Liberty Global Ltd (LBTYB) 2002 Q3 法說會逐字稿

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the UnitedGlobalCom and United Pan-Europe Communications third quarter 2002 earnings release conference call. This conference call and associated webcast is the property of UnitedGlobalCom Incorporated and United Pan-Europe Communications,nv. Any redistribution, retransmission or re-broadcasted of this call or webcast in any form without the written consent of UnitedGlobalCom and/or United Pan-Europe Communications,nv, is strictly prohibited. At this time all participants are in a listen only mode. Following today's formal presentation instructions will be given for a question and answer session. If anyone needs assistance at any time during the conference call, please press the star key followed by zero for operator assistance. As a reminder, this conference call is being recorded on this date, November 14th, 2002. I would now like to turn the conference over to Mr. Mike Fries, President and Chief Operating Officer for UnitedGlobalCom. Please go ahead Sir.

Welcome everybody to our third quarter call. Let me take a second and introduce the rest of the team on the call with me today. Of course in Denver we have Gene Schneider, Chairman and CEO, Rick Westerman, our CFO and in Europe we have John Riordan, President and CEO of UPC and Charlie Bracken our CFO.

We're going to stick to the usual script today. Gene and I we'll start off with general remarks about where we sit and our recent results and then we'll turn it over to John and Charlie who will provide more details on UPC and then we open it for questions. The game plan is to keep our remarks to about 20 minutes or so. We'll be speaking from slides which you can access on our website, UnitedGlobal.com or UPC's website, UPCcorp.com so we encourage you to look at those. As usual we're going to make some forward-looking statements so I encourage you to review our SEC filings for greater detail on these results and I want to make sure you see the Safe Harbor statements and on the slides themselves. Let me turn it over to Gene

Thank you, Mike. I would like also to thank everyone for joining us this morning. I'm just going to say as Mike indicated a few words here then turn it over to him and the rest of the team. It is nice to be doing these calls on a regular basis again. We have taken very significant steps during the past year to put our business on a much stronger financial and operating ground. If you think back to one year ago on this very same quarterly call, we still had a pretty steep hill to climb. Our balance sheet consisted of nearly $10 billion of debt. We had no clear path at that time to re-capitalization. Our businesses were doing better but we still had negative EBITDA almost across the board. And we were still working pretty hard to close our long awaited deal with liberty. We're not quite over that hill today, but the top is certainly well insight. After some significant effort, we're well down the path of re-capitalizing our balance sheet. UDC is virtually debt free today. The restructuring of UPC is on tract and by March of next year our European subsidiary will have exchanged 5.2 billion Euro of debt into new equity. UDC will remain the largest shareholder of UPC increasing ownership from 53% to nearly 66% of the new restructured equity. Throughout this process, the businesses have performed at record levels. On a consolidated basis, UDC reported third quarter EBITDA of $85 million. That is nearly a $130 million- improvement over a year ago when we were negative $42 million. For nine months EBITDA increased from negative 173 to positive $210 million or a $380 million swing. Every major business we own is now operating positive EBITDA.

We closed our deal with liberty in January and we're very pleased with the way our partnership with John Dobb and Gary has worked out. We see eye to eye on virtually every thing and they have been very supportive partners. In closing I would like to personally thank those of you who have stuck by us throughout this time and also our new shareholders for your support. We're feeling good about where we've headed and where we're headed. After reviewing our results today, I think you probably will, too. Okay, Mike, back to you.

Thank you, Gene. At this point I'm going to be referring to some slides, the first of which summarizes a few highlights from the third quarter or page 3 in the presentation on the website. In the three months of September 30th, our consolidated businesses added 63,000 new revenue generating units or RGU's bringing the year-to-date total around 236,000. The good news is things have picked up through our fall selling season and apparently we have added over 50,000 RGU's in the third quarter. Total consolidated RGU were $8.7 million, a 5% increase over 2001. The largest part of that growth coming from our voice and data business which ended the quarter at $1.4 million or 20% year-on-year increase.

Today we have over 700,000 high speed Internet customers in our consolidated operations the vast majority of which are in Europe where we have reached average penetration around 12% of our 5.92 million two-way homes there. In fact, some markets like Sweden the number is as high as 22%. As most of you will be aware those numbers look pretty good compared to US operators. Revenue for the quarter $385 million up 18% from a year ago and nearly 50% of that growth came from the high speed data business.

Today together voice and data represent around 38% of total revenue. The best part of the story as Gene eluded to is our EBITDA performance with a three month September total consolidated EBITDA $85 million up from a loss of $42 million for the same period a year ago. Year-to-date EBITDA of $210 million we're on target to meet a yearend forecast around $295 million at the consolidated UGC level. That number compares to I think something in the order of $190 million loss a year ago. So as Gene mentioned a pretty dramatic turnaround here for us.

I'm on slide four. If you have been following our progress over the last 18 to 24 months you know that our EBITDA gross is part of an 8 quarter trend dating back to the fourth quarter of 02 when the loss for that period was over $130 million alone. As this slide shows, every quarter since then has demonstrated some consistent and significant improvement driven largely by three things, the first the business reached a level of scale where marginal increase and voice and data revenue are dropping to the EBITDA line and second we have had large reductions in head count particularly in Europe where that business is down over 3000 people from its peek and 1500 below where it was just a year ago and third we had a turn around in our media and [Inaudible] divisions in Europe which John and Charlie will refer to but in the nine month ended 2001 in September they lost about $156 million and now they're approximately break even. Those three things has really driven the gross in EBITDA as you see on that chart.

The other major element of the story on page 5 is our capital expenditures which for the first nine months of 2002 were $235 million that and that compares to over $1.8 billion in the fiscal year 2000 and nearly $1 billion in the fiscal year 2001. The full year forecast in 02 for UGC consolidated is around $400 million. Of that $2.8 billion we spent in the prior two fiscal years the vast majority of that was contributed to network rebuild and related fixed costs of course and today over two-thirds of CAPEX is attributable to variable cp cost which come down in all businesses, digital and data over the last 24 months. A footnote on that $45 million EBITDA in the third quarter about -- it excluded about $32 million of CPE inventory reduction. So that number normalized would be closer to the second quarter.

As some analyst here are looking at the EBITDA to CAPEX ratio I think if you do the math you will find the numbers are improving for UGC consolidated and UPC. Slide six, it is a quick recap of the re-capitalization initiative that Gene eluded to. We are now debt free at UGC after tendering for all of our high yield debt at the beginning of the year. In September 30th of this year we announced an agreement among ourselves. UPC and [Inaudible] on the restructuring of 5.2 billion euro. The basic terms were announced. They're summarized here and in the press release. A few highlights, it's 5.2 billion of debt which will be exchanged 98% of the equity as UPC largest creditor UGC will end up with 56% of that restructured equity. We have committed to put up half a million dollars of capital in the business and the net equity is $1.9 billion based upon the terms of the deal announced. We are on track to close this by March 30th.

Once that transaction is completed, UGC's consolidated pro forma from debt should be approximately $3.5 billion excluding two non recourse subsidiaries [Poland and UAP]. Which means if you take our Q4 estimated EBITDA we will be around 10 times debt EBITDA but given the significant growth in EBITDA ahead of us for 2003 that number ought to be closer to six to seven times by year end 03 with no debt reduction. I think those numbers are achievable.

Last slide for me then I'll turn it over to John and Charlie, one minute on Chile, our global com, most of you know this is our largest asset outside of UPC and one were understandably we realize getting a lot of a attention. But I think we think it deserves some. We have a nationwide trip elementary play network that sevens 745,000rgu, nearly 220,000 voice and over 50,000 high speed Internet subs. VTR is the second largest telecom provider and our penetration is north of 23% of our 1,000,002 way homes some are actually 40%. Business generating $20 per RGU about 70%gross margin so good economics and for the third consecutive year the VTR is going to meet its budget. This year is forecasted to deliver $100 million of revenue and $44 million of EBITDA, the number EBITDA up 42,000 and looking for 25% growth in 2003. Unlike a lot of operators in the region it has $150 million in debt, a good portion of which we're going to refinance locally in the first quarter ideally of next year which equates to around 3.5 times debt per year on EBITDA or 2.6 times EBITDA. So on any conservative evaluation metric we think this is a dollar a share in UGC. Understandably there is a lot happening in Europe we understand everybody preoccupation about business but we think the things we're doing in which Chile are good. It's a predictable asset and cash generator and we're pleased with the results. With that I'll turn it over to John and Charlie.

Thank you, Mike. Good morning to those of you listening in the United States and good afternoon to our European listeners. With me here today is Charlie Bracken, our Chief Financial Officer, and Gene Musselman our Chief Operating Officer. I'm going to say a few words then hand it over to Charlie who will walk you through the financial results for the quarter. Over the last 12 months we outlined three key tasks for the company, UPC. First was to review and reset the balance sheets and capital structure. We were pleased to announce on the September 30th, this year, UGC and the bond committee had reached a binding agreement to restructure UPC's balance sheet. This will financially deliver the company at the corporate level and will secure its future. This was a further important step in the process we started in February of 2002 and one which will give UPC a firm, financial structure upon which to base its growth. For our operating subsidiaries it continues to be business as usual.

Secondly, we have been focused on driving operation and efficiencies to bring cost savings across Europe. The resetting of our cost base has been largely completed and has resulted in a substantial reduction in operating expenses over the last 12 months. We are delighted to report that in line with previous guidance or UPC media and priority telecom achieved their first quarter of adjusted EBITDA inQ3 of this year, 2002. UPC has reset the operating leverage in our balance sheet to match our strategy. Our come to operating liabilities have been reduced by over $335 million in part funded by improved asset management. We have been focused on the implementation of our strategic review. This will ensure that all customers generate a positive net present value to the company optimizing near time EBITDA and cash flow generations. We have made progress and improving the efficiency of our capital spent. Capital expenditure shave reduced significantly during the third quarter of 2002 to 54 million euro from 264 million euro# for third quarter 2001 this time reduction in capital reflects both a truly variable nature of UPC capital requirements and the company's focused investment in new building and upgrade.

Having made good progress on the three key tasks outlined above, we're now focused on the next phase of our development. Over the coming 12 months we'll be targeting prudent revenue growth while maintaining our strategy of adding profitable subscribers and continuing growth and adjusted EBITDA. We're delighted with the progress made at the EU to ensure the union to add 10 additional countries. We're a major player in the communications industry in central Europe and it is very encouraging to know that these countries will be part of the EU by January of 2004. We recognize that customers are our greatest assets and in improving the service we offer to our customers continue to top our list of priorities. Significant effort has been -- has gone into improving our customer care and the quality of the service in our call centers. We have invested heavily in IT systems and our billing platform in order to improve the interaction with our customers and I am confident that the benefits of this investment will be increasingly seen through the improvement and the quality of our customer relationships. Our strong operational results are achieved through the exceptional performance of UPC employees who are working together with management to drive our businesses forward. I would like to thank them for the dedication during this difficult period as they continue to demonstrate in achieving our operational goals. With that, I would like to hand you over to Charlie to walk you through the financial results of the quarter.

Thanks a lot, John, and thanks to everybody who has joined the call. I'm going to carry on from where Mike left off in turning some of the pages of the joint UGC and UPC presentation. I think it is on our website. If you can download it from there you can follow along with me. I just thank Mike's disclaimers regarding forward-looking statements which is subject to the legal qualifications. I should also mention that the remarks I make today should be taken in the context of the 10-Q filing as well as this mornings press release.

With that said let me return to the presentation. For those reading along I'm on page 10. This is a slide we have shown you before which really echo's the revolution of our strategic vision the last six to 12 months built on the comments that John has made. Let me just make a couple of renewed comments on that. As I do recall the old plan was very much focused on top-line growth, revenues to really drive a mass market strategy which was our first advantage and again you would be able to scale the [Inaudible], the capital [Inaudible] of the company to drive profitability. Given the changes in the financial market and the changes in competition, also very real cash flow constraints of the industry. Our news plan priorities cash flow generation and the maximization of net present value rather than the volume of subscribers. Focus on EBITDA and top-line growth for the sake of it. Now, with the resale of the cost base we really have done a lot to reset the capital balance of the company. We've taken out over a billion EURO of CAPEX and cost over 12 months which has been a good achievement by the operational management.

From here we have a base we think to build prudent revenue gross by investing capital to build top-line growth net present value to our customers. Despite the cost restructuring that has been going on, we have managed to grow the business. The next slide on page 11, you can see some of the highlights of this. Year after year we seen new service subscribers grow around 25%. That is around 225% new subscribers that is in the digital voice and data products that builds our digital base. That contributed to an overall increase of revenue generating unit as we call it, a unit that is either digital or voice or data around 6% and quarter and quarter we netted out around 13EUR. Put that in basic cable equivalence terms which is sometimes what you see in the U.S., a Western European customers are now making shy of 20EUROS per customer and that compares favorably where we started a few years back which is around 10 or 11 three years ago. In Eastern Europe we're making good progress. This goes back further. I think Gene first told me about a buck a month in Hungary some years ago. We are now making 8euro from our eastern European customers. Showing great growth for United Kingdom focused on driving the product. If you return to the group's overall results on page 12, this is what Mike was saying you see they're underlying UPC has pretty good growth. You can see a yearend year growth of 11% and the core distribution. The core business has grown around 15% year end year from 293 to 336 million euros. Despite the cost reset we grow the revenues in line with our new prudent revenue targets.

The real story is on EBITDA, if you turn to page 13, you can see here a pretty sizeable turn around year on year in this comparison for the group as a whole come from negative 37 to around positive 78. And if you look at the core of the operations you see distribution has gone from 45 to positive 96. We've also reset the cost base of our business [Inaudible] telecom, which has gone from negative 32 to break even in Q3 as well as the cost base of the UPC media group which has gone from around 26 to again break even in Q3. We continue to focus on optimizing the cost of our functional groups, particularly in relation to the IT and digital platform that we scale all across all our countries at the corporate level and we have seen a pretty sizeable turnaround there from 27 million to 19 million.

Turning to the last page, this is what Mike said about leverage. We are very focused on leverage in the company and making sure that the company goes forward with the right capital structure. The restructuring is very important step in getting this done. And if you took our Q3 results performance for the re-capitalization we have around $3.2 billion of net debt which as we continue to improve our EBITDA, it moves us towards the more prudent leverage levels demanded by the market today. With that, I'm going to open up to questions and, operator, if you can come back on-line and we'll start the question and answer process

If anyone has a question, please press star than the number '1' on your key pad. Questions will be taken in the order they are received. If you would like to withdraw your question, press star then the number two on your telephone key pad. One moment, please, for your first question. Your first question is from Mr. David Joist with Guzzman and Company

Thank you. Can you talk about the programming expenses and do you see any improvement there, anything that sort of sticks out across your various systems and countries of operation?

Well, our operating expenses are three aspects to it. As you know, our analogue -- this is UPC. The analogue cable business is largely a business with a very high program margin. It's around 81%. That is predominantly true of the western European countries. Is a low margin in the eastern European countries and Gene talked about this but we have been focused in driving those margins up, particularly in Poland as well as in Hungary and Czech. A group average is 75% now on primary margins and I think it is fair to say that we continue to try to use our scale and we continue to try to focus on -- Gene is nodding -- try to drive our margins up. Gene, if you want to comment on that.

The only thing I would add is I think you're probably referring to the Poland situation, oh, maybe 18 months ago and there we had margins of about 55%. Those are above 70% now. As Charlie indicated, I think if you look at the other eastern European countries, they're probably more at 75% so we have done a great job, I think, in terms of renegotiating a lot of our contracts and restructuring our channel line up to get more efficient and productive programming and I don't see this as an area of any real problems going forward.

The other area of programming is our digital offer which is as you know on a much less developed stage. There we do have some -- you know with the shift in our strategy from a mass market, we have been left with the minimum guaranties, particularly a contract with a group known as Synovia which is a movie channel that we signed with Disney and that is depressing, significantly depressing our digital margin. On that product, you know, we are figuring out the afford on that and we'll keep you posted as we can. In terms of the other digital platform, we are making positive EBITDA and digital in SCANDINAVIA I can't, we are likely with that product in Austria, the key is to build scale in the business and that will see the gross margins go up overtime. There is obviously margin pickup there but by and large we think that we're going in the right way on the digital side. Finally with programming as you no we do have some paid TV channels. In terms of the margins on paid TV channels they're not great. The reason they're not great is because again with the shift in strategy from a mass market strategy the businesses are subscale in terms of subscribers and we're very focused on closing down channels which we have done quite a lot as you know and/or trying to reset those contracts and/or combine those channels with others to try and make sure we drive more profitability there. Obviously, we have retooled a lot of those channels to be to a longer analogue world compared to eastern Europe compared to the digital world in which they were designed. Does that answer your question, David?

That is great, thank you.

Your next question is from Mr. Mathew Herigan with Genco Partners.

Two questions. First, could you comment on the competence and the speeds of the high speed competition and major western European markets, what you're seeing from the PTT's and again, you know, what the speeds and the price points are and then secondly, I mean, you've got a fair amount of capacity on your circuit, voice platform, CBR capacity. I think it's built to optimize 35, 40% penetration. With the CPE equipment coming off lot are you going to emphasize voice more next year, still the -- behind data but maybe ramping up a little bit faster than digital given you're trying to work out some issues on the product?

This is John Riordan, can I take the second question, first? Yes, we are now that we have a definitive agreement and moved the company towards as we mentioned earlier in more aggressive bundling strategy. We are going to emphasize the sale of Telephony. Yes, you're right, we do have substantial capacity. The CPE costs are reducing dramatically and we're looking forward to increased Telephony penetration. You asked -- about high speed competition. DSL at long last the phone companies have started to supply DSL reasonably aggressively in some countries, not in all. It's -- I can't give you a single answer here but to say France DSL is competitive with our product. Of course, we have a lot of flexibility because our costs of providing data services has come down dramatically with the scale because it is a scale business and we have a pan European IP backbone. Elsewhere we continue to drive substantial numbers of data subscribers. We are well able to scale our product if we have to. We don't intend right now because the competition is not sufficient to actually make any abrupt changes of strategy. And we are still aiming for about an average of 38 to 40EURO's for our data product and we do - have no plans to reduce that and there is no competitive trend. Should a competitive trend arise, we obviously have plans for different levels of product but do not intend to apply them in the near future

Maybe I can add to that, John.

Yes, please.

Because of the uniqueness of our platform, one of the things that you might like to know is that we're really, you know, -- at this point we're tearing a lot of our services in digital. We offer a variety of different packages starting with a student package that is discounted and mainly it is dependent upon the backbone of the local universities. In addition to that we have a basic [chello] package and recently we have introduced a [chello] plug which is more of a business or a high-end user package. With respect to speeds themselves, we have been looking at keeping very close track of the competition and in a number of markets we have increased our speeds not only once but twice this year to keep up with the competition so we have a considerable flexibility built into the platform that we have. And we also have the throttling capability where we're able to go in and monitor the usage of individuals right down to the CMTS which has been able to do two things for us: Number one, through the throttling effort we can squeeze the bandwidth on the heavy users and what we found is that in doing so we have had a dramatic decrease in the bandwidth usage of the high-end users and in addition to that we have been able to [monetize] some of that usage by moving them into higher tier. I think we can keep up with the competition as we go forward.

Thank you very much.

Your next question Fridays Mr. Nick Renwick with Merrill Lynch

Yes. Could you discuss a little bit about sequential trends particularly in the top line. I think that is the first time I have seen UPC posted a decrease in ARPO. The second is on the entertainment situation that is coming up to the year anniversary of that asset sale. I was wondering what some of the timing is there and whether that 80 million in excess cash pro proceeds is still on the balance sheet and then if you can update us more specifically where you are in the UPC restructuring processes as far as approval from the banks and so forth.

Why don't I have a crack at that Charlie. Added entertainment, the cash is -- they filed that 10Q - I think they did file that since today but you can see the bond sheet. As you know, we have pursued that in the company around 50% of the debt of the company. There is significant amount of cash proceeds, net obviously from reinvestments, they are still on that balance sheet. We're clearly come back to you on that payment as soon as we have something to say. So I'm not sure I have more information today. On the restructuring side very much on track. We hope it is over and done with by the end of March. As you know we have been fortunate the banks have given us terrific support. We have secured a six month waiver as well as relaxation of some of the key covenants which give the bank a better head room and on that basis we have -- we think we're in more shape from the bank facility and, you know, as we head there we will keep people aware of it as soon as possible. In terms of the operational sheets we did record a decrease on quarter on quarter. There are three factors in play all of which in themselves are not key drivers. As you know, Q3 is historically a much slower quarter, in terms of net adds but in telephony, it dropped about two to three EUR, O from August to July and people do not use the phone as much during the holiday. The installation revenues, we're allowed to --you know, in the course of year out woo book our installation revenues as long as they don't exceed our subscriber acquisition cost. If you have a sale, you have a decline in installation revenue as part of the new strategy, Gene has been focused on getting the installation revenue upfront. We declined a little a month, a couple of million on the installation revenue. The third issue is -- we can't see. We actually have a strong currency moving in our favor in eastern Europe in Q1 and Q2. In Q3, it has moved against us on the budget rates but we were ahead of budget rates, particularly in Poland Q1 and in Q2. So those are three of the key drivers. Obviously the reason for no dramatic shift is we have low era sets in the months which we said is being impacted by the bad public publicity and restructuring in Holland. We did not add as knowledge as in previous years, apples to apples. You would not have seen some of those compensated.

Just to clarify, the banks have agreed to this restructuring proposal?

The banks have given us a six month waiver which basically, you know, which contemplates the restructuring agreement as set out and announced. So we get a restructuring agreement finalized and done and executed by the end of March there is no issues with the bang

The answer is yes.

Sorry, Mike.

Thank you.

Your final question is from Mr. David Gladstone from Morgan Stanley

Good afternoon. A couple of questions. On your cost base you mentioned in the press release that the cost base is basically been reset to the current level. Should we take this as a -- as a base cost run rate which we can go forward or are there further head count reductions going in over the next year or so, and where else would we be expecting a cost reduction to come from this stage because obviously your EBITDA margins as you're projecting in the disclosure statement continued to increase significantly

You know, we're never going to say never about reducing cost. We're always focused on driving efficiencies and using our scale. I think that as a natural evolution over the next three to five, 10 years of our driving scale economics across the European properties, shared services and all that good stuff. I think what we are saying it has been a very significant [Inaudible] in head counts, Gene mentioned the primary margins, look get looking at SLA and capital expand and the like feel I think to say the cost of the step change, you won't see a step change like the one we have seen this year again I hope you continue to see efficiency and the like feel I think in terms of the modeling side of the business, we believe we have a high degree of operational leverage. Our margin across the product is 75%. This is .2 with improved and connecting and I think continuing to use the scale. I think that if you look at our OPEX those two categories, the administration and the OPEX is fixed in nature and it is very scalable and a proportional of the other OPEX kind of course -- it is also scalable. So I would hope that you would see operating leverage in the business but, Gene if you want to comment

I can just add a couple of things perhaps. Yes, I think you can see some further economies in terms of expense and give you a couple of examples. I think over the course of the next few months you'll see a continued decrease in head count probably between two and 300 coming out of system operations again. I think with respect to programming, we're continuing to negotiate with the key suppliers and drive those performing costs down. I think that will be reflected in next year's cost base. Also, we're getting to a point where we're starting to drive efficiencies through the Garvey building system which has only been in place in recent months. With respect to it, it has a very positive impact in our call center operations and it will also very possibly impact bad debt and I think you can expect to see that go down significantly in 2003. And we're also looking at consolidating our network operation centers. Today we have 10. By mid next year we should probably be down to two as well as consolidation of such things as mediation and cost management. I think going into 2003, we're going to begin to realize some of the efficiencies that we have been building on over the past two years.

Just to follow up. Can you give us a bit more color on the rollout, whether it was a key focus for you at the moment but on the digital product, how many incremental does it operation on the average say in Netherlands versus say regular analogue customer and then this last question, just if you could clarify on the capital expenditures, there was 30 million of that was to do with inventories. If you could clarify with the normalized rate be more like 80 or would it be more like 20?

This is Charlie here. We're trying to stay clear of the product offerings and the real reason is we can bundle strategies and it becomes a matter of judgment on allocation. We're running it around 20, 25 EURO's. As we bundle the key to get additional out there it is going to be bundling. I think that is going to be hard for people to see. Also mentioning we are using free service periods of driver of revenue so across all our products, you know, Internet, Telephony in the bundle, I think it is going to be hard to model out our product and it is worth picking it up [Inaudible]I think in terms of the point, there was change in the counting, the FCC recommended to the industry as you may know that we actually take out the classification of inventory and put it in fixed assets and to be honest with you for us it hasn't made a lot of difference from quarter to quarter. Historically I think we changed our reported CAPEX around seven, $8 million. The reason we thought it was worth putting in this quarter we have been focusing very hard on our asset management and we can still management our current assets including inventory and 18 is not a representative number of our CAPEX because we are winding down our inventory. That is why we specifically disclosed it today. We still have a reasonable industry amount and ton to focus in driving our inventory levels down.

Normalized it would be close tore Q2, would you not it, Charlie?

I think that is right.

Thanks. Just a final question. The new Darby billing system, does it allow you to bill for all triple services on one bill?

Yes, it does. We have gone to a consolidated bill and those systems will implement Darby

Which countries or which markets is that rolled out in now

At the present time we have all of France and the Netherlands on Darby and looking at bringing up Austria next year

About 3 million RGU?

3 million in Austria would add 750,000 to a million depending on when we get them on next year

That is great. Thank you.

Is that it, operator?

Ladies and gentlemen, this concludes the question and answer session of today's conference call. Closing remarks will now be presented by Mr. Mike Fries. Please go ahead, sir.

Well, listen, thanks everyone for join us. I guess the two key messages to take away from this call is one recap initiatives are on track and two another great quarter on the financial side really across all our businesses from an EBITDA and a free cash flow point of view. We have given some guidance on yearend so you can figure out that the fourth quarter ought to be equally as good. We certainly look forward to speaking to you then. Thank you for joining us.

Ladies and gentlemen, this concludes the UnitedGlobalCom and United Pan-Europe Communications third quarter 2002 earnings release conference call. If you like to listen to a replay of today's conference call please call 1-800-642-1687 or 706-645-9291 followed by the pass code 647-0243. Once again if you would like to listen to a replay of today's conference call please dial either 1-800-642-1687 or 706-645-9291 followed by the pass code 647-0243. You may also access a replay of today's conference call by visiting the UnitedGlobalCom or United Pan-Europe Communications Corporate websites at www.unitedglobal.com or www.UPCCORP.com. Thank you for participating. You may now disconnect.