Liberty Global Ltd (LBTYA) 2009 Q1 法說會逐字稿

Welcome to Liberty Global's investor call. This call and the associated webcast are the property of Liberty Global and any redistribution, retransmission or rebroadcast of this call in any form without the express written consent of Liberty Global is strictly prohibited. (Operator Instructions) Today's formal presentation materials can be found under the Investor Relations section of Liberty Global's website at www.lgi.com. Following today's program, instructions will be given for a question-and-answer session. As a reminder, this conference is being recorded on this date, May 6th, 2009. I would now like to turn the conference over to Mr. Mike Fries, President and CEO of Liberty Global. Please go ahead, sir.

Thanks and welcome, everybody. Good morning, or good afternoon to those across the ocean. We have our typical cast on the call with me this morning. Gene Musselman, running GPC, Charlie Bracken and Bernie Dvorak, our co-CFO's, Miranda Curtis and Graham Hollis, who oversee Japan, Mauricio Ramos from Santiago, Balan Nair, our CTO, Shane O'Niell, who heads up M&A on our European programming operations, and of course Rick Westerman. I'm going to turn it back to the operator very quickly to read the Safe Harbor and we'll get right into it.

Thank you. Page two of the slide 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 with respect to Liberty Global's outlook and future growth prospect. These expectations regarding competitive and economic conditions, and liquidity and other 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 risk include those detailed from time to time in Liberty Global's filings within the Securities and Exchange Commission, including its most recently filed Form 10-K and 10-Q. Liberty Global disclaims any obligation to update any of these forward-looking statements to reflect any change in these expectations or in the conditions on which any such statement is based. I would now like to turn the call back over to Mr. Mike Fries.

Thank you. I hope you appreciate that we've shortened that message just a little bit. As usual, we are going to be speaking from slides, and you can find them on our website. We encourage you to try to grab those while we're talking if you haven't already. Our agenda will be largely familiar to you. I'm going to discuss first quarter highlights and key take aways. Gene Musselman will drill down a bit on UPC. Charlie will wrap up with financials, and if all goes as planned that should leave plenty of time for your questions. So, I'm going to begin on slide four if you have them entitled Q1 hightlights. And I'll start with perhaps the most important point and that is despite tough economic times, we're growing right through this cycle. Now, we're not immune to what's happening. You will hear a bit about that today. This macro environment really hasn't spared anyone, but we do have some pretty strong antibodies. And perhaps the best indicator of that, is our ability to sell advanced services. I'm referring to voice data, and digital TV. Where we have had one of our best quarters ever with 811,000 net adds. I'll give some color on those numbers in a minute. But we're seeing very little slow down in these core products, in facts our record growth in voice and digital.

The financial front, Charlie will walk through the details in a moment. I'll simply say that we feel like we've reported some strong cash flow results here. Specifically, you'll notice that we're tracking at the high end of our guidance on operating cash flow are ahead of target on free cash flow. Second main point of the slide here, is that we believe we're well positioned to continue growing, particularly in these core products. Why do I say that? Well, first of all it's still very early days for us in digital TV with plenty of up side and penetration in ARPU growth. Technically, we just had one of our strongest quarters in the voice business reflecting the value we've built into our triple play bundles. We're poised to start ramping up the DOCSIS 3.0 across Europe. We've already launched into Japan of course. And we now have past two million homes in the Netherlands. This technology is scaling better than we expected, and in Japan we're actually starting to see the benefits in our market share and ARPU.

Third, on the slide, you see, we've been busy fine-tuning our capital structure. We're doing this not because we have to, but because we want to, and because we can, even in this environment. The best example is our recent initiative to push out even further our debt maturities in Europe, and we're now in the final stages of extending over $3 billion of European bank and bond debt from 2012, 2014 maturities, all the way out to essential 2016 and 2018. When that's complete, 85% of our UPC debt will mature in '014 and beyond. That's five to nine years from now. Not surprisingly we also to continue to buy our own equity with $110 million or roughly 3% of the Company purchased in the first quarter. One reason for the slightly more conservative pace of buybacks at least by our standards, is that we've also been nibbling at our LGI converts purchasing about 20% of add issue at very attractive prices.

On the liquidity front, we sit today with over $2 billion of cash and undrawn line and we're generating free cash flow in all of our major credit pools. This activity we believe, is definitely benefiting the trading value of our debt securities and ultimately should continue to benefit the value of our equity. Finally, on this slide, I'll give you a quick update on strategic area of focus.

First on, technology. The point here is that we're moving pretty quickly on the innovation front, whether it's our rapid progress on 3.0 or the work we're doing to redefine our next-generation set-tops. We feel like there's nothing going on that we haven't thought about, and we're moving on the right things at the right pace. I'll also add that we expect to remain focused like a laser on our capital spend this year and that shouldn't surprise anybody.

On a regulatory perspective, other than the small set-back from the Opto ruling in Holland, which won't have any impact us on us this year and we're still challenging in fact, we feel like the waters remain largely calm. But I'll tell you, we've watched the horizon more closely these days, as you can imagine. And lastly on the M&A front, we remain as ever opportunistic. The best example, this quarter is our recent agreement to sell our sub scale Slovenian operation for approximately EUR20 million, which represents an accretive multiple to our stock price, over a 30% rate of return to us, and we think the right transaction. We continue to work diligently with our Japanese partners on our pending partnership issues there, which you are aware of. And, we're open for business should the European M&A environment pick up again. So we're set up for continued growth, we're opportunistically fine-tuning our balance sheet and we're strategically well positioned from a technology, regulatory and M&A point of view.

So with that, I'm going to run through three quick slides on subscribers and product before turning it over to Gene. And I'm going to start with slide five which shows the break down of our net adds for the quarter. I think the first key take-away from this slide comes from the top two charts, which shows that our voice and data business continue to grow at a steady clip. You'll see that between the two products, we added 314,000 new RGUs in the quarter, which is right in line with our average growth over the prior four quarters. And in fact, largely consistent with our growth in these product over the last three years. I'll dig into that in a minute. If you move to the chart on the bottom left of the page, you will see recent quarterly trends in our total video subscriber base. And in this segment, we continue to have our work cut out for us. We lost 98,000 video subs in the quarter off a current sub base of 15.5 million. Obviously, we're not happy about that. But it's worth pointing out that 70% of those subscriber losses can be attributed to just three of 15 countries. Including the Netherlands and Belgium two, of our more highly penetrated markets where incumbent telcos continue to running aggressive TV offers, and in Hungary, which we've talked about. And we're feeling pressure from both competition and the economy. The if you look at the bottom right, you'll see our total net adds for the quarter of 216,000 and the trend for the last five quarters. While 216,000 in net adds is a bit below our average of around 260,000, the explanation is in the video losses. And the fix, which Gene will touch on in a minute and which is bearing fruit in a number of markets, is in better churn management emphasizing the bundle. And then most importantly upselling digital services to our analog sub base, which as you will see on slide six, the next slide, we're doing a pretty good job of. In fact, we added nearly 500,000 digital cable subscribers in the quarter which is our best quarter ever and a huge improvement from last year. We now have over 5.6 million digital cable homes connected over 50% of which are taking a DVR or HD service from us. And you can see from the chart in the bottom left, that with only 39% digital TV penetration, we've got plenty of runway to grow this business. In fact, it's worth pointing out that even though we've yet to convert six out of 10 homes, our digital cable subscription revenue today exceeds our analog revenue by over 30%. If you do the rough math on those numbers I think it demonstrates for you that we're generating nearly twice as much revenue or video ARPU out of a digital TV home than an analog TV home, which is the message we've been giving you for some time. And that's why even in markets where we've lost customers, like the Netherlands for example, we're still growing video revenue at a healthy clip. As we ramp up those digital sales or stem the churn, the pace of that growth accelerates.

Let's look at my last slide before I hand it over to Gene and Charlie. There's a couple of key points on slide seven. The first is, that like digital cable, we've got a large and growing voice and broad band business, with 11.2 million subscribers today. That's up nearly 40% in the last two years. And with relatively low penetration rates of 17% and 22%, we've still got room to grow here. And I think our consistent quarterly net adds support that point. The second purpose of the slide is to peel back the onion a bit on our 4% rebased revenue growth for the group to show you how our key products are performing. And we really just started reporting these numbers, which show our broadband data revenue up (inaudible) per quarter driven by good volume and more stable ARPUs, voice revenues up 5% driven by surprisingly steady unit growth, and video revenue up 4% reflecting the combination of very strong digital growth offset by analog TV losses. So all together we grew subscription revenue from these three products, 5% in the quarter which puts us largely in line with our peer group here in the states. The difference between the 5% and the 4% we reported is explained by the negative movement in other categories like B2B programming and internet connect revenue streams. So the primary message here, is that our core subscription business is working and we believe we're poised for continued growth. While we're not immune to the effect of the macro environment, we're growing through it. And where we've got unique challenges, we're 100% focused on turning them around and seeing results. This is a good segue to Gene Musselman. Gene?

Thank you, Mike. Building on Mike's comments, UPC delivered growth in the first quarter, but we were impacted by continued competition across most of our markets and worsening economy, particularly in Central and Eastern Europe. I'll run through some of the key results and then describe a number of initiatives designed to improve our top-line performance in five main areas. Those being accelerating the up sell of digital, reducing analog churn, implementing selective price increases, aggressively rolling out Euro DOCSIS 3.0, and stabilizing our telephony ARPU.

Starting with some good news, consistent with other LGI operations, UPC delivered a solid quarter in advanced services net adds, driven primarily by digital TV as we added over 225,000 digital RGUs in the quarter. In addition, volume growth and voice and data products was reasonably steady with 140,000 net RGU additions combined. However this volume growth was offset to some degree by ARPU declines for both products, driven by lower revenue pardon me, lower telephony usage and less favorable internet tier mix. Also, as Mike pointed out, we had a difficult quarter in terms of analog churn, in a few of our larger markets. While analog churn for the period remains low by most standards, that is more or less 1% per month, it's up slightly year on year. And we lost 89,000 video subscribers in Q1 compared to 71,000 a year ago. In a moment Charlie will walk through our financial results, but our subscription revenue growth was offset by poor performance primarily in our Dutch B2B operation.

On the other hand, our core triple play revenues continue to grow. As we previously highlighted, in the past, we are working hard to turn around our performance in three of our more challenged markets. Austria, Hungary, and Romania. In Austria, our rebased revenue declined 7% while Hungary and Romania were down 1% and 8% respectively. Excluding these three markets, , UPC's rebase revenue growth would have been 3% compared to 1% for UPC Broadband group.

Looking at rebased OCF, it grew 4%. Expanding our margin 140 basis points versus Q1 '08. Again, excluding our three most challenging markets, UPC's rebase growth would have been 8%. In the past, we've talked about some challenges we face in these markets, and in a moment I will talk about some of the initiatives and how they are beginning to work.

Looking ahead, our main objective is to improve revenue growth over the balance of the year, through five main initiatives. Firstly, accelerating the analog to digital migration. Mike has already talked about the importance of digital to our Company, and we're clearly seeing similar results in Europe. It's important to note that we're less than 30% penetrated on digital cable. However, we're seeing the same ARPU uplift and revenue growth from DVR and HD. To further drive growth, Q2 VOD launches are planned in Austria and Cablecom. Both of those will take place in the month of May. Followed by Hungary and Poland in the second half. Furthermore, our digital business in the Netherlands proves that we can generate video growth in that market. Subscription revenues are up nearly 7% year on year, despite the fact that we're still around 30% digital penetration. Obviously up-selling digital to digital is the main driver and reducing analog churn, which is our second key focus. Here, we're just starting to see the benefits in Central and Eastern Europe where we've recently launched digital. For example, in Romania we added 37,000 digital RGUs, and for the second time in nine quarters, we didn't lose video subscribers. We're also selectively using loyalty programs as a CATV retention tool. For example, in Hungary we launched a discount loyalty offer for our customer base that was most at risk for churn. This approach has also paid off in Romania where Q1 CATV churn improved by more or less 50% compared to last year.

Double and triple play bundles, including analog video instead of digital, are also allowing us to offer a mix of completely competitively priced products. And in these cases, we use data marketing tools and dedicated retention desks to contact high-risk customers and limit the widespread use of discounting wherever possible. A third area of focus is to exploit opportunities for additional price increases throughout the footprint and the balance of this year. To date, selective price increases were implemented in the Netherlands, Cablecom, Ireland, Poland, and Czech. And in most of these countries, internet prices have been, or will be increased as we upgrade our portfolio speeds. Going forward, we will (inaudible) additional opportunities to selectively implement price increases.

The fourth area, our focus is the accelerated deployment of Euro DOCSIS 3.0. They're intended to boost our market share and stabilize our ARPU. Six new marks are planned for rollout by the end of the year. By the end of Q2, we will have completed the upgrade to Euro DOCSIS 3.0 of about 100% of the NL footprint. And in March, we launched our first national campaign featuring 3.0 speeds. At that time, we had deployed about two-thirds of the footprint, and next month we will introduce a new triple play bundle featuring next-generation speeds. Those are the 60 megabit and 120 megabit product that we're rolling out.

And lastly, the fifth area is telephony where we are maximizing voice ARPU by reshaping call plans and implementing marketing activities, targeting nonusage customers. We're looking at additional opportunities for telephone rate increases throughout the balance of the year as our per-minute rates are below the incumbent and most of our markets. Voice actually has been our fastest growing revenue product in recent quarters, due mainly to solid RGU growth. However, we've experienced a usage challenge, mainly due to mobile substitution. We're seeking to address this via marketing and promotional initiatives designed to encourage usage, while we're maintaining our volume growth. In summary, we're cautiously optimistic that we can improve UPC's top-line growth through a combination of the initiatives I just outlined. At this point I will turn it over to

Thanks a lot, Gene. For those following along, I'm on slide 10. And this highlights revenue and OCF for Q1. In all our results you've got to remember that the current exchange has significantly affected us because most of the currencies we operate in depreciated versus the US dollar. In fact FX, has impacted the reported revenue and OCF growth rates by around 9%. Reported revenue declined 1% to [$2.85 billion], but adjusting for FX and acquisitions, our rebase revenue growth was 4% led by our markets in Poland, Chile and Australia. From an OCF prospective, we reported OCF at $1.13 billion and that reflects growth at 3%. In our rebase growth rate, that's 7% in the quarter. And we had strong results particularly in Poland, and Australia (inaudible), but also a strong quarter from Telenet. If you turn now to slide 11, we'll drive into our reported and rebase results by key segments. And moving down the chart, UPC generated $968 million of revenue, and $458 million of OCF reflecting, as Gene discussed, rebase growth of 1% of revenue and 4% of OCF. Our other operation in Europe Telenet posted a particular strong quarter with rebase revenue of 5% and OCF of 14%. This performance stems in part from the success of the bundles, or shakes, as they call it. And the impact of selling into the Interkabel footprint, the acquisition we've made the end of last year, and also continued cost containment efforts.

J:COM reported a revenue of $863 million, reflecting 4% rebase growth and OCF of $376 million. That's an 8% rebase rate. And J:COM continues to have relatively steady performance and is recognizing margin improvement. That's really helped by operating efficiencies and the M&A integrations surges. Finally, our other major segment VTR generated 10% rebase revenue and 7% rebased OCF. Now, in Chile, rebased OCF was adversely affected by weakness in the Chilean peso relative to the US dollar, with regard to VTR's US dollar programming contracts.

Now, if you adjust for the FX impact of those contracts, rebase OCF growth would have increased to double digits year on year as we've seen in previous years. If you go to slide 12, this slide depict our quarterly consolidated OCF margins and the margin improvement by segment. We continue to grow revenue faster than our cost base because we're realizing scale efficiencies and maintaining fixed cost base. And from a consolidated perspective, we increased our OCF margin 160 basis points booked to 43.8% from 42.2% in Q1 of '08. Now, as compared to Q1 '08 last year, both our OpEx and SG&A fell as a percentage of revenue. OpEx fell 110 basis points to 38% of revenue, and SG&A fell 50 basis points to 18.2% of revenue. In terms of bad debt, which falls in the OpEx category, we had a slight increase of bad debt in a consolidated basis, primarily in UPC and VTR. In terms of segment margin, UPC margin improvement was largely due to western Europe as all four countries, Netherlands, Switzerland, Austria and Ireland were up year over year. The (inaudible) OCF margin was up nearly 400 basis points to over 50% which is a record due in part to lower set-top box sales and (inaudible). And similar to Telenet, J:COM's OCF margin was always record, up 180 basis points. As we've said previously we expect to drive full-year OCF margins higher in 2009 versus 2008.

Turning to slide 13, which is highlighting our CapEx and free cash flow, as the top graph shows, CapEx in Q1 of '09 was 21% of revenue, or $537 million. And that compares to 20% of revenue or $520 million in Q1 of '08. As a percentage of spend, CPA and scalable infrastructure accounted for 62% the spend as opposed to 56% in Q1 of '08. And that's really driven by digital box which account for a higher proportion of our CPA as our digital video adds exceeded our budget. Network was 22%, down from 23% a year ago, and we added nearly 200,000 two-way organic homes to the footprint to the quarter. Support and other was down 16% spent versus 21% in Q1 '08.

In '09, we expect to drive CapEx as a percentage of revenue versus 2008 down, and that's going to be led by UPC.

Let's go to free cash flow. If you go to the lower graph, free cash flow was up 31% or $40 million, $267 million. Cash flow from ops was up 9%, $704 million with J:COM (inaudible) posting very healthy increases. We feel good about our free cash flow target even with the additional interest cost associated with our maturity exemption. You should also know from a free cash flow quarterly phase-in perspective, that we typically incur higher interest rate of payments and taxes in Q1 and Q3.

Turning to page 14, this is just a snapshot of the balance sheet. Total debt at Q1 decreased $1.2 billion from Q4 '08 to $19.3 billion. The decrease is primarily due to the FX translation impact and (inaudible) network payments of debt. Our cash position was $1.1 billion with restricted cash. It was $1.5 billion in Q1 of '09. And regarding our leverage ratios, growth in net ratios were 4.3% and 3.9% times respectively, the drop in the reported ratio at year end. Now adjusting to (inaudible) debt, which is asset collatorized, that's principally debt related to the borrowing against (inaudible) shares, our consolidated ratios would be 3.9 and 3.7 times respectively. And our consolidated liquidity position is strong, greater than $2 billion. And Q1 '09 that breaks down as following. $555 million in cash of Parent Company, $514 million of cash at operating subsidiaries, and $1.1 billion of undrawn borrowing capacity through our other subsidiaries. As our OCF grows, our leverage level may continue to fall further.

In slide 15, we've just given you an overview of how we are working on the capital structure. No given the current environment, we are reinvesting in our business and balancing our excess liquidity between equity and opportunistic debt repurchases.

So far in 2009, we've done the following. We've extended over $3 billion of UPC bank and bond paper, and we took our it maturities of 2012 to 2014 out to 2014 to 2018. And of our approximately EUR 8 billion of debt of UPC credit group, 85% of this debt is now due 2014 and beyond. These extensions were well received by the credit markets and debt has traded up significantly across the board. We also purchased EUR 101 million or the UTC convert at a 65% of face value. Finally we purchased $110 million of our equity at an average price of $14.60 per share. We still have got $235 million remaining under the existing program. The rationale for refinancing the debt trenches which mature into 2012, 2014 so early, we're one of the few names that have access to the credit markets today. We wanted to finance ahead of the pack and be as proactive as we view our capital structure. Staggering our maturity schedule is very important to us. And also, if we minimize our maturities over the next five years, we'll have more flexibilities to deploy our capital and further stock buybacks or acquisitions.

Turning now to the conclusion on page 16, we continue to grow in light of the macro environment. We believe the economy is having some impact, but we're growing throughout the cycle. We continue to invest in our business as our strategy is to position with the right products to capitalize on changes in consumer behavior. We're on track to attain our 2009 targets for OCF and free cash flow. In the current capital markets, we envision that we can see some de-leveraging of the balance sheet, although to the extent that the credit marks improved we wouldn't reevaluate that. We've demonstrated that we're thinking long term. We've moved our maturities from 2012 to 2014 and pushed them out two to four years. We think it's a smart thing to do. We want to have sufficient flexibility in how we deploy our capital, and having five years before any real maturity in UPC, for example, we believe is a positive benefit for our equity holders. Overall, we remain committed to our levered equity strategy and combined with our anticipated OCF and free cash flow growth, it should enable to us create a meaningful shareholder value. With that operator, I think we're ready to begin the Q and A.

Thank you. (Operator instructions) And our first question comes from Natixis, Mr. Alan Gould.

Thank you. I've got a couple questions here. First, Mike, in selling Slovenia, which looks like five to six times operating cash flow, was it just substandard? How much does that reflect what the market price is for some of these central and eastern European cable operations?

Yes, okay, well, the multiple is north of our trading multiple. So it's, and it doesn't have a 5 handle in front of it, to respond to your number. But as I mentioned in my remarks, first and foremost, it is a country that is sub scale and will forever be sub scale. We got as big as you can get, and I think felt that it just wasn't going to perform over the long term the way we wanted to. In fact, if you broke out the numbers in the first quarter you would see that it was among the countries that had negative growth in both revenue and OCF. So our feeling was that there's probably a better owner of this business that we could use the cash to redeploy in other ways. And that we could find a buyer who is a better, ace said, a better owner of it than us. That's really the logic behind it. As long as it was accretive for us relative to our stock prices, as long as it generated a good IRR, and it did, well north of 30% IRR to us, and as long as we could rash naturalize that, strategically it just wasn't going to fit long term in the portfolio, if you will, but it was something we should get done.

Okay. Then question for Miranda or Graham. Japan only had 4% rebased revenue growth this quarter. It's got relatively low basic penetration. What's happening competitively in Japan, both on high-speed data and I'm surprised that, why isn't the basic penetration increasing a bit there?

Good question, Alan. As you know, it's something we've been grappling with for some time. J:COM management is really focused on trying to diversify sales channels away from additional TSR's and maybe with experimenting with J:COM shop. We're doing all the work to improve net web sales. And they are looking at -- they are confronting more active competition, particularly in the (inaudible) regions (inaudible) where they have seen some price competition particularly on video. But the fundamental question still remains as to why Japan hasn't really adopted pay TV as we've seen in other markets. And one of the things that we're exploring at the moment is both the greater degree of cooperation with (inaudible), which (inaudible) a very weak platform in its own right, could be a useful allie in trying to revitalize consumer interest in video. And also in securing, I think, greater control of the key sports assets, which again we think has been overwhelming in its performance in terms of driving penetration. So, there's a lot of focus, a lot of activity in video at the moment. High-speed data just continues to go gang busters, 160 Meg (inaudible). I think it's over 30% of new sales. And while the market remains competitive, we're seeing very little in the way of real price erosion in that category. So, it remains a very powerful part of the bundle. Mike, I'm sorry.

Yes, I was going to add. I was there a few weeks ago, and they are intently aware of their opportunity in cable TV in particular. This is the first quarter, they've reported a negative loss of video subs, and that has certainly got their attention. And I'm going to tell you they have a number of initiatives underway that are encouraging to me. Number one, you've got the country digitalizing in 2011, and there's some great opportunities for them to pick up pocket of customers from either municipalities or other public-like utilities to convert into subs similar to what's happened here in the US. Secondly, they're really pushing A to D. There's an expectation that by the end of this year 40% of their digital line-up will be HD broadcasts. That's going to have an impact. And as Miranda mentioned, there is a complete re-alignment underway of their market sales channels. So it didn't take them but one month of a negative video sub month to get their attention. And I think put all their efforts on that core product, and I expect you will see the results of that for the rest of the year.

Okay. Thank you very much.

Yes.

And our next question comes from Vijay Jayant from Barclays Capital.

Thanks. Mike, a more broader question, the Obama administration is talking about acquiring US-based companies to pay taxes on all profits on overseas even if they are not repatriated to the US. Can you talk about if that will have an implications on Liberty Global in general?

I think it's way too soon to know, Vijay As you can imagine, it's something we are watching very closely. It's unclear to us the timing of the implementation of such a program, and whether or not it will actually make it through the gauntlet of review here legislatively. Having said that, we are multinational, like other main multi-nationals. And we expect that if they're going to try to realign how things are managed internationally for companies like us, it will have some impact. What I will tell you, I don't think anybody has better tax people than we do. So, I'm pretty confident that whatever the outcome of this legislation, we'll be able to one, understand it very quickly. Two, work our way around it, if we can. And three, articulate to you guys in an urgent fashion, what it means to us. At this point, Vijay, it's just too soon to know.

Great. Question for Charlie. Charlie, you mentioned that VTR, you had some margin compression because of your programming in US dollars. I generally thought that if you bought product in another currency, you normally hedged that. Was that net of the hedge, or was that not hedged at all?

That was hedged. The way the hedges work, we do a thing called hedge accounting which means that you can match the hedge into the OCF line. So, the hedge is actually coming through free cash flow. It's below the OCF line. And that's just a function of how we account. We have been looking at hedge accounting changing there, but it is quite a big shift.

The right fix is what we call (inaudible). We're in the midst, and Mauricio is on the line. We are in the midst of getting all those contracts converted to pesos where we can and s quickly as we can. That's the right solution to this in the long run. But I think Charlie is accurately reflecting that the hedges don't impact the OCF line.

But economically, Vijay, we are quite hedged, it's just not the way it's reported.

Great, thank you.

(Operator Instructions) And we'll take our next question from Jason Bazinet with Citi.

I just had two questions. I guess in the material you put out on the extension of the maturities. There's two tables in one of the releases. You put one that shows where things are as of March 31st, and the other shows it sort of pro forma. I guess my first question is, are you sort of done with all of the refinancings or is there sort of more to go? Then my second question is I think in the US, maybe because of the different air interface standards, the wholesale mobile market has never really taken off. Do you see the European market as fundamentally different in that respect? In other words, is it more favorable to potential buyers of wholesale mobile? Thanks.

I think ,we obviously have a lot of debt, although I think we are prudently leveraged, and we have plenty of comfort. I think, we not looking to add at this point in the cycle. We're very comfortable with the debt we have. But we're trying to be prudent about potential rollover risk. And clearly 2014, there was a lot of debt being re-financed potentially. And we decided to push a bunch of that out. It has cost us some money, and therefore obviously it's cost the equity holder money, but I think in the long term it's the smart thing to do because it reduces the size of the refinancing risk in 2014. Now, as we stand today, refinancing risk of 2014 is down very significantly. If markets are attractive, we might well look at pushing a bit more out. But only if they're attractive and it's opportunistic. But I think we've broken the back of the big issue, which to remind you, is over four years away, or four-and-a-half years, in fact, we had this discission. So I think we're trying to be prudent and strike a balance between not leaving it too late but not trying to do all of it at the beginning.

And let me just respond to Charlie's point about it costing us. We actually don't know whether in the end this will be a less or more expensive refinancing solution, because most experts believe rates, inflation, comparable metrics are heading upwards. We don't know where rates will be, where margins or spreads will be in 2013 or 2014. So I think we've done the right thing by taking over half of what was an '014 issue and pushing it out more or less at today's rates. It's certainly higher than what we did a couple years ago when things were very robust, but nonetheless could very well be at rates much lower than exist at that point.

Absolutely.

Second, on your wholesale mobile, if you are asking about NB&O's in particular, I think that's what you are after, there are more of those brought., and we certainly have a handful of them, and they work better or worse depending on the marketplace. From our perspective, there may be a couple markets where we can look at mobile in a more integrated holistic way where owning an outright license and getting in the mobile business may make sense for us, if we can do it very very cost efficiently without massive outflows of capital and without having to pay for licenses. And those are markets where we have huge scale, nationwide coverage, and great market share in our existing product, like say VTR, where, for example, we've got 80% plus video market share, 65% broadband market share, and 40% voice market share on footprint. We have a very strong position in that country with nationwide coverage. If we could find a solution to a mobile product there, it may make sense. But having said that it's early days. We don't have anything on the table or anything to announce. But it could be in that some instances, owning and operating a mobile platform may be smarter than trying to patch together an MVO relationship, which doesn't create great economics.

Perfect, thank you.

And our next question comes from Jeff Wlodarczak with Hudson Square.

Can you provide early color on the rollout of DOCSIS 3.0 on your results for the Netherlands. And for Balan, and then can you provide more color? There was mention of DOCSIS 3.0 scaling better than expected in the Netherlands. Maybe you could provide more color there? Then what's the latest for household upgrade cost for DOCSIS 3.0? Thanks.

Balan, Do you want to hit the technology and upgrade points?

Sure. The cost for the implement DOCSIS 3.0 hasn't changed much. If anything, it may have gone slightly lower both on the C MTS side and since the last time we talked,Jeff, modern price has dropped quite a bit as well. On the scaling issue, it's a function of the fact that we're upgrading existing platforms. So in the Netherlands specifically, it's a Cisco platform, and we're just doing upgrades to the chassis as oppose to replacing the whole frame shelf everything together. From that sense, these are just card swap-outs, so it's giving pretty good.

There's three reasons to roll it out aggressively in Europe, right. The first is we want to get ahead of any fiber initiatives that may exist or might be reported to exist at some point down the road. Secondly, it's a great way to preserve our data ARPU so we can reinvigorate rate growth and grab more market share. As Gene mentioned, we just essentially a month ago, rolled out a nationwide marking plan in Holland. It's too soon to know exactly what it means. We have priced in Holland our first European rollout, very expensively. It's 60 Meg for EUR60 , 120 Meg for EUR80. So it's expensive premium product that it's going to remain expensive for awhile, we think, until we really figure out where the market is. And over time will allow us to essentially elevate the rest of our portfolio. So our point will be that cable begins where DSL ends. That's really something that's going to take a bit of time to implement, but no question, will have an impact. In Japan, we're a little farther along. We have seen good results, in particular where we're competing against NTT. Estimates vary, but anywhere from 25, 30% of our net adds are coming out of these high-end products.. When we have 140,000 today data subscribers in that faster speed range. So Japan is clearly having the effect we need it to have. It's a head-on product to NTT. We're getting market share, it's working. In Europe, we're only a month into it. So I expect on our next call we'll have more information. But we think it's going to do what we expect. If I could ask one follow-up. Mike, now that Liberty Entertainment is merging in DirecTV can you talk about some of the things that Liberty Global could potentially gain from a DirecTV relationship and specifically in DirectTV's Latin American's platform? I don't know that the transaction they've announced has any real impact on that one way or the other. If there was something to do with DirecTV we could have just as easily done it, I would have thought, pre or post. Having said that, there are no conversations underway. I think that transaction has got a way to go before it closes, and lots of moving pieces. But from our perspective, we have a good dialogue with Direct TV. We talk to them regularly on programming issues, technology issues, and since we don't compete with one another, really don't compete hardly at all our view, there's always opportunities to work together. I don't know that it at this stage, it redefines any particular opportunity for us, though

Alright. Thanks.

And thank you. Our next question comes from David Gober with Morgan Stanley.

Good morning guys. Thank you for taking the question. One for Gene. I thought slide 7 with details of subscription versus revenues was very interesting. Could you elaborate a little bit on what's driving the B2B declines? Is that primarily a cyclical issue? And also, are installation revenues declining within that as well? And then one for Mike. When do you guys expect the Slovenia transaction to close? Could you highlight any other assets that might be sub scale or non-core where you could potentially be exploring an asset sale?

Sure. Gene, you want to start with B2B?

Yes You were breaking up pretty badly, so I only picked up pieces of what you were saying, but I think --

The question is essentially --

Actually, I'm optimistic with respect to B2B, even though we experienced a revenue shortfall in the first quarter, we were essentially on bang on, on OCF. Last fall, we hired a new Managing Director for B2B. He's doing an excellent job. He's very knowledgeable about business. He's very personable. He works well with the local countries, and he understands product development. And we're starting now to roll out new products like we haven't in the past. Switzerland, for example, is performing extremely well. In fact, it's our top performing country. In the Netherlands, we've just hired a new VP of Sales. We've gone through an organizational restructuring, and in March, it was the best sales month they've ever experienced. Poland, Czech, Slovak, Hungary, we're just in the process of rolling out sellable product. In Poland, in the first two months we've picked up 1,000 new customers. Austria I can't, we're in the process of rebranding to UPC. They have just upped their year-end commitment by EUR5 million. We didn't have the revenue result that we would have liked, but we certainly drove the OCF. And I think we're pretty well positioned to have a good year, and there's a foundation that we're building on.

Gene, you want to address the Slovenian sale?

I didn't catch the -- Shane is on.

I'm here, Mike.

Timing of the Slovenian sale.

We expect the timing to close, the deal to close in the next five to six weeks.

And I will just add that we have, I think we have a pretty good track record of timing here, in terms of when to get out and when not. If you look at the French situation, I think when the book is written, and is already being written today, that asset and that operation is challenging. So I think that decision was, this decision will be a good one when you lack at that time competitive environment, but it's reasonably sub scale. There's nothing else that jumps off the table for us or jumps off the plate. I think it's a very successful acquisition for us. We bought it for $70 million three years ago. We're exiting at $120 million despite the tough times I think we feel it's been a good deal.

Great. And just one follow-up for Maricio, if I could. You guys talked about the trends in programming costs. Are you guys still seeing any mismatch due to FX fluctuations in terms of the other costs? I know in the past you guys have said that there's are some adjustments for inflation and FX that you make on revenues, but is the volatility impacting OCF at all?

The key line items indeed we do take CPI increases every 6 months. We just took our CPI increase the last one in January. So we are CPI protected there. The other two line items that have FX, or could have FX swings, other than programming, are international bandwidth costs, and we typically buy in advance, so we're somewhat protected there. We do that every year or two years, and we usually are able to drive the permit cost down as well as protect from FX. And evidently on a CapEx front a lot of what we buy, in terms of CP's is US dollar denominated, so we are having to adjust our CapEx to increase in the dollar price.

We disclose in our 10-K, that between 1% and 3% of our revenue and 5% and 7% of our OpEx or SG&A could be exposed to mismatches, but we're getting, but those matches go both directions. The Yen is up, and first quarter I think we've taken the brunt of the issue, given the fact that most of these currencies are down 25% to 30% over the prior year. So, maybe that we've seen the brunt of it in this quarter. But it's a relatively small part of our revenue and OCF mix, then you have to look at the movement of the current he sees within that small part of the mix. I think it's not unimportant, and we'll the to report on it, but it's not going to move the needle.

Ok, that's very helpful. Thanks.

We have a question from Matthew Harrigan with Wunderlich Securities.

Good morning. A couple questions. On the broadband side, Gene talked about behavioral you've got some people trading down, and you are seeing some nice things happen over time with log rhythmic growth and peer to peer and all that. Are you concerned that the macro element is going to crowd out the benefits of 3.0 initially,if it's pretty powerful (inaudible) in a couple of years. Second question is on the hedge accounting benefit, you talked about Chile, but clearly there would have been even larger in eastern Europe I know you hedge four or five turns of OCF. It's hard for us outside guys to capture that. Maybe Charlie could give us a number there. Then lastly, if we could get some update on super media and the permutations of the tax issue. And Sumotomo wanting to have a Japanese partner and all that?

Charlie, are you still on?

Yes, Two types of accounting. So one is on the debt what we have done is we have swapped what is on the face of it is a lot of Euro debt into matching currencies. For example, let's say hypothetical $100 million of foreign equivalent of EDIBTA,, we've swapped that up four times. So we have $400 million of that large amount of Euro debt that is now in foreign. So as an equity holder you are not exposed to a leverage point of view to any movement in currency. So we don't have, what I guess Gene has described as the Argentina risk, borrowing dollars with pesos cash flows. You haven't done that. You've borrowed foreign against foreign cash flows or whatever. But a different point, which is operationally we do store certain costs in non functional currencies. A classic example is Chile, where we have a dollar program. What hedge accounting does as a particular form of accounting, is it allows you to put the hedge through the OpEx line as oppose to below the OCF line. We have not, (inaudible) by the way, adopted hedge accounting because it has a lot of complexities. Although, we are looking again at it. So, we are hedged. We just haven't put the hedges through.

On the 3.0 front, if anybody tells you that bandwidth consumption or bandwidth demand is not on some form of geometric curve, then they're telling the truth. We see that in our own bandwidth usage and delivery and it's our view that cable sits in a very unique position here. We are able, phone company have. It's (inaudible) where we operate because we are able to upgrade for $20 a home essential to fiber speed when they're faced with massive capital expenditures and all sorts of other problems. And I will tell you that in that situation, will prove out as quickly as we want to? I don't know. Will we actually hit every budgeted data assumption in the next three years? I don't know. But I can tell that you strategically, this is the right thing to do. That tactically, this is the right thing to do. And that financially, this is the right thing to do. So we'll have to finesse and be creative and flexible in how we market and price rule out. But the overall battle plan is to do just that. I don't think there's any question, it's the right one. In terms of super media, (inaudible), it's really too soon to provide any color there. Except to say we are in good dialogue with Sumitomo and we have a very strong, long-lasting relationship with them. And we remain, we believe, quite flexible because we think there's many options that exist. And we think we have a relatively strong position, vis-a-vis the partnership and how it may or may not go. And so we'll report to you as it develops. But there's nothing more to say on that.

Great. Surprise, surprise, I think I garbled my question to Charlie a little bit. What I meant to ask is, if you were able to do that accounting on a hedge accounting basis on those currency swaps in the exotic currencies, what would the effect , deemed effect of OCF have been on the quarter? I assume the way the math of that would work, the effect, it would have overshot the effective currency during the quarter, if you had hedged out that much, the and it might have even been deceptive. Is there any sort of dollar figure that could you attach to

I think we've thrown a number at you, but what I will say is it would have in increased our profitability and increased our both rebates (inaudible) . It would have been a net positive, which we didn't

Great, thank you.

And we'll take our final question now from David Kestenbaum from Morgan Joseph. Could you just talk about the central eastern and European markets? Are you seeing any bounce-back? Some of the economic data obviously remains pretty weak but did you pretty well relative to some of the other markets this quarter.

When you say bounce-back, you mean in what respect?

The economy. I know your performance has bounced back as you've made changes there, but just the macro economy.

There's some good news in Hungary and Romania both have announced pretty sizable loan programs with the IMF. And I think that we believe they're taking the right steps, the steps you'd want to see them take. But in each situation, they're going to have to work their way out of it. Clearly, if you look at assessments of GDP growth today or estimates of GDP growth today for 2009 versus what they were just three or four months ago people are taking a decidedly more negative view of those markets, quite frankly, of all the markets. And I think we just have to continue to manage through that. As I've said many times, twelve benefit in those countries of being relatively inexpensive. We are not a premium luxury product, and we are, we believe, a important utility product. So we're going to feel some of that, no question about it, but we're also going come to out of it more quickly, and, I think, have the benefit of being, maybe even deriving some loyalty from consumers during these tough times. That's really the best we could say. We are hopeful. We think that they're taking the right -- there's nothing they're doing that would make you shake your head to say, oh my gosh this is a problem. They're making all the right moves and saying all the right things, so we just wait and see how things unfold. I don't know if you want to add anything to that, Charlie.

That's right. I think the good news is that we are in the right part of the economy, more protected than anywhere else. Clearly, there are some issues in macro economics, but we are hopeful that we are going to get through it.

So despite selling Slovenia you're still committed to the market?

The region, yes.

Can you talk about the timing? You said you're appealing the ruling in the opta ruling. When do you think will you hear, and what are you looking for to get a sense of what the impact could be in 2010?

Well, we're doing a number of things. We're appealing the ruling, as you would expect to us do. That will take some time to work its way through. Unclear exactly when we'll find out, but it's only been since around mid-March that this thing has been, quote unquote, effective. And we are doing a lot of work. Essential, we're faced with a retail (inaudible) kind of environment. So if we do end up having to implement this, our goal will be to demonstrate to prospective third parties what an appropriate margin is what in this business. What our costs truly are, and whatever appropriate minus arrangement should look like. We don't have many people interested in this arrangement today. We have we think two small relatively inconsequential operators who have raised their hand and said, gee, this could be interesting to us. But we'll do the dance. We'll go through the process. We've got the best consultants who has worked with us on these types of issues in the past in Holland. We are taking it seriously, and we're doing all the right things. It won't be until the fourth quarter, earliest that we even know what it looks like. And we're going to, if we aren't able to successfully turn it around, then we will be cooperative and forthright and try to make this an accretive event for us. So I really don't want to overplay it. The key data points for you are, it's not an '09 issue. Thus far, relatively inconsequential, operators have expressed an interest. We think we have all the right resource behind us to evaluate the economics and the appropriate solutions to the pricing model. And we expect we could possibly even make it accretive should we not prevail in challenging it in its own right.

Thank you. Yes.

I think that's all the time we have this morning. Certainly appreciate you guys, everybody getting on. And we look forward to talking to you on our next quarter. So thanks very much, and we're going to sign off Bye-bye.

And, ladies and gentlemen, this concludes Liberty Global's investor call. As a reminder, a replay of the call will be veil time in Investor Relations section of Liberty Global's website at www.lgi.com. Again, www.lgi.com. There you can also find a copy of today's presentation materials. Thank you.