Liberty Global Ltd (LBTYA) 2011 Q2 法說會逐字稿

Good morning, ladies and gentlemen and thank you for standing by. 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 or webcast in any form without the express written consent of Liberty Global is strictly prohibited. At this time, all participants are in a listen-only mode. Today's formal presentation materials can be found under the Investor Relations section of Liberty Global's website at www.LGI.com. Following today's formal presentation, instructions will be given for a question and answer session. As a reminder, this conference call is being recorded on this date, August 3, 2011. I would now like to turn the conference call over to Mr. Mike Fries, President and CEO of Liberty Global. Please go ahead, sir.

Great. Thank you and hello, everybody. Appreciate you joining us. I know it's a busy morning in our space. We've got a -- a large number of people on the call with us from Management as we normally do. I'll just introduce a few of those who you'll likely hear from. Bernie Dvorak and Charlie Bracken, our Co-CFOs are on. Diederik Karsten, Managing Director of our European Broadband business. Mauricio Ramos who runs Chile and Latin America. Balan Nair, our Chief Technology Officer. Rick Westerman from IR and PR and then Bob Leighton who also oversees our global programming business. I'm going to turn it back over to the operator and then we will get it started.

Thank you. Page 2 of the slides details the Company's Safe Harbor statements regarding forward-looking statements. Today's presentation may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including the Company's expectation with respect to its outlook for 2011 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 of risk include those detailed from time to time in Liberty Global's filings with the Securities and Exchange Commission including most recently filed forms 10-K A and 10-Q. 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 like to turn the call back over to Mr. Mike Fries.

Thanks. What if we refine the art of no surprises and in that vein the agenda will look just like all of our previous calls. As I usually do, I will start on slide 4 with a quick snapshot of the quarter covering our operating, financial and strategic priorities. I think the bottom-line here is that we had a really good quarter beginning with subscriber growth which continued to be the best part of our story. We added 235,000 net new RGUs in the second quarter and 486,000 year-to-date and those numbers are up meaningfully between 30% and 40% over last year. I think it's important to point out that all of our core operating regions -- the Western Europe, Central and Eastern Europe, and Chile -- performed well and are delivering more net adds in the first half of 2011 than in the same period last year. We now serve 17.6 million unique customers who in the aggregate subscribe to 28.3 million video, voice, and broadband products from us. I'll drill -- drill down on those numbers in a moment. I think the main point is that the demand for our digital television services, our superior broadband speeds, and our triple-play bundles is very strong.

As you might expect, our financial results for the quarter reflect this trend. Rebased operating cash flow was up 8%, our third consecutive quarter of improved growth. And rebased revenue was right where it's been for the last 6 quarters at mid-single digits. Bernie is going to provide some more color but you will see pretty quickly that the engine fueling our performance is Western Europe and, in particular, our largest market, Germany. With $3.4 billion of consolidated cash, $4.6 billion of liquidity and a 7 year average debt maturity, our balance sheet remains in great shape. Leverage is actually down a bit as a result of retiring 2 in the money convert issues, but as we look at it we are at currently at 4.6 times gross and 3.6 times net which is still right in our target range.

Our buyback program is on track to hit our guidance of $1 billion target by year-end, which -- and we've got about, I think, less than $400 million remaining at this point. And then finally just a few words on our M&A activity beginning with KBW, where it's been pretty widely reported that our acquisition has moved to a review stage in the German competition commission, something we actually expected. I will just tell you that things are on schedule and we fully expect this deal to close in the fourth quarter. We also announced a definitive agreement to sell AUSTAR for about 10 times operating cash flow. The deal requires both Australian regulatory approval and an IRS tax ruling and if all goes as planned, we should complete that transaction early next year.

And sticking with the regulatory theme for the moment, it's worth pointing out that overall our regulatory position remains quite strong in Europe especially at the EU level. Now from time-to-time, we encounter a few bumps in the road at the national level, which is something we've talked about for a long time. In fact, some recent developments may have you scratching your head. For example, you probably read that the Dutch regulator has now concluded that the video market in Holland is healthy and competitive and there's no need for further regulation of cable. At the same time, Belgium regulators in a neighboring market with many of the same characteristics went the other direction. Of course this is where we started in Holland, so we've seen this movie before and I'm confident we will reach an acceptable ending to the story.

To recapping quickly, we are delivering on all fronts, solid growth, a shareholder friendly capital structure, improved M&A activity, including some further rebalancing of the geographic footprint which would see over 90% of our revenue coming out of Europe. With that as an intro, let me turn to slide 5, where we presented our regular breakdown of subscriber growth by product. At the top you will see our broadband and voice net adds, both of which represented record second quarters for us at around 155,000 RGUs. Our broadband business continues to benefit from our considerable speed advantage especially in our larger markets. In Germany, for example, broadband growth was up 26% year-over-year. In the Netherlands, we are still grabbing market share with 100% of net adds in our footprint versus KPN and Switzerland nearly doubled its broadband growth from last year following the recent launch of new triple-play offers that have speeds up to 5 times that of Swisscom.

The bottom left, you will see our video losses for the quarter at 75,000. That's about a 30% improvement year-over-year and a 20% sequential improvement from the first quarter of this year. The number reflects among other things, significantly lower analog churn in our Central and Eastern European operations, in particular Romania, and the steady addition of digital video subscribers. And then on the bottom right, you'll see total net adds for the quarter of 235,000. Again, that's up 39% from last year, with all key operating regions showing improvement.

Slide 6, you will see that clearly one of the main drivers of our subscriber growth is the success of our bundles. And as I've said many times, the bundle is the product and this slide provides an interesting look at our success here. The chart on the left shows 2 performance metrics. The vertical bars represent what we call our advanced service subscriber base, which essentially just adds up our broadband, voice, and digital TV RGUs -- a sticky high ARPU services. You can see that over the last 3 years, we've nearly doubled this number from roughly 10 million to 20 million and we are on a record pace so far this year. The blue background on the chart shows our triple-play penetration, which has steadily risen over the last 4 years from 11% to 23% today. The modest uptick in 2010 reflects the consolidation of Unitymedia in Germany, which is still in the early stages of bundling and still has great upside. In fact, if you exclude Germany, 25% or 1 in 4 of our customers today, get the full triple-play of services from us. In the end, the bundle drives RGU volume but also ARPU expansion and as a group, we're -- we today were at little at over $41 per household per month and that's up 6% year-over-year.

Nowhere is all of this more true than in Germany, which has performed better than we anticipated when we entered the market 18 months ago. Slide 7 highlights some of this progress. The top left chart shows the ramp-up in subscriber growth since we acquired the business and the 208,000 RGUs acquired in the first half of this year compared to 175,000 in the second half of last year and is up substantially from our reported results in the first half of 2010. There's really 3 things driving this growth. First of all, we are still seeing raw organic demand for broadband in the German market, which has historically lagged behind countries like the Netherlands and Switzerland. While data penetration is up from 7% to 11% since the acquisition, it's still far below our other LGI markets in Western Europe, which average over 30% penetration.

Secondly, our triple-play bundles are working with customers and on the bottom left you'll see our latest campaign featuring a well-known German Formula One driver, Nick Heidfeld. And then lastly, we are driving home our broadband speed advantage compared to DSL. We estimate that we're now getting over 70% of the net adds on our footprint, today over 35% of our German broadband customers are taking 32 Mbps or higher. All of this translates into really strong financial performance, including rebased revenue and operating cash flow growth of 8% and 16% year-to-date and an operating cash flow margin north of 60%. So not surprisingly, you know the progress with Unity had validated our confidence in this market and it reaffirms both logic and enthusiasm we have to expand in the German market with the KBW acquisition.

And then finally on slide 8, we provided a quick update on some of our key product initiatives all of which demonstrate the pace, quality of innovation in our shop today. On the video front as I mentioned, lower analog churn and steady digital cable growth help bring our Q2 video losses to their lowest level in 5 years. But the upsell of digital TV is by far the most important part of that equation for us from a revenue and ARPU perspective. We now have 7.3 million digital cable RGUs, taking our penetration to just under 50%, more than double where we were 3 years ago, which means on the flip-side we've still got 8 million customers watching analog TV, more and more of whom are going to find it increasingly hard to resist the -- the ever-growing number of HD channels, DVR packages that we're providing. And just in case that wasn't enough, we are making great progress on our multimedia home gateway, which we've talked about before several times and which we continue to believe will be a game changer in our markets. We will soft launch the platform in the Netherlands next quarter followed by Switzerland in 2012. And then despite a very fragmented and nascent, over-the-top environment, also something we talked about in most of our markets, we are also on schedule to roll out our new online video platform. First in Holland, with dozens of streamed linear channels and thousands of hours of on-demand content.

In our broadband business, it continues to be all about speed leadership. With the recent additions of Chile and Ireland, we now offer 100 Mbps plus services in 13 countries to over 22 million homes. Here's some recent stats that will prove that for you or prove that -- do prove the model for us, anyhow. 65% of our European broadband customers take an internet speed of 20 Mbps today and that number ramps -- continues to ramp. In Western Europe, almost 90% of our UPC sales got the 20 Mbps or higher level and in Switzerland approximately 40% of our broadband sales were at the 50 Mbps speed. In terms of mobile, we're on track for our 4G network rollout in Chile early next year and we've signed wide-ranging MVNO deals in the Netherlands and in Switzerland. Then lastly despite the strength of the first half, we are optimistic about our subscriber growth in the balance of 2011. Across our European markets we are busily mapping out the details of our fall campaign and gearing up to continue the momentum and as you know, usually the fourth quarter is our strongest quarter. So while the financial markets outside of the cable business are choppy, our -- our particular operations are very, very steady. I look forward to answering any questions you have about it and then I'm going to turn it over to Bernie to walk you through some financial slides. Bernie?

Great. Thanks, Mike. Hello, everyone. Slide 10 highlights our headline year-to-date results in terms of revenue and OCF growth. Compared to our first-half 2010 results, our revenue increased by 16% or $706 million to slightly more than $5 billion and our OCF expanded by 20% or $387 million to $2.35 billion. Our growth in both metrics resulted from a combination of favorable FX, organic growth driven by higher subscriber volumes to our advanced services, and to a lesser extent the impact of acquisitions, in particular with Germany included for 6 months in 2011 compared to roughly 5 months in the 2010 period. In terms of FX, the US dollar weakened about 6% to the Euro during the first 6 months of 2011 compared to last year with even greater depreciation against other currencies like the Swiss frank and Australian dollar. As Mike mentioned earlier, our revenue and OCF results reflect rebates growth of 4% and 7% and Western Europe was our best performing region led by Ireland and Germany and we will review that in more detail shortly.

On the product side, broadband internet remains our fastest growing product. However an absolute dollar terms, video accounts for majority of our subscription revenue gains year-over-year reflecting the positive impact from the continued migration of analog to digital and upsell of our digital video base. On average a digital cable subscriber is still generating over 80% more ARPU than an analog cable sub. Our OCF margin of 46.5% for the 6 months is reflective of the inherent scale in our business and our ability to successfully sell our customers more bundled products. As compared to last year, our margin increased by 140 basis points largely on the strength of Western Europe, where we saw an uptick in every country led by Unitymedia's 420 basis point improvement. If you exclude Unitymedia for both the 2011 and 2010 year-to-date periods, our consolidated OCF margins still increased by 60 basis points. We remain on track to achieve our mid-single digit rebased revenue and OCF growth targets for 2011.

Moving to slide 11, we will take a closer look at our Q2 results by operating region. European cable remains our focus and the primary driver of value for us. In the second quarter we generated $2.1 billion of revenue and $1.1 billion of OCF representing 4% rebased revenue growth and 9% rebased OCF growth. The second quarter results were driven by strong performances from our Irish, German, and Swiss operations and additionally Central and Eastern Europe reported flat rebased year-over-year OCF growth, which is improved as compared to our Q1 rebased results. And for the second quarter, our Chilean business posted $229 million in revenue and $87 million in OCF, which reflect rebased revenue growth of 6% and rebased OCF decline of 4%.

So solid top line growth for VTR but as we expected the OCF decline resulted from costs associated with our 4G project which you all know about. If you exclude the $7 million of incremental 4G cost in Q2, VTR 's triple-play OCF growth would have been 4%. And that's a little below VTR's rebased revenue for the quarter because we had a very strong quarter in terms of RGU additions in Chile which contributed in part to higher customer acquisition and marketing costs. And finally in Australia, our DTH business generated rebased revenue and OCF growth of 1% and 5%, which was an improvement from AUSTAR'S relatively flat results in the first quarter. Overall, our Q2 results were strong but our OCF performance is particular -- particularly notable given our robust subscriber additions. And important to note however that as we look out to Q3, we expect to report lower rebased OCF growth due to several factors including phasing of our marketing spend as compared to last year's Q3; continued ramp and costs associated with our 4G project in Chile; costs related to the football rights we recently acquired in Belgium; and difficult year-over-year comps in certain markets like Germany and Switzerland.

Slide 12, similar to prior quarters, our big 4 markets in Western Europe consisting of Germany, Netherlands, Belgium, and Switzerland were largely responsible for driving OCF performance in the quarter. As a reminder these 4 countries account for roughly 70% of LGI's total operating cash flow. The chart on the left summarizes our rebased OCF growth for Western Europe, which was 10% for Q2 2011 compared to 6% for the second quarter last year and the chart on the right looks at the big 4 markets which constitute a large part of the total Western Europe year-over-year growth. Interesting to note that 3 of the 4 markets posted higher rebased OCF in Q2 as compared to the respective Q1 growth rates. And once again our German operation performed extremely well with 37% growth in net adds year-over-year which contributed to 18% rebased OCF growth in the quarter.

And our Dutch and Belgian operations each posted 8% rebased OCF growth in the quarter, so solid results given the amount of competition and maturity inherent in these businesses. Both operations have benefited from a disciplined cost focus, continued digital penetration, and triple-play success, as evidenced by the fact that each operation has added over 300,000 advanced services in the last 12 months. And our Swiss operations show an improvement over last year's Q2, increasing net adds by over 100% and achieving its best quarterly rebased OCF rate in 2 years with 7%. And not on this slide is Ireland, which had a stand out quarter, delivering rebased OCF growth of 27% in the quarter on the back of RGU growth as they have increased their RGU base by over 10% or 80,000 RGUs in just the last year.

Slide 13 shows CapEx and free cash flow performance. As the chart on the left highlights, our capital expenditures for Q2 were $508 million or 19.4% of revenue as compared to 20% in Q2 2010. This modest improvement was driven by our UPC broadband and VTR segments, which experienced year-over-year declines of 150 and 250 basis points respectfully. This is a good result given their growth in subscriber additions in the quarter as compared to Q2 2010. If you exclude VTR's wireless CapEx in Q2 of $13 million, our ratio would have fallen from 19.4% to 18.9%, although we expect our Chilean 4G CapEx will ramp further in the second half of this year. On a year-to-date basis, capital expenditures were $1 billion or 20.2% versus 19.3% largely as result of spending at our Belgium operation which resulted in more than a 400 basis point increase year-over-year.

Moving to the right hand chart, our adjusted free cash flow on a year-to-date basis increased 13% the $430 million compared to $382 million over the same period last year, with Q2 adjusted free cash flow of $165 million, nearly doubling last year's figure. For both the 3 and the 6 month results, our adjusted free cash flow improvement was driven by higher OCF, which was partially offset by higher CapEx and borrowing costs. In terms of the second half of the year and similar to our free cash flow phasing in prior years, we expect our adjusted free cash flow to be significantly weighted to the fourth quarter.

Slide 14 shows our leverage and liquidity situation. We finished Q2 with $23.7 billion of total debt and capital lease obligations, which represented a slight decline to our Q1 figures. And during the quarter we eliminated nearly all of our outstanding convertible securities including all of our UGC converts and 99.8% of our more recently issued LGI convertible notes. We issued 50 million shares and paid $187 million in cash to retire these securities, eliminating approximately $1.4 billion principle amount of debt. And at June 30, we had $3.4 billion of cash, not including the $1.5 billion of cash held in escrow in connection with the pending KBW acquisition. And our adjusted gross to leverage ratio was 4.6 times which nets off the $1.2 billion Sumitomo loan and our net leverage ratio was 3.6 times, which for our cash position includes our reported cash as well as the KBW escrowed cash. And both of these ratios were down modestly from Q1 levels.

In terms of liquidity, we had a $4.6 billion consolidated position at June 30, excluding our escrowed cash. This consisted of $915 million of cash at the LGI parent and our non-operating subsidiaries; $2.5 billion of cash at our operating subs; and $1.2 billion in maximum borrowing capacity under our credit facilities. And subsequent to quarter-end, Telenet used approximately $1.3 billion of its $1.7 billion in cash to make a $739 million capital distribution of which we received about $370 million and they repaid $580 million of term loans. Adjusting for both transactions, our quarter-end cash position would have been roughly $2.45 billion of which $1.3 billion would have been at LGI and our non-operating subs.

And finally our buyback strategy is in full force. Given than we were locked out of the market for about half of second quarter, we resumed our program in earnest in July. And including what we have purchased year to date through July plus the $187 million of incentive payments on our LGI convertible bonds, we have a little less than $400 million of stock to repurchase over the next 5 months. So if you turn to slide 15, in summary, we are encouraged by our overall performance in Q2 and the first half of the year. And this is particularly true of our RGU growth, which led by our German business, was unusually strong during Q2 given the slow down that we typically see heading into summer. We are also excited about our fall marketing campaigns and the launch of new innovative products. Our capital structure is in great shape and our stock repurchase program is pacing to $1 billion 2011 target. And finally we are confirming all of our 2011 guidance targets today.

So with that, operator, let's open up for questions.

The question and answer session will be conducted electronically. (Operator Instructions) In order to accommodate everyone, we request that you ask only question with one follow-up, as needed. (Operator Instructions) We'll pause for just a moment to give everyone an opportunity to signal for questions.

And we'll take our first question from James Ratcliffe with Barclays Capital.

Good morning, guys. Thanks for taking the question. Two if I could. First of all, I noticed, Kabel Deutschland has also started offering MVNO service. When you think about markets like Germany or the Netherlands where there is another cable operator, does it make sense to look at these MVNOs potentially as a collaborative effort with all the cable operators or sticking to your own platform? And, secondly when you look at certainly financial markets at the moment, does this any change in what your longer term view of the right target multiple for this business is? Thanks.

Well, thanks, James. You know on the first question regarding MVNO deals and cooperation within markets, I will tell you that we have a track record of already doing that. So in the Netherlands where we have an MVNO signed, to get to the point we are at, we did cooperate with Ziggo in both securing spectrum and anticipating what we might do with that spectrum together and that -- the basis of that cooperation, obviously, assisted us in acquiring the spectrum and achieving a relatively strong and full MVNO deal with Vodafone in that market. I think your main question is, is there scope and opportunity for cooperation among cable operators within a market and I think the answer is yes. I didn't follow the second question. Do you want to repeat that?

Just given what we are seeing in recently in financial markets if any of this is changing your view of the appropriate long-term leverage for this business? Not really. I mean, you know, you look at our, the average life of our debt and the fact that 85% of it is due in oh, '16, I believe, or longer. We are not experts in being able to forecast exactly where debt markets will be over the next five years, of course, but as we sit here today, our business is very stable. Our growth is steady and our balance sheet is de-risked and strong. So, no, we don't see any reason to amend our leverage target or our fundamental strategy of levered equity growth at this stage of the game, nope. Great. Thank you.

And we will take our next question from David Joyce with Miller Tabak.

Thank you. On this very strong Ireland growth, what would you attribute that -- the net RGU -- the growth year-over-year from? Is that from getting the broadband upgraded and I understand correctly there is still some more investment in that market you want to do? And if you could apply to that the notion that Eircom is looking now to get into the TV over the broadband product? Thanks.

Well I was just in Ireland about 10 days ago meeting with the Management team and going through the business. I can tell you that it's attributable to a number of things and I will repeat some of the numbers that Bernie referenced. We've just upped our budget, our forecast for the year in Ireland by 30%, by the way. And mid-20%s sort of EBITDA growth in the second quarter, I think reflects the fact that there is huge pent up demand for broadband in this market, that we are well-through the rebuild, particularly in Dublin though there is some more to go. And thirdly, there is -- we have a competitive environment there that is -- I would say not as dynamic as other markets we operate in.

Eircom might be putting out press releases, but I think this is a company that is in serious financial trouble. So, it has been certainly helpful for us to take advantage of their inability to respond or upgrade and rebuild their networks. When you're rolling out 20, 35, 50, 100 Mbps broadband speed and your competitor is dealing with an older copper network, I think that gives you tremendous momentum. The other thing I would say is that our digital penetration in that market I believe is probably north of 60% and maybe even higher than that. And we are offering most of the great content in that marketplace. Sky, who we compete with, does a very good job of helping to value and promote content in that market, not too dissimilar from the UK. And so our ARPUs in this market are meaningfully higher, in fact they're the highest in Europe for us and that gives us more room to drive cash flow as well.

I think it's a combination of our success in rebuilding the pent up demand for broadband, the fact that we have a competitor that is in an awkward moment, and the fact that consumers know and understand and value the triple-play, in particular the value of digital television.

Thanks. If I could just tack on to that. I was wondering what the update would be on the Aster acquisition. I know that's still pending some regulatory approval?

It's right where you describe it, pending regulatory approval. We are working through the concerns expressed by the local regulator there. And are diligently evaluating alternative ways of satisfying those concerns. And I don't think we are providing any further update except that we are hopeful we can get that across the line.

Great quarter. Thank you.

Yes.

All right. We'll take our next question from Jeff Wlodarczak from Pivotal Research Group.

Hello. Good morning, guys. Wanted to spend a little bit more time on M&A. Mike, maybe you could touch base or talk about the Aussie regulator's sort of peculiar logic against the Aster sale. Are your Roman cable assets sort of off the table in terms of the sale and then I have one follow-up?

The first question, was it Aster or Austar?

I'm actually sitting on Austar. Sorry.

Yes. Okay. That's what I figured.

You just talked about Aster so it can be confusing.

That's what I thought. Okay. So the transaction in Australia, which we announced, and everybody I'm sure saw in mid-July too sell Austar to Foxtel at a pretty good multiple has two major conditions to completion. One is, of course, approval by the ACCC, the competition commission there, and an IRS ruling. The ACCC has followed the time frame that it's obligated to follow and issued a list of issues or published a list of issues or concerns with the transaction which in my experience, now running close to 17 years worth in this market, is par for the course. It is typical for the ACCC to come out swinging, to have a long list of concerns, many of which, if not all of which, don't necessarily reflect the sort of considered view of the market that the rest of us might have.

So, I mean, I can go through those individually if you think there is value. I will tell you that we're scratching our heads a little bit as I've said publicly. We do believe there is plenty of information and ammunition, if you will, to rebut those concerns. And we ought to know relatively quickly I think around mid-September where we stand with respect to that. But I'm not worried, if that's where you are going at going. I think this is exactly what I expected and, by the way, Foxtel and the folks at Telstra News expected and that is a robust conversation with regulators about a transaction that brings the two pay TV companies together.

So, there really isn't -- I mean I don't want -- there really isn't much more to say to it than that. I mean, the concerns are unique to that marketplace. They don't have relevance outside of Australia. They revolve mostly around access and supply of content and the notion that we might some day compete with one another which is highly unlikely. So, those are the two main areas that we're focused on providing them information with and for and we're -- I'm still very, very confident we will get this deal done.

All right. Fair enough. And then can you comment at all on your Romanian cable assets potentially being off the table in terms of selling?

Well I mean, we haven't said much publicly about that from the very, very beginning. So, I suppose the transaction remains in that stage or that phase. We are always reviewing opportunistically the ability or the transactions that might allow us to rationalize markets. And certainly you would expect that that's a market, given our operating history there, that we would be considering alternatives. I'll simply say that we continue to consider those alternatives and when we have something that we can publicly disclose, you can bet we will do it. But in the same -- we have the right kind of discipline on the buy side and we have the right kind of discipline on the rebalancing front. So, I think all the activity that's happened or might be happening I think you can take confidence in is going to be to the benefit of our shareholders.

Fair enough. And then one more, can you provide any color on trends so far in the third quarter in Switzerland in particular where you launched 50 meg at a modestly lower price? Thanks.

Diederik, you want to hit that?

Yes, sure, Mike. The launch of that particular product happened in April and the first results we have been seeing since May are encouraging. If you look at the Q2 sets in net adds, we have been doing better in internet, digital cable. So, although we are moving forward, the numbers itself are still kind of single digit where the intent, obviously at the end of the day is to accelerate the growth. But all steps are positive. The propositions have been well received. And so we believe that from that point of view, we will end the year also with a better result than -- based on this new propositions, than last year. Those are indications.

Yes, I mean, we have done 50,000 digital net adds year to date in Switzerland. And, you know, pretty steady -- steadily improving voice and data net adds and as Bernie mentioned we are driving the EBITDA line. So I wouldn't suggest that Switzerland is cooking with gas, but I'll tell you the trajectory and trend is right where we want it to be which is steady improvement quarter-over-quarter in a very important and large market for us and the driver for that is in fact these new triple-play packs and the speed advantage we have over Cablecom, which -- sorry, over Swisscom -- which is starting to show itself.

Okay. Thanks.

Yes.

All right and we will take our next question from Jason Bazinet with Citi.

I just have a long-term question in the context of your equity shrink strategy. Can you just remind us what limitations there are if any regarding repatriating cash back to the US to pursue to your equity shrinking and can you educate us in terms of what steps you can take to increase the balance of cash that you can repatriate back to the US?

Sure. I will let Charlie address that. I don't know that we've really said much publicly about the -- or quantified for you publicly those limits but the limits mostly have to do with repatriating capital to the US in a tax efficient manner. But, you want to address that, Charlie? Charlie, take us off mute? Okay, well, I mean the limitations are as I described them.

Okay.

In principal. We have plenty of cash in the system as we just described. But getting that cash up to the US does require -- well, let me say it this way. To get it up tax efficiently requires some maneuvering. I will tell you that without being -- without quantifying it for you, that we have years, at least 2 to 3 years remaining of this kind of pace.

Okay.

For buyback before we have any particular issues. And one thing I can assure you of is if and when we get close to hitting the limit, we will be coming up with some creative ways of expanding that limit.

Okay. Very good.

I can't tell you what they are yet, because we haven't put the technology to work. But, certainly we got plenty of head room, if you will, in terms of buyback capability--

Mike, I'm sorry I got cut off very briefly. I'm back now. Apologies.

Yes. Did you hear the answer I just provided?

I didn't, actually, no. I'm sure it was right.

Okay. Well, so the question was around the buyback limitations and I just described we have at least 2 plus years -- 2.5, 3 years of this sort of pace of buyback capability before we get any sort of tax or--

Yes and I think the other key point is being with it the ability to raise money in the United States. Not necessarily our first choice or our first prize, but we could just raise capital in the United States against our assets in Europe which obviously is the amount of money immediately in the states. So, that gives some leeway if we need it to.

It's a self-imposed limitation, let me put it that way, Jason.

Okay. Understood. Great. Very helpful. Thank you.

Yes.

All right. And we will take our next question from Hugh McCaffrey with Goldman Sachs.

Thank you. I've got a couple of questions just around demand, speed demand in Europe. So 65% of customers are on over 20 megabits per second services. In terms of the gross additions, what kind of demand are you seeing across the range of speeds? Is the majority of demand towards 100 megabits or is still at the sort of 30 megabit level? And then I've got a follow-up in Germany.

The speed demand, and I might have even mentioned a number along those lines but I would say that the speed demands are principally at 20 or above but they are in that sweet spot -- 20 to 30, let's say, 25 to 35. I would say the demand that we are seeing in Switzerland were 45% are buying 50 Mbps or higher is unique relative to our other markets, but that in principle we are seeing demand, I would say, in that 20 to 30 megabit sweet-spot. That's where people see today anyway the kind of price value and usage benefit, that they are more or less across the board. I think the quote I gave was 90% of our sales at UPC are at 20 Mbps or higher. So I'll tell you that very few people are buying 10 Mbps products from us and we've shifted entire market and the concept of broadband in our markets to that 20 Mbps and higher level and redefined what it means I think to have high speed internet. But principally if I had to break that 90% of sales down, I would say the vast majority of those are going to be at 20 to 30 meg.

Okay that's very clear -- and just kind of digging in a little bit on Germany, the triple-play demand has been so very robust in that market. And can you just give us a bit of color in terms of which triple-play tiers people are going for? Is it -- would it be reasonable to assume in the context of your answer that most people are going for the HD-package at 32 Mbps?

Well, I mean, do you want to provide some color on that Diederik? That's -- I mean the slide that we showed you that has the 32 -- the 32 meg of product is probably our most popular with the digital TV in a package, the triple-play package and that speed -- that price varies based on the promotion. But my recollection is that 32 meg is the primary sweet spot. But Diederik, do you want add to that?

That is correct. That's the best selling product. It's more or less like in the Netherlands we the have the EUR45, 25 meg pack. So this -- and next to that, the gaining popularity is the HD/DVR box. Next to that there's two separate boxes, and HD/DVR is a relative new phenomenon still in Germany. And every quarter we are gaining traction there. So in direct DVD BOB, that is the key source of growth in the next year to come for us in Germany, so. Does that answer your question?

Yes, yes. That's very helpful. Thank you.

Okay. Thank you.

All right. And our next question comes from Matthew Harrigan with Wunderlich Securities.

Good morning. Since Balan is on the call, could he update us on the G.FAST recommendation over at the ITU and what the implications for the development of kind of a FiOS light that would have speeds about like FiOS has right now. I know the physics of the copper are what they are and there's been a lot that's been aspirational for years but I'd still like to get your thoughts on it because it's getting a fair amount of press. And then if we could also get your, Balan, engineer's perspective on the Horizon box, that would be great.

Balan?

Sure. I will start with the Horizon box. That program is on track for, as Mike pointed out, a soft launch in the Netherlands in the fourth quarter. It is a pretty complex box with lots of software and hardware innovations that we bring. So, lots of work there. But it's going good. Your other question on the ITU grid, I didn't catch the whole question there.

Basically, the ITU looking at new recommendation, G.FAST. It's trying to use the copper for up to the last 200 meters to get much faster speeds than you have right now. I mean, they are almost comparable to FiOS in its presence incarnation. I know that's aspirational for years and the guts of the copper are what they are, but if you look at some technical journals, people are talking about it more. I know it hasn't totally hardened out, but I think they are doing some pretty serious work on it. So, I guess you can sort of reduce the question down to, do you think that the competition on the copper side with relatively short loop lengths is going to get a little bit more robust over a period of time, because you've got a huge amount of runway relative to what the telcos can do right now?

Sure. There's couple of new innovations there -- spectrum management and--.

Yes, I think he is referring to vectoring. Balan?

That's part of it.

Yes. Balan, did we lose you? Yes, anyway. You could say we're -- this is what happens when you run are a global company, everybody is in different places. My understanding of that, Matt, is that it -- while telcos are promoting it as a potential solution to having to spend the money to build fiber, in the end when you look them straight in the eye, I don't know that they fully believe it's a solution. I think it may be the band-aid perhaps to respond to our broadband initiatives. But it's not a long-term solution, certainly doesn't appear to be one in the eyes of regulators.

Having just returned from Brussels a couple weeks ago and participating in an EU roundtable with all my peers at Deutsche Telekom and Vodafone and Telefonica, et cetera. And having dinner with [Neuve Cross] and [Beroso], the word fiber for them is the critical piece of the puzzle when it comes to telcos. And, I'm not an engineer. I'll let Balan describe it more fully, but my business instinct is it's not yet being perceived as a fix for what appears to be relatively significant price tag they face in terms of competing with us and building fiber.

Thanks, Mike.

Yes.

All right and we will take our next question from Ben Swinburne with Morgan Stanley.

Thanks. Mike, could you talk a little bit more about the German opportunity as you look at KBW? I know it's a ways out, but the Unity growth is really impressive, particularly the margin expansion. So, I was just wondering if you could spend a little bit of time comparing the KBW opportunity to what you have been able to deliver in Unity or at Unity? And then just on broadband in general, I'm wondering how you are thinking in your markets about selling broadband as a stand alone product? If you think that sort of having a cheaper broadband option in the bundle, sort of incenting people into the bundle is always the right strategy or do you think about selling stand alone data given it's such a profitable product, you've got a superiority issue over the telcos in most of your markets? Is that an opportunity you think is worth exploiting as well?

Sure. Okay, well, in Germany, I mean, everybody knows we've -- we are in the regulatory review process there on the KBW deals -- about a $4.5 billion transaction. I think when we reported it we showed the EBITDA multiple with synergies at 8 times, 2011. And clearly lots of obvious and important reasons to look at this transaction and to try to complete this transaction. Not the least of which is that KBW is contiguous to Unitymedia's footprint and represents some of the best markets together with Unity in Germany in terms in economic growth, demographic profile, et cetera. The synergies are not insignificant though we haven't publicly said what those synergies are. You can imagine they're not -- they're not bad. And we have a very good track record for achieving synergies in a market like this.

The size of the business when you put them together is pretty meaningful for us. You are looking at a business with roughly 12 million homes passed. Something in the order of 6.5 million video subs. At least 6.5 million, maybe even more than that. Something in the order of 1.5 million voice and data subscribers, EUR1.5 billion of revenue and over EUR800 million of EBITDA. So, you are looking at a large profitable contiguous network platform in Europe's strongest, fastest-growing market where our product is being consumed at ever-increasing speeds and the pace that I haven't seen in our business for quite sometime because of pent up demand and because they get it.

They get the fact that a bundle represents to them a huge economic and -- opportunity in terms of getting these great products and services at reasonable prices and that the products and services we are offering are best in class, in fact as good or better than anything you're going to get anywhere else in the world. So, there is a lot of very basic logic in terms of the financial scale and the operational scale we will achieve. But also the market itself just represents one of the best opportunities we've -- I've seen, anyway, in 20 years in the business. In terms of broadband as a stand alone opportunity versus being sold as part of a bundle, every time we bolt a project on to a bundle we deliver gross margins.

Let me say that again -- every time we are able to bolt a product on to a -- let's say, broadband bundle, broadband-inspired bundle, we deliver positive absolute gross margin to the platform and we are all about delivering gross margins. The long as we can achieve gross margins in voice in the 70%s and gross margin in video right now in the 80%s, if -- depending on the tier, it's hard for me to argue that we shouldn't be using broadband, if that's the killer app, as a means of selling more and more products and services. We don't see any slowdown in the demand for digital television. We don't see any slowdown, in fact we had a great voice quarter in the demand for fixed voice when it sold as part of an aggressively-priced -- and fast ARPU -- broadband bundle.

So, nothing in our work, daily work, weekly and nothing in our numbers or results indicate to us any slowdown in demand for that bundle. That doesn't mean, Ben, that some point we won't get creative and we won't find ways to pick the pocket of a incumbent by restructuring a bundle or a package. We will certainly be creative on that front and always have been creative on that front. But today having that 20, 30, 40, 50 mbps speed as the lead product in a bundle, and then providing a very compelling digital package for folks who want more TV, who want HD and want a DVR is really the ticket and something that's working for us quite successfully.

It will be interesting when we roll out Horizon, our new box, because that will change the nature of the conversation. That will become the conversation and from -- for a while there where we are talking about revolutionizing the video experience in the home and towards leap-frogging people into the moment where all their content becomes seamlessly integrated and shared and accessible and with a very cool user interface. Exactly what everybody we know wants but has yet to see. So we will have now two guns in our holster, so to speak, and we'll see how we market and package that. But I do believe that the bundle at least at this stage is really the valuable and the most efficient way to go.

I appreciate the color, Mike, thanks.

Yes.

And we will take our final question today from Henrik Herbst with Credit Suisse.

Yes. Thank you. I was wondering if you could please give us your current thoughts on the 800MHz spectrum motion coming out in the Netherlands -- they could be interested in doing something with the cable operators and what your thoughts would be on that? Thank you.

Yes. Are you there?

Sorry. Yes. We got off up but we are back. We are -- like in many countries we are evaluating what we call situational mobile opportunities including I would say assessing acquisition of spectrum and interestingly like Mike said before we've had experienced with acquiring that to get a good signal on the 2.6GHz line. But the 800 meg is a different I would say approach. It's big ticket item.

So we are assessing carefully whether that would be something for us because with the acquisition of the spectrum in this case you would get a kind of a liability to build out and in particular the build out I would say obligation, where you will then start to turn into a mobile operator. And as you know in the Netherlands, for example, there is 3 big operators already active and it's highly questionable whether we would like to be number 4 and even in combination with Ziggo. And as Mike as has said before, we look at the mobile opportunities on a case-by-case basis but we also be cautious not to overdo it. So we are not going to bid any material amount on spectrum if there isn't an opportunity to also exploit it and without understanding the subsequent obligations because it's not about spectrum but it's also about to build out of the networks.

Yes. Did that help?

Answer your question?

Yes, that's very helpful. Thank you.

Okay. Thanks.

Operator, is that--?

And that was our final question for today.

Great. Well listen, thanks everybody for joining us. It's now officially August. So, hopefully you've got great plans to relax and enjoy the summer. We will be speaking to you at the end of our third quarter and look forward to that so thanks very much for joining us.

Ladies and gentlemen, this concludes Liberty Global's investor call. As a reminder, a replay of the call will be available in the Investor Relations section at Liberty Global's website at www.LGI.com. There, you can find a copy of today's presentation materials.