so much less.
Any more but this is a drag.
And on the video side.
We have very stable on the video side with our high value video customer consuming high value content and.
Youll see us, losing some video customers more on the low end video side and I don't know if you realized but we have launched.
Really strong innovation.
A week ago.
Virgin media stream, so the customer without a monthly fee pace 35 pounds upfront and get product free TV and the opportunity with a new user interface on a monthly basis too.
Put in all OTT product the customer one thing thats temporary.
And the margin of this product is very similar to the margin of other video customer. So therefore.
We are looking at our Q.
And we have we are looking less.
Telephone the odd to us because like mobile usage is picking up again and I think you can reverse that trend however that affected into our number and we have just launched an innovation.
To put us into better profitability.
With the fully fledged IPC deposits I.
I hope that helps.
Yep, great. Thank you very much appreciate it okay, but listen everyone. Thank you for joining the call and it quickly here and a punch line is we think we're managing very well through these macro.
Challenges.
Do you go with price adjustments that certainly provide tailwind as we step back and look at it we're in the right markets. We have the right network strategies by product strategies right brands right team and feel like we've got.
All of the ingredients, if you will to be successful longer term.
And we remain agile and opportunistic on the strategic issues that matter to you and you will have.
You will know our track record there so stay tuned.
And we're committed to a levered equity strategy capital strong capital structure, which really is.
As much as anything dependent on not just leverage and free cash, but also the buybacks, which as you know we've been pretty aggressive with so appreciate you joining us look forward to updating you on our Q2 results shortly and speak to you soon thank you everybody.
Ladies and gentlemen, this concludes Liberty Global's first quarter 2022 investor calls.
Binder, a replay of the call will be available in the Investor Relations section of Liberty Global's website. There you can also find the copy of today's presentation materials. Thank you Miss you may now disconnect.
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