Liberty Global Ltd (LBTYB) 2016 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 2016 results investor call. As a reminder, the first portion of the call will focus on Liberty's European results. The second portion, to begin at approximate 10:30 AM Eastern, will focus on the LiLAC Group. This call and the associated webcast are the property of Liberty Global and any redistribution, retransmission or rebroadcast of this call or webcast in any form without the express written consent of Liberty Global is strictly prohibited.

(Operator Instructions)

Today's formal presentation materials can be found under the Investor Relations section of Liberty Global's website at www.libertyglobal.com. Following each of the European portion and the LiLAC portion of today's formal presentation, instructions will be given for a question-and-answer session. As a reminder, this investor call is being recorded on this date, February 16, 2017.

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

These risks include those detailed from time to time in Liberty Global's filings with the Securities and Exchange Commission, including its most recently filed Form 10-K. Liberty Global disclaims any obligation to update any of these forward-looking statements to reflect any change in its expectations or in the condition on which any such statement is based. I would now like to turn the call over to Mr. Mike Fries.

Thank you, Operator, and welcome, everybody. We certainly appreciate you joining us today for our year-end results call. I will let you know right off the top that our agenda is going to be a little bit different than in the past. As we foreshadowed, we're essentially hosting two calls this morning. We will spend the first hour or so on Europe for Liberty Global Group shareholders and then we will transition to LiLAC and spend the second hour or so talking about our Latin American and Caribbean business. It's going to be a longer morning for the shareholders of both stocks, but we hope a bit more informational and helpful for everyone. Of course, we welcome your feedback, so please reach out to Rick and the Team and let us know what you think.

I will kick it off, the first half of the call here on Europe, and as usual I am joined by Senior Execs in Denver and throughout Europe. I will make some brief remarks about 2016, try to give you the big picture, which we think, by the way, looks very bright indeed. Charlie will give you the numbers and then we will get right to your questions. As usual, we are working from slides so I hope you can down those slides, get them in front of you and follow along, because they've got a lot of great data in them.

I'm going to begin on slide 4 with what we think the big takeaways are from the quarter. These are the things we think you need to know. First of all, on the back of a very strong fourth quarter, which included 7.5% rebased OCF growth, excluding Ziggo, we achieved our 2016 financial guidance targets.

This was helped, of course, by a 24% increase in RGU growth to (inaudible) with nearly one million net adds for the full year, and as we expected, the uplift in subscriber growth was supported by our new-build program. With a little over 0.5 million new households built in the fourth quarter alone, we hit our full-year target of 1.4 million new homes built. Of course, Project Lightning in the UK is our most important new-build initiative and you're going to hear a lot about that today, trust me, along with our other new-build plans in Europe for 2017.

Our Connect & Play bundling strategy is working really well for us. It helps when you have the best fixed network with top speeds of 200 to 500 megabits across Europe and headed to one gig, by the way, by the end of the year as we start our DOCSIS 3.1 field trials. It helps when you are a quad-play provider nearly everywhere, with mobile working as both a revenue driver and a retention tool and it helps when your video platforms rock. With advanced UIs, Replay TV, Go apps and Netflix, our entertainment product has never been better or more compelling, in my view.

Three final points on this slide, all of them financial. First, as Charlie will outline, we exceeded guidance, with $2 billion of adjusted free cash flow for the full year. At the same time, we strengthened our balance sheet by lowering our cost of capital and pushing out maturities. We now have over $6 billion of liquidity in Europe, as we define that term. Lastly, I think you'll be pleased to learn for a whole host of reasons, market dynamics, excess liquidity from the Vodafone JV transaction, we're increasing our share buyback program this year by an additional $1 billion, so we are now targeting a total of $3 billion in share repurchases in 2017, which is just under 10% of our market cap.

To recap, our new-build initiatives are working, our Connect & Play bundles, together with mobile, are generating customer excitement. We've never been on better footing financially, which is why we are upping our buyback this year. Most importantly, growth is accelerating just as we indicated it would.

If you turn to slide 5, I think you can see that pretty clearly. On the left-hand side of the slide, we show the acceleration in our quarterly operating cash flow growth. It was about 2.5% in the first half of the year, rising to 5.2% in Q3 and 7.5% in Q4, as I just mentioned. We've highlighted the Q4 OCF growth of our key regions just to the right of that chart. You can see that the UK and Ireland kicked in 8% OCF growth. Markets like Belgium and Central Eastern Europe had 9% OCF growth.

Several factors contribute to the uplift: price increases, RGU growth and, importantly, I think the impact of our Liberty Go efficiency programs, which we have talked about this year. In fact, operating cost for the second half of the year, when you exclude Ziggo, were down 1% versus the same period in 2015. I like the chart on the right-hand side, too, of this slide, which shows our year-over-year subscriber results. Net adds for 2016 were up 24%, as I mentioned, to 950,000.

Two great storylines here, plainly illustrated in this chart. The first is a 12% uplift in broadband net adds, which of course was supported by new build and innovative products like our Connect Box, which provides ultra-fast Wi-Fi speeds throughout the home. We installed three million Connect Boxes last year, by the way. Consumers love this device.

The second is a 31% improvement in video attrition, or said another way, we retained an additional 123,000 video subs last year -- versus last year, which we attribute to investments we made and the functionality and the performance of our next-gen platforms, along with the broadening of our content offering in core markets and, of course, supported by our new-build program, which we dig into a bit further on slide 6 for both 2016 and 2017.

As we said before, our new-build initiatives are a major source of growth for us with unlevered IRRs we estimate in 30% range. But they're also consuming a lot of capital, so we want to be as transparent as possible for shareholders and analysts keeping track of how we are doing. As reported, in 2016 we built 1.4 million new homes. That's about a 50% increase from the prior year and as with just about any large-scale and complex construction project, we did encounter some operational and logistical challenges. We highlighted those to you throughout the year, but that is normal and necessary in my view and actually has given us even greater confidence for this year's objectives.

Total new-build CapEx in 2016 was around $800 million end to end, including CPE and related cost. This represents nearly 20% of our total CapEx last year, which means that our more normalized P&E ratio to revenue would have been around 22%. For 2017, we are targeting another 1.4 million homes, but with a different geographic mix and when you exclude Netherlands and the upgrades we did in Germany last year, we're actually increasing the new-build by 200,000 homes this year. This slide lays out, I think pretty clearly, what we're going to do in each of those markets. On the far left, you will see we are ramping up materially at Virgin Media from 465,000 homes to up to 800,000 Lightning premises in 2017. Again, this is our most important market. I'm going dig into it a bit more on the next slide.

In Germany, we will increase our two new builds by 20% to about 100,000. We're also going to continue to upgrade MDUs, don't get me wrong, but we're not going to track those the same way. We'll track those separately. In Switzerland and Austria, we'll building another 50,000 homes and we expect to see very good penetration levels here just like we did throughout 2016, actually reaching 50% or higher. Belgian, there's not much happening. This market is largely cabled, so we're really just focused on new housing formation.

Lastly, in Central Eastern Europe, we did a lot last year. We built nearly 600,000 homes but we're reducing our build estimates in 2017 as we focus on what we thing are the highest return areas, but more importantly, we have to spend some marketing dollars on penetrating the footprint we already built over the last two years. If you add it all up, we're going to increase our new-build CapEx in 2017 to around $1 billion, including around $900 million of construction and capacity-related costs. For those keeping track of the math, the higher spend per home in 2017 is really related to the higher weighting of the UK in the mix. We are still in line with our forecast of build cost.

Clearly, our most important investment in new build is Project Lightning in the UK, which we break down a bit more detail on slide 7, so hopefully you can turn to that. When you step back and look at it, 2016 was a great year for Virgin Media. Total net adds were up about 40% at 304,000, with a little over half of those new RGUs coming from Lightning territories. By the way, that means that half our growth came from the existing footprint, which means we were stable in that area year over year. I'm excited by that.

Broadband RGU adds were up significantly and we continue to gain market share on footprint, where speeds, as you know, are 2.5 to four times higher than BT and Sky. This is a huge advantage for us. Importantly, we gained video customers last year, as a direct result of not only our new-build program but also more on-demand content, a refreshed user interface and the launch of our new V6 set top box. By the way, the UK is the first market to get the EOS box that we developed for Europe. It's 4K enabled, has six tuners, a terabyte hard drive, a much faster processor and much better overall customer experience. It's also less expensive.

It is important to point out that Q4 net adds of 36,000 were impacted by the November price increase that we announced in October, which did result in a pick-up in churn. The good news, though, is that, that churn in December and January have fallen from the peak levels seen in October and November. In fact, December was a record month for sales and installs and our net adds are up significantly during the first six weeks of 2017, so we think that is behind us.

The middle chart shows the phasing of our new build the last year. As you can see, there was a significant ramp in Q4, with over 215,000 new homes built. As you will note in the press release, the 465,000 home figure that we did for the full year includes about 140,000 homes which are essentially built and paid for but haven't been released to marketing yet. Typically these homes need to be powered up, which has already happened for 20% of them this year with the balance occurring, we believe, within 90 days of a period end. Now, we show them as home passed since the capital has been spent. By the way, our fully loaded cost these days is around GBP600 pounds per premise, right in line with our forecast.

Beginning 2017, about 15% of our new build will be larger turnkey projects, so not just in fills and MDUs. The benefit here is it allows us really far greater economies of scale as we literally hand over a contract to a single supplier to go and extend network in a whole town or village. The far right-hand side of this slide shows, I think pretty well, our penetration in new Lightning homes. After nine months, we are averaging 23% penetration and after 15 months we are averaging 32% penetration, so we think we are on track to hit 40% after three years.

Lightning is not only about passing more residential properties. As we expand the network, we're also targeting more commercial premises and expanding our services to SoHo and SME customers. In 2016 we added 18,000 commercial premises as part of our build efforts and that number should double this year. Lastly, and very importantly, ARPUs are right in line with what we've targeted. The estimated run rate ARPU after discounts is about GBP48.40, slightly ahead of our expectations. So this is a big year for Virgin Media, no question about it, with a significant ramp up in new build, new and expanded [video] services continue to OpEx efficiencies and a reinvigorated mobile proposition, which is a great segue to slide 8.

I think everyone on this call understands and appreciates our strategy on fixed mobile convergence in Europe. We think we made tremendous strides in 2016 to ensure that we are delivering market-leading mobile services to complement our gigabit-ready broadband networks. This slide provides a great update on where we stand in each geography.

I will start on the left, in the UK, where we have 3 million mobile subs and nearly $900 million in mobile revenue. FMC, or fixed mobile convergence penetration, is only 20% in this market, but I think it is important to know that we have made some really key moves in the last few months we think are going to energize Virgin Media's quad-play opportunity here.

For example, we launched 4G in the fourth quarter and became the first in the UK to market zero rated services for WhatsApp and Facebook messaging. We just announced, and you would've seen this, I'm sure, a five-year extension to our BT MVNO agreement. It's full-MVNO relationship and what we believe are on very favorable terms including, by the way, optionality around what we may choose to do with other MVNO solutions down the road.

Later this year we're going to start the process of migrating our existing mobile customers onto our own centralized core platform, which is going to give us increased control of the customer, the ability to offer true converged bundles, by the way, which nobody in the UK is doing today. As I mentioned on the earnings call in November, as you look at each of these markets we believe the quad-play penetration across the group should reach 30% to 40% over the medium term. So there's lots of upside here.

In Belgium, Telenet is leading the charge on innovative products in our converged environment. You remember, we have three million mobile subs after the acquisition of BASE and about $800 million of mobile revenue. Belgium is already our most advanced mobile market. It has 38% fixed mobile conversion penetration and a one-of-a-kind fixed mobile bundle called WIGO that has already been a huge success in the market. Of course, in the next 24 to 36 months we're going to realize tremendous synergies from migrating the Telnet subscribers over to base network. So Belgium is set.

On the far right, we highlight some of our other European markets, but I want to spend the last minute or two talking about Holland, where we recently completed the JV with Vodafone. This is a huge opportunity for us. With the combination of Ziggo's nationwide platform that connects 9.5 million broadband and TV subs with Vodafone's 4G mobile network that has five million mobile subs and we've talked about how financially accretive the deal was for us at closing and over the medium term, but it's also strategically important. There's only 20% of existing Ziggo broadband customers taking a Vodafone post-paid mobile today. We have tremendous upside as we start crossing-selling fixed to mobile products.

Now part of that confidence in Holland extends from the steady turnaround in our Ziggo platform, which you can see pretty clearly on slide 9. We've talked a lot about Ziggo over the last 18 months and I felt it was important to reflect on the good things that have happened, which this chart, I think, tells the story quite well. In the fourth quarter of 2015, so over a year ago, we lost 52,000 RGUs in Holland. Mostly all of those were video losses and we were flat in broadband and voice.

Every quarter since then, we have shown consistent improvement, you can see that on the chart, culminating in the fourth quarter of 2016 with 51,000 positive net RGU adds, so a 100,000 sub turnaround over the year, which happened. By the way, in all products we added video subs, broadband subs, voice subs. So many things contributed to these results over the last year, so improvements in network reliability, customer service, reduction of truck rolls and our enhanced bundles.

But Ziggo's turnaround, in my mind, also serves as a great case study for how impactful the entertainment platform can be in competitive markets. Here is what we have been up to. Holland is our largest market for Horizon set tops and the companion Horizon Go app, both of which have about a million users today. Replay TV is killing it with 800,000 users. That's up 70% in the last year. In November, we celebrated the first anniversary of Ziggo Sport, which has become the preeminent and most-watched sports channel in Holland. Over 80% of our customers watch it regularly and close to 40% have it set up in their top-10 channel list.

As announced earlier, you should know this, we launched the Netflix app in the fourth quarter and on January 1 we added exclusive content from HBO to our (inaudible) portfolio, making us the quote, Home of HBO in Holland. These were all really important steps. As Vodafone Ziggo, which it is called now, is starting out with good momentum in the largest part of its business, broadband and entertainment, and we are super excited to see how the new combined Management Team can elevate both the fixed and mobile business as they execute on a EUR3.5 billion synergy plan, by the way. So stay tuned; we will provide updates on that as we go.

I'll finish my remarks on slide 10, recapping our priorities for 2017 and providing some guidance, which I'm sure you are all interested in. The five pillars of our operating game plan for 2017 on the left-hand side should be familiar and consistent to all of you. The foundation of subscriber growth is our Connect & Play platform, which means to us exploiting the fastest broadband speeds in every market, combining that with the most advanced video platform, which is characterized by the incredibly user interface, access to the most comprehensive content offering on all your devices wherever you are. You then add to that mobile and seamless connectivity and supercharge the whole thing by expanding our scale and reach with high-return network extensions to millions of homes. That is the core subscriber growth strategy.

We'll also continue to leverage our B2B opportunity, especially and SME in SoHo, with cloud-based services, Wi-Fi access points, security platforms and, importantly, mobile. Lastly, we will continue to drive scale-based efficiencies throughout the organization. We've talked about it all year. You're probably sick of hearing it from us, but the proof is in the numbers. As I mentioned earlier, our indirect costs were down 1% in the second half of 2016 on an FX-neutral basis and pretty much every market contributed here. The UK and Ireland were down 2%; Switzerland and Austria were down 6%; Central Europe was down 2%. Even our corporate costs were flat.

All these drivers factor into our 2017 guidance targets, which you can see on the right-hand of the side. To begin with, we are switching up the structure of our OCF guidance from this point forward. A year ago we provided you with a three-year CAGR of 7% to 9% for rebased operating cash flow growth and the principal goal was to communicate to you a new elevated standard for growth over the medium term that was consistent with our internal plans and, by the way, our compensation schemes. Those goals remain in place, in particular our compensation plans. Nothing has changed.

As our fourth-quarter OCF growth of 7.5% should indicate, we are trending up towards 7% to 8% annual OCF growth. In fact, we want to confirm today that we expect to be a 7% to 8% annual growth Company over the medium term with actually some upside to that range in 2018, or next year. The truth is it that took a bit longer in 2016 to get the engine humming and we still have a lot of work to do in front of us, don't get me wrong, to consistently hit that cruising altitude of 7% to 8%. In 2017 we're going to go with a more conservative range, with rebased OCF guidance of 6% to 7%. By the way, that is a 50% uplift from 2016 and I'm pretty sure well above Street consensus.

Some have asked about the EUR100 million of service charges that we will collect from Vodafone -- the Vodafone Ziggo JV and how those are treated. Let me be clear. We have decided that those fees will not contribute to our OCF growth rates. In fact, they'll be rebased for all periods as if they existed in all periods and, to be honest with you, depressed growth in 2017 by a couple hundred basis points. So even though it is depressing the growth, we think it is the right way to approach this, especially for the comp.

On the balance of our typical guidance figures, we expect P&E additions as a percentage of sales to range between 29% and 31% compared to about 28% in 2016 but, of course, we're stepping up new-build spend, so that is normal. We're going to reduce our adjusted free cash flow for the year to about $1.5 billion, again reflecting the higher CapEx spend on new build. In terms of our share repurchase program, as I said on the opening slide, we are expanding the program this year by an additional $1 billion and now expect to purchase $3 billion worth of stock this year.

As I look back over 2016, I can tell you all of us, we feel really good about the foundation we have established for accelerated and sustainable growth, and growth is what it is all about. We've got a super-fast broadband network, killer TV apps, triple-play bundles, mobile launch to everywhere, millions of new homes built and ready to market and an operating model that generates material cost efficiencies. I feel we are on our way. I hope you agree we are on a way. I'm excited that we are able to show you some great results this quarter.

Now I will turn it over to Charlie and then we will get to your questions. Charlie?

Thanks, Mike. I'm now on page 12 where we present the full-year financial results for the Liberty Global Group. Two quick notes before I go into the details. First, our results include BASE in Belgium as of February 11, 2016. Second, since the joint venture transaction with Vodafone in the Netherlands closed on December 31 of 2016, our P&L and cash flow include the financial results of Ziggo for the full year of 2016, but we have deconsolidated the Netherlands from our balance sheet at year end.

Starting on the left of this page and adjusting for FX and the impact of acquisitions, we grew rebased revenue by 2.5% year over year to $17.3 billion in 2016, or 3.3% excluding Ziggo. I will provide some color regarding the drivers in a minute. With respect to our OCF, we reported just over $8 billion for FY16 and when excluding the Netherlands as per our guidance, we delivered 4.3% rebased OCF growth in 2016, which was within our 4% to 5% guidance range for the year.

2016 was clearly a year with two halves. In the first half of the year, we reported rebased OCF growth of 2.4% whilst in the second half of 2016 we delivered rebased OCF growth of 6.4%, including 7.5% in Q4. This acceleration was partly driven by our Liberty Go efficiency program and we are please report that our overall indirect cost base of around $4.5 billion, when you exclude the Netherlands, was close to flat in 2016.

Moving to our property and equipment additions, we spent $4.6 billion in Europe, or 27% of revenue in 2016, which is above the 23%, or $3.9 billion, in 2015. In line with our full-year guidance, absolute P&E additions increased by around $700 million in 2016, largely due to increased line extension and scalable infrastructure spend which was related to new-build projects and, to a lesser extent, higher spend to support capital. Adjusted free cash flow declined by approximately $450 million during 2016 as compared to 2015, but finished ahead of our updated guidance of $1.8 billion. That was mainly due to favorable working capital movements in Q4 driving the adjusted free cash flow to a billion for the final quarter of the year.

This year-over-year decline is primarily due to higher vendor financing payments that more than offset the increased cash received from OCF and related working capital changes and lower cash payments for capital expenditures, both of which benefited from increased vendor financing efforts. On a net basis, our vendor financing programs results in around $140 million of additional cash flow in 2016 as compared to 2015.

Turning to slide 13, which shows the full-year 2016 financial performance of our Western European operations, which represent over 90% of our total European revenue in OCF, I will now go into the drivers for each of our key segments, starting on the left with our largest business, Virgin Media in the UK and Ireland, which reported rebased revenue and OCF growth of 3% and 5%, respectively. On the revenue front, Virgin Media's full-year result was primarily attributable to a higher cable subscription revenue driven by a mix of improved volumes year over year and an increase in ARPU per RGU. In Q4, rebased revenue growth at Virgin was only 1%. That's partly related to a 9% decline in our mobile business, including interconnect and Freestyle handset revenue and a decline of 5% in our B2B revenue.

B2B revenue was impacted by a $12 million revenue benefit in Q4 of 2015, relating to the settlement of disputes with mobile operators. Cable subscription revenue, on the other hand, grew 4% in Q4. Virgin Media ended 2016 particular strongly, with an 8% rebased OCF growth rate in Q4, which was supported by strict indirect cost control.

Looking ahead to 2017, we expect Virgin Media's top line to benefit from the November 2016 price increase, a bigger annual impact from our new-build activity and our new 4G mobile offerings, among other things. On the other hand, an expected GBP30 million increase in network infrastructure charges will lead to OCF headwinds in 2017. The OCF growth phasing is expected to be weighted towards the end of the year, a similar trend to 2016.

Moving to Germany, Unitymedia generated solid results, with 6% rebased revenue and OCF growth, driven by a combination of an increase in ARPU per RGU and the addition over 300,000 subscribers last year. These positive revenue trends were partially offset by higher staff-related costs and higher programming and copyright expenses.

In Belgium, Telenet delivered rebased revenue growth of 3%, as continued growth in our legacy cable business was muted by a decline in mobile revenue in the former base business due to adverse competitive and regulatory pressures. Telenet's OCF increased 4% in 2016 on a rebased basis, including a 9% growth in Q4, which benefited from an $8 million positive pylon tax settlement in Wallonia.

Turning to Switzerland and Austria, we delivered rebased revenue growth of 2% and rebased OCF growth of 5% in 2016. Revenue was primarily driven by mobile volume growth and a solid performance in the B2B segment, supported by growth in cable subscription revenue due to higher ARPU per RGU, which was offset by lower average subscribers. With respect to Switzerland and Austria's rebased 2016 OCF growth, we benefited from tight cost controls, in part driven by Liberty Go efficiencies.

Moving to the far right, I will for the last time highlight the performance of our Dutch business, Ziggo, on a standalone basis. On the back of the improved operational trends that Mike highlighted earlier, Ziggo reported close to flat Q4 rebased revenue performance, leading to a 2% revenue contraction for the full year. Rebased OCF declined 3% in 2016, which is driven by higher direct costs, including the programming cost, which was mainly driven by our investment in our popular Ziggo Sports channel. This increase was partially offset by lower indirect expenses on a year-over-year basis, primarily driven by decline in integration-related expenses.

Turning to our balance sheet on slide 14, total third-party debt and capital leases for Liberty Global Group was $37.8 billion, while the cash and cash equivalents totaled just over $1 billion at year end. After excluding the $2.1 billion of debt backed by shares that we hold in ITV, (inaudible) and Lionsgate, our consolidated adjusted gross and net leverage ratios were five times and 4.8 times at year end. As a side note, when you include the $2.3 billion of cash proceeds that we received in the first week of January following the closure of the Dutch JV, our cash balance would've been $3.4 billion, which would lower our net leverage on an adjusted basis to 4.5 times.

We were active in the credit markets during the last quarter of 2016, extending the average tenor of our third-party debt to 7.5 years, up from just over seven years at Q3. More than 85% of our debt comes due in 2021 and thereafter, while our blended fully swapped borrowing cost is now 4.7%, as opposed to 4.8% in Q3. In 2017, we will remain opportunistic and continue with our strategy to refinance ahead of the curve and maximize tenor across all credit silos. So far this year, the credit markets have been robust and we managed to refinance another $4 billion in the first six weeks of 2017 at attractive rates.

Moving to the middle of page, you can see our liquidity which, including the JV proceeds, total $6.4 billion comprised of $3.4 billion of cash and $3 billion of aggregate unused borrowing capacity under our credit facilities. On the right-hand side of the slide, we highlight our share repurchases. During Q4 we bought back approximately $450 million of stock, bringing the total amount of our buybacks to nearly $2 billion in 2016 and, as Mike stated earlier, we remain committed to buybacks and our Board has authorized a significant increase in the buyback.

To summarize on page 15, our new-build activities continue gaining momentum and we remain focused on investing in product innovation, further advancing our fixed to mobile conversion strategies and differentiating our bundles with our Connect & Play strategy. These investments, in combination with great customer service, should enable us to successfully execute reasonable price increases across our footprint while delivering solid RGU growth over the years to come.

2016 was clearly a year of two halves, where we invested in the foundation of our Liberty growth plan in the first half and we saw the benefits kicking in during the second half. This resulted in a solid set of financial results, especially in Q4, and sets the stage for our goal to deliver 6% to 7% rebased OCF growth, stepping up to 7% to 8% annual rebased OCF growth over the medium term.

With that, Operator, we are happy to open up for questions.

(Operator Instructions)

We will take our first question from Nick Lyall from Societe Generale.

Morning. It's Nick from Societe Generale. Can I just ask a question on UK cost, please? Your (inaudible) cost control was very strong in the fourth quarter, so could you tell us, in terms of programming costs, were costs down mainly because of BT and what do you expect the outlook to be, really, for programming costs into next year? Also, is there anything we should expect in terms of a reduction in the MVNO costs, with net cost, even with data rising from the new BT deal, please? Thank you.

Hi, thanks. First of all, everybody, appreciate you putting up with the long remarks. It was a lot to talk about, so sorry for that, but wanted to make sure you had all the info.

On the programming costs, Nick, those are not a part of indirect costs as reported. We put that up in our direct costs and our direct costs are increasing year over year along with our revenue. Gross margin, largely flat but we are not, and nor have we, indicated material changes in our direct cost profile, which -- where programming would reside. For the most part, we are increasing our programming costs every year to support the video platform as we've outlined.

Tom, I don't -- I think Tom is on but he's got a hoarse voice, so I'll let him chime in if he's up to it. We have not disclosed, nor are we going to disclose, any details from the MVNO agreement or extension with BT but suffice it to say that we would have been unlikely to reach an agreement with somebody for an additional five years that didn't contemplate improved pricing and improved product access and it is also, of course, a very full MVNO that gives us control of our customers.

You should assume that the terms of our mobile access going forward will be better than they have been in the past and that is why we agreed to extend the contract. There was a bit of a competition for that as well, so I think we ended up with a good deal that will be -- you will see that certainly over time in the numbers.

That's great, Mike. You mentioned as well, sorry, just to come back on the MVNO agreement, you mentioned MNO optionality for later. Should we read into that a little break clause or is there maybe more to it that we should think about?

I think you have got it right. We wanted to ensure that we had flexibility in the event another strategic solution presented itself and so there are, and I think we have been public with that, there are some break cause terms built into that. That is all we will say.

That's great. Thank you.

You got it.

We'll take our next question from your Ulrich Rathe from Jefferies.

Thanks very much. I was interested to discuss the UK cable service revenues. You mentioned that the rebased growth was around 4%. I think the first three quarters have averaged slightly below 4% as well. I understand there's a couple of one-offs in there, but still, given that there was a significant price increase about mid-quarter, I was wondering why that number would not be higher. In particular, if it is not simply the phasing of one-offs, I was wondering, have you used unusually strong retention measures to keep the churn down here? Is there a particular issue in the quarter on the price increase with retention measures that is different from the ones you would usually apply, or do you have any other reasons why the growth came in the way it did? Thank you.

Tom, are you to answering that? I know you've got a cold.

Mike, I'm here and hello, everybody. We certainly used retention measures very effectively through the period. I wouldn't call them unusually strong. I think the issue we had with the price rise, of course, it was the second price rise we took in calendar 2016. We had a price rise in February, this second price rise in November.

It's been quite a common practice in the market amongst our competitors, but its something that Virgin Media certainly had not done in recent times. I think we did come under some more pressure under churn and we used our wide range of retention measures in addressing that. That clearly has an offset and in the end, it does retain those customers. As alluded to earlier, we have seen that churn performance recover and we have certainly seen a strong sales performance that ran throughout 2016 on the back of the core business and Lightning continue and so we do see a good recovery in volumes coming through.

Thanks. Can I follow up with a very quick one on the financing? Charlie, you said that you're increasing exposure here. Could you explain why you are actually increasing exposures, because the spend of financing deals are becoming better, because people are desperate to jockey for a place in your list or is it simply attractive rates and that's the reason why you increase it, or are they actually getting better and that's the reason why you are increasing it? Thank you.

There were two big issues. One issue is, is that the type of spend that we are increasing is new-build construction and typically the sweet spot of vendor financing is the new-build construction firms, because obviously it's hard labor so they have to pay their wages in two weeks and clearly us paying them earlier rather than later is very attractive them.

I think the second issue is, is that because of the controls in financing the supply chain, not at our level, obviously, but small to midsize companies, source of financing from us is very attractive and arguably a cheaper source of financing they get from the bank market in Europe today.

Thank you very much.

We'll take our next question from Michael Bishop with Goldman Sachs.

Two questions, please. Firstly, on Virgin Media, you clearly mentioned the phasing of growth will effectively build throughout the year, but I wanted to understand will the phasing of new builds, ie the $800 million, will that also phase in a similar fashion to 2016 and might there be this issue where we have homes passed but not marketable again so we should think about that in terms of the growth for 2018 versus 2017? Secondly, Telenet presents a very upbeat message about moving to 1 gigabits across the footprint by the end of 2018 and having completed over 30% of the node upgrades, so I was wondering if you could update us on the progress there across the rest of the footprint? Thanks.

On the Telenet question, I think the strategy is clear, and Balan is on, he can address it as well, we need capacity in that market and the one gig upgrade has been something we have been on for quite some time. Not sure what else to add to it. The business is solid. We have not seen the sort of impact that we estimated to see from the resale provisions although Orange is certainly doing their best and maybe start to try to drive growth.

I think the real story of Telenet is of course getting the mobile platform to fully integrated, getting the customers moved over and continuing to press forward on the quad-play offering, which we think is unique and by far the best in the marketplace. We are confident that Telenet can continue to drive good mid-single-digit growth this year. I think that was our guidance and it makes sense. A few headwinds on the mobile revenue side. I think they articulated that as well.

But for the most part, really swinging to more aggressive growth as they start to migrate customers from BASE -- or for Telenet over to the BASE platform and of course saving that many that they're otherwise paying in MVNO costs. You should see, I would say, accelerated growth from Telenet and that's been the storyline over the next 24 months and that is one of the reasons we are excited about it.

Tom, I'm not sure how much you want to say on the phasing of the build. I think historically we have certainly focused on the second half of the year for all kinds of reasons and the marketable question will be one that evolves. This was a particularly unique fourth quarter but I will say we have decided to define a homes passed as a basically a premise that can be powered up and made operational within three month of construction. The reason for that is we spent the capital. We want you to see that the capital, actually 90%-plus of it, has gone to building that premise and when it gets connected with power and those sorts of things, if it's within 90 days, we will start marketing it.

The point I'll make is if it does continue through this year you will see our denominator in the penetration rates will be a bit higher because we do include, in that denominator, even those homes that are not yet marketed. It is not a marketed-only ratio, if you follow me. We will keep you abreast of that quarter by quarter. You've got the numbers for this quarter, 140,000, a bunch of them already hooked up, within 90 days should be hooked up and then you will have that number every quarter from us. Not sure if you wanted to add anything to that, Tom.

Nothing to add, thanks, Mike.

Just to quickly follow up on the Telenet (inaudible) costs, really I was after where you are in terms of upgrading the network speeds across the rest of the footprint, given Telenet's comments about getting to one gig by the end of 2018. Is that the sort of metric we should be thinking about for the other markets as well, or will they be slightly behind?

Well, the other markets will be driven mostly by DOCSIS and we are field trying that this year. We are not going public with our network plan yet or maybe ever in terms of where we intend to be one gig and why, but you should assume that, that is around the corner for us and with marginal expense for the most part with DOCSIS 3.1. Balan, I don't know if you're on. If you want to add anything to that, go ahead.

Sure. We have been upgrading all across the board, all of our CMT assets, to be DOCSIS 3.1 capable and get us to the one gigabit with much better spectral efficiency. You will start saying that, as Mike stated, by the end of 2017 we will have the one gigabit product around a lot of Europe, starting with trials and then full rollout as well.

That's great. Thank you very much.

We'll take our next question from Jeff Wlodarczak with Pivotal.

Good morning, guys. I wanted to focus on the UK as well. Specifically on the 5% decline in business revenue, how much of that is broader economic market weakness versus the inherently lumpy nature of that business and if you could talk about the prospects for business in the UK going forward? Then there's some speculation you are going to launch a UK budget brand, I guess to go after some players, TalkTalk or Plusnet from BT. Is that something that's interesting?

Tom, do you want to hit those?

On B2B, I think the apparent decline is entirely due to a positive adjustment we had in the prior period. I think the underlying B2B revenue was up and our profit contribution from B2B significantly up. I think we are continuing in B2B to have a good growth business across SoHo and SME and with a much more focused effort on MLE where we have gone in and really made sure the capital allocation is efficient.

There was a GBP12 million, I believe that was the number, GBP12 million of revenue in Q4 2015, Jeff. Something to do with (technical difficulty) settlements disputes with mobile operators. That was the (inaudible) compared to that.

In our public sector business, I think we are rigorous. We did a quite extensive review of that two years ago. We've made sure all of those accounts are a positive and significant internal rate of return and we tend to be in that area of the public sector, a bit more regional, bit more emergency services, which seems to be a steadier business than some of our competitors experienced in dealing with the central government. I think in terms of B2B we see it as a continued growth area, particularly SoHo/SME but pretty much across the board.

And then the UK budget brand potential?

I think we're always reviewing the way we go to market. I think the budget area is of less interest to us than maybe our competitors, but we are constantly thinking about how we can get through the emerging segments in the marketplace and so we will keep items under review.

Thanks very much.

We'll take our next question from Vijay Jayant with Evercore ISI.

It's James Ratcliffe for Vijay. Two if I could. It looked like there was a significant rise, about 12% organically in Germany OpEx. There was some mention of additional costs there. What was driving that? Is that from one-time or otherwise? Secondly, when you look at the 2017 OCF growth of 6% to 7%, can you help us break that down? How much of that is organic growth of the business? How much is ongoing contribution from Liberty Go? How much is any tailwind from footprint expansion? Thanks.

Sure. On the second question, James, and I think Lutz is on. He can address the OpEx. On the second question of the -- we're not going to provide a whole lot of color here on where that 6% to 7% comes from, but you should assume it's not going to be materially different than 2016. Clearly, efficiencies will be a part of that as we continue to roll out and implement all of the various things we're doing across the business to be more efficient in how we were in the business and so that is going to be a chunk of it. There will be organic growth as -- steady-state growth as we saw this year in markets like the UK where we grew basically the same as 2015 in the business as usual segment.

You're going to see new-build obviously kicking and in various markets along with price increases. We took price increases again across the board, some more aggressive than others, but if you laid them out year over year 2016/2017 we continue to take reasonable price increases on our products to reflect the investment we're making in customer service and innovation all that good stuff. I don't think it is going to be materially different and we'll certainly give you more color on it as the quarters unfold.

In terms of Germany OpEx, Lutz, if you're on, I think you can address that. It's mostly to do with marketing and customer growth. Go ahead.

I think the cost development on the business as usual to keep the lights on is indeed decreasing, so we are getting efficiencies. We have done also -- we're in the middle of a restructuring program and laying 20% of staff off. Why is cost increasing? Because we have new sources for growth, so investments in B2B, we fuel growth there, getting more customers. We have new-builds now so we have generated 200,000 homes and we have a dedicated sales team for that, to if not to generate the customers and we have ramped up also marketing activities for the consumer. You see that in the numbers, especially in quarter four. Therefore, the increasing cost at the end is simply to make sure we have the same growth speed also in the future.

Thank you.

I would point out, though, that the operating cash flow margin in the fourth quarter was still 62.5%. It continues to be a profitable business and that is up from 61.5%, 61.8% in the first half of the year, so they are continuing to scale.

Great. Thank you.

We'll take our next question from Matthew Harrigan with Wunderlich Securities.

Thank you. I wanted to get your view from a European perspective. (Inaudible) at Supermobility and I think on occasions that cable's almost in a uniquely advantageous spot for 5G, given the density, the cell site locations, the right away, the powering and everything and he was saying it's almost inefficient in stateside for mobile providers to build out (inaudible) small-cell topologies and then there are things happening on the technology side, even using 802.11 waveforms for LTE over time. It could further advantage the cable.

When you look at Europe, given your situation in Belgium with BASE and your JV in the Netherlands now and in other markets, how do you feel about 5G? Do you think that part of the winning game plan might be to carry even more data for other operators beyond the cell tower business you have right now? Thank you.

Sure, Matt. I think we have talked about 5G pretty much on every call and we've said the same thing, which it is certainly an evolutionary technology, one that people will embrace, operators and consumers. It's going to take time, four to five years before I think even launch and certainly longer than that before any material penetration. We believe you are accurate and correct that, that technology does require more infrastructure on the ground, the back haul and other matters and we think our networks clearly will play a role.

But the important point to make is we are in the mobile business and we intend to be even more successful in the mobile business over the next three to five years so we will be a 5G provide. Not only will we benefit from the developments that will occur and all of the positive consumer benefits that will occur, but we will be actually delivering those benefits to customers as a mobile operator and obviously to the extent we have network in those markets, we'll be benefit, utilizing our own networks. It is a win-win for us. It's not simply a -- we're not a taker in the sense that we hope 5G works and they come to us knocking on the door and asking for access, it is the other way around. We're in the mobile business, so either through our MNO or MVNO relationships we intend to be a player in 5G and then of course to take advantage of the fact that we have the densest, most accessible network for back haul and other things that are necessary. So it is a win-win, as we see it.

Thanks, Mike.

You got it.

We'll take our next question is from Ben Swinburne with Morgan Stanley.

Thank you. Good morning. Going back to your comments on entertainment being a core differentiator for you in a lot of markets, you've also talked recently about acquisition opportunities around content. You have done some small broadcaster acquisitions. Can you maybe update on your thoughts on how content assets may or may not play a greater role going forward for the Company? For Charlie, I think you or Tom mentioned the phasing for OCF growth in UK would be back-half weighted. Is that probably also a good place for us to be for the overall Company in Europe in terms of phasing to the 6% to 7% guidance? Just need more color. I figured since the UK is so big it probably is, but I thought I'd come back and ask.

Good questions. On the entertainment side, and I will repeat what we said before, nothing has changed. There are no Disneys or Time Warners in Europe. We need to be looking at the content on a market-by-market basis, being opportunistic about the kind of product that people want in those markets and what we can gain access to a efficient way. In many ways, Holland is a great case study, incredible functionality on the entertainment platform, available on every device, so we've completely neutralized the impact of OTT, if you will, integrating great OTT apps like Netflix right into the core product and then topping it off with exclusive sports, exclusive HBO.

When you add it all up, we are not betting the farm on that sort of package. That is a really affordable and, we think, manageable set of content investments in a market where we need it to differentiate and it is working, as you can see in the numbers.

What we do another country will be case by case. Free-to-air assets have worked in for us in Belgium and Ireland, but fortunately those were small investments and the benefits are clear. We're extend reach, we're developing -- getting right in the middle of original production. We're offering content that is only available to our customers. We'll start zero rating that content.

So having a relationship with free to air in some of those markets where we can access that asset efficiently and extensively, I might add, importantly, I might add, makes sense for us. But we're going to look at it case by case. I think there is no big bangs that we see across Europe. We're going to be smart about content and start to focus on what customers want first part. That is the strategy. It hasn't really changed and I think we're going to be -- certainly you will know more as the year unfolds but that's the basic approach to it. Charlie, you want to hit the phasing point?

I agree with you. I think the phasing of the acceleration will come towards the back half of the year not the least because clearly we are building momentum in the new-build. We continue to drive these synergies in the Liberty Go program on the cost side. I would assume a much faster growth in the second half than the first half.

Thank you both.

You got it.

We'll take our next question from Amy Yong with Macquarie Capital.

Thanks. Two questions for you. First on Germany, I know convergences is really important for the model, but clearly you're early in Germany. What are your thoughts on mobile going forward? Is that even a necessity given the footprint? How has your relationship with Vodafone evolved since the Ziggo JV? Thanks.

In Germany, Lutz can chime in, it is not yet a quad-play market. It's got the lowest quad-play penetration of any country. It's certainly early days. The beauty of this market is we continue to penetrate broadband, all broad providers are doing it, penetrate broadband quarter after quarter. We're doing 60,000 net adds in just at Unitymedia every quarter. The cable industry is doing 140,000, 150,000 net adds every quarter, which is 50% more than the entire DSL industry, but they are also adding 100,000.

You are adding 250,000, 300,000 new broadband customers every quarter across the industry in Germany and that is a piece of the business you want to be owning and we think we are over achieving, of course, on our footprint. So it is clearly very much a broadband market. The entertainment piece is evolving, of course, and something where we think we are leading the charge in and convergence will happen over time. We are developing. We have a mobile product out there today. We have 350,000 SIMS, something like that in the marketplace. I think we are also being cautious and putting our money where the opportunity is at this moment, which is clearly in broadband and video.

On the Vodafone side in Holland, it has been -- it's gone swimmingly. We have got a great team on the ground, could not be happier with the combined management group. It's so far a very high functioning relationship in terms of what we can achieve and what we need to achieve in that market to be competitive. I am hopeful, we are all hopeful that Holland starts to rationalize when it comes to pricing and discounts and we think it should and probably will. We have a number of -- I can't talk about them and I won't talk about them, but we have a whole host of arrows in our quiver here to be able to -- are implementing this year as we start cross-selling and converging the product. Then not to forget the synergies that we believe are achievable as we integrate the business.

So lots of good things that are going to happen there. The relationship with them has been super. We're excited about Holland collectively and individually. It's not going to happen overnight. It's going to take some time. The mobile business there in particular is challenging, as you would have noticed from their numbers if they've reported yet. But it is nice to have the Ziggo piece going well and bedding down the biggest part of it and -- but we are excited.

Great. Thanks.

You got it.

We will take our last question from James Ratzer with New Street Research.

Thank you much, indeed. Two questions, please, first one for Charlie. Just wondering if you could discuss a little about how you are thinking about leverage going forward. You mentioned you're at now 4.5 times post the closing of the Dutch transaction. That's given you some flexibility to increase the share buyback going forward. How are you thinking about an optimal capital structure in the medium term?

The second question I had, please, was thinking about Project Lightning take-up in the UK. Kind of question in two parts, firstly, you are saying now after 15 months you've got 32% take-up. Do you think in the medium term maybe 40% could be conservative? The second part, I noticed that after 12 months of take-up you have cut the number since November from 29% take-up now to 25%. It sounds like there is something going on with the Q4 2015 cohort that you released to market. What is going on with that quarter of homes released? Is that just a one-off or is that something we need to dig into in more detail? Thank you.

I will let Tom flesh it out, but on the Virgin question, the Project Lightening question, you're going to have some variability as you release homes into that cohort. Remember, even in -- as I said, the denominator includes homes we have not even released to marketing yet. That's going to show some variability quarter over quarter and month to month or cohort to cohort and we will try to provide transparency where we can, but it's not atypical that you'll see that kind of variability. Depending on how many homes you put into the denominator and how long you been marketing them and all that good stuff.

In terms of upside, we're not sitting here today saying there is more upside to 40%, but we think 40% is a good number and again, if we get there, that is GBP1 billion of margin. So we are hopeful to get those kind of numbers and that would be, for us, more than successful in terms of our deployment of capital. We are not upping that number today. Charlie, you want to hit the leverage point?

Yes, I think our guides have been for a very long time four to five times. We are very comfortable at the top end of that range, particularly given the interest rates remain very, very low, particularly compared to when we set that guidance and that our debt continues to be fixed rate, fully swaps at very attractive rates. I think our all-time lowest cost of borrowing came in this quarter at 4.7%. I think you can assume whilst we have no immediate need to do it, we're very comfortable if we had to, to get to five times again.

Great. Tom, did you have any more details on that Q4 2015 cohort at all?

I don't at hand. I think inevitably it will be because the cohorts, as we move forward, the pool in the cohort is going to vary and the mix will vary. We'll come out with that in more detail and make sure that we are completely transparent on how we are reporting those numbers.

Great. Thanks, guys.

Okay. We appreciate everyone hanging in there and a little longer call today, but glad you could join us. We are going to transition to the Latin America and I think if you want to just hang on, I believe, Operator, is all you have to do, but we're going to pause and then let others join. Is that correct?

That is correct.

Great. All right, thanks, everybody.

Ladies and gentlemen, this concludes Liberty Global's fourth-quarter 2016 results investor call for its European operations. As a reminder, a replay of the call will be available in the investor relations section of Liberty Global's website at www.LibertyGlobal.com. There you can also find a copy of today's presentation materials. As a reminder, the fourth-quarter 2016 results investor call for Liberty Global's LiLAC group will begin shortly, at approximately 10.30 AM Eastern time.

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Liberty Global's Fourth Quarter 2016 Results Investor Call for its LiLAC Group operations.

This call and the associated webcast are the property of Liberty Global, and any redistribution, retransmission or rebroadcast of this call or webcast in any form without the express written consent of Liberty Global is strictly prohibited.

(Operator Instructions) Today's formal presentation materials can be found under the Investor Relations section of Liberty Global's website at www.libertyglobal.com. (Operator Instructions) As a reminder, this investor call is being recorded on this date, February 16, 2017.

Page 2 of the slides details the company's safe harbor statements regarding forward-looking statements. Today's presentation may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including the company's expectation with respect to its outlook 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 from time to time in Liberty Global's filings with the Securities and Exchange Commission, including its most recently filed Form 10-K. 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 Mike Fries.

All right. Thanks, operator, and welcome, everybody, particularly our LiLAC shareholders who may have just dialed in to join us and hello again to those who were with us on our last hour for the European call. This is our first LiLAC investor call, as we've said, and we're hoping that the next 45 minutes or so really provide you with a bit more information and transparency about our Latin American and Caribbean businesses.

I'm joined again by the new leadership team here in Denver, in Europe, in Miami, in particular, Betzalel Kenigsztein, who's the President and COO of LiLAC; John Reid, our CEO of Cable & Wireless; and Christian [indiscernible], CFO of LiLAC. Each of them are going to make some remarks today and help during Q&A so you don't have to listen to me the entire time.

I'm going to provide a quick introduction and Betzalel will cover some consolidated results, including -- and particularly Chile and Puerto Rico. John is going to dive into Cable & Wireless, and then Chris will close with some financial results, and then we'll get to your questions. And as we do usually, we're talking from slides, so I hope you can get those slides and follow along with us.

Now I'm not entirely sure who's on the call and I'm on Slide 4 now, but we thought there might be a fair amount of investors who are new to the LiLAC story. We want to start with a quick recap of the LiLAC opportunity as we see it, basically laying out for you the strategic, operational and financial reasons to own this stock. I think the first point to make is that LiLAC represents a highly diversified set of operations across the region that is and will continue to experience tremendous growth over the next 5 to 10 years.

Now we're not the biggest operator in the region, but we feel like we're one of the best positioned to exploit this opportunity, with 5 million fixed RGUs, 4 million mobile subs, $3.6 billion of annual revenue and market-leading positions across 20 countries. We're the #1 fixed broadband provider in 14 of those markets, the #1 video provider in 9 of our 16 in countries with TV, and the #1 or #2 mobile provider in 17 of those 20 markets.

So fixed and mobile convergence is alive and well at LiLAC. And it's well known that broadband and pay TV penetration in this region are about 35%, 40% compared to, say, 85% in the U.S. And also, the broadband consumption across both fixed and mobile networks is growing faster than it is in America and Western Europe. We think we're poised to ride this wave -- by the way, including in the B2B segment, where Cable & Wireless is perhaps the most respected provider of B2B services throughout the Caribbean and Panama, and our subsea fiber network is feeding the entire region with fast, reliable bandwidth, and that is consistently ranked as #1 provider. These 2 businesses represent 40% of Cable & Wireless' revenue today, and this expertise and productivity will help B2B fuel growth in Chile and Puerto Rico, where we're really just getting started.

Now as we know from Europe, scale drives opportunity and growth, and it's no different at LiLAC. We have already seen Columbus and Cable & Wireless hit nearly all of their synergy targets, and we've recently announced another $150 million of synergies between Cable & Wireless and LiLAC by year-end 2020. Half of those savings will come from OCF improvements, the other half CapEx savings. And together with revenue drivers I talked about, we think over the medium term, LiLAC should return to being a high single-digit OCF growth company. I know Chris will provide some specific guidance for 2017.

And we're in a perfect position to play a big role in the necessary and inevitable consolidation that's going to take place in Latin America and the Caribbean. When we originally created a LiLAC tracking stock, one of the main reasons for doing so was to exploit this highly fragmented telecom space. I'll tell you, our pipeline is deep and it's rich, but we're going to be patient. Clearly, we think our stock is undervalued. But now -- and we're pushing forward with the hard spin of the business potentially by year-end. And in time, I can assure you that LiLAC will be front and center on some very interesting opportunities to drive further scale in the fixed to mobile network business and create great value, as well as in the B2B space.

We're excited about this region. I hope that's becoming clear in this company and this stock. And for those that have been long-term investors with us, I think you know our playbook. It won't happen overnight. But with steady organic growth, smart capital structure management and disciplined M&A initiatives, we're confident that this will be a very interesting business for a long time.

Now I'll finish my remarks with some big headlines on Slide 5 about the year and the quarter. But before I turn it over to the rest of the team and as you'll hear in a moment, the legacy LiLAC operations in Chile and Puerto Rico are cruising along nicely. Together, they added nearly 100,000 new RGUs. In 2016, they generated a combined 9% rebased OCF growth for the full year. Both of these markers are competitive, just like in Europe, but we're leading the pack with the fastest broadband speed and the best entertainment platforms.

During the 7 months we've owned Cable & Wireless, we worked our tails off to steady the ship and create all of the right conditions for continued growth. We nailed down our growth strategy for each market. We created a new operating model, established new leadership and at the same time, we infused the organization with the best of what we do in Europe and what we know as well as with some of our brightest executives who have already been integrated. John Reid will expand on that. But the group exceeded the OCF guidance in the fourth quarter and is on the right track to achieve this sort of growth we originally anticipated.

Network upgrade and network expansion are critical drivers of success in nearly all of our LiLAC markets, and we added a total of 150,000 two-way homes in Chile and Puerto Rico last year. And Cable & Wireless operations added or upgraded about 200,000 homes, primarily in Panama, and we're planning to build or upgrade another 450,000 homes this year.

Similar to Europe, the Connect & Play strategy defines the opportunity in this region. We're increasing our top broadband speeds in Puerto Rico to 400 megabits per second. The speed of our core triple-play product in Chile is already 100 megabits. Across both markets, we developed approximately 150,000 Connect Box deployments, and we'll continue to aggressively deploy this game-changing WiFi router in 2017.

And in addition to delivering the fastest speeds, we have a great product entertainment product everywhere, including the Premier League rights on Flow Sports in the Caribbean, which are a killer app.

And lastly, as we signal to you, this opportunity is very similar to Europe in the sense that LiLAC will be a levered equity growth story. And even though we have been undercapitalized at the moment, we did initiate a $300 million buyback plan late last year, and we're certainly interested in taking advantage of the current stock price at these levels.

So we are excited about LiLAC, the region, the company, the opportunity, the management team. We appreciate the patience that shareholders have shown, and we're anxious to continue to demonstrate to you the opportunity we see here in this region.

And with that, I'll turn it over to Betzalel, and we'll get to your questions at the end.

Thank you, Mike. I would like to take you through a high-level review of our 2016 results. You can see from the chart on Slide 6 that the acquisition of Cable & Wireless in May 2016 transformed LiLAC by having significant scale, nearly tripling the revenue at LiLAC. Our legacy business in Chile and Puerto Rico performed very well in 2016, generating healthy rebased growth. VTR had a strong quarter, with rebased revenue and OCF up 6% and 10%, respectively, while LCPR generated strong OCF growth despite a challenging macroeconomic environment.

CWC performance was somewhat challenged, but we remain confident of the business significant growth potential. We have spent a considerable amount of time together with the CWC team analyzing strategic opportunities with a few focus areas. First, we continue to leverage the talent pool across Liberty Global, and we are transferring seasoned professionals into the LiLAC businesses in areas such as programming, marketing, finance and technology. Leveraging our talents and experiences will drive operational improvements, including simplifying and standardizing processes using track course [ph], reducing installation times and lowering call center costs

Second, we are focusing on delivering products our customers desire and on the same time, improving their experience, which is key to our future success. And finally, we aim to leverage our scale to achieve the targeted synergies following the acquisition of Cable & Wireless. For example, we are negotiating final regional procurement agreement on access equipment, IT services and external labor, and we plan to leverage our attractive content pricing in Chile and apply to Panama and the rest of the Caribbean.

On Slide 7, we will take a closer look at VTR. In 2016, we added 77,000 organic RGUs and 66,000 customers, which was an annual record. These organic RGU additions included 88,000 broadband RGUs, our best result in 9 years. Underpinning this success was our dedication to delivering the best customer experience, which we are improving through a number of initiatives.

We aggressively rolled out our next-generation WiFi Connect Boxes. As of the end of the year, we had over 100,000 industries [ph] delivering a great solutions with improved WiFi capabilities for challenging environments such as the predominantly concrete homes in Chile. We also increased our broadband speeds last year and now offer 100 megabits per second in our core Vive bundle. And it wasn't just the fixed business that enjoyed a strong 2016. We also increased our mobile subscriber base by 26% to 166,000 subscribers as a result of operational improvements and refreshed packages.

In terms of new builds and upgraded homes, during the year, we delivered over 130,000 homes and the program proved to be such a success that we are picking up the pace and targeting an additional 175,000 homes in 2017. Wrapping up this slide, I'd like to highlight the initial success that we have had in the B2B space, in particular, in the SOHO segment. During 2016, we created and launched our first B2B bundle focused on SOHO segment, leveraging best practice from our European operations. We focused our marketing message on a unique value proposition with superior broadband speeds and dedicated B2B customer support. Through these initiatives, we were able to add over 20,000 SOHO customers in 2016, a base that we expect will continue to expand in 2017.

On Slide 8, we will dive into Puerto Rico. Liberty Puerto Rico operations continued to deliver strong operational and financial results as we have the best network and the best products on the island. And during 2016, we continue to enhance our video and broadband offering. In Q3, we launched our UPick skinny video bundles, which allow customers to choose their video package that best suit their needs. This follows on the heels of our success with Spanish-speaking packages, which allow customers to save up to 40% of their monthly bill but also allow us to efficiently manage our margin even much lower content cost. On the broadband front, we have deployed 40,000 WiFi Connect Boxes, and we raised our top broadband speed to 400 megabits per second, far outpacing what our main competitor can provide.

We have also been focusing resources in our B2B business as the SOHO and SME segment, in particular, represent a large segment for us to exploit. We leveraged our fiber infrastructure to deliver high-quality services, mainly to the SME segment, taking advantage of our robust international connectivity through Cable & Wireless submarine network.

As you can see in the middle of this slide, our innovative product offering resulted in bulk customers and RGU additions in 2016 as we added 3,000 customers and 22,000 organic RGUs. And on the far right, you can see the pace of our new build activity. In 2015 and 2016, we built a combined 30,000 homes and plans to roughly triplicate that 2 years' numbers in 2017.

With that, I will turn it over to John.

Hello, everyone. I'll now take you through CWC's performance as well as provide some color around the opportunity that Mike touched on earlier. I want to start with the people side of our business, which is key to successfully executing on our plans.

Over the last several months, we've been working to put in place the right operating model as well as the right people for us to be successful in our markets. Now I'm pretty much through that process. On this slide, you can see that one of the more significant changes that we've made is reorganize our operations into regional clusters, where Gary Sinclair, for example, is now responsible for the entire Caribbean business, both consumer and B2B, whereas previously, we managed these segments separately. This single ownership of the P&L and our view of the customers will result in better performance across the region.

Before we established the new structure, we completed a very detailed, bottoms-up, country-by-country regimental exercise with the Liberty team to identify the most attractive opportunities and how best to exploit them. We're now in the early stage of the execution phase, and as Betzalel indicated, we're working closely with the broader Liberty Group to ensure we benefit from all the skill, experience and scale that we collectively have. In particular, we're benefiting from the go-to-market strategic expertise, engineering and design leadership, as well as procurement and content savings as we transform many of our businesses from what historically has been an incumbent telco to a triple-play and increasingly quad-play cable model.

Finally, on this slide, you can see our net additions since the acquisition by Liberty in mid-May last year. In short, we had a good performance in mobile, with 13,000 net adds, led by continuing strong growth in Jamaica, while the fixed picture was more mixed, as progress and Panama was more than offset by the impact of competition in some of our larger Caribbean markets. It's worth pointing out that in addition to the competitive environment, our organic RGU numbers were also impacted by an adjustment that we recorded in Q4 to eliminate 30,000 nonpay subscribers from our subscriber counts.

I'll now take you through our 3 largest markets, which together represent approximately 85% of CWC's revenue. Due to the acquisition timing and the pending changes to CWC's fiscal year, I'll focus mainly on our Q4 results for comparative purposes.

First, the largest cluster is our Caribbean business. Across our 15 Caribbean markets, we saw flat revenue performance in the fourth quarter against the prior year. Running through the major markets in turn. Jamaica, a real indicator of what we can do if we get the execution right, continued its strong performance led by mobile, which was up strongly in revenue and where we saw our subscriber base about 900,000 for the first time, with 56,000 subscribers added in the quarter.

Fixed voice and B2B growth more than offset some of the softness in broadband and video, following the increased competition, which resulted in double-digit top line growth year-over-year. Barbados had another difficult quarter as our growth in video and B2B was more than offset by declines across our other products.

We experienced some initial technical challenges as we began migrating customers from their legacy copper network to our nationwide Fiber-to-the-Home platform. However, with these issues now resolved, we expect to see increased ARPU and churn benefits on this more advanced infrastructure and as we work to complete our customer migration in 2017.

Later this year, we expect that Barbados will also be the first market where we launch a full true quad-play offering. In Trinidad, our largest radio market in the Caribbean, we saw encouraging results with stable broadband subscribers. However, this was offset by some video weakness, leading to a flat overall performance.

Moving to our largest single market in Panama, our top line was up in Q4, driven by B2B. Our most competitive mobile business continued to prove challenging, with revenue off against the prior year; while in video and broadband, we saw the early benefits of our new M3ster video and broadband bundles. Upgrading and expanding this network while introducing new services represents one of our best opportunities to create a leading quad-play provider, underpinned by our strong existing mobile position.

B2B continues to be a large part of Panama's business and revenue was up subsequently year-over-year, with double-digit growth in the fourth quarter. Finally, to the Bahamas, similar to the third quarter, we saw a sharp revenue decline as we continue with our plan to reduce our inbound roaming tariffs while also increasing data-led promotions, following the introduction of a new mobile competitor.

To reduce churn, we also recently introduced the Flow TV mobile app in December, and we continued to make steady progress with our fixed line products over FTTH, however, recognizing that these still represent a very small contributor to the revenue line compared to approximately 70% from mobile.

Looking across the region, our subsea and LatAm business continued to perform strongly as we continue to deliver unmatched connectivity across the region. Overall, we've seen some positive top line performance in the quarter with encouraging revenue growth, both year-over-year and sequentially. While we still have a lot to do, I'm convinced that we've developed the right strategy and that we have the unique opportunity ahead of us to create a leading quad-play, B2B and subsea operator in the region and deliver strong and sustainable growth over the medium term.

With that, I'll hand over to Chris, who will take you through the financials.

Thanks, John. On the following slides, I'll take you through the financial results for LiLAC. And I am starting on Page 12. After adjusting for FX and the impact of acquisitions, rebased revenue growth was 1% year-over-year at $2.7 billion for 2016, while our rebased OCF growth was 6% at $1.1 billion for the same period. I will provide you with some more details at the segment level on the next slide, but the rebased OCF growth of our legacy operations in Chile and Puerto Rico was 9% for 2016 as compared to our guidance of 6%.

On the CWC front, we delivered OCF of $226 million in the fourth quarter, just above our Q4 2016 OCF guidance range of $215 million to $225 million. P&E additions increased to $568 million in 2016 or 21% of revenue, up from 19% of revenue or $227 million in 2015. This is consistent with our target and also includes incremental spend related to the replacement of network assets in the Bahamas damaged by Hurricane Matthew in Q4.

Overall, the year-over-year increase in both total spend and as a percentage of revenue was primarily driven by the inclusion of CWC and our new build programs in Chile and Puerto Rico. Finally, moving to the far right of this slide, consistent with our limited free cash flow target, we delivered 2016 adjusted free cash flow of $62 million. The modest year-over-year decline is attributable to the inclusion of CWC's negative free cash flow of approximately $22 million since the acquisition.

On Slide 13, we show the financial performance of our 3 operations, starting on the left with Cable & Wireless. One quick note regarding the graph. The U.S. dollar amounts on this page combine the pre- and post-acquisition results of CWC while the rebased revenue and OCF growth rates are for the post-acquisition period.

The post-acquisition revenues of CWC declined 1% on a rebased basis as growth in our managed services and broadband Internet business was more than offset by declines in fixed line telephony and mobile, driven in part by increased competitive activity in markets like the Bahamas and Trinidad. Rebased OCF growth at Cable & Wireless with the post-acquisition period was 3%. Despite softness in the top line, the company benefited from staff and network-related savings following the Columbus acquisition as well as lower year-over-year integration costs. In terms of capital intensity, CWC reported P&E additions of 21% of revenue during 2016, including 20% during the post-acquisition period.

Moving to VTR, which represents around 1/4 of LiLAC's total business, we delivered rebased revenue growth of 6%, primarily driven by VTR's cable subscription revenue, which increased as a result of a higher ARPU per RGU and solid volume growth of 77,000 net new RGUs in 2016. Mobile subscription revenue grew 19% during the year, albeit from a small base, as we benefited from the introduction of refreshed mobile packages and a new sales approach.

VTR reported rebased OCF growth of 7% for 2016, mainly driven by the aforementioned revenue growth and a disciplined approach to cost containment. Property and equipment additions for VTR were 23% of revenue in 2016, up from 18% in 2015, driven largely by the significant ramp-up in our new build and upgrade program.

Rounding out LiLAC on the far right with Puerto Rico. We reported 1% rebased revenue growth in 2016. Despite macro challenges, we achieved double-digit growth in our B2B business and as Betzalel mentioned earlier, we experienced solid broadband and voice subscriber growth during the year. Our revenue growth was offset by a 2% decline in ARPU per RGU on a year-over-year basis. This was largely by design, reflecting our go-to-market video strategy, which is focused on lower ARPU Spanish and UPick video offers, both of which have attractive margins.

Importantly, we delivered strong rebased OCF growth of 15% in fiscal 2016 or $28 million year-over-year. This OCF performance was driven by cost control and the $13 million positive impact in H2 2016 from the reversal of a previously reported provision and a recognition of indemnification proceeds in connection with a favorable ruling on a legal case. In terms of P&E additions, Puerto Rico finished 2016 at 22% of revenue, which was up 1 percentage point or around $10 million year-over-year, driven in part by more than a doubling of our new build activity.

Moving to Slide 14, which is focused on our leverage and our buyback program. Similar to our European strategy, we manage our balance sheet risk by focusing on 3 factors. First, we organize our debt structure around ring-fenced borrowing groups, consisting of Cable & Wireless with $3.6 billion of debt, VTR with around $1.5 billion and LCPR with just under $1 billion. Second, we are focused on keeping our tenure extended. And third, we hedge our interest in currencies where possible.

With respect to our leverage, we ended the year with $6 billion of total third-party debt and over $0.5 billion of cash, reflecting consolidated gross and net leverage ratios of 4x and 3.6x, both slightly reduced versus Q3 and calendar year 2015. The average tenure of third-party debt was 5.5 years, and more than 90% of our debt comes due after 2020. With that being said, we expect to be opportunistic over the next 18 months to improve our maturity profile, especially at CWC.

We finished 2016 with a fully swapped borrowing cost of 6.8%. The slight increase over Q3 reflects in part our Q4 financing activity, which included a new $300 million term loan at CWC and the impact of hedging.

Turning to liquidity. We had $1.5 billion at year-end, including approximately $550 million of cash and $1 billion of aggregate unused borrowing capacity under our credit facilities. As we sit here today, our liquidity, combined with incremental leverage capacity and future free cash flow debt generation, positions us well to remain opportunistic with respect to our $300 million share repurchase program and incremental investment opportunities that may arise.

On Slide 15, we provide our 2017 outlook for the LiLAC Group. We are targeting approximately $1.5 billion in consolidated OCF in 2017 at current FX rates, with the Chilean peso likely to be the most material driver of FX fluctuations. At that level, we would expect our rebased OCF growth to run conservatively, in the low- to mid-single-digit range in 2017. Our reported rebased OCF growth in 2017 will be adversely affected by 2 factors in particular: first, as mentioned earlier, the $13 million nonrecurring benefit in 2016 in Puerto Rico, which will reduce our LiLAC OCF rebased growth by nearly 1%; and second, the extremely difficult comparison we face relating to CWC's Q1 2016 pre-acquisition OCF, which we have discussed in detail over the previous 2 quarters and which is graphically shown on the right. This difficult comp will likely result in us reporting significant negative rebased OCF growth in Q1.

In terms of capital intensity, we are targeting a range of 21% to 23% in 2017, which reflects our increased new build and upgrade activity across all 3 business units as well as continuing investments in LTE coverage and next-gen products. In fact, we are planning to build or upgrade 450,000 homes in 2017, an increase over 2016 levels. And this brings me to the adjusted free cash flow of LiLAC, which is projected to be limited again in 2017 and will be heavily back-end-weighted in the year.

Turning to the final slide. Overall results for Chile and Puerto Rico were strong in 2016, and we made key steps in our integration of CWC in the second half of the year. We believe that the execution of our 2017 operating and investment plan will set the stage for an acceleration of OCF growth in 2018 and beyond, and we look forward to updating the market in the coming quarters as we execute on our strategy.

With that, operator, we are ready to open up for questions.

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

I just had one quick question on the -- you talked about it being a levered equity return story. If I look at that $300 million buyback target by '19, is the right way to interpret that, is that roughly your free cash generation that you said will be modest this year will sort of go towards buybacks? And then to the extent that your EBITDA grows and you hold your leverage consent, those monies would be plowed back into the plant in terms of CapEx. Is that a fair interpretation?

Well, it's a good question, Jason. Listen, I think the main point -- the most important point to takeaway is that, philosophically, we intend, over time, for LiLAC to operate in a similar manner. By that, I mean generating really high single-digit OCF growth, maintaining moderate, more moderate but consistent leverage and ideally generating free cash to the parent that can be used for acquisitions or buybacks. So that's the main point, which is we intend to evolve into a platform here that looks very similar in terms of how we create value for shareholders. That's point one. In terms of the exact numbers, I mean, we feel there is, obviously, a limited free cash flow today, as we pointed out. We're going to grow that number over time. But we did feel there was liquidity, sufficient liquidity, to start buying stock, especially when it was trading, and we didn't want to miss that opportunity to do so. And we felt that, that number, $300 million, was the right kind of amount, but that could change over time. There's significant draft cash in this operation that could be ultimately upstream. You saw the subsidiary cash figure of $500 million. There is borrowing availability. So I think we're at an inflection point here, and we're going to see how the M&A opportunities evolve, how the stock trades, how the cash flows progress. But the main point was that, over time, you should view this in a similar light, a levered equity growth story, where we're going to be optimizing capital and shareholder returns. I hope that's a little clear.

We'll take our next question from David Joyce with Evercore ISI.

I was hoping you could drill down some more into the PP&E plans now that you've gone through your strategic review. Could you help us think about how you would be slicing up? Where you would be investing first? How you would be prioritizing, be it in mobile or fixed line upgrades? I know you talked about new home builds. But just could you talk about the product types as well as the countries in which you would be looking to be investing this year?

Yes, Balan -- I don't know, John, if you want to hit that on Cable & Wireless, or Balan is on the line, either one. I mean, you're going to hear that. It's a combination of both mobile networks. Well, the company, Cable & Wireless in particular, has been investing quite a bit in mobile networks in the last few years, a combination of mobile networks, making sure we're up the snuff, and then more importantly, driving fixed -- converting and upgrading copper but also driving our fixed capabilities in core markets. But who wants to take that question? You want to take that question, John, for Cable & Wireless?

Yes, sure, Mike. Yes, that's exactly the strategy. I think we've done a pretty good job leading up to -- actually, prior to the Compass acquisition. And then of course, since Liberty has bought the company, a great -- a significant amount of investment went into the mobile network, and that was Cable & Wireless' strategy. And with that, LTE rolled out a number of sites. And of course, we've got other countries coming on stream. As a company, that's a legacy telco for the most part, except for the Compass assets. We've got a lot of copper. So the strategy is market-specific in terms of either upgrading ADSL to VDSL or ADSL to HFC or some Fiber-to-the-Home expansions. So there's upgrades and there's expansion plans by country. And our anticipation, our target is to certainly accelerate the -- that upgrade so that our customers, regardless of the country, can pretty much have the same product set and the same amount of customer experience. And that's certainly what we expect to achieve over the midterm.

Betzalel, you want to talk about VTR in Puerto Rico? Go ahead, Balan, if you just want to add to that.

Sure. I'd say that you'd see a lot of our capital investments will go to its new builds products. You'd see in VTR, in Puerto Rico, we're investing in video; we're investing in our latest and greatest CPE. But really, we are investing a lot in new builds as well. And you'll see the capital intensity in mobile dropping a bit, and the capital intensity in the fixed network is growing because that's where it's going to drive the growth in the business in all of LiLAC.

Yes, just one point, Mike, to add. I think that [indiscernible] cable in Chile and Puerto Rico, most of the investment is in new build. There's a significant part of the investment in -- or not significant but a significant number of homes that will come in the Cable & Wireless properties, where we are upgrading the network from one-way to two-way, especially in Panama HFC. That is one-way that we are bringing to two-way and also expanding to new build on HFC in Panama, specifically.

And just finally on the Panama side. Given the mobile competition there, do you need more investment in the network there? Or is that much more just a marketing issue because of the high prepaid market that it is?

I can take that again, Mike. I don't think it's so much of an investment in the network. We kind of -- we upgrade according to, certainly, as data consumption growth, and we fill in where we have to if there's any congestion in the network as we do in any country. It's more of an issue of it's a 4-player market. You've got a couple of players in particular that certainly play for price as opposed to ourselves and another key operator there. So I think it's just a little movement. And I think for the most part, the consideration is that it's really about the value proposition, how we've kind of tie in our mobile product with our fixed line strategy. We will be the only true 4-play operator in the region, and I think that's going to significantly change the -- certainly change the competitive dynamics. But it's really about the marketing and the competitive landscape than it is about the network.

We'll take our next question from Andres with Scotiabank.

John, you mentioned your plans to ramp up the fixed line network in Panama. Can you give us an idea what percentage of your network is currently capable of delivering video and how that can improve on your -- on the M3ter bundling plan? And second question, I -- regarding Trinidad and Tobago, I understand that you're currently in the process of divesting from TSTT. Can you give us an idea of how that process is going and perhaps an estimate on how much you could monetize from your former stake in the company?

On the Panama network, we've been busy upgrading that network. That network actually considers -- or consists of one-way HFC, now two-way HFC after we've upgraded about 180,000 homes over the past year. We've got a lot of copper there. So the plan there, Andres, is by the end of the year, we'll be able to compete certainly and offer a very similar product set as we do in other countries over probably 2/3 of our plans. And that doesn't count the expansion plans, but that's well articulated. So maybe for us, it is a ramp-up. It's an acceleration of our, I guess, our capital intensity in that particular market. And in doing so, I will add, certainly benefiting from the scale of Liberty and certainly the cost effectiveness of allowing us to do that in a more accelerated rate. So it really changes by quarter. We've gone from 100% HFC one-way 12 months ago to 2/3 of that network being completed. So that will continue to be upgraded and accelerated throughout the year. And our anticipation is, certainly in the short term, we will be able to compete in probably 80% to 90% of our network on the same product set as our competitors.

And we'll take our next question from Julio Arciniegas with RBC Capital Markets.

Can you give me some color about the competitive dynamic in Panama? Because well, I've seen that revenue growth has improved quite a lot in this quarter? Can you give me some color about these project-related revenues? What's the amount of this project, and in general, the competitive dynamic?

Do you want to handle that, John or Betzalel?

Yes, I'll -- I can start and, Betzalel, you can certainly chime in. In Panama, there's a 4-play mobile market, and we are the market leader. And we kind of maintain that market leadership probably since inception. We were the incumbent. So we still enjoy an over 50% market share in Panama. The investment strategy has pivoted, I guess, to the fixed line, as we've articulated. And as of right now, on the fixed line business when it comes to video, there's only really 2 players besides the DTH service providers, and that's ourselves and Cable Onda. They are -- of course, they're market leader. And being the, I guess, the incumbent triple-play operator in that market, it's about -- now I think about 65% market share. So that's where we see tremendous opportunity, and it's probably similar percentages on the broadband as well. So for us, it's -- that's an obvious investment target. I think we're holding our own in mobile. The business continues to change as we understand and move into a more data-centric and consumption model and away from voice. But that being said, we've held our strategy there. We held our position there, I should say. And so our focus on the fixed line and that expansionary capital, as per what Balan said, and also the upgrade strategy, as we've articulated, I think is certainly the right one. So we expect that percentage of market share to change going forward. It continues to change as we've launched our first upgrade project, and that will continue through '17 and into '18. But again, we see a significant opportunity there. If we go from one market to 2, we will certainly gain our fair share of market through that transition. And again, and coming back to my point on us being really the only quad-play provider in the market is a unique opportunity for -- certainly for Panama.

I'd say from a strategic point of view, also this is a big market, of course, with Cable & Wireless and one that we certainly have forecasted to be a big contributor to growth and upside over time. As we've seen in Europe, it may also be a market and a candidate for consolidation. I mean, there's only so many competitors a market can withstand, and we don't have anything to announce or anything under way. But it does appear to us from 30,000 feet that over time, some of these markets like Panama might benefit from consolidation in the mobile space perhaps or elsewhere, just to ensure that there is significant infrastructure investment and infrastructure competition going into benefiting consumers. And so there's a handful of markets where that could be a case. This one could be one.

Okay. And can I follow up in the project-related revenues? Because basically, I see that in Panama, mobile revenues excluding these project-related revenues, they have been minus 10%, I think so. And also, you have some pressure in the broadband side. So I would like to get some color into the size of these project-related revenues.

Well, in terms of the mobile network, as earlier indicated, the market continues to sort of play itself out with a couple of lower, I guess, lower share of market player that are competing more in price than we are on the top. And certainly, we're looking at our strategy in terms of we've got a lot of customers that go back and forth between networks based on price and so we're responding to that and developing new value proposition. When it comes to broadband, the churn is the result of that old network that had not been upgraded yet. So as we continue with that strategy of upgrading the ADSL, which is really where the churn is taking place to HFC or even upgraded to VDSL 2, we'll see the benefits of that. So really, it's just a matter of time in that market, especially when it comes to the fixed network. We're trying to, again, ramp up our investment strategy so that we can offer the same services as other parts of the network. So it really comes down to timing, and that's why we've also, again, accelerated our investment strategy there.

And we'll take our next question from Kevin Roe with Roe Equity Research.

Thank you for the stand-alone LiLAC call. It's greatly appreciated. Two questions for John. First, on the Bahamas. You mentioned the new mobile competitor in November. Any surprises there? And can you briefly talk about your expectations for mobile in Bahamas in '17? And regarding the hurricane, is there a specific OCF impact you can call out from the hurricane in Q4?

I'll answer the OCF question. I'll defer to Chris, the number -- it hasn't moved a whole lot since we gave some guidance at the end of the quarter, Kevin. But I'll let Chris give an update. In terms of BTC, no, we haven't. If anything, I think we've held market share and actually grew subscribers in the fourth quarter. Now a lot of that, of course, was special promotions and sort of data packages that we brought to the market. So if anything, I suppose, the market shifting in terms of we've been able to keep our base pretty strong, has probably only been a bit of a surprise to us. I mean, we would have expected probably a higher churn in the first several months. And even those that have churned off are still keeping -- a lot of them are keeping SIM [ph]. So the number of connected devices to our network is still pretty high and really against what we thought our plan would be. In terms of BTC, obviously, we factored in, in our own internal outlook some market erosion there. We're going to go from 100%, and we're going to lose share. And I think we've been pretty conservative in terms of our outlook, in terms of our internal kind of forecasting as what to expect. And at the same time what's critical for us is to ramp up that fixed line investment. So we've just gone from 14,000 to that 26,000 homes on our new Fiber-to-the-Home network. And that's important, not just because we want to sort of expand our video and broadband market share and grow that product, but also it gives us an opportunity to really keep the mobile customer through a sort of cross-platform value proposition, which we've -- as an example, we've launched the mobile and TV service for all of our customers in the -- late in the fourth quarter. That gives a sort of a skinny package bolt-on for a mobile subs before we get the video product to their home. So I think we've -- I think we're in pretty good shape. We will continue to evaluate our strategy and certainly pricing and packaging as each month goes on. But I think the early indications, Kevin, is we're in pretty good condition based on what we probably would have expected 6 or 8 months ago.

Yes. In terms of OCF, we estimated it was about $4 million in Q4 impact.

Great. And a quick follow-up for John on Trinidad. You've got your new management team in place. How should we think about 2017? Can this market return to growth?

Yes, yes. Trinidad is -- from the old plummet [ph] days, was really, I guess, our jewel in the crown. It was really our first HFC, a very passive optical network, and we designed it right. I think, sometimes, you just realize through changing market conditions that the leaders need to change based on the competitive landscape changing. And of course, we've made those, as we've indicated. So yes, our anticipation is we are back -- actually, we're back down there next week. We've got some new leadership, new engaged team, new customer value proposition is being created and a real focus for us on Trinidad, in particular. Because we still see, even though they've had some macro issues with the oil impact, it's still a very, very strong market for us, strong B2B market for us. And so my anticipation is that we will obviously see a reversal of fortune in the new fiscal year. And it does start with people, but it's really a complete reset for that country.

Two other things to add there. We are still shooting for the third license, I believe, John, so in the mobile space. So that would be a big positive if we could pull that off. And I think somebody should address the earlier question on TSTT. I don't know if that's you, Chris, or you, John, in terms of where we are in divesting that 49% stake. So at least, get to have an update on that.

Yes, I can speak to it. We continue to go through the process, the formal process, which is the -- and we're in the early days of expressions of interest. And we have an extension from the telecom authority of Trinidad and Tobago to the end of March. And it's not -- I will say it's not easy to divest an asset that's a 49% stake. Some of the interested parties, obviously, would like to have control. So there's some -- but there is interest, and I think we'll get through the process. And again, the government has a vested interest as well to start to get us off that asset, as it were, I guess, and so I think that'll play out the way we want it to. And then I think as we've indicated, it will also free us up to pursue that third mobile license. So I think it's just a matter of timing. It's a bit complicated, but all parties want to see this come to a successful conclusion.

And we'll take our final question today Matthew Harrigan with Wunderlich Securities.

You guys have really interesting opportunities for programming innovation with the quad play, Barbados, Panama, et cetera. I know you've done some really interesting things that Flow Sports already, and you've got relationship with Televisa. I think you've done some more things in Spanish bookings. And in Puerto Rico, there are higher margin. Can you talk a little bit about your innovation there and what you can bring to CWC from some of the other LiLAC markets? And then secondly, you've really had a big rally, particularly in dollars in some of the markets that you're in and not just Chile but even some of the smaller markets like Jamaica. I don't know what that bodes for the macro sensitivity. But how do you feel about the tourism and all that in the Caribbean countries? I mean, in Puerto Rico, you got through the downturn. In Europe, I mean, in 2008, 2009, I don't think you missed much of the blip. But how do you feel about the macro sensitivity in both the upside and the downside now that you're very familiar with the CWC markets?

On the programming side, Matt, we are doing, I guess, a few things. Number one, as I think Betzalel mentioned in the synergy estimates, we are definitely trying to bring as much of our $2.5 billion of programming spend in Europe to bear on contract renegotiations, access, et cetera, et cetera. So you should expect us to do that, continue to do that, and that'll be obviously a benefit over time. We don't have the same sort of programming investments and then issue is yet under way other than the Premier League, as one example, as we do in Europe. But I think there are opportunities that we're evaluating for sure in the programming space. And I think you're going to find, whether it's in the Caribbean or in South America or Central America, we're going to be creative and inventive and use the same basic game plan that we've used in Europe in terms of trying to create a competitive video product. And I think in most cases, we have that, and that's certainly what we want to try to do. The macro picture, I'll let these guys jump in. I mean, it's a tale of -- it depends on which market you're talking about. I mean, Panama, certainly, in my understanding has good growth ahead of it, 5%, 6%, I think, is the estimate for GDP growth. Bahamas and Jamaica, Barbados, closer to flat but not negative. And so we watch that closely. We clearly hedge every and all -- any and all debt that we can. And so we, I think, more or less hedge pretty much everything. Chris, you can address that. But we've learned our lesson over the last 20 years about macro risk and how best to manage through it. And I think we're doing everything in our power, which I will tell you many of our competitors in the region do not do. And you know who they are. They don't bother with it at all. And we, on the other hand, will withstand any big shocks in the macro picture as well as being able to power through any macro volatility in the economy because of what we've done. So, Chris, you want to address the balance sheet, quickly?

Yes, sure. In terms of overall leverage, as you know, Matt, we're hedged completely on the VTR debt, the $1.4 billion. We have done -- we've been able to execute some hedges on the Jamaican dollar in the last few months, and then a range of the currencies are pegged. So we're, at least, in pretty stable countries. So I think we're relatively balance sheet-hedged today from what we can do. There are few other currencies that we're working through, whether you can actually hedge them. So it's something we can update in the coming quarters.

I think, Matt, if you don't mind, I'll just -- just to add to Mike's comments on certainly large tourism base and certainly important to us across the region. From all my reports, the numbers are up on a lot of these countries as reported by the tourism bureaus. What's also important for you to, I guess, to get some insight on, is we've actually -- we're developing some pretty unique hospitality products. I mean, there's 200,000 to 300,000 hotel and hospitality homes that we've identified in the Caribbean. And so the product development team is close to launching a -- some unique products when it comes to in-room, in-property and sort of managed WiFis and new sort of video solutions and other hospitality opportunities that we see. So for us, as a growth part of our B2B business, it's really the #1 -- it's the #1 certainly, what we would call, managed service outside the core connectivity. So we see tremendous upside on hospitality, Caribbean on the whole. And I think as it go on, I will see that meaningful impact coming into our business in the next couple of years.

Listen, we appreciate everybody hanging in there this morning and joining us for both calls, if you did. And then of course, for the second call, we're glad we're able to pull that off. And we'll continue this, I think, for sure. It's definitely worth our time and, hopefully, your time to get more transparency and information about LiLAC.

I'm pleased with the management team. I think John and Betzalel and Chris and others are really doing a nice job of both integrating LiLAC with LiLAC -- with Liberty, making sure we're not missing any opportunities to drive synergies and strategic opportunity, but also just putting their heads down and running the business day in and day out to hit the strategic plan and the financial plans we put in place.

So as I said in my -- at the outset, it's going take to take some time. This is not going to get sorted over night. This is going to be a longer-term growth opportunity. We like the region. We think we're in the right space in this region. And then lastly, I think, there's going to be some really interesting consolidation opportunities over time, and we're well positioned. We're well positioned because we generate a lot of cash flow. We have a great balance sheet. I think we've got the right operating model, and we're opportunistic, and we've been down this path before. So we're excited about it and look forward to bringing you along for the ride and updating you on a quarterly basis.

So appreciate you joining us, and take care. Thanks, everybody.

Ladies and gentlemen, this concludes Liberty Global's Fourth Quarter 2016 Results Investor Call. As a reminder, a replay of the call will be available in the Investor Relations section of Liberty Global's website at www.libertyglobal.com. There, you can also find a copy of today's presentation materials.