Q3 2022 Liberty Global PLC Earnings Call
[music].
Good morning, ladies and gentlemen.
Thank you for standing by and welcome to the Liberty Global's third quarter 2022, Investor call. This call any of the associated webcast are property of Liberty go logo and re distribution transmission rebroadcast of all the calls or webcast in any form without.
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Today's formal presentation materials can be found underneath the investor Relations section of Liberty Global's website at Liberty Global Dotcom.
After today's formal presentation instructions will be given right question and answer session.
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Today's presentation May include forward looking statements within the managing of private Securities Litigation Reform Act of 1995, including the company's expectations with respect to its outlook and further growth prospects and other information and statements that are not historical facts.
These forward looking statements involve certain risks that could cause actual results to differ materially from those expressed or implied by these statements.
These risks include those detailed in Liberty Global's filings with the Securities and Exchange Commission, including its most recent filed forms 10-Q and 10-K as amended labor.
Liberty Global disclaims any obligation to update any of these forward looking statements to reflect any change in its expectations or the conditions on which such statement is based I will now turn the call over to Mr. Friese.
Great. Thanks, operator, and welcome everyone. We appreciate you joining us today for our third quarter results call.
A lot of ground to cover so as usual Charlie and I will deliver some prepared remarks, and then we'll get the rest of the team engaged in the Q&A just to remind you that we'll be referring to a slide presentation, which is available on our website and is a fair bit of useful data. So hope you can grab that while we're speaking and I'll kick off on slide three with what we believe are the five key.
Ways from the quarter first of all as you all know we continue to experience a challenging macro environment in Europe today with record inflation higher energy costs rising interest rates and volatile currencies. So while unemployment remains low and central banks are clearly taking action in our core markets, it's pretty clear.
For the GDP growth forecasts are coming down and we remain cautious about the macro outlook for 2023.
Despite these factors our business continues to perform well, which is consistent with what we experienced in prior periods of economic dislocation.
Operating companies provide an essential service for individuals' households schools and businesses and we don't see anything on the horizon that will change the demand for connectivity in fact, we only see it increasing over time.
Our Q3 results reflect this trend with subscriber volumes and revenue largely stable to growing across the group will drill down on these results in a moment and we also saw a significant improvement in EBITDA growth in the quarter in three of our four markets, Australia will expand upon in a moment the positive benefits from synergies cost controls and price rises.
More than offset the impact of wage increases in energy costs, where we're fully hedged for 2022 and <unk>.
Third, we're making excellent progress on our fixed and mobile network strategies across the footprint. Our fiber plans are advancing in the U K, Ireland, and Belgium, and five <unk> coverage is increasing in every market where on this in just a minute.
And fourth we remain firmly committed to our buyback plans with $1 7 billion.
Or about 14% of our outstanding shares repurchased this year and a minimum commitment to buy back 10% of our shares next year.
Our confidence in this strategy is emboldened by the widening gap between public and private values, our free cash flow profile and the strength of our balance sheet and the latter pointed towards repeating that all of our debt is siloed long term fixed rate and currency hedged and we're sitting on a large cash balance so not surprisingly we believe our capital.
Structure is a huge asset in this environment and then finally, we're confirming all of our original guidance for 2022 at the operating company level and importantly, our distributable cash flow guidance of $1 7 billion at Liberty Global moving to slide four we're presenting here our usual chart on connectivity trends in our big four markets.
There's always quite a bit of data included so I'll begin with a couple of general observations first of all as you glance at the numbers, you'll see that we delivered stable performance in broadband as the Orange segment of the bar chart with growth in the U K more than offsetting flat to slightly down net adds in Switzerland, Belgium and Holland in.
In line with historical trends broadband sales picked up in the third quarter sequentially and year over year supported by back to school promos, but we also saw elevated churn due to price rises and in the case of Sunrise the phase out of the UPC brand.
Meanwhile, It was a good quarter for postpaid mobile, which saw improved growth trends versus Q2 supported by the iPhone 14 launch in September and converged FMC offerings across the group and looking at each market briefly Virgin media delivered a sequentially better quarter in broadband with 19000 net adds despite a highly competitive.
The backdrop and cost of living challenges, we estimate our share of gross adds was up for the quarter, bringing our national market share to a new high and we continue to see good growth in our greenfield areas. What we have historically called lightning, which bodes really well for our network build plans going forward.
In UK mobile we had our best quarter of the year on postpaid adds with 47000 supported by our best in class churn and we.
Now have 1 million customers, taking our converged volt product, which offers double data Wi Fi guarantees and average broadband speeds of over 400 Megabits per second.
We're proud of the fact that every second home in the U K is a customer of ours, but theres a long way to go average service penetration is around one five products per customer so lutz and the team have a lot to play for and.
Turning to Sunrise broadband performance was stable on a sequential basis Swiss broadband market remains competitive with higher promotional activity and we continue to experience. Some added rotational churn as we phase out the UPC brand or positively yellow our digital first service is performing really well and Andre is seeing good inflow on the <unk>.
New Sunrise portfolio and strong speed uptake, including one gig services.
With mobile we saw good performance across all the brands with 42000 postpaid net adds roughly in line with Swisscom and helped by the Sunrise rebranded our back to school campaign.
In Holland Vodafone singles broadband net adds remained negative at 9000 slightly worst in Q2 as a result of intensified market competition.
The positive side churn was stable year on year. Despite the price rise in July and NPS has improved you are in and the team remains focused on the broader customer experience with one gig broadband now available to 93% of our footprint and smart Wifi pods and almost half the homes.
Mobile postpaid adds and Holland were strong at 67000 better than KPN by the way and supported by the higher uptake of converged Sims the best NPS in the market and our successful runner campaign I don't have much to add to Telenet results with John Porter released last week overall, the Belgian fixed market continues to see low growth.
Telling it betting down the price rise from June and holding broadband subs flat in the quarter on the other hand mobile postpaid adds were the highest in the last four quarters driven by our one of our bundles and summer web deals and looking forward Q4 is always a big sales quarter for us, especially in mobile and we have strong campaigns underway now and approaching in each market.
Slide five provides a breakdown on our revenue growth. This is the first time. We've shown you this sort of data, but we think it helps illuminate some key topline growth trends so before jumping into the numbers I will just highlight the pie charts at the bottom of the slide.
The main goal here is to illustrate the diversity of our revenue growth mix with consumer fixed at roughly 30% to 50% consumer mobile, including handsets at around 20% to 45% depending on the market and <unk>, both fixed and mobile between 20% to 25% of revenue numbers above these charts at the top.
Show Q3, and year to date revenue growth figures for each of these segments by country with a bit more granularity around broadband and mobile service revenue to.
Rather than dive into each opco I think it's easier just to make a few big observations here first as Youll see along the top all of the <unk> have generated modest revenue growth in the third quarter and year to date with the exception of BMO too, which was negatively impacted by a reduction in handset sales, principally some lapping of BTB contracts and competition and consume.
Fixed.
The second big takeaway is that the consumer fixed business. That's the next line down has been declining in all big four markets.
And with both headwinds and <unk>, appearing here on one hand, as you know well by now we are generally losing video and voice RG use like every mature market, albeit at a slower pace in the U S. By the way video today only represents on average around 15% of our total revenue.
At the same time, however, we are growing in broadband arguably our most important product and roughly 50% of our consumer fixed revenue in some cases like at BMO to broadband revenue is growing as fast as 6% to 7%.
The third big takeaway is that our consumer mobile business is strong growing low to mid single digits and when you strip out handset revenue, which is zero margin and more volatile quarter to quarter the trends for mobile service revenue or even stronger supported by both postpaid additions and price increases and then finally.
Youll see that <unk> has a consistent growth engine as we challenge for market share from a relatively low starting point, usually 10% to 30%.
<unk> revenue growth is averaging mid to even high single digits, except in the U K, which had exceptional growth a year ago from some backhaul contracts. When you stand back from the chart. There is a lot of green numbers here with fixed consumer revenue as the only outlier really and on that front, we have clear strategies to manage our video base from both a profitability.
<unk> and penetration perspective, while we drive broadband share in broadband revenue and of course, both mobile and <unk> are consistent sources of revenue growth.
In support of this growth in broadband mobile and B to B, we've been heavily focused on our network strategies in each market and we summarized the latest updates for fixed to mobile on slide six starting with fixed on the left hand side, even though we have the largest one gig network in every market today, we're committed to expanding that lead.
Your ship position and we're making good progress on our announced fiber plans in the U K, Ireland and Belgium.
<unk> is on track to add 500000 Greenfield homes in the UK This year and we'll carry that momentum and that build engine into our recently announced and fully financed fiber JV, which is targeting an additional $5 million to $7 million Greenfield homes.
The second part of that strategy of course is a cost efficient upgrade of our existing HFC network to 16 million fiber homes, which is on budget and on track.
We're taking a similar approach in Ireland, which is targeting 200000 homes out of $1 million upgraded to fiber by year end and just announced its first wholesale agreement with Vodafone and that's a big milestone at the same time, we went into a network access deal with another operator that extend our fiber footprint reach to an additional 450000 Ho.
On top of the $1 million.
<unk> is making great progress on the recently announced <unk> focused on building fiber to 78% of Flanders with DOCSIS to the balanced.
And then as a quick update on our mobile networks summarized on the right hand side of the slide we're making strong progress of <unk> across our footprint with coverage ratios driven by spectrum availability and other factors Youll see that Switzerland, and Holland are nearly 100% <unk> today and among the best mobile networks in the world, while the U K and Belgium are a bit farther behind.
That's due to slower spectrum availability and market conditions.
Actually we're expecting 50% coverage of the U K in 2023 and.
And as you might expect we're focused intently on the next wave of innovation in mobile in particular over in <unk>, Standalone and mobile private networks.
And finally I'll end my bit on slide seven which provides an update on capital allocation.
And we talk every quarter about the intrinsic value of our company relative to our public market cap and regardless of the methodology you use and regardless of whether you look at EBITDA operating free cash flow or free cash flow the value gap is substantial.
Any of you on the call that I get that I know and nearly all of the analysts covering us have a buy rating on the stock now.
Now, while we want nothing more than to see that value recognized in the market in the meantime, we have been aggressive buyers of our own shares. This slide illustrates our commitment in a number of ways first on the bottom left you can see that since 2017 and inclusive of this year.
We purchased $12 5 billion of stock or approximately 50% of the shares outstanding and.
And we're committed to acquiring another 10% of the shares next year in 2023.
Also on this slide for the first time, we've translated our buyback activity into our yield concept to help make the relative value point. When you look at it. This way from 2017 to 2021, we've returned an average annual yield of 11% to shareholders and that number will be 14% in 2022.
Net.
<unk> simply taken the buyback amount and dividing it by the average market cap for that period.
Now this buyback yield compares to an average dividend yield for our European peer group of around 5% and is we believe a superior approach to shareholder remuneration, both quantum and structure and.
And as I mentioned earlier, we've done this while maintaining a rock solid balance sheet, which is a huge asset at times like these on the right side of the slide we summarize those key data points again, each of which is worth calling out first we are sitting on significant cash dollar denominated cash principally of around 4 billion on a on a consolidated basis with $3 billion at the Corp.
What level and even more liquidity.
And we've shown great discipline in the allocation of this capital focusing on buybacks op codes and ventures.
And mostly funded through free cash flow and second our debt position is very secure with no near term refinancings or floating rate exposure and average cost of capital at around 4% and a seven year average life and importantly, all of our debt is siloed being theres no debt at the parent company and its hedged in local currency of the <unk>.
Operating company and then finally, we're able to complete three key financings before the debt markets closed raising over $9 billion in new capital on really good terms for our UK fiber JV, our Belgian net co JV and a recap of BMO too. So just to wrap it up here before I turn it over despite macro challenges we are reconfirm.
Our original guidance across the board, that's a pretty strong indicator of our ability to deliver in difficult times, our connectivity trends are solid and support a diverse and growing mix of revenue.
While synergies price increases and cost controls are helping us deliver strong EBITDA growth.
We're committed to the right balance of FMC related innovation and network investment to ensure we maintain and expand our leadership position.
And our approach to capital allocation and buybacks is unwavering supported by our free cash flow profile and a strong balance sheet.
Surely over to you.
Thanks, Mike on the next page, we provided a summary of the revenue profile in our four key markets. Overall, we've managed to deliver revenue growth in three of our four markets amidst challenging market conditions and despite some pressure in fixed price adjustments in Benelux were supportive and mobile growth remained strong.
BMO two reported a modest decline in overall revenue with declines in consumer fixed fee to be fixed and low margin handset is not fully offset by strong mobile growth I'll give more color on this in the next slide.
And Switzerland strong mobile momentum in growth would be to be more than offset the pressure from lower consumer fixed revenues.
Lower fixed line revenues were driven by changes in our premix and softer fixed volumes rising to the phasing out of the UPC brand last quarter.
This impact will likely continue in Q4, as we reposition the EPC subscriber base.
In the Netherlands, we saw a return to revenue growth supported by a strong performance in mobile and b to be coupled with the July crossroads benefit and fix the main pressure remains in consumer fixed where the market remains very competitive.
The strongest revenue growth, we've seen in Belgium, this quarter driven by the mid June price rise of nearly 5% higher roaming revenues and strong ICT delivery.
On the next slide we provide some detailed analysis of our UK revenues overall revenue declined 6%, but the key drivers of that decline on lower sales and a lower margin and largely variable cost products such as handset sales in video where like the U S. Cable operators, we continue to slowly lose subscribers and.
And it is important to remember television profitability is materially lower versus broadband and increasingly we're able to drive more variable content cost in this space.
We also continued to lose our fixed telephony customers as we have for many years.
Mike has highlighted earlier that the core high margin broadband business is actually growing very strongly but it helps explain why underlying consumer fixed revenues were down one 6%.
Our b to B revenues from large fiber contracts are also very lumpy, which can distort the underlying growth rate. For example in Q3 last year, we had significant fiber sales that won't repeat this year.
These connected circuits remain a growth business, but the phasing of these larger sales can vary quarter to quarter. If you strip out these lower margin products and those would be to be fixed revenues underlying revenue growth was actually positive one 4%.
This performance was supported by an outstanding mobile service revenue evolution of more than 4% year on year, which saw further acceleration in Q3 as the April price increases continue to flow through on postpaid volumes kept growing.
Moving onto our adjusted EBITDA performance in the quarter BMO, two delivered accelerated EBITDA growth of 8%, but this did include a $35 million legal settlement one off.
Excluding this one off growth will be approximately 3% lower.
This performance was driven by synergy execution of price rises with Nbn migration set to contribute more savings in Q4.
$18 million of Opex cost to capture was included in EBITDA This quarter.
Summarize saw EBITDA declined two 3% as tailwind from the MBNA synergies fated combined with a weaker fixed our premixed.
Other drivers of this decline included increased acquisition and marketing costs, which were partly offset by labor synergies.
EBITDA included $6 million of cost to capture in the quarter.
As implied by our continued guidance for flat EBITDA growth in 2022, we expect a relatively tough fourth quarter, giving ongoing pressure in fixed and lowest synergy tailwind.
Vodafone <unk> saw a return to EBITDA growth of one, 3%, which was driven by strong cost control and support from price rises in fixed despite headwinds from inflation in particular energy.
And Telenet reported strong EBITDA growth at around 5% driven by price rises and continued cost optimization offsetting energy headwinds.
Turning to our capital allocation slide we continue to be on track relative to guidance across the <unk> in terms of capital intensity.
Excluding the cost of capture of investments in the UK, our capex to sales for the nine months year to date remained around 20% of sales are modestly below in the case of Sunrise.
We expect a pickup in capital intensity in Q4, as you've seen historically, but overall, we expect to meet our capex guidance for the group and our core markets.
On a consolidated basis, our capex split remains around half on products enablers and CPA and the other half on baseline capacity Newbuild upgrade.
And lastly, turning to ventures, the fair value of the portfolio fell slightly to $3 billion driven primarily by declines in the TV share price, while our technology and infrastructure valuations remained stable quarter on quarter.
Moving to free cash flow and the key drivers year to date, we delivered $979 million of full company distributable free cash flow.
The third quarter as usual, so relatively higher interest payments offset by higher overall dividends, including $49 million from Virgin media to along with $267 million coming from our share of the recapitalization and $58 million from Vodafone zero in the quarter and we remain on track to deliver $1 $7 billion of distributable free cash flow.
Full year 2022 at the original guidance FX rates.
Turning to our guidance today, we are reiterating all opco guidance across the portfolio. Following a resilient performance during the quarter. We're on track to deliver our group guidance of $1 7 billion of distributable free cash flow for the year, excluding the impacts of FX and we continued to execute on our buyback commitment to $1 7 billion in 2022.
Bought back 73 million shares year to date and today, we actually have 459 million shares outstanding compared to around $900 million at the end of 2016.
As Mike mentioned will be executing on at least another 10% share buyback in 2023. So you should consider that a floor for the next year in terms of what we might do.
And to that point, our balance sheet position remained strong with $4 billion of consolidated cash at the end of the quarter of which $3 billion is that the group corporate level.
And with that operator, I'm hunting over for Q&A. Thanks.
Yes.
Thank you.
<unk> and answer session will be conducted electronically.
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The first question comes from the line of James Ratcliffe with Evercore ISI. Your line is now open.
Hi, Thanks for taking the question a couple if I could first of all just on.
When you think about the impact of a higher rate environment can you talk about any impact on your thoughts around capital structure.
Of that retirement target leverage the appeal of holding a large cash balance.
And also whether this affects year use of vendor financing.
And second Mike you mentioned <unk>.
<unk> video and that has a declining business in terms of profitability can you give us a sense of what the profit margins on video look like versus say broadband. Thanks.
Sure Hey, James.
I'll, let Charlie work up an answer to higher rates, but just preface that answer by saying were fixed rate across the group so higher rates in terms of our existing balance sheet don't impact us directly at all it's only refinancing should we need it we don't our M&A, which we're not.
Commenting on so.
But he can work up a more specific answer to that on TV margins they vary by market.
Sure.
They are low, but they're not as low as mid perhaps Charlie implied meaning that you know in broadband we're generating 99% margins TV could vary on a gross margin basis from 75% to 50% depending on what we're paying for content.
In what market.
Paying for that content so.
It's not <unk>, it's not broadband and voice, which is very very high margin because it does have direct costs associated with content and content acquisition and spend but it's still positive margin.
I think sometimes we refer to the to a broader definition of profitability on television where we start to include the cost of the box but of course the devices themselves are becoming less expensive more powerful more IP driven streaming devices. So the good news is what I meant in my comments was that.
We're doing a lot of things on the technology side to drive the overall rate of return if you will right. The return on capital from this business down by making the devices themselves.
Inexpensive for consumers.
So we need to maintain that revenue stream, even if it's small because we do know that consumers in the UK For example have told us without without a video product there would be less interested in our broadband product, which is one of the advantages. We have of course over every outlet in that market as we are offering an FMC converged bundle with video and it does matter.
Consumers that you can offer them some sort of video solution, whether thats all in box.
I can ask to one box where xfinity.
To draw a comparison on whether thats more of a.
And IP first digital first box App first box like our TV stream box in the U K.
Which really drives you to streaming services, so having a solution for videos critical Charlie on rates.
So I think I'll just echo what Mike said I think we're very comfortable of our ratio of four to five times. We have an average life of seven years. So we don't have to do any refinancings in seven years' time.
It's our maturity how it'll depend a lot on and I think we've demonstrated we have the ability with the underlying businesses of broadband and mobile it's pass through inflation, So I would be very I.
I would expect us not to change our four to five times.
Guidance I think in terms of benefit answering just to reiterate reservoir Lansing is just a tool to optimize your working capital, we shouldnt be forcing our vendors to lend us money for 90 days, if we can organize it for them and their people.
Not material to our cash flow metric.
Metrics. It just it is a tool we use to optimize our cost of capital for our vendors in our supply chain.
Terms of the excess cash I think.
Important point is all of our businesses, even with all the things that are going on in the world are broadly speaking positive free cash flow and significantly positive free cash flow. So that corporate cash number that we talk about I mean that is clearly free and clear for capital allocation I might signal, we think our stock is cheap.
And all four if we can find acquisition opportunities that are even better than buying our stock, which is looks hard today and obviously for that but I don't have any might you should comment but there is no.
Heritage to hold that size of cash.
Sure.
Certainly not from a leverage point of view, but I think it's more of a just being opportunistic and we think this environment. The reason, we say the cash as an asset in times. Like this is you don't know what the next six to 12 months will bring four competitors or peers for opportunity and so we want to stay.
In a position where we could take advantage of that if necessary.
But netted against our debt. It obviously is a good thing if youre looking at net leverage.
Great. Thanks for your question operator, Thanks, Dan.
Thank you.
The next question comes from the line of Sam Mchugh with B N. P. Exane you May proceed.
Alright, Thanks, guys just to follow up on that Switzerland quick question on certain part.
You mentioned Q4 might be a bit tough on the rebranding.
Could give a little more color on how far through the UPC migration you all on that or how we should think about kind of cable all through declines in next few quarters and all other kpis.
The key for northern App or a bit more in early 2023.
And if I kind of on the balance sheet you mentioned the cash should we be thinking about interest income as a half decent offset some of the FX.
I think you got about 40 million next year.
Hold on a bit more on interest income.
Or at least anyway, thanks very much.
Sure Andrea do you want to tackle the rebranding issue.
Yes sure.
Okay.
So in effect, we have consolidated our commercial brands UPC and Sunrise into one commercial brand that we're using for new customer acquisition, which is now.
Sunrise brand that has already happened at the end of.
Of Mei.
Since then of course, we have if you want less distribution sources for the acquisition of new customers.
In fact, we have been able in the last two quarters or one of the half quarter.
We accelerated our inflow of new customers on both mobile and fixed on mobile we are already outperforming our previous levels. So that is working very well on <unk>. We are slightly behind the previous levels, but we are expecting to ramp up on that as we go along.
The other question of course to the migration is while we have now a fully focused sunrise portfolio.
Have a number of UPC customers on old products and those will be.
Over the years to come so we're not expecting that we migrate all of the customers onto the new products within one quarter.
Joining it would probably take around two years and the op threshold, we're seeing mainly driven by the low Q.
One front book prices compare.
The base situations that we have in particular on the UPC side now.
Now, giving an outlook is a bit premature at this moment in time, because we have just started our commercial initiatives and are learning as we go along.
So I think we will have a more stable outlook in the upcoming quarters, but overall I think the situation is.
It's quite well I think they're very happy with the fact that the new Sunrise brand is really embracing most of the growth opportunity in the market.
<unk> mentioned that Theres, some rotational churn that we are observing which I would say, it's a bit of an operational floor at the short term, but we are working full speed on mitigate.
I think we are going in the right direction.
Jeremy you want to address.
Yes, so you're quite right, we're going to get some cash income happy days.
As you all are cashes.
Corporately is broadly speaking in dollars. So you should be looking at the corporate cash yields.
Obviously, we've been anybody that'll beginning of the year and navigate towards the end of year is much higher. So you can do the math as well as I do but we have these SMA as we are getting pretty good yield pickup. So there will be a reasonably material number next year from interest income and it will depend on the rights of the buyback how that plays out in terms of.
I wish we get.
Thank you operator.
Thank you.
The next question comes from the line of.
<unk> along with Society General.
Please proceed.
Thanks, very much guys.
Just a quick question on Vodafone Ziegel. Please it looked like the same from what you said about the churn will start to maybe to grow subs weakest quarter again, despite some pretty aggressive <unk>.
<unk>. So could you just discuss and competitions hitting is there a big difference between grew subs on the broadband product in fiber areas.
One five and it is obviously the competition's fiber and one 5 billion <unk> seen quite a big distinction in other words, you just filed by hitting it hard.
If possible.
GMO to Charlie you talked about passing through inflation.
Do you think you can pass through inflation in the same way in 2023, you've seen fuel prices.
Washington to break the MBA moves do you is that something youre thinking about for 20, some years, where we were thinking might be possible.
Okay.
Listen I'll just hit the BMO two question quickly to say that we arent going to discuss today.
What we may or may not think of.
Doing around price increases just premature.
You do point out understandably that while we don't know what inflation will be at that time and certainly other operators have tncs, where they can take CPI or RPI plus we're just not in a position today to talk about it.
And we're still working through that on Vodafone <unk>, We've got Ritchie on who I'm sure can address this.
More comprehensively, but we've been competing with fiber in the Dutch market for some time.
This is not a new.
Experience for US KPN has been building fiber for over a decade and so we are pretty good experienced pretty good.
<unk> track record on on what happens how quickly and how we win back and level out competition in fiber areas. But go ahead, Richard if you want to provide any further color there.
I think it's fair to say Mike here.
On fiber becomes available newly in an area you see a small uptick in detour and promotion in the first six to 12 months.
Because it attracts new customers simply because there's choice, but at the same time as the commercial offers on the fiber side to explain you also see a lot of customers coming back for various reasons the.
Most dominant walnuts that video platform at Vodafone is extremely rich and at the same time its all about the experience, which you gave with the fiber connection for US just a key connection and our strong Wifi proposition is attracting a lot of customers. So we do see a small uptick that in after six to 12 months you also see customers coming back on the back of expiring.
Contracts.
Which I think is a promising field conditions.
So pretty pretty soon after the 12 months you can pretty similar between the two types of competition is up there.
Okay.
Theres always if thats more choices available Christmas consciously make a choice on who to pick in terms of the operator.
But I think the main point I'm, making is that clearly.
Let's say comes back after the promotional periods that the customer has actually gone for quality, which we offered the best network in the Netherlands from a fixed perspective.
Independently measured setups.
Original opinion.
<unk>, it's all about the experience and then fiber insurances HFC doesn't change yet Wi Fi experience and I do believe we understand the Wi Fi experience with deployment boats with a smart Wi Fi apps and all the self serve is around it.
Thanks very much.
Yes, thanks, Nick.
You.
The next question comes from the line of Jordan <unk> with Citi. You May proceed.
Yes, good afternoon, and good morning, and thank you for taking my questions.
Before I start as a follow up on <unk>.
And Andre you mentioned into Credentialing process.
Through our main competitor last week highlighted that in the areas, where I solved is offering fiber that seems to be a bit more pressure on let's say on the kpis I just wanted to.
Perhaps gabon refinery of how youre thinking about the integration.
And that over the next few months streets compared.
Congrats from Italy solved most likely we'll have a much bigger fiber footprint on which to market our products.
And whether that puts any pressure, perhaps accelerate the migration process.
Any thoughts around that will be great and then my second question is on the pricing environment in the Netherlands, I guess across Europe . This quarter will be a lot more inflationary pressures next year VCR.
Just curious to hear from you whether you believe you will be able to accelerate revenue and not more obviously, there's been a lot of promotional and straightforwardly, whether you believe those will not be us.
<unk> in turn to 'twenty three.
Color on that.
Thank you.
Andre do you want to address.
Swisscom comments around solved and I think the issue around I wasn't quite sure I understood. The question around fiber access Swisscom is still hasnt been building aggressively given uncertainty around their fiber rollout plans, but go ahead and address that.
Andre.
Yes.
In the Meanwhile, probably built around 400000 lines, which are currently not.
Marketable as they are billed and point to Multipoint.
And.
The decision that they took no to rebuild them into point to point.
To comply with the request from <unk>.
They can bring them to market as soon as they can from the rebuilt no I don't think the immediate thing to happen it requires quite some.
Technical investment and change in the already 400000 build homes.
So it will not be immediate when its happening yes, it's true that we will have more competition in that footprint, but the difference between us and Swisscom is also that in that footprint to the vast majority we are already today offering one gig services on our HFC.
Such that the impact on us.
Quite less than what the impact on Swisscom is nevertheless of course. There is also some pricing pressure that comes to the equation, but also with our second brand yellow, which is also selling this expanded footprint. The HFC solution. We are also a good second price.
To compete well so yes, we would expect that there is some competition increase to happen as soon as the rebuilds as happens. However, I do think that the impact of as much as it is with Swisscom given that we have access to the HFC network already today.
And Richie we're not saying much about pricing for next year, either in Holland, but if you want to add any color on right.
Got that.
Not really an answer because we're not going to comment on it other than the fact that the terms and conditions cater for CPI related price increases, but thats not immediately saying we will increase prices at the same time. It also doesn't mean, we're not going to do that it's just.
Topic, we're not commenting on.
Okay.
Next question hover.
Thank you.
Next question comes from the line of Carl Murdock Smith with Varian Baird you May proceed.
Hi, Thank you very much.
Mike Youre, clearly frustrated that the share price.
Given what you said on the slide with that in mind.
I wanted to ask about the buyback.
What you Havent thoughts board approval to pull forward 2023 buyback given where the share price currently is.
Meaning we will kind of have two months now.
Before next year's buyback kicks off so just wanted to get more color around that decision, making thanks.
Sure well I mean, we haven't announced anything today and and we haven't necessarily indicated that we won't do anything today. So I think we're just <unk>.
First and foremost.
Reinforcing the commitment we've made for 2023.
Talked about the $1 7 billion, which of course started the year at $1 4 billion. So you should assume that when we say 10% to minimum it is it generally a minimum if market conditions are such that we would seek to increase that buyback, we would likely do it and in terms of the next what is it 60 days well, we're leaving our options open we haven't settled.
I think publicly but we will see what the market provides I guess is way I would answer that.
The commitment we made in 2000 to a $1 four raising that to $1 seven was.
Great for shareholders, and we look forward to buying more stock in the future and certainly based upon the commitment we've made around 10% you should assume that as a minimum when we start those purchases.
Our rapidly we make those purchases is generally something we don't discuss.
And that's more of a retro retroactive retrospective update so.
That's what I would say.
Okay, that's great.
One follow up if that's okay.
On the wholesale deal that you mentioned in the islands.
Obviously that is a big step forward announcing a wholesale deal that I was wondering if you could.
To provide an update on your confidence in terms of signing wholesale deal in the U K at some point. Thank you.
Well as <unk> said many times, we're in conversation with everybody.
We're just getting started in our fiber.
Activities in the U K, we started upgrading the 16 million homes with Devon announced any numbers, but I'm.
I'm pleased we're all pleased with the progress we're making on that upgrade and we're just getting organized seeking final regulatory approval for the fiber JV with <unk>, but that will hit the ground running so we've got.
Quite a bit of activity in front of us to get those upgrades and those networks to a point, where they cannot for wholesale and those conversations continue with all parties. So nothing to announce this quarter, but you should assume we're in conversation with everybody and then last point I'll make is that the upgrade of the 16 million homes, when we announced it was never dipped.
Pendant on a wholesale deal I'll, just say that we approved the capital which is about 100 pounds of home on the basis of its relative cost of DOCSIS four as well as it we think the benefit to the BDC and <unk> business over the long term in that context, a wholesale deal will be gravy, but obviously the new JV.
To build out $5 million to $7 million would seek wholesale deals and we have nothing to announce this quarter.
That's great thanks very much.
Got it.
Thank you.
The next question comes from the line of Louis <unk> with Credit Suisse. You May proceed.
Hi, Thank you for taking my questions have two please.
The first one is on energy on wages into 'twenty 'twenty three several of your peers that have reported already.
Indicating significant headwinds from energy price increases in wages rent negotiations into 2023 can.
Can you give us some color on how you are seeing these two elements impacting each of the liberties reagents into into 2023. The second one is on the U K, specifically on the consumer fixed business.
Your fixed line our pool is deteriorating sequentially this quarter. Despite a 6% price increase that was announced early this year. When you look at the Kpis you have rollout 330000, new lightning premises so far this year.
Yet in the fixed and broadband net adds year to date.
Little bit weak compared to last year I would be interested in understanding what are the competitive dynamics that you are seeing this quarter.
Collateral if youre facing increased pressure from fiber overbuild in your existing footprint. Thank you.
Okay. Thanks, Charlie do you want I'm not sure what we're saying publicly about energy and wages other than that were set we think we're 70% hedged on energy going into 2023.
But I don't believe we've provided much color around or quantify the impact of that on our business were also largely completed with our wage negotiations, but go ahead, Charlie Let me know let these guys know what were saying, yes, I think on the energy side right. Mike we have locked in a lot of hedging for next year was from May wind up being a good thing because as you want to energy prices.
As have dropped so I think some of our markets will benefit in that because we are planning to broadly speaking get fully hedged on the fixed price at least on the.
Energy costs 23 by the end of the year. So it will give you an update on that in Q4.
It's encouraging that prices are going down and they obviously makes the return on capital from some of the renewables investments a bit more attractive, but you should assume that we.
We have we have certainly been hit versus our original assumptions by the Ukraine.
In terms of energy this year and some of that will certainly spillover into into next year, and then I think I'm with Mike I don't think we've said an awful lot about the exact numbers, but on energy and indeed on wages. There is still lots of moving parts will give you an update on that in February .
I guess for 23.
Lutz do you want to address the U K question.
Yeah.
Yes sure.
So.
In terms of.
Fixed customer net adds.
Right 12000 broadband net adds of 19000 this quarter so.
The market is smaller.
We explain this to ourself because during the pandemic.
There was a big <unk>.
Growth in the market and now.
Base.
Smaller growth coming to the market our relative market share so the share on <unk> and the <unk>.
Mahler market has increased.
Therefore, we are able to continue to.
Released positive growth year.
And also on the acquisition pricing because the market is smaller it is.
Promotional market.
That means also that the acquisition prices compared to a year ago or.
Something like one five.
Pounds lower than a year ago, yeah. So so theres more competition market are smaller, but I think we get more than our fair share out of it.
In terms of op Hugh.
Your observation is right we have put through a six 5% price increase.
What you could also see out of mics and Chinese presentation is that.
Customer.
Looking for ways to optimize their monthly spend yes, and I mean, the monthly spend on average with US is broadly 50 pounds.
It is up.
On the attention of the customer and so were they predominantly optimize.
Mid tier video pay TV video rights or not.
Premium pay TV such as <unk>.
Premier League Formula one more more of the mid tier stuff.
And also fixed voice.
And therefore.
We have pressure here.
We are growing.
Pretty strongly and underlying.
Fixed brought back.
But as Charlie said the margins here are lower and we are sitting all saw partially on variable content cost for exactly. These <unk>. So therefore, the underlying EBITDA growth is also supported out of out of better gross margin here I hope that helps.
It does thank you.
Thank you.
The next question comes from the line of Jerry Dellis with Jefferies. You May proceed.
Yes. Good morning, good afternoon, and thank you for taking my question I've got two questions. Please in relation to the spin down effects that you're seeing within the UK TV business.
Is there a sort of a commercial strategy that can help to arrest. These headwinds as we go into next year.
Or is it predominantly now a matter of cost management and if it is a matter of cost management, then what would be the immediate actions that you think you would be able to take on a fairly short timescale and the second question. If I may is.
I remember in the past you used to give us some data around it.
Adoption rates.
Broadband services in the lightning areas I just wanted to if it was possible to get an update on that please thank you.
Yeah, so listen on them. So go ahead go ahead.
Yes, sorry, I mean on the first one and maybe I should have mentioned that before right of course.
We have a strong.
Got it.
Really.
Get back to growth and this is convergence so.
Brad I mean.
I think it's a good success that only after one year. After we launched volt every fifth of our fixed broadband customers have not fixed and mobile with us and our superior bundle.
But theres still a lot of our fixed customers, who don't have mobile with us on mobile customers, who don't have fixed with us. So therefore.
The year 'twenty three for us is the.
Convergence and so we absolutely want to accelerate that.
That means customers have higher <unk> and lower churn.
And also next to that obviously, we are building our digital capabilities. So understanding Mike said at the beginning every second household with a customer of ours in the UK. So we capture all the data understand the customer better and we have built a machine that allow us.
Now to digitally offer the right product at the right time to the customer.
So this is absolutely the name of the game.
Having said that there is huge opportunities for further cost savings in this company.
And I think one I mentioned before.
More and more we are able for the.
Mid tier.
Pay TV content to get to a variable.
Content deals, which then puts us in a position to be not so much positive about that.
And obviously the synergies help as well right I mean, we are we have delivered now.
On the way to deliver 30% of the run rate synergy end of this year, we are well underway here and it's only 30% so that means 70% to come. So therefore I think we are we are in a good position high level, but the cost of living crisis.
So as not to change the strategy, but to now shift gears and turn even faster into the convergence game.
Yes on your second question I think we're not providing that detail, sometimes we do sometimes we don't but.
But it hasnt changed materially with respect to Newbuild and business as usual I think we are largely flat.
The business as usual marketplace and most of those net adds came from the lightning territory, but those numbers go move both directions, sometimes we're adding customers in <unk> and less customers enlightening.
We're not we're not going backwards on VA, you still either flat to slightly up depending on the quarter.
And then the adoption rates.
Round solus or to play or Triple play didn't move materially I mean, I think there are about a third a third a third for the most part Lutz, if but a small movement to one or the other can have an impact in a quarter over a period of time. So I think we're just seeing a bit more so lists or broadband only customers lately, which is driving.
A slightly lower <unk>, and so customer mix fluctuates, but does have an impact on ARPA.
Yeah, sorry, I forgot to answer that thank you.
I mean, the last thing to comment I mean, it's absolutely.
Important to understand that our lightning penetration stays on the same level.
So we are not getting to a lower penetration, sometimes also nowhere, where we expand our network. That's another fiber network and even then we get to the same penetration.
I mean, if you compare our penetration of the run rate at the end in the steady state after three years, you'll get to close to 30%.
Compare this with any off net in this in this country right.
I think it's a very strong achievement and so far we are able to keep this.
Okay. Thank you very much.
Thank you.
The next question comes from the line of Matthew Harrigan with benchmark you May proceed.
Thank you Mike I think you alluded already on for the first time I'm curious if you could put that in the European context from your.
Look far along in part D does that actually the person advantages because you don't have as much.
Legacy infrastructure do you see as a big cost saver.
To be honest with you heard international footprint.
Do a lot for your flexibility on the business services side with mobile I'd, just love to get more.
Broader view on that.
Yeah, I mentioned it along with a few other things that we're excited about.
With our <unk> rollout I would say, we're I'll, let <unk> jump in here I'd say, we're early early days on Oran as are most operators that.
We're watching and learning there's multiple approaches to over and there are clear advantages to Oran, but you've got to do it.
I would say a careful and thoughtful way, we're not ripping anything out as such and we're not building from scratch like Charlie and others. So we have to be thoughtful about when and how we implement but we think theres opportunities there or any color you want to add anything there.
Yes, I, just would emphasize that given our legacy and existing and existing radio networks.
We will likely be using a number of solutions and 23, you will see us try out some of these solutions in several of the countries as we set the strategy on on rollout of all rent, but it is extremely important for us when you look at 2014 526.
Great. Thank you Enrique.
Thank you.
The next question comes from the line of James <unk> with New Street Research you May proceed.
Yes, thank you very much indeed.
So a couple of questions from me maybe just.
Sticking with you the last question on mobile, but on the topline trends.
I mean mobile over the last few quarters is getting increasingly strong as a part of your business.
If you could just talk a little bit more about how sustainable.
Those trends are I mean to what extent is Q3 being boosted by roaming.
Is there the potential for future price up in that segment, where at the moment it seems like with lower prices and Etfs to land price rises in mobile.
Fixed it.
Got it hooked pack conclusion.
And secondly, just in the last few days in the U K, we've heard about equinox to be interesting to get your response to that and how you think it might affect your obviously your existing business and maybe the new joint venture with <unk>.
Might you consider actually any legal challenge against it. Thank you.
Listen on an equinox two in the U K like everybody else, we're waiting to see what it really means.
And we're confident that the regulators.
Regulators will evaluated in.
In the context of its impact on competition in network development. So we don't have much to add to the commentary there we're really waiting to see what what it all means and when we have more information, we'll certainly comment at this point, it's not really impacting how we see the market because we just don't have enough data.
But I'm sure they'll make that data clear.
In the next couple of months and we'll know more I think early part of next year, maybe maybe sooner.
On mobile I'll add I'll ask anyone to jump in here, but I'll simply say that you have to remember and you would know this James mobile Arpus have been eroding for a decade and as you identified a relatively low today.
And so it's.
It's easier to see sustainable <unk> growth in service revenue growth when youre, starting at such a low level in Europe , and whether it's roaming or.
Pricing contractual price increases.
Or this demand for connectivity.
I think I think it is sustainable this growth in mobile service revenue I think our peers are showing in saying the same things.
And it's one of the tailwind that we identified quite frankly early when we decided to combine with mobile operators or acquire mobile operators that we thought this was a revenue stream that over that had probably reached a bottom and you had lots of tailwind and opportunities to grow and thrive and when we're seeing that take place. So we're pretty.
<unk> on that.
Anyone else want to talk about mobile revenue in their markets.
I mean, I can't I think.
Can add from the UK perspective.
That.
As Mike has said.
It's now a step change in the industry and my personal view is it is driven by <unk>. So right I mean customers have.
Roughly 30% usage increase year over year used to pay less and less I think we are building now right.
A great new infrastructure with <unk> and <unk>.
I think the industry has managed now.
We invite the customer to pay a bit for this I use it and as you also have said.
We as virtual video too we only apply this price rise to the AD time, which is a relatively small amount and therefore the sensitivity we have seen is pretty low.
Yes.
Okay great.
Is that it rectory.
Operator, I think we can shut it okay.
Alright, well listen thanks for joining US sorry, we went over a couple of minutes.
I always appreciate your questions and your feedback and input.
We really think that we're managing well through these difficult times and weather.
Whether it's our connectivity trends or our revenue our EBITDA growth and that we're demonstrating again that we can perform well when when times are tough and that's I think one of the hallmarks of this industry and we're certainly demonstrating that and we will continue on our network investment strategies will update you on those regularly.
And we think we're in a fortunate position on our balance sheet with our cash position and we look forward to.
Both acquiring more stock, but also finding ways to be opportunistic with that capital. So thanks, again, and we'll speak to you next quarter take care.
Ladies and gentlemen, this concludes Liberty Global's third quarter 2022, Investor call. As a reminder, a replay of this call will be available in the Investor Relations section of Liberty Global's website.
There you can also find a copy of today's presentation materials.
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