Liberty Global Ltd. Q4 FY2020 Earnings Call

Good morning ladies and gentlemen and thank you for standing by. Welcome to Liberty Global’s fourth quarter 2020 investor call. This call and associated webcast are the property of Liberty Global and any redistribution, retransmission, or rebroadcast of this call or webcast in any form without the express written consent of Liberty Global is strictly prohibited. At this time, all participants are in listen-only mode. Today’s formal presentation materials can be found under the Investor Relations section of Liberty Global’s website at libertyglobal.com. After today’s formal presentation, instructions will be given for a question and answer session. Page 2 of the slides details the company’s Safe Harbor statement regarding forward-looking statements. Today’s presentation may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including the company’s expectations with respect to its outlook and future growth prospects and other 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 change in its expectations or in the conditions on which any such statement is based. I would now like to turn the call over to Mr. Mike Fries.

Thanks Operator and welcome everyone. We appreciate your presence today. As this is our year-end call, I have a lot of information to share and I apologize in advance for the length of my remarks. All my key executives are here, and I will ensure they participate in the Q&A session. As usual, Charlie and I will be presenting from slides available on our website for you to follow along. I will start on Slide 4 with some highlights from 2020. This has been an exceptional year for us, our employees, and our customers. The impact of COVID-19 was felt by everyone, including us, but we were fortunate to have some strong advantages that helped us meet or exceed nearly all of our internal forecasts set before COVID. Families, schools, hospitals, and businesses experienced an unprecedented need for stable and robust connectivity. In January, our average upstream and downstream traffic was still 90% and 50% above last year’s levels, indicating our strong performance. We learned many lessons during this crisis, such as the importance of prioritizing our people with flexible work arrangements, constant communication, and attention to their wellbeing. We recognized the goodwill generated by exceeding customer expectations through enhanced speed, more data, increased entertainment options, and affordable access plans. Our digital transformation initiatives in customer sales and service were quickly accelerated. Throughout the year, we noticed a significant preference for quality among connectivity customers, reinforcing our strengths. We provide the fastest speeds, the most reliable services, fixed and mobile bundles, and a better customer experience compared to our competitors. As customers start to value these factors more, we remain committed to the necessary investments and innovations to enhance our market position. You've witnessed this through our fixed mobile transformation, the rollout of 1-Gig broadband, our investments in digital customer experiences, and our focus on new connectivity and entertainment projects, which I will delve into. It’s no surprise that 2020 was a robust year both operationally and financially. I encourage you to refer to the summary table on the right side of the slide for key figures, but let me highlight significant points, especially our subscriber growth. We added over 80,000 new fixed customers, reversing the prior year’s loss of 74,000. Our broadband net additions reached 242,000, a threefold increase from 2019, and postpaid mobile additions hit 513,000 despite shop closures throughout the year. Several factors contributed to these results, including reduced churn and higher customer satisfaction across all operations, which served as a tailwind. In the U.K., we delivered steady growth on our existing footprint as well as in new areas. Switzerland also saw consistent sales and momentum throughout the year, continuing a turnaround initiated ten quarters ago. Charlie will discuss the financial results, but the key takeaway is that we delivered strong outcomes. Excluding the effects of COVID on areas like premium sports and mobile roaming, we achieved positive revenue and exceeded initial expectations for EBITDA and operating free cash flow. One standout figure was our free cash flow of $1.1 billion, representing a nearly 40% increase year-over-year. You can calculate free cash flow per share based on our 580 million shares outstanding, reflecting an attractive yield on our stock. Regarding our Q4 results, we've seen continued low churn and record customer satisfaction driving higher sales and net additions, making it our best quarter of the year. Virgin Media achieved its strongest customer growth in 12 quarters, and UPC in Switzerland experienced positive broadband growth for the first time in 13 quarters, complemented by strong performance from Sunrise. Our customer growth is driven by key product launches such as 1-Gig, Smart Wi-Fi, and our advanced entertainment platform. Despite the challenges posed by the pandemic, we made significant progress in our fixed mobile transformation, aided by two major M&A transactions. I'm pleased to report that the acquisition of Sunrise, which closed in November, has progressed well with leadership, integration, and commercial planning going smoothly. André Krause, who was the CEO of Sunrise, leads an exceptional management team, with Severina Pascu, who initiated the UPC turnaround, now in the COO role. We have validated Swiss synergies and advanced commercial planning, with more updates expected in our upcoming second quarter call. In the U.K., the regulatory review of our joint venture with Telefonica's O2 is progressing well, and we are optimistic about receiving midyear approval. The knowledge we’ve gained further reinforces our confidence in this transaction, which represents about $12 billion in synergies. Historically, we have successfully under-promised and over-delivered on synergy expectations, as exemplified by Vodafone Ziggo, which achieved around 6% EBITDA growth and $1.2 billion in operating free cash flow for 2020, achieving synergies a year ahead of schedule. This case illustrates the growth and stable cash flow derived from fixed mobile convergence, leading into our priorities for 2021. I am very proud of our initiatives in diversity, equity, and inclusion at Liberty Global. We have focused on gender equality and broadband access for underserved communities and established our first global DE&I council last year, which I co-chair. We will hold ourselves accountable to tangible goals reflecting our culture and purpose. I am likewise committed to our ESG programs, where we are recognized leaders, currently ranked third in the telecom media sector on the Dow Jones Sustainability Index. We aim to make further progress toward our net zero targets, which we will announce later this year. Now, briefly touching upon five key priorities for 2021: First, we expect positive revenue growth across our core markets this year, driven by continued customer additions, potential price rises, and advancements in our B2B divisions, assuming modest improvement in the COVID situation. Secondly, despite $45 billion in strategic M&A last year, I foresee a busy year ahead as we aim to be a fixed mobile champion in our markets, which will enhance our competitive stability and value creation. Third, we will focus on optimizing our portfolio of venture investments, estimated to be valued around $4 per share. Fourth, we are concentrating on increasing free cash flow, with a forecasted 25% increase for the year. After factoring in our commitment to buybacks, which included $1 billion repurchased last year, we expect to see an even more significant increase in free cash flow per share. On Slide 5 is an illustration of customer growth acceleration alongside product innovations. From the data, you can see our substantial progress each quarter in gaining customers and broadband additions, highlighting our most critical growth measures. Fixed customer additions rose from negative 19,000 in Q1 to 56,000 in Q4, and broadband net additions reached 242,000, reflecting steady improvement. Virgin Media alone added over 100,000 new broadband subscriptions, capturing nearly 45% of the broadband net additions in the market in Q4. In the U.S., our team has excelled in base management and maintaining low churn while increasing digital sales to 50%. We have also introduced numerous new products, enhancing our offerings. In Europe, we doubled the availability of 1-Gig broadband to 20 million homes by year-end, reaching significant coverage across most markets. In the U.K., our 1-Gig rollout reached 7.3 million homes by December, nearly double that of BT open reach, with plans to expand further throughout 2021. Although we are still in the early marketing stage for 1-Gig services, we recognize the importance of speed to our customers. Currently, over 90% of our broadband subscriptions are on speeds of 100 megabit or higher, and half at 200 megabit or higher. We anticipate that the 1-Gig product will gain traction, restoring our market leadership in this area. On the video front, we see improvement in losses declining from 74,000 in Q1 to just 10,000 in Q4, with total losses for the year being 180,000, a 30% reduction from the previous year. Our lower video ARPU and a strong free-to-air broadcast sector contribute to this stability. We are also introducing advanced video devices like TV360 and Apollo, which enhance our video offerings and cater to customer needs. In summary, the momentum seen in 2020 is expected to continue into 2021, supported by price adjustments, churn management, and product innovation, assuming a gradual improvement in economic activities. Lastly, our Ventures portfolio is valued at $2.4 billion today, or a bit over $4 per share. It consists of tech, content, sports, and infrastructure investments, primarily valuing the tech and content sectors. I will elaborate further on our investments as we strive to monetize opportunities while realizing their strategic relevance. To recap, we had a strong operational and financial performance in 2020, and we're off to a great start in 2021. Our significant fixed mobile combinations in Switzerland and the U.K. are progressing well, and with $6 billion in liquidity at year-end, we continue to invest in our plans: building fixed mobile champions, pursuing strategic ventures, and repurchasing shares we believe are undervalued. I look forward to your questions, but first, I’ll turn it over to Charlie.

Thanks Mike. Turning to our consolidated numbers, I’m starting on a page entitled, Underlying Revenue Stable. Total group revenue saw a decline of 0.5% in Q4, resulting in full year decline of 1.5%. We estimate the negative impacts of COVID to be around $54 million in Q4 and around $200 million for the full year, which negatively impacted our growth rate by around 1.8%. Without that, we believe the group would have seen positive rebased revenue growth for the full year. On the right-hand side of the page, for each of the last three quarters, you will see the five key areas impacted by COVID. In general, COVID impacted our business much less in Q4 than it did when the pandemic first hit in Q2. The impact of not having access to premium sports in Q2 was $34 million; however, as sports started to return by Q4, the downside was only around $7 million. Handset sales and roaming revenues were impacted by the pandemic and we estimate contributed to a $16 million drag in Q4, while the impacts on our broadcasting businesses was around $6 million for the quarter. There was some impact on our B2B businesses, we estimate around $22 million in Q4, but it was largely due to reduced sales. Fortunately, to date we haven’t seen a material impact on bad debt and late charges on either our B2B or consumer businesses. On the next slide, we provide details of our adjusted EBITDA. For the full year 2020, we delivered minus-3.9% adjusted EBITDA growth, which was in line with our expectations. As we called out in our Q3 results presentation, Virgin Media declined 11% rebased versus Q4 of 2019. This was driven by $7 million of costs related to the O2 merger and some other growth investments, particularly $21 million in the accelerated digitization and on-shoring of our custom content platforms as well as an $18 million increase in marketing, which did result in accelerated subscriber growth. The remaining difference versus Q4 of 2019 was the impact of end of contract cost, network taxes, and deferment of our price rise from Q4 to Q1 2021. Swiss trends continued to gradually improve with a 7.9% decline in Q4, partially explained by a 4% drag from $10 million of costs to capture synergies. While Sunrise’s rebased has not improved since completion of financials, the standalone business is reporting around 2% full year growth based on the historical IFRS reporting policy. Turning to operating free cash flow, we delivered 5% operating free cash flow growth for the full year, which is in line with our guidance of mid-single digit growth. This is despite $26 million of cost to capture, which is equivalent to more than 1% of growth. Our capital intensity declined to 22.5% in 2020 or 19.6% excluding capex related to Project Lightning, and but for cost of capture in Switzerland, all markets would have returned positive OFCF growth year-on-year. The standout was the de-consolidated joint venture in the Netherlands, which grew 9% year-on-year, delivering $1.2 billion of operating free cash flow. Turning to our 2020 free cash flow results, we delivered 39% growth or $300 million compared to 2019 and reported $1.1 billion of consolidated free cash flow, ahead of our $1 billion guidance. This is despite some currency headwinds versus guidance assumptions and a $6 million drag from working capital which we generally believe affects a telecom company such as ourselves. Our cash flow was further suppressed by the $329 million of capital expenditures related to our U.K. network expansion, Project Lightning. On the page entitled, 2021 Outlook, we provide details of our expectations for our key assets going forward. Given that we fully expect our U.K. business will be deconsolidated into a joint venture by midyear and that Vodafone Ziggo and Telenet already provide standalone guidance, going forward we’ll provide our key financials guidance not on a group consolidated basis but for each business unit. At the group level, we’ll be guiding only to consolidated free cash flow, which we expect to grow more than 25% to $1.35 billion for 2021 based on the assumption that the JV closes at midyear. In the U.K. and Ireland, we expect to return to top line growth despite an increased year-end impact from end of contract costs, although cost of capture synergies will weigh on adjusted EBITDA and OFCF growth. For the full year, we expect standalone adjusted EBITDA to decline low single digits across both metrics. We also expect a return to revenue growth in Switzerland for the combined UPC-Sunrise business, though expect a low single digit adjusted EBITDA decline and a mid-single digit OFCF decline, and that’s because we’re spending over Fr 150 million of costs to capture synergies, but on the underlying business we think there will be growth. Telenet, our Belgian operation, has garnered 1% to 2% adjusted EBITDA growth and continued free cash flow growth, expected to generate €420 million to €440 million. Vodafone Ziggo, our Dutch joint venture is expected to see 1% to 3% adjusted EBITDA growth and will increase year-over-year cash distributions to shareholders in the range of €550 million to €650 million, or $677 million to $800 million. With that, Operator, over to questions.

All right, we’ll take the first question from Robert Grindle with Deutsche Bank.

Okay, that’s me, I think. Hi there, how’s it going? May I ask about the U.K.? I saw the strong Lightning take-up stats, but the Lightning build was lower than the previous three years. Is that COVID or are you hanging fire a bit pending the O2 merger, or I think you mentioned in the slides that passive infrastructure access is not really available at the moment. Is that what you’re waiting for, and what’s the prognosis there? Thank you.

Well, I’ll just make a couple comments and then Lutz, you can work a more detailed answer. If you look at the last four or five years, we’ve always built between 400,000 and 500,000 homes per year. Last year, we did 426,000, and we’ve done 2.5 million to date. I wouldn’t read anything into it. It’s more about just optimizing our overall financial picture. Could we have built a few more? Yes. Could we have built a few less? Probably. The PIA is reducing our cost pretty considerably, so below £600, which is a great thing, and the more we use of that, of course, it could accelerate both the capital we spend and the number of homes we build. It’s all good news there. There’s really nothing negative. Our coverage is growing, our penetration remains strong, our ARPUs are strong, and the returns are high, so the Lightning Project as it sits today is in great shape. Certainly when the merger closes, sorry, the joint venture closes, we will sit down with Telefonica when we’re allowed to and really re-evaluate the entire picture around our fixed networks in the U.K., specifically the pace of Lightning build, secondly our broader ambition to expand in the network beyond our Lightning footprint aggressively, the path we’ll take to 10 gig, will we bring in financial partners, how will we accretively and aggressively take advantage of our network leadership in this market and ensure we remain network leaders for some time. That’s our real opportunity here. Any other color, Lutz?

You said it all, basically. I think the only thing I would add is that the Lightning team, on top of the network expansion for homes, is also now going to connect more base stations for 5G. We closed two big deals, one with Vodafone, one with 3, and obviously here also you see now an acceleration of really connecting circuits, so if you take both into account, then it runs at pace and, as Mike said, I think we have to review the strategy together then after the approval with Telefonica.

Thank you.

All right, once again that is star, one to ask a question. If you find your question has been answered, you may remove yourself from the queue by pressing star, two. The next question is from Christian Fangmann with HSBC.

Yes, great. Thank you. Hi guys. I have actually a question on Switzerland. It looks like a good outcome back to broadband growth in that market on an underlying basis at UPC standalone. My question is more on the integration costs and the phasing - you mentioned Fr 150 million. Can you maybe give us a split between opex and capex here, and also what you expect in terms of synergies already in 2020 and the phasing over the next few years, just broadly speaking that we can model it properly? I think a bit more color or guidance around that would be nice.

Yes, André is on the call - I can ask him to address to some extent. We’re being obviously a little careful about annual synergy expectations, but I’ll tell you that in 2021, the synergies are expected to be relatively nominal, I think maybe in the Fr 30 million range, something like that, against the Fr 150 million cost of capture. But it ramps pretty quickly, so I think in 2022 it’s four or five times that number and then it grows ratably to the 2024, 2025 timeframe, and it’s not going to look materially different than the Belgian synergy model or the Dutch synergy model in terms of how much is revenue, how much is cost related, and how much is cost savings based on a 2020 cost base, and it’s about 85/15 - you know, 15% revenues, and those are really in the later years. It’s a conservative synergy gate in our view. André, I don’t know what other color we’re providing on those sorts of numbers, but I’ll let you wrap that up.

Well, I think you outlined it well. I think on the cost of capture, of course, we tried to be pretty front-loaded. We are moving fast, integration is progressing quite well, and obviously some of the opex stuff is going first whereas some of the investments are coming later on as we go through it. I would expect that the largest part of the total cost of capture should be done by the end of ’22, and in terms of synergy expectations, of course it’s always a bit of a question mark around the revenue synergies, how quickly they’re going to run through, but as Mike pointed out, I would re-confirm the shape of the trajectory.

Thank you very much.

All right, the next question is from James Ratzer with New Street Research.

Yes, thank you very much indeed. Question for me really was around your cash return thoughts from her. Firstly on the buyback, I noticed the pace of that seemed to slow in the fourth quarter, so I was wondering if there was any logic behind that and should we be expecting the pace of buyback to be accelerated during the first half of this year. Given the strong cash flow guidance that you’re giving and the rate of buyback, you’ll still end this year at the current run rate with well over $3 billion of cash on the balance sheet, so I was wondering if you could give any further thoughts around timing of that potentially being returned to shareholders or other uses of that capital. Thank you.

We can’t identify any other uses of the capital beyond what I’ve said generally, which is we remain opportunistic around strategic transactional ideas that might occur in our core markets, and maybe continued modest investment in ventures. There’s nothing else that’s jumping out at us at this point that would require meaningful amounts of capital, so buybacks remain front and center. And as you’ve said, just looking at last year, the number that we started out at a normal pace, and when of course the stock declined, we ramped up and bought most of our stock in that period of time, Q2, a bit of Q3. From our perspective, we’ll do the same this year, so I think the end of the year was a bit of an odd period, both related to where we were in our 10b5-1 plan and our material non-public information and having just announced, or about to announce the increased authorization, we wanted to get through the year with what remaining we had. I think you should expect us to look at the situation dynamically, and it wouldn’t surprise me if we ended up buying more stock in the first half than the second half because we believe our operating and financial story continues to look better and better. Let’s see how things evolve, but we’ve got the full $1 billion available, we have been spending more daily in this year than we were in the fourth quarter, and that shouldn’t surprise you, but let’s see how things evolve. I can't be more specific than that, James.

Great, okay. Clear, thank you.

All right, the next question is from Michael Bishop with Goldman Sachs.

Thanks very much. I’d like to just try and to pull together a couple of things on the free cash flow guide. It feels like the step-up to 1.35 is largely driven by the higher Vodafone Ziggo distribution, and then obviously the growth and the accretion that Sunrise brings. Is there anything else you’d call out as driving that 1.35, given it looks like you’re guiding the operating cash flow will be modestly down for a couple of the assets, like the U.K. and Switzerland? Then if I could ask a more forward-looking question on the cash flow, which is related, it sounds like we should take the 1.35 and then effectively if you want to think about that on a run rate basis going forward, you’ll be spending at least Fr 150 million on integration costs in Switzerland, £15 million in the U.K., but then you’ll probably spend some for the second half as the deal in the U.K. closes, so simplistically, should we think about the underlying cash flow being quite a bit above $1.5 billion? Thanks very much.

Good questions. Charlie?

I think you’re quite right - we saw the acceleration in Vodafone distribution continued through cash machine. The strong acceleration in Telenet based on that guidance. In the U.K. it’s more partly until we close the deal, but also because of the cost of capture and also the Lightning build. Again, I would emphasize that conceptually, you could switch off the Lightning construction capex and that would increase our free cash flow pretty materially if we wanted to. Then in Switzerland, I think you rightly point out that we’re getting some good free cash flow, and that’s not least because we are getting some synergies as a result of the transaction, so I think the message is that we’ve got a real cash flow machine, and I think Mike made the point about the synergies, there’s a lot more to go from here. We would expect continued free cash flow growth as we monetize those synergies, as well as we see continued good operational performance, particularly in the turnaround in the U.K.

And as I said in my remarks, which you would already know, Michael, the free cash flow per share figure would be even obviously more robust on a growth rate basis, just given our new purchase of 8, 9, 10% of our market cap every year, so if you’re looking at it integrated, the free cash flow underlying, the operating free cash flow story, as Charlie said and as you pointed out, is strong, and then we were able to accelerate that on a free cash flow per share basis, just by virtue of buyback activity.

Thanks. Just to clarify, for the second half of the year in the U.K., should I understand that there will be a small net cash outflow in the 1.35 due to the integration costs exceeding the synergies generated?

Go ahead, Charlie.

We view the situation as generally stable, taking into account the seasonality of free cash flow in the U.K. We are optimistic that the deal will close, and we will provide updated assumptions once it is finalized because we currently lack detailed insights regarding O2. Our best estimate is that whether we close or not, the free cash flow will remain relatively consistent. There are many factors that could influence this assumption.

You’re coming through a little bit fuzzy, Charlie, but I think the point was the guidance is provided assuming that the deal doesn’t close, just to be clear for folks and give them a baseline on top of which they can overlay the JV, and as Charlie indicated, interestingly whether we consolidate Virgin Media for the entire year or just half the year, interestingly the free cash flow number won’t be meaningfully different, because we’ll be then distributing that cash in the second half of the year back up to the parent. I think you can look at it either way, Michael, and you’re not going to get a materially different number, if that makes sense.

Yes, that’s helpful. Thanks a lot.

All right, the next question is from Nick Lyall with SocGen.

Good afternoon, everybody. Just one on Switzerland, Mike, if I could. The market still looks a bit tricky. You talked about discounts, I think in the statement, again on the front book, so is that doing anything in terms of your plans for price changes? Could you maybe just discuss at what point you think the new company can cope with price changes, and also what are the plans for the brands in Switzerland as well, please? Thanks.

Sure, in fact André, why don’t I let you take both of those since you’re running it. Go ahead.

Yes, sure. Thanks for the question. I would say overall, yes, the market is quite competitive, and there’s quite a lot of tension on the front book; however, I would say that those businesses, Sunrise and UPC operating still majorly independent in Q4 have seen the best quarters for the year, not only for this year but for the last three years probably, so that is showing that we have a very competitive offering. Now looking forward for us, of course, combining fixed mobile convergence is the name of the game, and we have still a lot of opportunity on both businesses to actually drive more value to our customers while not necessarily destroying value but rather creating value.

Okay, thanks very much.

The next question is from David Wright with Bank of America.

Yes, good afternoon. Thank you. Regarding the U.K., I want to acknowledge the achievements of Lutz and the team, but it's important to note that much of the commercial momentum is linked to the delay in the price increase. My question is about how significant this factor is, and as you implement pricing changes for customers at the end of Q1 or early Q2, how do you anticipate those performance indicators will respond? Do you believe the current commercial activity is more influenced by pricing or by the quality of service and product development? Thank you.

I’d just say, and then I’ll let Lutz provide a bit more color, this began building early in the year, David, so as you look at the U.K. broadband adds, first quarter was 80,000, I think; second quarter, 33,000; third quarter, 47,000; fourth quarter, 54,000. It’s our view that that is an undeniable trend regardless of any announcements that may or may not have been made on price increases. As I mentioned in my remarks, lots of positive things driving that, and Lutz, why don’t you flush that out a bit more?

Yes, exactly. We put together a strategy to get back to sustainable growth in 2019, fixed mobile convergence one, a lot of innovation like Mike has already called out, better base management, on-shoring of customer service, a huge effort in digital, and so this has led to reduced churn and increased sales. You’re right - obviously waiving the price rise in 2020 has helped here, but if we would have done one, the numbers would be a bit lower, the net add growth, however it would be still substantially higher than 2019. Maybe I’ll give you a bit of flavor of the price rise, how it’s going. We’ve got a very rational reaction from the public, so in the press and in customers it was well received. We’re in the middle of it at the moment, and it seems that the demand for higher speeds in the pandemic especially is increasing. When you have kids doing homeschooling, parents working and stuff, you need higher speeds, and so we’re offering that, so therefore obviously Q1 net adds while doing a price rise cannot be higher than the 55,000 broadband adds that you have seen in Q4, however I would not be surprised if we would have still positive net adds in Q1.

Can I just ask as a follow-on, the commentary made on the demand for higher speeds perhaps lagging from COVID, etc., also you have some competitors announcing fairly substantial price rises in the U.K. too. After a couple of choppy years, do you feel like the U.K. market is returning to more rationality, perhaps supported by that COVID effect?

Yes, well I think all the players have big investments on one hand, right, in next generation networks on the fixed side and 5G on the mobile side. Sky does also a big investment on the content side, so that’s one. Second, usage has increased dramatically, as Mike has pointed out, so that means also obviously that all needs some funding, and therefore I think price rises have been done by almost everybody, right? BT CPI-plus 3.9, I think Vodafone the same. I think just today, Sky has announced their price rise for this year as well, and we have done it in January, so I would say on price rise, very rational and I think also however well received by the customer, as I said before. There is still higher competition on the acquisition side, right, so here prices, if you compare price development for, for instance, products like in the 60 meg space, prices are lower, so that is the dynamic. We haven’t followed that so much as Virgin Media and we get our fair share.

Very good, thank you.

Yes, the prices are indeed lower in those lower tiers, but we're offering generally faster speeds. For example, BT may provide a 38-meg product or Sky a 60-meg product, while we're at 100 meg for the same customer base. As a result, our price per megabit is much more appealing. As customers become more knowledgeable and focused on broadband products, that price per megabit becomes less significant. We consistently offer faster speeds, even if the prices are similar.

The next question is from Polo Tang with UBS.

Yes, hi. Thanks for taking the questions. The first one is for Mike. You talked earlier about how you’d be busy on the strategic front in 2021, so can you maybe just elaborate on those comments? Were you referring to completing the U.K. deal, or are you doing new additional things that you’d maybe give us some sense in terms of the areas that you’re looking at? And I just have a follow-up question which is really just about Sky. Dana Strong is obviously taking over as CEO of Sky, and she obviously knows Virgin Media very well, so do you see scope for closer cooperation with Sky going forward, for example maybe Sky could invest alongside you guys in terms of a fiber footprint expansion, or maybe doing cable wholesale? Thanks.

I’ll address that. Regarding Dana, she is well-known to us and has worked with me for over twenty years. I view her as an excellent executive, and we are pleased for her new role. It’s beneficial for us to have someone in that position who understands us and who Comcast is familiar with. I believe she will take her time evaluating market opportunities. I am confident she will be just as strategic as Jeremy regarding the long-term strategy and options for improving economics and managing costs. We are proud of her, and this offers a great opportunity for continued discussions about our strategic futures. Until the deal is approved, we can't do much, and you probably won't hear much until then. However, I wouldn’t be surprised if we reconnect on various topics with Sky, an important partner for us. On the M&A front, I wasn’t pointing to anything specific, but in our core markets, ventures, and buybacks, we have executed our plans. Over the past five years, we have completed over $80 billion in transactions, allowing us to exit less profitable markets while strengthening our position in others where we have scale. Our approach has varied by market; we either exited, acquired, or merged, and we believe we made the right decisions. Now we are among the top players in these markets, which gives us the flexibility to be opportunistic and creative. For markets where we haven't taken action yet, like Ireland and Poland, we will keep assessing their long-term potential and any fixed mobile opportunities. I would be surprised if we end 2021 without further transformation in those markets. Additionally, we are enthusiastic about opportunities in the infrastructure space. We own substantial infrastructure, including fiber networks and real estate. Charlie and his team have done well in optimizing assets, enabling us to explore the future of edge computing creatively. We won’t compete directly with the major players but will seek partnerships, raise capital, and monetize assets. The value of our networks is significant, and there's considerable interest in investing in them. We will look for ways to create value while ensuring any actions are beneficial to our overall plans and guidance, which is exciting for us to pursue closely in 2021.

Clear, thanks.

We’ll take the next question from Steve Malcolm with Redburn.

Yes, good morning guys. Thanks for taking the question. I’ll try and go for a couple if I can, they’re quite big ones. First just on Vodafone Ziggo, I guess paradoxically it’s still bringing in the best financial numbers in the group, but the operational KPIs are amongst the weakest. You’ve lost 60,000-odd RGs in the last couple of quarters. Do you feel that you’ve got the balance right there between volume and price, particularly as KPN ramps up its fiber build over the next three, four, five years? Interested to hear your thoughts on that. Then just swinging back to the U.K., can you just help us understand the evolution of the ARPU through the year? Obviously you’ve had best tariff modifications, skip the price rise, you get the price rise in the first quarter, best tariff begins to lap, I guess through the back end of the year. Can you maybe get that U.K. offer back to flat? How should we think about the progress for that number through 2021? Thank you.

Steve, you were moving pretty quick on the U.K. question. Could you repeat that, just a bit more slowly? Not all of it, just the main portion.

Yes, so I just wanted to understand how we should think about the evolution of the U.K. ARPU through 2021. I think you were down something like 4% in Q4. You had best tariff modifications, you skipped the price rise, you got the price rise in Q1 back end, you begin to lap the best tariff impact through the second half of the year. Just trying to understand whether you think you can get that number back to stable in terms of volume growth, but the ARPU picture is a bit blurry.

Okay Lutz, do you want to tackle the ARPU question, give your two cents on that? I could provide some color too.

Our price increase should help drive ARPU growth again. Meanwhile, there is a factor that hasn’t fully materialized in 2020 but is expected to take effect in 2021. We are being cautious in our planning due to some revenue loss associated with ADTN. Therefore, we believe our performance will be more comparable to 2022 rather than 2021. While we don't expect a significant decline, it might be slightly lower, depending on how customers respond to ADTN.

In the Dutch market, the team has done a commendable job. It’s clearly a competitive environment and KPN has announced plans to achieve about 50% fiber reach, which we had anticipated. We now have one gigabit service available to 6 million homes and are actively marketing. I view this situation as a temporary pause. The synergies and execution have been significant, and the rollout of new products has been effective. The results from 2021 should not be seen as indicative of long-term market opportunities; instead, the current guidance reflects more of a temporary respite rather than a clear trend for the coming three years. I trust in their ability to adjust pricing and volume in response to market dynamics. In comparing them to KPN in 2020, which may be what many of you do, it’s not a completely fair assessment. They’ve had an exceptional year relative to KPN regarding net additions and nearly every metric. We saw a revenue growth of 2% and EBITDA increase of 6%, while KPN experienced declines of about 4%, and they added only 55,000 mobile users compared to our 270,000. Their broadband results were weaker as well. However, as with any market, there will be ups and downs. KPN is a strong operator and won't remain down indefinitely. Competition will keep them striving. I have faith that this management team has a solid long-term strategy, even though one year’s performance shouldn’t be taken as a forecast. Charlie, do you have anything to add?

I’d agree. The only thing I’d say, they’ve done a great job on B2B. I don’t know if you’ve noticed, but they’ve moved their market share up very materially on B2B, and there’s still a lot of runway to go, so I actually think they’re doing a terrific job of execution, perhaps amongst the best in the group, so I’d concur with everything Mike said.

Okay, especially just to clarify then, can you hear me?

Yes, I think the question, Charlie, was the decision not to give revenue guidance at Vodafone Ziggo.

Vodafone, so is that just because of the breather that you’re talking about and getting some flexibility to respond to that situation?

No, to be honest with you, revenue guidance in a world of COVID is not the easiest thing. I think we’d all have a lot more confidence in cash flow guidance, because who knows what’s the impact on sports and whatever. This company is performing well and I think you’ll see some very good results. Management’s famously quite conservative, though he is putting pressure on the group.

Okay, thanks so much, guys.

You got it. I think we’re at the mark here, Rick, or can we take another question or two?

Last one.

The last question is from Andrew Beale with Arete Research.

Hi. I wanted to come back to Vodafone Ziggo again, actually, and just ask you about your background thinking around a possible IPO there. Obviously you’ve just discussed the results in Holland, but I guess it’s a business that’s given you and continues to give you large dividends, so just wondering how you thought about the ongoing value from 50% ownership of those dividends in a business you like versus the opportunity to highlight equity value more broadly across your wider group operations, and obviously I appreciate you’ve got a partner there so there’s things you won’t be able to talk about, but any background around that thinking. not just for Vodafone Ziggo but the sort of wider outlook for local IPOs.

Yes, that’s a good question, but there’s nothing new to report at this time. We do have a partner who is currently quite busy with other initiatives and making significant progress. If you were to ask both of us, we would agree that we have a strong appreciation for this business, particularly because it operates in a three-player market, holds a leading market share, primarily focuses on B2C products, and has a solid free cash flow profile, as you mentioned. Is it a potential IPO candidate? Possibly, depending on market conditions. It seems there is a shift happening in Europe, driven by multiple positive factors, such as regulatory changes. Regulators are focusing on infrastructure and development, wanting a fair investment environment where companies can expect returns. There could even be more consolidation in the mobile sector, but only time will tell. We have noted how COVID has benefited those prepared with strong products, and consumer demand is only increasing. While multiples have been low for a while, there are many favorable trends in our sector. Notably, we might be considered an outlier because we are more entrepreneurial, profitable, and strategic compared to many of our peers. Nevertheless, the sector overall seems positioned for a strong year, and there might be opportunities for listing. However, it’s not just up to us; we wouldn’t pursue that if our partner was against it. Over the long term, there are mechanisms in our agreements that allow either party to initiate an IPO or sell the company for specific reasons, as the future is uncertain. We are reaching critical stages in those discussions, making the next 24 months intriguing. Our partnership is strong, and we'll need to collaboratively determine the best path forward regarding our assets and markets. I’m excited about our business's performance, which has exceeded our expectations. Fortunately, as Charlie often emphasizes, it's generating substantial cash flow for the parent company, which is very reliable. Our free cash flow is an essential aspect for us, and we’re not looking to disrupt it or cause any instability in our partnership. So, stay tuned. Over the next two years, I believe there will be developments regarding this, and we will keep you informed as they arise. Anyhow, I’ll close it out just briefly. Appreciate everybody joining the call. We felt it was a difficult year for everyone on the planet, and we feel fortunate to have come through it with pretty strong operating and financial results, and as I mentioned in my remarks, results that mostly have continued through this year It wasn’t a one-off in our minds, there’s a lot of momentum going into 2021, and thus far we’re seeing that momentum continue, which is a really positive indicator for Q1. Strategically, I think we’re focused on the right things. The ventures portfolio, give it a look. It’s not something we’re sharing with you because there’s nothing else to talk about. We really believe that there is underlying value, we’ve made smart investments. These are investments that enable our opcos and our operating businesses mostly, and that’s something to be taken under consideration, and there could be more coming. As ever, we’re working on the value gap, doing our best to both execute on the business but also be sure strategically and financially we’re making it clear to investors where we see the value in the company. Appreciate your joining us, and we’ll speak to you soon. Take care.

Ladies and gentlemen, this concludes Liberty Global’s fourth quarter 2020 investor call. As a reminder, a replay of the 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.