Liberty Global Ltd (LBTYA) 2025 Q4 法說會逐字稿

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Liberty Global's fourth quarter 2025 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 expressed 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 libertyglobal.com. After today's formal presentation, instructions will be given for a question-and-answer session.

Page 2 of the slides details the company's safe harbor statement regarding forward-looking statements. Today's presentation may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including the company's expectations with respect with outlook and future growth prospects and other information and statements that are not historical facts. These forward-looking statements involve certain risks that could cause actual results to differ materially from those expressed or implied by these statements.

These risks include those detailed in Liberty Global's filings with the Securities and Exchange Commission, including its most recently filed Forms 10-Q and 10-K as amended. Liberty Global disclaims any obligation to update any of these forward-looking statements to reflect any change in its expectations or in the conditions on which any such statement is based.

I would now like to turn the call over to Mr. Mike Fries.

Hello, everyone, and thanks for joining us today. As you would have seen by now, in addition to our results, we announced two significant transactions earlier today, which, of course, we'll address in our prepared remarks. As a result, I think this call may run over 60 minutes. I hope you can stick with us because there's quite a bit to talk about here. We've broken this down into our typical quarterly results presentation, which Charlie and I will breeze through, as we usually do.

perhaps a little faster than normal. And then we'll move into more of a strategic update like we did two years ago at this time. I also think it might be a good call to follow the slides that we're broadcasting, especially the second half.

But let me jump right in on slide 4. And certainly, by now, you are all familiar with how we organize and manage our business today. As illustrated here, everything falls into one of three operating verticals. Liberty Telecom comprises our four national FMC champions that generate $22 billion of revenue and $8 billion of EBITDA on an aggregate basis and where our primary goals are to drive commercial momentum and importantly, unlock equity value for shareholders. Much more on that in a moment.

Liberty Global on the far right houses our portfolio of media, infra and tech investments totaling $3.4 billion today. And here, we're focused on rotating capital, right, and investing in high-growth sectors with scale and tailwinds. And of course, in the center, sits Liberty Global itself with $2.2 billion of cash and a team with decades of experience operating and investing in these businesses.

Now I'll come back to this slide and the strategic update. But first, let me provide some highlights on each of these for 2025. So it has clearly been a busy year for us on all three fronts. And as slide 5 points out, we feel like we've delivered on our core strategic priorities. There's a lot of detail here, so I'm just going to hit a few of the high points.

We'll talk about our telecom company results in the next couple of slides, but we're pleased with the momentum that our commercial and network strategies are delivering, especially in the second half of the year, supported in parts by the benefits we realized in [AI], all of our three large OpCos hit their guidance targets last year.

When it comes to unlocking value in telecom, a key goal for us, as you know, you've no doubt seen our announcements on the UK fiber transaction and our acquisition of Vodafone's interest in the Netherlands. We'll dig into both those deals shortly, but this is exactly what we said we would do on our call last year and the year before. At Liberty Global, we've totally reshaped our operating model, having reduced our net corporate spend by 75% in the last 12 months.

Needless to say excited to see how this new guidance leads its way into analysts, some of the parts calculations. And we continue to allocate capital to the highest return. As you know, we did reduce the buyback last year from 10% to 5% of shares partially, to be honest, in anticipation of some of these varied transactions. And so far this year, we're not actively in the market, but we always remain opportunistic on our stock and we'll keep you abreast of our plans throughout the course of the year versus guiding to them.

With respect to our cash balance pro forma for the transactions announced today and for what we expect to realize in further asset sales, we should end the year with $1.5 billion of cash, and Charlie will get into that in a bit more detail in a moment.

And then finally, our growth portfolio remains highly concentrated with five assets comprising 70% of the $3.4 billion in value. We couldn't be more excited about Formula E, the progress we're making on the Gen4 car, our racing calendar, and of course, our sponsors and we have renewed focus on the Experian economy. I'm not going to get into much detail here, but by this, we mean live events, sports, et cetera.

We probably looked at 100 deals in the space. We've done real work in about 40, and we've only closed a handful of very small transactions. So that can give you some comfort that while we're excited about this sector, we're staying very disciplined as we look to rotate capital.

Now the next two slides summarize Q4 operating performance for our telecom businesses. In the UK, Lutania have implemented a number of things that helped improve broadband performance throughout the year.

Initiatives like bundling Netflix and being recognized as a top UK broadband provider. Those things drove a strong Q4 as well as stable ARPUs.

Postpaid mobile results were impacted, however, by the increases that they took in October. Hopefully, we'll see improved performance in '26, especially as 5G coverage continues to grow and pricing pressure settles. In Ireland, combination of fiber wholesale activations, improved network performance, actually, they are also ranked the best provider in the market. And off-net expansion, supported net growth in the fixed base with stable ARPUs. Mobile in Ireland continued to grow steadily and remember, we're an MVNO there, helped in part by a senior offer launched in June.

In the Netherlands, Vodafone Ziggo's How We Win plan is driving substantial improvements in the broadband base, becoming the largest provider of 2 gigabit broadband speeds in the market and recent recognition as the best TV provider help make Q4 the single best resulting services in nearly three years with steady improvement over the last six months carrying into 2026.

Postpaid mobile growth in Holland continued to be supported by nearly universal 5G coverage and a strong flanker brand. And then finally, Telenet had its highest quarterly broadband result in three years, helped by fixed mobile convergence in the South and a strong Black Friday period.

And similar to other markets we operate in, ARPUs were fixed in mobile are very stable. Now if it wasn't enough information for you, we will be discussing three out of these four markets in our strategic update later in the call, including a lot more commentary on their performance and outlook.

So in the meantime, Charlie, over to you.

Thanks, Mike. Now turning to our Q4 financial highlights. Our operating companies in the UK, the Netherlands and Belgium delivered on their full year guidance metrics despite challenging market conditions. VMO2 delivered a revenue decline of 5.9% on a reported basis, which was impacted by lower nexfibre construction revenues due to a slowdown in the fiber build and also sustained competitive pressure in both the fixed and mobile market in the UK.

On a guidance basis, excluding nexfibre construction and O2 Daisy, we delivered modest growth for the full year. Adjusted EBITDA declined by 2.4% on a reported basis, primarily driven by lower nexfibre construction profitability. Excluding this, adjusted EBITDA fell by 1% in Q4, but we still achieved growth overall for the full year of positive 1%.

Moving to VodafoneZiggo, we saw a revenue decline of 2.3% in Q4 driven by fixed churn and reduced low-margin IoT revenues. This is partially offset by the annual price adjustment and higher Ziggo Sport revenues.

Adjusted EBITDA declined 3.4% in Q4 driven by this lower revenue and higher costs related to commercial initiatives. The full year figures were in line with the guidance in Q1 for the new How We Win strategy. At Telenet, we saw a revenue decline of 1.3%, driven by our strategic decision to not renew the Belgium football broadcasting rights and lower programming revenues.

Adjusted EBITDA declined by 9.9%, driven by elevated labor and marketing costs as well as higher professional services and outsourced labor spend.

Turning to our treasury update. We've been extremely proactive through 2025 and nearly for 2026 and extending our 2028 and 2029 maturities. And we successfully refinanced $15 billion across our credit silos. And both VMO2 and VodafoneZiggo, we have fully refinanced all 2028 maturities, boring successful term loan refinancings, senior secured note issuances and private taps within these credit silos.

In Belgium, as we announced in Q3, we have EUR4.35 billion of committed financing at Wyre which is contingent on BCA regulatory approval of our fiber sharing agreement. A portion of the proceeds around EUR2.34 billion are allocated to repay the intercompany loan with Telenet and will be used to rebalance leverage at Telenet. We intend to further repay some of the 2028 debt at Telenet with the proceeds from our partial Wyre stake sale, which is expected to complete this year.

All of this proactive refinancing activity has significantly reduced our 2028 maturities and maintained our average tenor of around five years at broadly comparable credit spreads to our historic levels.

Turning to the next slide. We remain committed to our disciplined capital allocation model as we rotate capital into high-growth investments and strategic transactions. Starting in the top left, we successfully delivered against all free cash flow guidance metrics for the year across our OpCos and JVs.

And additionally, following our corporate reshaping program, Liberty Services and Corporate closed 2025 ahead of guidance at negative $130 million of adjusted EBITDA, which is around $20 million better than our $150 million target.

Moving to the Liberty Growth walk on the bottom left. The fair market value of our growth portfolio remained broadly stable versus Q3 at $3.4 billion. This was driven by modest investments in nexfibre, AtlasEdge and EdgeConneX, offset by the partial disposal of our ITV stake and the full exit of our Enfabrica stake as well as positive fair market value adjustments of Formula E and UPC Slovakia, which has been held in the growth portfolio until the sale process completes later this year.

Turning to our cash walk on the top right, we ended the year with a consolidated cash balance of $2.2 billion. During the quarter, we received $162 million of upstream cash and JV dividends and $140 million net cash proceeds from disposals in our growth portfolio, including $180 million from the partial ITV stake sale. We spent $34 million in our buyback program during the quarter, repurchasing a total of 5% of our outstanding shares during the year.

Moving to the bottom right, we are aiming to end 2026 with around $1.5 billion of corporate cash. After deducting for the cash outflows related to the M&A transactions Mike will touch on in a moment, we intend to replenish our corporate cash with a combination of dividends and cash upstream from our operating businesses as well as noncore asset disposals from our growth portfolio.

Turning to Liberty Growth in Media & Sports. Our strategy remains to invest live sports and entertainment platforms with growing global fan basis. Formula E is our leading example of this, and Season 12 has started strongly ahead of the launch of the Gen4 car. Our data center assets, EdgeConneX and AtlasEdge continue to show strong top line revenue growth, supporting a $1 billion-plus year-end valuation. And our energy transition assets also made big steps forward in 2025.

Egg Power secured GBP400 million of senior debt to help fund over 400 megawatts equivalent of wind and solar power projects, and Believ, our destination charging business has now built 2,500 public charging sockets, which are averaging around GBP1,500 EBITDA per socket with a further 23,000 awarded to them by UK local authorities. And they're currently bidding on a large number of additional sockets, which are being awarded.

INSTECH focuses on AI. We made a strategic investment in 11 labs, and we're also moving our in-house AI investments into the growth pillar given their potential to sell services to third-party customers outside the Liberty family.

We've also established a new services pillar, and have transferred Liberty Blume into it from Jan 2026. Now Liberty Blume develops tech-enabled back-office solutions for Liberty Global companies as well as third parties. It delivered over 20% revenue growth in 2025, achieving over GBP100 million of revenue with an order book of nearly GBP400 million. The initial value has been set at GBP100 million, and we've hired a new CEO to accelerate growth.

Starting January 2026, we're also introducing an annual management fee of 1.5% of assets under management, paid by Liberty Growth to Liberty Services. This fee will be funded by distributions from the growth portfolio, including disposals and will be used to fund direct and allocated operating costs such as treasury and related legal services, and these are all directly attributable to the growth portfolio.

Turning to our guidance for 2026, we're providing guidance by operating company. For Virgin Media, O2 from Q1 2026, we will move to new disclosure, which better reflects the three key operating verticals following the creation of O2 Daisy. Now these are consumer, business and wholesale.

There's a pro forma information in the stand-alone VMO2 release, which explains this further alongside updated KPI disclosures. On this basis, the VMO2 revenue guidance is now set on total service revenues which we expect to decline by 3% to 5%.

Now this is adjusted for the impact of the Daisy transaction, which is driven by continued promotional intensity as well as planned streamlining of the B2B product portfolio following the creation of O2 Daisy.

Adjusted EBITDA is also expected to decline by 3% to 5%, also against the comparable period adjusted for the Daisy impact, driven by lower revenue and lower gross margin due to the changing customer mix. Stable property and equipment additions of GBP2.2 billion, excluding right-of-use additions due to continued investment in 5G and fiber to the home and adjusted free cash flow of around GBP200 million for the year supporting cash distributions to shareholders of the same amount.

For VodafoneZiggo, we expect stable to low single-digit decline in revenue driven by a lower fixed base and the flow-through of the front book pricing impact, albeit with support from continued price indexation and fixed and mobile.

Mid- to high single-digit decline in adjusted EBITDA driven by OpEx investments into network resilience and service reliability. Property and equipment additions to revenue is expected to be around 23% to 25% driven by continued 5G and DOCSIS 4.0 investments as well as a CapEx component of investments into network resilience and service reliability.

As to give more detail on this additional investment, we expect EUR100 million of incremental investment of OpEx and CapEx into network resilience and service reliability during 2026. Now this will reduce to GBP50 million OpEx impact in 2027, 2028. And we're expecting adjusted free cash flow to be around EUR100 million with no shareholder distributions planned for the year.

For Telenet, we're introducing new full year 2026 guidance based on IFRS financials, excluding Wyre, we expect stable revenue growth, reflecting a stable operating environment and the annual price indexation under Belgium regulations, low single-digit growth in adjusted EBITDAaL, supported by OpEx savings from significant digital and IT investments and continued lower programming costs.

Property and equipment additions to revenue of around 20% as investments in 5G and digital upgrades stepped down and positive adjusted free cash flow of around EUR20 million.

And finally, for Liberty Corporate, we expect around $50 million negative adjusted EBITDA driven by the annualization of the cost savings from the corporate reshaping that took place in 2025 and the implementation of the new 1.5% management fee from the growth portfolio.

Thanks, Charlie. Great job. And now we're going to switch gears to what I think I hope is the most important part of today's call. And that, of course, is an update on the key transactions we've just announced and how they significantly advance our plans to deliver value to shareholders. .

I'll start by revisiting the first slide that I showed you today, and that's the three core pillars of our operating structure, Liberty Telecom, Liberty Growth and Liberty Global. We'll go back to the strategies for each of these. I think you've got them by now.

But what I have done on this slide is present a very rudimentary sum of the parts valuation exercise for these three pillars at the bottom of the slide that shows that the Liberty Growth portfolio today, accepting the fair market value that Deloitte has prepared is worth roughly $10 per Liberty Global share.

Our corporate cash of $2.2 billion, even after a reasonable reduction of the value for the $50 million of corporate spend this year is roughly $6 per Liberty share, which means that with an $11 stock price today, there's at least $5 per share of negative value being ascribed to our Liberty Telecom businesses. And of course, there are multiple ways of arriving at these figures. Some people start by valuing Liberty Telecom and then applying discounts to cash and Liberty Growth and Corporate, but I like this approach.

Cash is cash, and we believe the growth assets are valued fairly and appropriately. More importantly, we're rapidly turning those growth assets into cash. We've already exited something that $1.6 billion in the last six years. So whether it's negative five or zero, you can see why we have focused a lot of time and attention on creating and delivering value in our telecom portfolio.

Of course, the Sunrise spin-off just 14 months ago was step one. That transaction delivered what is today, roughly $13 per share of value to Liberty Global Investors, far more than anyone expected at the time what the implied value was for that business at the time. And that's why we can say our stock price on a combined basis is up meaningfully over the last two years.

Now moving to the next slide. Here's another thing that gives us some confidence in the value of our telecom business. The European telecom sector has been experiencing a broad-based rally this year with the Euro Telco Index up 16% year-to-date. And just about every major incumbent telco and you know all the names, up even more than that, 20%, 25%. So what's happening here?

We see three key tailwinds impacting the sector. First, of course, is an improving regulatory environment. This is not to say that we're totally satisfied with where things stand. You know us better than that. But if you look at the UK and the changes they've made to the CMA or if you look at the recently published draft of the EU's Digital Networks Act, we believe there's a good chance regulators continue to loosen rules around consolidation and spectrum policies, especially in the age of AI, where telecom continues to be perceived rightly as critical infrastructure for consumers, for businesses and for governments.

Secondly, just as we are seeing in our own operations like Telenet, where 5G CapEx is largely behind us now or Ireland, where our fiber build is coming to an end, there is light at the end of the CapEx tunnel. And when you combine declining CapEx intensity, with Telecom's high margins and stable revenues, you've got a strong recipe for improving free cash flow.

And then finally, there is the AI thesis. It's hard to find an industry more ready to benefit from AI-driven efficiencies, customer improvements, network automation than the telecom sector. In addition, as AI permeates every aspect of our lives, our role, telco's role as foundational connectivity and data transport providers, I think, continues to increase.

And then lastly, there appears to be, and this is an area you're experts in more than me, but there appears to be a rotation going on here. Investors growing a bit sour on how capital light software-driven industries and rotating capital into more infrastructure-based or defensive sectors where AI is a net-net positive and quite frankly, unlikely to be as disruptive over time.

I think the impact of AI, if you ask me on our industry will be positively transformational. I recently asked the CEO of one of the big tech companies. Look, how do I go from spending $14 billion a year on OpEx to $7 billion. That's what I want to do.

You said bring me your P&L and we'll go through it. The point is we're just scratching the surface today. I think the upside for us from AI is massive, and it's massive for our entire industry.

Now so with that as background, on this call, last year and the year before, we laid out two very specific goals related to our telecom businesses, and they're summarized here on slide 16. The first was to prepare each of our Benelux operating companies, this was last year, for the next phase of value creation.

And I'd say we achieved that goal, bringing in Stephen van Rooyen as CEO has been a game changer for VodafoneZiggo. And of course, today, we're announcing the acquisition of Vodafone's 50% stake in VodafoneZiggo in order to advance our plans to spin off a new company that combines our Dutch and Belgian operations. More on that, of course, in a second.

In the UK, we committed last year to advance our plans to monetize our fixed network infrastructure for both financial and strategic reasons. Now early last year, we pivoted away from a pure NetCo, as you know, but together with Telefonica, we continue to evaluate accretive ways to grow and finance fiber infrastructure in the UK.

Today, of course, we announced the acquisition of UK's second largest AltNet creating what will ultimately be an 8 million home fiber platform with the opportunity to further consolidate a fragmented market. So let's get into these deals.

Beginning with the Vodafone acquisition on slide 17, after what can only be described as a very successful and I mean, seriously mean rewarding partnership with Vodafone in the Netherlands. We're pleased to announce an agreement to acquire their 50% stake in exchange for EUR1 billion of cash plus a 10% equity interest in a new company called Ziggo Group, which will own 100% of VodafoneZiggo and 100% of Telenet in Belgium.

Now there's three primary reasons for doing this -- three primary benefits from this deal. To begin with, we believe the net present value both operational synergies and incremental service revenues from this transaction and combination total about EUR1 billion alone. And of course, pretty much all that accrues to us.

Second, we think the combination of Holland and Belgium is a financial winner. As the chart on my right shows together, the two operations serve 7 million mobile subs and over 5 million broadband subs with total revenue of EUR6.6 billion and over EUR2.5 billion of EBITDA.

Combination also creates a clear road map to reduce leverage to what we're estimating will be about 4.5 times through a combination of synergies and improving operational performance. In fact, we think we'll generate $500 million of free cash flow by 2028.

And then third most importantly, we are announcing today our intention to list Ziggo on the Euronext exchange in 2027 and to simultaneously spin off our 90% interest delivered to Liberty Global shareholders as we did in Switzerland. Interestingly, similar to Sunrise, there is a strong epistory here. Belgium and Holland are rational markets, just like Switzerland. We have a clear network strategy in each country like we had in Switzerland.

Our plan to reduce leverage are front and center and actionable like they were and are in Switzerland. And the financial profile should support both free cash flow and dividends in the future.

Interestingly, this is more anecdotal, just as Sunrise, it was one of a very successful public company that we took private and then relisted, Ziggo was also a very successful public company that we took private. So we will be reintroducing Ziggo to the public markets as we did with Sunrise.

Now just a quick update on slide 18 of VodafoneZiggo's recent performance. There's no question that Stephen's How We Win plan is driving clear operational turnaround, a combination of OpEx savings, repositioned broadband pricing, speed upgrades and a multi-brand strategy are delivering materially lower churn.

You can see that on the bottom right of this slide where Q4 '25 was the best broadband performance, I think, in 10 quarters and things continue to look good into 2026. We've also provided a medium term outlook for VodafoneZiggo on slide 19 and while 2025 EBITDA was in line with our plan, 2026 guidance, as Charlie indicated, shows a decline impact and in part by our large one-off investment we're making in network resilience and service reliability.

In 2028, however, we expect EBITDA growth to rebound. We're not giving you actual numbers here, but we are confident in that trajectory. That EBITDA growth, combined with a very stable cash envelope should generate the meaningful free cash flow I just referenced.

And as Charlie indicated, leverage will peak in 2026, but should decline thereafter, both organically, that's, of course, from EBITDA growth and through asset sales like our tower portfolio, the proceeds of which we intend to use to reduce debt.

And then a quick strategic update on Telenet on slide 20. We can't underestimate the importance of the steps we've taken over the last 24 months in Belgium to both rationalize the market structure and create a clear operating road map for both of our businesses there.

As you know, this is the first time we've completely carved out a fixed NetCo, which we call Wyre, and have even gone one step further by entering into a network sharing arrangement with the incumbent telco Proximus that will create arguably the most attractive fiber wholesale market in Europe.

And to facilitate the carve-out, we secured EUR4.35 billion of new capital to both fund the Wyre build and reduce leverage at Telenet. And to discuss, we're in the process of selling a stake in Wyre with the proceeds earmarked for further deleveraging in Telenet. Goal here is to bring Telenet's midterm leverage down to the 4.5 times level.

And Telenet, as part of the new Ziggo Group, I think represents a very strong equity story itself with outstanding retail brands, significant B2B growth, an upgraded 5G network and long-term access to fiber.

Perhaps even more importantly, though, with CapEx declining significantly this year, Telenet's free cash flow is at that inflection point and poised for continued growth.

Now let's switch gears to the UK and our announcement today to use our fiber JV -- Nexfibre to acquire Substantial Group, which consists of the Netomnia fiber network and a 500,000 subscriber broadband customer base for a total enterprise value of GBP2 billion and a net payment of GBP1.1 billion at closing.

Now I'll walk through the various transaction steps on the next slide, but the goal here is simple. The first goal is to create the second largest fiber network after BT Openreach. When you combine Netomnia's 3.5 billion fiber homes with nexfibre's existing 2.6 million fiber homes, and then you add 2.1 million VMO2 homes that wouldn't be made available to nexfibre for upgrade, the platform will ultimately reach 8 million fiber homes by 2027.

As I'll outline in a moment, there are significant benefits to VMO2 stakeholders. This is a fantastic outcome for VMO2. It's also a strong vote of confidence in the UK generally. We want the UK government to know that we, together with our partners are willing to commit significant capital to the UK based upon their pro-growth policies.

Now this next slide is one that you'll probably want to print out and tuck away somewhere. As I said, this is a complicated transaction, they often are, and this is an attempt to simplify it as best we can. On the left-hand side, you'll see the money and asset flows.

The green numbers, when you take a look at the slide, if you're looking at it now, the green numbers simply show the cash and how it moves from and to the various parties here, approximately GBP1 billion of equity will be injected into nexfibre, the acquisition vehicle, and that's our 50-50 JV with InfraVia, of course. And this will consist of GBP850 million of cash from InfraVia, and $150 million from Liberty and Telefonica.

So the first point to make is that Liberty Global directly will be responsible for GBP75 million of cash in order to complete this transaction. The $1 billion together with the new debt facility, I think it's about $2.7 billion, we'll fully fund both this transaction and the longer-term strategic plans for nexfibre 2.0.

Now once capitalized, nexfibre distributes a little over $2 billion of cash, GBP950 million to Substantial Group for the Netomnia fiber assets and GBP1.1 billion to VMO2, of course, VMO2 will use that capital to both acquire the broadband subscribers for $150 million and reduced leverage.

The vast majority of the GBP1.1 billion going to VMO2 is in exchange for a significant commitment to utilize the Nexfibre network on a wholesale basis. That's how these deals work. Specifically, VMO2 will provide access to 2.1 million of its own homes that will agree to pay nexfibre wholesale access fee on those homes once they're upgraded to fiber. And additionally, VMO2 will pay wholesale access fees day one on another 2.5 million homes that overlap nexfibre's footprint.

So there's substantial value being contributed to the nexfibre 2.0 plan by VMO2, and that's why it's being paid. Now as I mentioned, the benefits to VMO2 are substantial. To begin with VMO2 gets cash to reduce leverage. This is necessary, of course, given the increased wholesale fees paid out to nexfibre. Second, it will end up with 500,000 additional broadband customers.

Third, there will be substantial CapEx avoidance here, both in terms of the cost to build and the cost to connect millions of premises that would no longer be the responsibility of VMO2. We think the NPV of that is around GBP800 million. Fourth, VMO2 will be able to continue providing construction and managed services to Nexfibre in exchange for revenue and positive EBITDA. And the NPV of that contract, we think, is around GBP400 million.

And then finally, in addition to having access to the second largest fiber footprint in the UK, VMO2 will also receive a direct stake in nexfibre 2.0. Now looking ahead, I think this transaction also opens up the market for further consolidation, something that we have talked about for a long time and may just be on the horizon.

One quick slide here, providing additional context on VMO2's operational outlook as I promised. On the left-hand side of slide 23, we make the point that despite a highly competitive market, VMO2 has delivered pretty good financial results, especially in comparison to its peers.

While revenue has been largely flat over the last four fiscal years, and you know that, EBITDA has grown annually at around 1.5%. During the same time frame, VMO2 has generated GBP2.6 billion of cumulative free cash flow and distributed GBP5.2 billion to Liberty and Telefonica in the form of dividends. We are happy shareholders here. That's clear.

Now the rest of the slide identifies the main drivers of growth moving forward and why we're confident in the VMO2 story, including three powerful brands, Virgin Media, O2 and Giffgaff that reach every segment and help drive fixed mobile convergence.

There's also synergies in B2B growth on the recently completed O2 Daisy merger, strong wholesale position as the number one MVNO provider and now a key partner in the second largest fiber footprint.

I mean Lutz and the team, we believe we have a pretty good head start in AI-driven innovation and efficiency as well. And on top of that, there's the opportunity to drive growth off-net to the 10 million homes we don't reach today. So a lot of really good things happening in the UK market for us.

Finally, this is the key takeaways here on the final slide, what we'd like you to bring home, if you will, from the second half of this call, right? Number one, we think the telecom sector broadly and equity values in Europe more specifically are poised for continued depreciation in the eyes of investors. Tailwinds from consolidation, stable cash flows and what appears to be a rotation into stocks that will be net beneficiaries of AI as opposed to roadkill are drivers here.

Hopefully, by now, you're convinced that we are serious about delivering value to shareholders. The Sunrise spin-off was always step one. We told you that. And the transactions we announced today, in particular, the Vodafone stake acquisition and our intention to list and spin off the new Ziggo Group will be step two. In the meantime, we worked extremely hard to reshape our corporate operating model.

This is not just a cost-saving exercise, even though it did save considerable costs. We believe that our structure today is fit for purpose, both to continue operating and investing in the TMT sector that we've done over the last 20-plus years, but also to provide our unique form of expertise to existing and future affiliates.

Now why we were only marginally successful in convincing analysts to look at our corporate cost differently, we have been spectacularly successful at reducing those net corporate costs as I said, by 75%, that is going to accrue to the benefit of our stock price.

And we're excited about our growth platform. We have a great track record here, and we're focused on the right centers, where we have a clear right to play, as they say, and where there are tailwinds and scale opportunities that I think we're uniquely qualified to pursue. So stay tuned to see what we there.

And then finally, in our world, capital allocation is everything. Now where you choose to invest your capital, especially in a capital-intensive business, has never mattered more. We've always run our telecom businesses as if we're going to own them forever. And even in that context, they generally have not required any cash from us to achieve their strategic and operating objectives. We will invest in a telecom business when it unlocks value for shareholders.

We've said that many times. Like we did with Sunrise, delevering the company pre-spin and like we're doing with the acquisition of Vodafone stake in Holland.

We have been significant buyers of our own stock, $15 billion over the last nine years to be exact, reducing the number of shares outstanding by 63% and ensuring that those who stuck around with us end up with a bigger piece of the pie. You owned 1% of our company in 2017, who ended up with over 2.5% of Sunrise, for example.

And finally, we do believe there will be opportunities in tech, infrastructure, energy, media, sports and live entertainment. These are areas where we have significant deal flow, great partnerships lined up, $10 per share of value and importantly, strategic flexibility to deliver that value to shareholders.

So hopefully, that update was helpful for you, especially on the recent announcements of the two deals this morning. So with that, operator, we'll get to questions.

(Operator Instructions) Robert Grindle, Deutsche Bank.

My head is spinning with all the news you guys have provided. So I'll ask one question about the UK deal. 8 million nexfibre homes post deal completion and the 2.1 million HFC home upgrade. Do you think that definitively unlocks the UK wholesale opportunity in a major way. Do you think you have to wait to get to the full 8 million? Or are you on a course before you get to that point to get more wholesale business in.

I'll take a crack at it, Robert. Thanks for the question. And Lutz or others can chime in here. But the 8 million will be achieved relatively quickly, end of '27 probably. So that's a good fiber number for nexfibre 2.0, both as you say, from the three -- the contribution of the three entities.

And VMO2 will be a significant whole buy partner for that 8 million home footprint. And remember that Lutz and VMO2 continue to upgrade their network. So there'll be another 12 million homes on the VMO2 network that continue to be upgraded.

So we believe you're looking at what is effectively a 20 million home footprint in the end, the vast majority of which will be fiber. So obviously, first order of business is to grow and manage our own customer base on that 20 million home network, but also very much so to provide wholesale opportunity for the market, which is much needed for reasons that you understand very well. Does that answer your question?

It does. Mike, is there a timeline on getting the rest of the VMO2 network upgraded?

Well, I don't know if we've disclosed that time line. Lutz, if you want to reference that, let me know if we disclose that or no.

I would add only that we have already upgraded 5 million homes to fiber out of the 13 we are having. So you -- Robert, you can add these 5 million to the 8 million. So you have very quickly an access to 13 million fiber homes. And the second part, right, I think we always said that we will enter the consumer wholesale market. And obviously, the more homes and fiber we are able to offer, the more interested it is.

Further guidance on how quickly we will upgrade the remaining homes we haven't given, and we don't want to.

Josh Mills, BNP Paribas.

Maybe I'll ask my question is on the VodafoneZiggo transaction. I think you're still talking about a stable CapEx envelope over the guidance period. But now that you're creating this new Ziggo group with more scale, does it change your appetite or opportunity to invest more on the cable to fiber upgrade strategy? Is there any synergies there you can take for your learnings in the Telenet business and bring them over to the Netherlands, it would be very helpful. .

And then secondly, I think on slide 17, where you talk about the clear road map of bringing Ziggo Group leverage to 4.5 times. Is that all organic deleveraging? Or would you be willing to inject cash into this business prior to a spin-off as you did with Sunrise.

Great questions. Listen, I think on the network strategy for Holland and Belgium, those plans are set. So we have made a definitive the assessment of the OpEx strategy and network strategy for a fixed business in VodafoneZiggo's market, and we are going with DOCSIS 4. The team has already done a great job of getting 2 gig rolled out nationwide with the largest 2 gig provider and they'll be at 4-giga and 8-gig right around the corner.

So there is no strategy or plan to build fiber in the Netherlands, and we don't believe it's necessary either from a commercial and certainly not attractive from a capital point of view. So the CapEx profile does not change as a result of this or any announcements that we're making today.

On the leverage, I think the -- as we mentioned, there's two very clear sources of deleveraging. One is organic growth. the second -- or three, I guess, the second is free cash flow and paying down debt as we're doing Sunrise. And then three is asset sales.

So in the case of Holland, we have PropCo and TowerCo. In the case of Belgium, we have the Wyre stake. So there will be asset sales. With those proceeds used to delever, there will be growth in EBITDA organic and there will be free cash to organically delever. And that is the plan.

At this stage, we don't anticipate putting any capital or cash into the Ziggo Group to get the plans launched in 2027. And Charlie, do you want to add anything to that?

No. I absolutely endorse what it is. I mean you remember there are some premature financial synergies that we get, which obviously give us strong free cash flow. I should clarify that, that $500 million is the annual target. It's not a cumulative target.

I also think that with this, the team has performed and his team, by the way, performance fantastically. And as they give this EBITDA turnaround, I think you can do the math and figure out how that can treat to getting towards this 4.5% target, which we think works based on what we saw and summarized.

Matthew Harrigan, StoneX.

Since I'm the last American left in the draw again. When I talk to your US peers on AI, they don't expect to see too much quantifiable benefit this year, but pretty substantially but by '28. Is that something that you layer into your numbers somewhat. And clearly, the market is not remotely assigning the value of the ventures plus cat, so they're not going to give you anything for having your telecom OpEx.

But what are your thoughts on really seeing that discernible in the numbers? And when you look at AI, is that some -- I mean clearly, a lot of the value in your network has been appropriated by Silicon Valley and other tech companies.

But when AI really sticks in, are you going to see 85% of the benefit on the cost side? Or do you expect to see some revenue enhancements that actively attached to you as well? And it's a fairly big question, but obviously, people are -- it will be very transformative if you can have your OpEx even if it's in 8 to 10 years.

Yes. Look, I'll address that generally and I'll ask Enrique to step in and provide a bit more color. But three things are really driving for any telco, driving the benefits from AI, right? Beginning with customer acquisition -- and very thin, which we're all seeing marginal improvements from the investment in our call centers and things like that. The second is frag credit, things like that, that can really drive down OpEx and inefficiencies.

And then as you mentioned, in the network and operations. And I don't know, wealthily, those are each going to contribute one third, let's say, of the monstrable benefits we expect to see in the next, let's say, one to three years. And they're not small numbers.

They will be real benefits. And I think the nice thing that I'm seeing in the space is that whereas a year ago on this call, I would have said that we're inventing a lot of these applications right now, we're getting bombarded with start-ups and third-parties in Silicon Valley companies that are doing a much better job in many instances of creating these solutions for us. And so the pace of integration and implementation, I think, is speeding up, and it's real.

So as I said in my remarks, I don't think there's an industry better positioned to benefit from marginal improvement in CapEx, OpEx and revenue from AI, but I would emphasize the word marginal there. That's really all we're doing at this stage as an industry is finding marginal benefits. I think the real home run is to think more broadly and bigger about how we kind of disrupt our own supply chain, our own software stacks, our own operating models and to do that could be material.

I'll let Enrique chime in if you want, if you're on, Enrique.

Yes. I mean, I think maybe the first thing I'll emphasize, Mike, is, as you said, it is real. We have gone from a year ago, exploring AI to now seeing real benefits being delivered today and even more importantly, over the next 12 to 24 months, pretty material improvements, I would say, maybe most of the industry is seeing a lot of benefits on the call center and the support part of the business first.

We see that going to operations. But we're really getting excited about what we're starting to see as innovation more on the revenue side.

And I think we're going to see '26, at the end of '26, we're going to look back and look at those revenue opportunities as the year where they became real.

Mike, can I just have a quick plug. Sorry, I was going to say can I have a quick plug at sort of Liberty point of view. Look, the other aspect of this is back-office services. which is not as big as what Mike and Enrique said in the front of is the middle office, but the back office still is material for a telco, and it's about $1 billion, $1.5 billion by some definitions of spend for us. And what Blume is finding out is there's lots of tech enablement with AI tools to significantly reduce their accounting or payments or procurement of these special products, et cetera, et cetera.

And we're finding actually these are opportunities where we're getting massive savings by reducing heads, but we're able to scale our existing heads to grow revenues. And that's really what's driving that 20% revenue growth that we see in Blume. And actually, we see that continuing for many years.

Polo Tang, UBS.

It's really about VMO2 guidance. It was weaker than expected with a minus 3% to minus 5% decline in EBITDA, I think consensus on the same basis was probably going for about minus 1%. Can you help us understand how much of the decline relates to the rationalization in B2B that may be specific to VMO2? And separately, how much of the decline reflects weakness in the broader UK markets?

And can you maybe just give us some color in terms of what you're seeing in terms of UK competitive dynamics in both mobile and broadband.

And I also have a quick clarification in terms of the Netomnia nexfibre deal because VMO2 is receiving in EUR1.1 billion of cash from nexfibre. But can you clarify what VMO2 is giving up? So specifically, what is the minimum commitment on the 4.6 million fiber footprint? And can you give some sense in terms of what the wholesale rate is per subscriber?

Yes. Thanks, Polo. I'll let Lutz address your first question around VMO2 guidance and what we're seeing in the market. And then Andrea, you can work up a good answer to the question around VMO2's commitments. I don't know how specific we're being about that as we sit here now, Polo, but I'll let Andrea address that.

Guys?

Yes. Polo, so you can broadly contribute 30% to the B2B restatement of numbers, including Daisy. And 70% is attributed to a cautious view on the fixed consumer market. So it's not mobile, it is fixed consumer. As we all know, competition is very high as we speak.

Yes, as Mike alluded to, I think we had a pretty good Q4 with very low fixed net add losses and a pretty stable ARPU. But so far, right, the market is even more competitive. There's a fixed telecom access ready outstanding from Ofcom.

And therefore, we have factored this in a cautious guidance. The reason why you see a similar number on EBITDA is simply that we are also paying more and more wholesale fees to nexfibre, and that is, to some extent, up some of our efficiencies.

But just to be clear, and Charlie, you keep me honest here. The guidance we've provided today for VMO2 does not pro forma into that guidance the transaction with Substantial Group. So we'll have -- this is all happening real time.

We're going to have to amend it.

Yes.

Completely excludes it also. I think, Mike, why I said nexfibre is we have a growing customer base in the existing nexfibre coverage.

I know why you said it. I just wanted to clarify it. Andrea?

Polo, I think there were three questions there. One was, are we giving any sort of -- is there any sort of minimum penetration commitments. Now there's an adjustment at closing depending upon how many subsets are transferred over, that's very manageable, but going forward is their minimum commitments. There's also no migration commitments. The transaction is being designed to give Lutz full flexibility in terms of managing the migration from HFC to fiber, which we obviously thought very important in the overall market context.

I think your second question was just a clarification on what VMO2 was getting. I think if you break it down, VMO2 is getting $1.1 billion in cash and is getting a -- is getting a 15% stake in nexfibre. In return for that, it's going to spend GBP150 million to buy approximately 500,000 subscribers at closing, we think is the estimate that the Substantial Group will have.

And it's also committing its traffic on 4.6 million homes, 2.4 million in the overlapping Netomnia area and then 2.1 million are in these new homes that we're contributing into Nexfibre 2.0, which has been carefully selected to make it a contiguous complete network.

So it's not going to be a sort of Swiss cheese. And I think what was the -- there was a third point, I'm sorry, I'm just --

Third question is, are we providing any detail on wholesale rates and things of that nature. And the answer is no.

No. Yes. Thank you, Mike. Yes, thank you. We're not today, but it's a competitive wholesale rate.

Ulrich Rathe, Bernstein Societe Generale Group.

On the Belgium deal, you mentioned a synergy figure there. Could you talk a little bit about what kind of synergies these are because this is a cross-border deal where the story in European telecoms has always been that it's harder to create synergies. And specifically on the synergies, would the financial synergies that Charlie sort of alluded to be included in that EUR1 billion figure. And if I may just add a clarification, there was some Bloomberg sort of headlines about Telenet deferring a refinancing because of difficult markets. Could you comment on that, if that is appropriate at this time.

Charlie?

Yes. Let me just comment on the Telenet refinancing. I think we felt that the market fully understood the number of steps we were taking in Belgium, which we essentially were to pay down debt to 4.5 times on Telenet through the Wyre sale and the fact that we docked in the refinancing to separate out Wyre at the EUR4.35 billion, we thought have been well understood. I think it probably was in hindsight too much for the credit market to digest in one go. And that's fine.

I mean it was an opportunistic transaction as we always do. We thought that by halving the amount of available Belgium debt, there'll be a lot more demand than we felt. And it was a pretty choppy market. If you may recall, it was a softer market that we had a few a few weeks ago. So I think the discretion is the better part of -- and Nick and I felt that the right thing to do is take a pause. We will let these transactions settle. We'll prove out the various steps.

And at the right time, we'll go away and do what we usually do, which is in the $500 million to $1 billion tranches refinanced. But we still have plenty of time, I think, as we tried to show in the results call, we actually don't have any material debt maturities, particularly include our revolver until 2029 in turn, but we're very confident and hopefully the credit markets will support this, that as these steps unfold, we can essentially reprice the debt and extend the maturity.

And it's interesting, actually, the debt still trades at a very tight level despite this transaction last week, which perhaps is a bit bewildering. Look, I think in terms of the synergies, I think I slightly disagree, I think there are cross-border synergies. Enrique has proved that with the incredible work he's been doing on technology.

I mean there's an awful lot of scale benefits and national technology doesn't really have a difference market to market. And I think also, as you rightly point out, the ability to drive financial synergies will come because we are able to use the platform that we will create in VodafoneZiggo and Telenet to really drive the technology across the broader footprint, which obviously has some benefits to us.

So I think we feel pretty good about the synergies. And actually, to be honest with you, we might have undercooked them because we were obviously operating on a clean team basis in this transaction. So stay tuned. Let's see what we can come up with.

Yes. Our track record on synergies is pretty good. And I would agree with Charlie's comment that we've probably undercooked them, especially on the OpEx and potential revenue side. Does that answer all your questions, Ulrich?

Yes. I was just wondering, so are the financial synergies included? Or is the EUR1 billion just the operational bit.

They are included.

They are included, yes.

David Wright, Bank of America.

Again, so much to absorb here. I guess when we're thinking about the Ziggo spin, Mike, it's a strong equity story similar to Sunrise, but that does ignore what I think you flagged at the time, which was Sunrise was a very clear and strong dividend payer, obviously, in a very low rate market, and we've seen that dividend growth just today in the Sunrise share price work so well. There's no dividend story here in Ziggo.

And I guess my other question is, what's the sort of run rate of synergy you guys sort of need to hit in the short term to really commit to the spin. Is that date really in stone there? And I guess my sort of associated question is, I think the VodZiggo guidance was also quite a lot weaker than most of the forecast alongside VMO2.

I'm just wondering, is there a sense as you sort of restack this business that you're -- I don't want to use the phrase kitchen sinking, but you are guiding to find a level you can absolutely deliver on and maybe put a little bit more investment into 2026 to grow from.

Yes, David, that's a lot of good questions there. That's I'll try to address and Stephen can jump in here as well. With respect to timing, I mean, we were purposely general about timing. We believe 2027, as we especially get into the second half of that -- of next year, we are going to be able to see or forecast the kind of storyline here that the market will want to see. That does reflect and has comparisons to Sunrise, namely a deleveraging story from free cash flow, EBITDA growth and asset sales.

Secondly, the ability to project or forecast a free cash flow number. We gave you a number today, EUR500 million. That's 50% more free cash flow than Sunrise generates. It's not coming this year or next year, but we're going to be -- we believe we'll be able to forecast that kind of free cash flow story when it's time to get to the market.

And I think the growth -- we've talked quite a bit about How We Win plan and how it -- we even showed you some visuals on the slides about how '26 is an investment year for 2027 and 2028, we start to see a rebound.

So it's our view that all those things when they come together, will tell a compelling equity story. But here's the other thing to point out, which is unlike, say, Oddo, we're not listing this company through an initial public offering. We're not waiting to build a book. We're not looking for a minimum price. We're not going to raise primary capital.

So those -- we don't have any of those strikes against us. We're listing the shares and spinning them off to shareholders exactly as we did with Sunrise and the market will find a value, we believe, a healthy good value well above the negative $5 we're getting in our stock today.

That's all you got to believe. That's it. You've got to believe that there's good equity value in this story that in the hands of our shareholders, that equity value will trade well on Euronext exchange with a compelling operating and brand-driven storyline and it will be less than zero. It will be more than zero. That's all you got to believe.

And so I think we have lots of flexibility here, tons of freedom to plan how and when and what we do, which is -- which to me is very exciting.

Stephen, do you want to add anything to that on the Vodafone side?

Well, I think the only component I'd add to it as you said. Can you hear me, Mike?

Got you.

So look, as you said, I think the core of it is that we have an unfolding story of business improvement. So the underlying value of the core VodafoneZiggo business, I think, will come through as we get through the investment in 2026 and into 2027. We've shown a track record so far in the last 12 months, and we've got high confidence given what we're seeing today and given the plans we have ahead of us that 2026 will be another step forward in the plan.

And as you say, 2027 will show those return on investments, and we'll accelerate out of that. So I think the core business, if you value the core business, will look slightly different in 12 months from now.

James Ratzer, New Street Research.

So I was interested in following up on the slide you had to discuss the kind of Netomnia Virgin transaction in a bit more detail on Slide 22. So you've got a very kind of helpful chart there showing all the cash movements. Could you just run me through also what the debt movements are because Netomnia, I think, will have around maybe a bit over GBP1 billion of debt on closing. Does that all go to nexfibre? Or does some of it go to VMO2?

And then of the subscribers or the homes, sorry, you've got the 2.5 million homes where VMO2 is going to pay committed wholesale fees on closing. How many subscribers does VMO2 have in that footprint, please?

And then secondly, on the 2.1 million homes that then nexfibre will be upgrading, what's VMO2's customer volume in that footprint? And to give us an idea of kind of Lutz's incentive to migrate customers over to FTTH, can you let us know, please how many customers today within VMO2 have been upgraded from HFC to FTTH, where VMO2 has done that upgrade itself as a result of the overlay.

Thanks, James. Charlie, you hit the debt question, please?

Yes. So first of all, there's no incremental debt going on to VMO2. I'm not sure how much we're disclosing, but I would underline that nexfibre will have a fully financed business plan to get to 8 million fiber homes, with a combination of existing debt, but also the undrawn facilities.

So this is a fully financed cash flow positive AltNet, which I don't think we can say about all of them. And I think in terms of the details of the numbers, look, let's take that offline because I'm not sure what we've agreed to disclose or not disclose.

But that is the key message, fully financed and no debt into VMO2.

And on the 4.6 million homes, Andrea, keep me honest, I think you could -- we're not disclosing the number of customers today, but you can read across from our broad penetration rates to those areas. It's going to roughly equal our current penetration rates. I think it's a safe bet. Lutz, do you want to address the fiber question?

Yes. So far, we have a very low number on fiber in our existing Virgin Media, O2 cable coverage, right? Majority of our customers in fiber are coming from the fiber network nexfibre owns. And so we still -- no customer is leaving us because of technology. Also, we are able to acquire exactly the same number of customers in the cable network as well as in fiber.

So therefore, commercially, we don't have, at the moment, an incentive to put customers on fiber. And therefore, we have a low number for now.

Yes. But in this, you should assume in the deal we just announced, there will be some incentives. For example, cost to connect, wholesale rates, but we're not disclosing those details today.

That will conclude the formal question-and-answer session. I would now like to turn the call over to you, Mr. Fries, for closing remarks.

Sure. Thanks for sticking with us, guys. Sorry, we went a little bit over. We had a lot, as you said, to disclose. I just want to say quickly, thank you to everybody on the call today from my team because this has been a Herculean effort and just about everybody on this call is involved in the transactions and of course, delivering these results. So thank you to each of you for the great work and terrific, terrific outcomes.

And look at the deals we think were announced today, I'm excited about. I think they unlock both value but also give us a tactical runway to control our destiny here, specifically in the Benelux region, but also, I think, increasingly in the UK market. So they're the right kind of deals. It's exactly what we told you we would do a year ago.

I think you can trust us when we tell you we where we're focused, what we're focused on and how we intend to create value. So I appreciate you joining us. I know there'll be a lot of questions and follow-up, you know where to find us. So thank you, everybody.

Ladies and gentlemen, this concludes Liberty Global's fourth quarter 2025 investor call. As a reminder, a replay of the call will be available in the Investor Relations section of Liberty Global's website. There, you can also find a copy of today's presentation materials.