Liberty Global Ltd (LBTYK) 2015 Q3 法說會逐字稿

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Liberty Global's third-quarter 2015 results investor call. This call and the assisted 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, November 6, 2015. Page 2 of 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 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 risk 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 forms 10-K and 10-Q.

Liberty Global disclaims any obligation to update any of these forward-looking statements to reflect any change in its expectations or in the conditions on which any such statement is based. I would now like to turn the call over to Mr. Mike Fries.

Thank you operator and welcome everybody. I want to welcome both sets of shareholders today actually, appreciate you joining us. I've got several of my top execs on the phone with me and I will introduce them as they chime in during the call. Our agenda is going to be familiar to many of you, I hope.

I am going to provide some overview remarks, some highlights and then Bernie will get into the details on the numbers, then we will take your questions. And I'm speaking from slides today as we normally do and I hope you can get those off of our website because I will be referring to them at least in my remarks.

Starting on slide 4, with what I think are some key themes here. If you're looking for five or six key takeaways from the call, here they are. I will spend a few minutes on these because I think they will provide great context for you as we go through the rest of the presentation.

First, as predicted our subscriber growth is back on track and accelerating. As you've already seen, we added more RGUs in the third quarter than the first two quarters combined. In fact, nearly all of our European operating regions delivered materially better RGU adds this quarter and I think Q2 in growth ticked up in every product segment. The 525,000 RGUs added through nine months, we definitely have our work cut out for us in Q4 to hit our target of up to one million net adds for the year, but this is traditionally our best quarter and we're working hard.

Secondly, we're starting to see the top line benefits from three new revenue drivers. We now have mobile launched in 10 countries, and we have added 450,000 postpaid subscribers in the last 12 months, with good ARPUs and healthy margins. In fact mobile revenue is now 8% of our total revenue and it is up 18% year to date.

Our focus on the SOHO and sne segment is supporting high single-digit growth in our B2B business, which is now also 8% of our rebased revenue and up 8% through nine months. And the construction of four million new homes in the UK is off to a great start, with millions of additional new homes in our sites across Europe.

Third, I feel better and better about our competitive position every quarter. There is no question that incumbent telcos across Europe are putting up a good fight, with more aggressive bundles and improved video offers. This has been happening for a while and we never underestimate these guys.

But they're still miles behind us in broadband speeds. We just moved to 200 megabits in the UK for example, nearly three times these speed of BT, and we've got an incredibly efficient road map to one gig when we need it. Our mobile offers give us great flexible in leverage to grow and retain customers.

And I'll talk about our advanced video platforms in a second, but when you consider that our next gen video services in TV everywhere products consist of very fat content offers that are being sold for very skinny prices, it's becoming increasingly clear that we have OTT on the run in Europe, and I'll provide a bit more detail on that in a second.

To complement and supercharge our strategic growth plans, we're now in the implementation phase of which we call Liberty 3.0. This is a massive transformation program designed to streamline our operating model, accelerate our growth and drive even greater efficiencies through the business. It is ambitious, it is exciting and it is 100% accretive to what is already a very strong growth business.

And fifth, even though you know it, we always felt good about repeating, and that our levered equity growth plan is on track in delivering returns, the balance sheet is strong and our buyback program is in full swing. Lastly, we are confirming all of our financial guidance targets today, even after this lower first half. Growth is accelerating, new revenue streams are kicking in, we're very well positioned vis-a-vis telcos and OTT and Liberty 3.0 is adding horsepower to our growth engine.

I could theoretically end the call right there and go to questions, but I promised the team I would walk through the rest of the slides. So bear with us. I'm going to move to slide 5 now which summarizes some of the key highlights from the quarter which support the themes I just talked about. On the left, you'll see our operating and financial metrics, as I mentioned.

Subgrowth was back on track with 320,000 new RGUs in the quarter, compared to about 200,000 in the first half of the year. Bernie is going to provide details on our financials, but we had our best Q3 revenue performance in two years, with rebased revenue up 4% and I will show you how that has been trending up throughout the year in most of our core markets. Meanwhile rebased operating cash flow growth came in at 3% for both the third quarter and year to date, and this number was obviously impacted by Ziggo which is in full-fledged integration mode, as you know. But if you net out Holland, our Q3 and year-to-date OCF growth was around 4.5%, with several of our regions like the UK, Germany and Belgium growing at 6% or better, and LiLAC at 10%.

Moving to the middle of the slide, I'm just going to touch briefly on our M&A pipeline which remains in my view both diverse and intriguing. You are aware of our mobile acquisition in Belgium which is progressing through the regulatory process. There are great synergies in this deal. We're confident we will get regulatory approval and assuming we do, it will be the first time we will own cable, mobile and a free to air broadcast business in one market.

Ireland will be another great test case. When we close the acquisition of TV3, the largest commercial broadcaster there. You would have also read about our discussions with Cable & Wireless, a market leading fixed to wireless operator in the Caribbean and Latin America.

I'm precluded from answering any questions. I'm telling you that upfront, or saying anything really about the opportunity. But as we ruled out our [laugh-in] tracker we did mention that in our opinion, this region is underpenetrated in broadband and paid TV and is likely to experience above-average growth. Just look at our own assets. And is right for consolidation, particularly by experienced and well-capitalized operators. Which is a good segue to the right hand side of the slide where we recap the numbers behind our levered equity growth strategy.

You'll see we're sitting on over $5 billion of current liquidity with gross leverage at the high end of our range of 4 to 5, and no material obligations due before 2021. Our average cost of debt is now 5.2%, the lowest ever, and we repurchased $500 million of stock in Q3, over $1 billion for year to date, and we still have$ 2.5 billion to go between now and the end of 2016.

As promised on slide 6, I'm going to dive a bit deeper in our subscriber results year to date, and I think this slide clearly illustrates how we've been able to accelerate growth throughout the year. On the far left side of the slide, you'll see that our video attrition has improved substantially over the three quarters, from a loss of $169,000 in Q1 to just $53,000 in the third quarter. Driven mostly by higher digital conversions. And with every European market actually showing improvements in video attrition quarter after quarter.

In the middle of the page you'll see that broadband and voice subs totalled 380,000 in the quarter, that is up from 240,000 in each of Q1 and Q2. And then the chart on the far right shows the acceleration of total RGU net adds for both Europe and LatAm from 68,000 in Q1 to 138,000 in Q2, to 320,000 in the third quarter.

I want to make a quick comment about cord cutting by the way. It's certainly a popular topic. In our world, connectivity to customer households is a golden ticket, whatever services they take and in the third quarter we had positive cord connections on a consolidated basis adding new customers and half of our markets remaining flat to down in the remainder. Case in point, we saw a record customer growth in the UK and 68,000 new RGUs, our best Q3 in years, with nearly as many broadband additions on our footprint as BT had in the whole country.

Continuing with some brief country highlights, and we're obviously happy to take questions on these, Germany delivered over 100,000 net adds due to good broadband momentum, our second lowest video attrition ever, and a much better tier mix with 70% of new broadband subs taking 129 megabit bit speeds and higher.

Switzerland had weaker RGU trends, partially related to our announced basic cable price increases 7% that starts in January, but we also announced plans to double broadband speeds for the majority of our sub-base, which we think will add considerable value.

Belgium had another strong quarter, effective marketing campaigns drove continued subscriber growth in fixed and mobile and high ARPUs. And our broadband subs on average are subscribing to 110 megabit broadband speeds, again far above what the incumbents are offering.

Moving to Latin America then, LiLAC reported another strong quarter of organic RGU additions, adding 24,000 in the quarter, now 100,000 year to date. Chile nearly doubled RGU additions compared to last year and helped by a new bundled offering of 50 HD channels and broadband speed to 40 meg in that market, and even Puerto Rico added customer relationships, 6,000 of them in the quarter.

We have long talked about driving top line growth in our core markets through subscriber growth and improvement in the price value relationship of our bundles and the success of our strategic initiatives. On slide 7 you're going to see that we have been doing just that. In most of our core operating regions over the last three quarters.

Starting on the top left with our largest operation in the UK and Ireland, you'll see that Virgin Media has seen a steady increase in revenue growth year to date, rising from 2.5% in Q1 to 3.4% in Q2, to 4.5% in the last quarter. Our residential cable business consistently posts steady gains, as we enhanced value for customers and take reasonable price increases. B2B was up 5% in the quarter and mobile, including our [three style] proposition is gaining great traction.

Germany in the middle of the page delivered its highest revenue growth in six quarters, at 7% for Q3 up from 6.3% in Q2 and 4.6% in Q1. Largely driven by accelerated net adds, more sales of our premium bundles, reasonable price increases and ARPU growth of about 7%.

Telenet in Belgium is like a well oiled machine, growing consistently at 6% to 6.5% on the top line for three straight quarters. Of course they were benefiting from a 4% price increase in new video products like play and play more and the recently relaunched sports package.

Holland, as you know, has been suffering from strong competition and integration related issues which we have been addressing successfully, we think the business and the market is stabilized. I will go into that in a second. As our second largest market, it has clearly been a drag in our consolidated results which is why I gave you those numbers net of Holland a moment ago.

In order to drive scale benefits we've combined the operations of Austria and central Eastern Europe under Switzerland, so we show that here combined, growing at about 2.2% to 2.7%. Switzerland and Austria are actually closer to mid single growth, but are weighed down by CE. So a lot of moving parts here, seven countries, but we felt really good about driving greater top line growth and efficiencies over the next few years, especially with the Liberty 3.0 plan.

And then finally, LiLAC grew 7% over the last two quarters and has great momentum and broadband bundles are killing the competition. On average three times faster than the other guys.

One of the ways we are growing the top line is with our next generation TV and mobile platforms, which we talk about on slide 8. Both of which help us create happier and stickier customers. On the video product front, I've got to tell you, I could not be more convinced that we are on the right track. Our next generation TV platforms are now offered in 8 countries across 43 million homes passed, more than 80% of our footprint. We now 6 million of our digital TV customers tapping into an incredible user interface at home, with all the best television on demand on every device.

Interestingly, Reed Hastings, said earlier this week, you may have seen it, that he has always been most scared of TV everywhere. I think his words were, you get all of this incredible content that the ecosystem provides on-demand at no extra cost, and while Halloween was a week ago go I think Reed's got a good reason to be scared in our markets.

When you download our Horizon go app on your phone or tablet you get all the same broadcasting cable channels that you normally get on the big screen, which means you get all the same sports programming and you add to that a seven-day replay TV feature, catch up TV on demand and thousands of movies, drama and kids program, packaged like Netflix on every device, both it in out of the home, and you get all that content and functionality essentially for free.

Today our customers are streaming live news and sports at the bus stop or repaying their favorite TV shows or watching our own hard bundled [S spot] services like MyPrime in Holland and Germany where we get 35% usage rates. We got 1.8 subscribers who use our TV everywhere services today, and that number is going to grow rapidly as we continue to make that available to more and more customers. I think Reed was right, so stay tuned.

The other important consumer innovation is our mobile and converged offers. As I mentioned, we have now launched mobile in 10 countries and are seeing the benefits of the quad [close] over 4.7 million customers. It is all about data and broadband. We know that, so we're focused on monetizing and/or securing the best terms from our MNO partners when it comes to pricing and technology.

We've already launched 4G in Switzerland and the Netherlands and we've seen a rapid increase in sales and revenue activity in both those markets. Maybe just a quick comment on mobile consolidation. Since we're now sort of experts, given our Belgium acquisition, for the record we do not see a seismic shift in regulatory policy under the new EU competition Commissioner. Her approach to mobile consolidation in our view reflects a prudent look, the pros and cons, and then clear willingness to approve transactions with reasonable remedies.

In Belgium, we are providing those remedies and in other markets like Austria and Ireland we're a beneficiary. So it'll be interesting to see how the UK unfolds, which of course we're watching closely, but we are very encouraged by consolidation in Europe. We did bring the sixth inning there, lots of opportunity ahead of us.

And to complement our mobile networks we have been aggressively rolling out Wi-Fi across our footprint. Today we have six million Wi-Fi spots across nine of our European markets and we should have about 10 million by early next year. So our customers can roam for free, which is a huge advantage for them, and the offloading benefit can be material advantage for us.

With Belgium for example, households with a mobile device offloads 50% of their data usage outside the home to Telenet's Wi-Fi network, which has a direct impact in terms of cost reduction and margin improvement for us, and is real money that we do not have to pay our MNO partner. So by combining our fixed network with our mobile strategy centered around MNOs and Wi-Fi, we think we can deliver fast, seamless and superior connectivity to our customers wherever they are.

I will wrap up my remarks on page 9 with some operational developments that have a direct impact on growth for us, and I will start was just a bit more color on Liberty 3.O. As I said before, and this is an important point. This is not just a cost cutting exercise.

I think we have seen, or you are likely to see, what that single-minded approach does to revenue growth, customer engagement, churn et cetera. Our plan is to push both buttons. Revenue will come from a greater focus on things like B2B, mobile, broadband market share and new build opportunities, and you can see an update on Project Lightning our new build in the UK in the middle of the slide.

Early results on build cost, penetrations and ARPUs are right on target and we're actively evaluating projects to build millions of additional homes across Europe. These top line initiatives together are the largest contributors to OCF growth over the coming years of Liberty 3.0.

At the same time, we are targeting a total cost efficiency program of about EUR1 billion from across the organization over the next few years, including obvious areas like procurement, supply chain and IT. In fact about half of these work streams are already in flight as we like to say we started this program, so there's nothing magical here.

We think we have a pretty good track record of integrating and streamlining operations and these are smart efficiencies that we know exist, not because of all the acquisitions that have taken place over the last five years. It is really just as simple is rethinking how we do things and how we operate our business. And when you combine the high single-digit rebates growth on the OCF line that we think we can trend towards over the medium term, together with our levered equity approach, Liberty 3.0 is a powerful value creation model for us.

I'm going to end with a quick update on Holland. I've got to tell you I'm very encouraged by the turnaround as they go. Where our renewed focus on service quality and innovative products are starting to pay off. For example, in July we initiated an aggressive sales campaign for our high-value offers that centered on Horizon TV and superior broadband speeds, and we saw Q3 sales jump 40% over Q2.

On the operating front we have implemented a number of quality initiatives that resulted in reduced customer calls and reduced truck rolls and now KPIs are starting to trend towards pre-integration levels. We had a small RGU loss in Q3, it was better than the earlier periods, and there's more work to be done. But one area where we're already outperforming today is Horizon.

We added a record 128,000 subs during the quarter and our Horizon go app was downloaded one million times since the rebranding in mid April. And 700,000 unique households are using it regularly. The current marketing campaign highlights the benefits of things like replay TV, which is an incredible product, a new killer app and I think growing really rapidly. Usage of by 80% of our users just in the first quarter.

We just announced Ziggo Sport. This is our own basic sports service, built off of our existing premium sports platform, and provided exclusively to our customers at no additional cost. Behind the scenes, of course, we continue to make significant progress on our $250 million synergy -- euro synergy plan, and we expect a portion of those synergy benefits to actually favorably impact operating cash flow in the fourth quarter.

Before turn it over to Bernie I'll come back to my key themes. It's all about growth for us, customers, ARPUs, revenue and OCF, and while we feel good about this year, we feel really good about the next few years. The competitive environment is becoming clearer to me. Our networks deliver superior quality. We're innovating at light speed in my view and despite our success, we are challenging ourselves to do more through Liberty 3.0, more for our customers a more for our shareholders. I look forward to your questions and with that I'll turn it over to you, Bernie.

Thanks Mike. I will provide a financial update on each of our two businesses, starting with Liberty Global Group which includes our European business and then move on to the LiLAC group, which tracks our operations in Chile and Puerto Rico. I am on slide 11 where we present our third-quarter results for the Liberty Global Group.

For the first nine months of 2015 we reported $12.8 billion of revenue, as compared to $12.7 billion for the prior year period. From a rebased growth perspective, which adjusts for FX movements and the impact of acquisitions and dispositions our revenue growth was 3% year to date. I would also to highlight that our third-quarter rebates revenue growth was 3.5%, which represents an improvement over the first two quarters of this year.

In terms of OCF, we have generated $6.1 billion year to date, versus $6 billion in 2014, resulting in a rebased growth of 3%. Our rebased OCF performance for the year to date period includes the net negative impact of certain items, the most significant of which was $31 million of additional integration expenses, primarily related to Ziggo.

Looking ahead, we are confirming our full year guidance for mid single-digit OCF growth rate, although we expect to end up at the lower end of that guidance range mainly due to weak performance at Ziggo. Given these expectations in our year to date results, it is clear that we anticipate a higher rebased OCF growth rate in Q4. In Europe we reported an OCF margin of 47.8% for the full year to date period, which is a 40 basis point improvement compared to the same period last year.

Turning to our capital intensity, we reported $2.8 billion or 22% of revenue for P&E additions in Europe year to date. The increase in P&E additions in both absolute and percentage terms was primarily related to an increase associated with the acquisition of Ziggo, as well as higher spending for a new build and upgrade projects.

For the first nine months of 2015 the liberty global group delivered free cash flow of $1.7 billion, an increase of 24% as compared to the prior year on a reported basis. We expect to deliver another strong quarter of free cash flow in Q4, driving mid teens growth for liberty global PLC for the full year.

On slide 12 we break out our third quarter rebased revenue and OCF growth rates for our operations in Western Europe. Which make up over 90% of our total European revenue. Starting on the top left with the UK and Ireland, our largest operation, Virgin Media posted another robust quarter with rebased revenue growth of 4.5% and OCF growth of 4%. Similar to last quarter, the year-over-year increase in revenue was mainly driven by higher cable subscription revenue, due to a combination of volume growth and ARPU improvements and higher mobile handset revenue following the November 2014 team launch of our split contract program in the UK.

Rebased OCF growth was slightly slower than revenue growth, due primarily to higher sports programming cost, as well as the adverse effect of a net GBP17 million non-recurring benefit in Q3 last year, related to a retroactive reduction and local authority charges. Moving to Germany, Unity Media reported strong rebased results, including 7% revenue growth and 9% OCF growth, our best quarterly performance in over a year.

Germany's top line result was primarily driven by growth in our subscriber base, including higher take-up of broadband products and lower video attrition, coupled with higher ARPU which continues to benefit from the broadband price increase that we took in the first quarter of 2015. On the OCF level, we continued our focus on tight cost controls leading to a record margin of over 63% in Q3.

Our Belgian operation reported 6% rebased revenue growth in Q3, driven by continued strong cable and mobile subscriber adds as well as a 4% price increase in Q1 this year. Telenet's Q3 OCF grew 7% on a rebased basis, driven largely by the same items as revenue growth. In the Netherlands we posted a rebased revenue contraction of 2% in Q3, mainly reflecting headwinds associated with RGU losses over the last 12 months.

The rebased OCF decline of 1% represents an improvement over Q2, when rebased OCF contracted 5%. The improvement was mainly due to lower integration cost in Q3. It is worth noting that we reported a sequential absolute OCF improvement, in local currency, from Q2 to Q3 which is a sign of progress.

Given the lack of recent subscriber growth and the current competitive environment, we expect the fourth quarter of 2015 to remain challenging with respect to rebased revenue growth. However we're delivering on the Ziggo synergy plan which we expect to have a favorable impact on OCF performance in the fourth quarter of 2015.

Finally, our Swiss and Austrian operations delivered 3% rebased revenue growth and 7% rebased OCF growth on a combined basis. In total, our Western European operations generated 4% rebased revenue growth and 4% rebased OCF growth in the third quarter of 2015.

Slide 13 lays out Liberty Global Group's leverage ratios and our share buyback plan. At September 30 we had total debt of $44.7 billion, an increase of approximately $1 billion from the second quarter of 2015 primarily due to incremental borrowings related to our increased position in ITV.

With respect to our leverage position at the end of the quarter, our gross and net leverage ratios in Europe stood at 5 times and 4.9 times, at the higher end of our 4 to 5 times target range, but we remain comfortable giving the quality of our underlying cable cash flow stream, our low interest cost and our long dated maturities. We have an average maturity profile of nearly eight years with no material principal obligations due before 2021. In addition, the Liberty Global Group's fully swapped borrowing cost now stands at 5.1% and a 80 basis point reduction from 5.9% at year end 2014.

Turning to our buyback program, you'll see the bottom of the page that we repurchased nearly $500 million of stock in the third quarter and over $1.4 billion year to date, which gives approximately $2.5 billion to be repurchase over the next 15 months under our current plan.

On slide 14 we present a summary of the year to date results of the LiLAC group, which is comprised of our operations in Latin America and the Caribbean. LiLAC delivered rebased revenue growth of 6% year to date, reaching $908 million.

Our operations in both Chile and Puerto Rico continue to deliver solid results, which I will break down on the following slide. On the OCF front, LiLAC posted rebased growth of 10% for the first nine months of 2015, bringing our year to date total to $364 million. We continue driving operational leverage, increasing our OCF margin by 160 basis points year over year to 40% for the year to date period. As a reminder, we expect a difficult comparison in Q4 2015 in Chile as a one time benefit recorded in Q4 2014 is not expected to recur in Q4 this year.

Moving to the bottom of the page, LiLAC's year to date P&E additions were 20% of revenue, an improvement from 22% in the corresponding prior year period. Finally for the year to date period, we delivered free cash flow of $40 million, up from $29 million last year.

On slide 15 we take a slightly deeper dive into our Q3 results in Chile and Puerto Rico. Starting with Chile, VTR reported third-quarter revenue of $204 million which represents 7% rebased revenue growth and our best third quarter result in five years. Fueled by a well-balanced combination of cable and mobile subscriber growth, as well as higher ARPU.

Our Q3 OCF in Chile increased 11% on a rebased basis, driven by the same revenue drivers as well as improved operational leverage, partially due to improvements in SG&A. In Puerto Rico, our Q3 rebased revenue and OCF growth came in at 6% and 9% respectively. These results were primarily attributable to increases in cable subscription revenue related to volume gains. Lastly on this page we turn to LiLAC group's leverage which was 4.4 times gross and 3.9 times on a net debt basis for Q3.

On a sequential basis leverage increased approximately half a turn as result of a series of transactions that we undertook to re-strike a large portion of the derivatives associated with $1.4 billion of debt at VTR. As a result, our average fully swapped cost of debt dropped to 6.4% of the end of Q3, down from 8.7% in Q2 2015. At September 30 we had $239 million of cash attributable to LiLAC, including $99 million that was held outside of the two credit pools, and $232 million of aggregate available borrowing capacity under our undrawn credit revolvers.

I will close our presentation on slide 16. In summary, subscriber additions rebounded in Q3 and our next gen TV platforms continue resonating well with customers. We're running our fall campaigns and are in the middle of our best selling season, and we're targeting up to 1 million RGU additions for the full year.

As mentioned before, we expect to achieve mid single-digit rebased OCF growth for the full year, albeit at the lower end of that range. With respect to Liberty 3.0, we are making big strides and are confident that this program will meaningfully increase our growth profile in the coming years.

And with that, I'll hand it back to the operator to open it up for questions.

(Operator Instructions)

Ben Swinburne, Morgan Stanley.

I will ask my question and follow-up upfront. Mike, can you talk about, you mentioned that Belgium is the first market you will have a free to air mobile and cable business, so it's an interesting comment. Can you talk about what that means in terms of growth, or whether that is a framework you'd like to replicate in other markets if you can?

And then separately at the beginning of the year you laid out your Project Lightning plans and talked about fine tuning your CapEx expectations. I don't know if you're far enough through the budgeting process, but do you have us a sense as we think of the mid-teens free cash flow growth that you're going to put up this year, is 2016 a year that can see that growth continue? Or do think you are going to lean into the over built enough that that algorithm really changes for the time being? So any color you have on that would be helpful.

Sure, thanks Ben. On the first question around free air mobile and cable, when we look at it, first of all independently each of those combinations create interesting cost synergies and revenue synergies. So putting together, of course, the cable business in Belgium with the mobile operation there, we have already described $140 million plus of synergy, somewhere in that area, and we know, we all know these days that there are six mobile convergent synergies whenever you put together mobile and fixed assets. And that will be for us a really good indicator and a really good opportunity to prove those out for you and for ourselves, So clearly that is one element of the interest.

When we combine a broadcast asset as we're seeing in Ireland, or we will see here, we do that for strategic reasons. We know that there is an ability to increase the reach of our brands, we know that there is an opportunity to ensure we have got all of the right content in the right format, on the right platforms. We know there is advertising opportunities in our business.

I can tell you and I have said it publicly, we have 50 billion hours of viewing information a year and 80 billion plus DNS clicks a day, which we generate no revenue on. So, not suggesting for a second there is any advertising revenue in our long range plan, because there isn't. It is all incremental if it comes about, but we are looking at advertising, advanced advertising using our data, and having the opportunity to put these businesses together to manage these opportunities together. We think it is exciting.

Would we do it on a bigger stage, I know where the question was leading, and the answer is not necessarily. I don't think there's any -- you can't draw any conclusions about whether we will our won't try to put these types of businesses together in every market, but we certainly think in the smaller markets like Belguim and Ireland it's going to be very interesting.

On Project Lightning CapEx, we're not giving any guidance today about 2016. I will say that we were pretty clear on the Project Lightning CapEx and the phasing of that project when we announced it, and I think we do a good job and we will try to do a good job in the future laying those differences out for you, or those incremental expenditures. But we have always said that we are about growth, as I mentioned in my remarks, and if we think there's an opportunity to put capital to work that is going to generate returns like Project Lightning in the UK, mid 30s, IRRs unlevered, then we're going to do that and you should want us to do that.

Now, are we going -- do we think it will result in a material change in the complexion of our capital structure and our free cash flow profile? No. We don't think so, but even if it did for a short period of time we will make sure that you understand that number and we are looking at the next 3 to 5 years when we make decisions like that.

James Ratcliffe, Buckingham research.

Two if I could. Mike, generally how do you think about the marginal benefit of broadband speed as speeds begin to ramp, both from a consumer impact, actual real consumer impact experience and for marketing value? So as you move from a lead of say 50 megabits to 10 megabits, compared to say, going to 200 in the UK versus 70 for telco, how does that change the competitive environment? Secondly, brought down the rating further for group and quite a bit for LiLAC, can you update us on how far you think those can go? I think you said in the past about 4.7% to 4.8% in Europe, is that still the right number to be thinking about?

Could you repeat the second question, I didn't get all of that?

In terms of continuing to bring the effective rates down on the debt.

Oh, I see. Rates. Yes.

What should be thinking about a best case where you could get to levels on this?

On the broadband speeds there is a very strong correlation that we see in almost all of our networks between the speed of the service we provide to a home and the amount of consumption that that home has. Today our average home is getting close to 80 megabits per second, our average consumption is close to 80 gigabits a month, and that almost, you can almost draw a straight line between the increase in our average speed delivered, last three or four years, and the increase in consumption. And there's is a reason for that.

Number one, people who want higher speeds generally want to be more engaged in the Internet, and they do and they are. But also they're finding that the experience is better. There is a competitive advantage in our opinion. We do believe and it is certainly not surprising that the entire world is to need, desire and want greater and greater speeds. It is going nowhere but up, and you look at that ecosystem, we are in a great position.

We can get to 1 gig, I think I've said it publicly, EUR20 a home pass for something we think on average to get ourselves to 3.1 in 1 gig. This is the right model to have, the cable model in our opinion, and we'll be careful of course about how we push that. But we feel very very good about it and it has a huge competitive impact, but more importantly it has a huge customer value impact.

We know that in the UK if you're getting 200 megabits from Virgin you are a happier broadband customer than the person getting 38 meg from BT. You just are.

Especially as there is more devices in the home, more OTT products being provided, more video consumption we all know it, we all experience it. I think the marginal benefit is increasingly clear to us, especially as video consumption rises. Charlie do you want to hit the interest rate point?

I would say 5.1% is a pretty good financing rate and we have finance cheaper than that, and obviously depends on the market to see if we can continue to drive our average cost down. The one thing I would say is, we remain focused on long maturities, so clearly if we wanted to we could cut our cost of borrowing by going shorter and we're not going to do that.

So we're going to continue to go for non-maturities in our debt. So I think there's probably some upside on the fly, but I would not say it was material now. But the most important thing is that we are able to refinance and roll these very long maturities at these very attractive rates. And clearly it helps us that the overall backdrop, particularly in Europe, is very positive for that.

I can't see EU rates going up anytime soon and in terms of the UK as you probably heard, Carney has said at least another year of low interest rates. I think there may be some upside, we'll plan a bit on market conditions, we have finance below 5%, but the step change of going from 6% to 5%, you won't see us go in those step changes going forward.

Jeff Wlodarczak, Pivotal Research Group.

Mike, can you talk broadly about the attractiveness of doing more wireless acquisitions versus, say, leveraging a potential Wi-Fi first MVNO strategy? And then in your view, how key is being able to offer consumers a quad play as a subscriber attrition tool, and then I have got a follow up?

Sure. This is a question we address all the time with shareholders and happy to do it again. Looking at MNO acquisitions, it is to soon to tell actually what the benefits will be in Belgium, but we have a pretty good idea when we look at the scale of that mobile sub-base for us. The opportunity to drive margin and a better customer experience, we felt that MNO acquisition made a lot of sense. In other markets we will see.

We have a lot of options, that is the beauty of our strategic plan and our footprint. We have a lot of options. When we look at taking advantage of a fixed mobile environment, a lot of options. MVNO, MNO and as you mentioned, even Wi-Fi first, which of course everyone is looking at and that is one of the reasons we keep rolling out our Wi-Fi hotspot network, and one of the reasons that we have aggressive R&D and innovation platform. It could very well be a solution over time.

Right now, Europe is a quad play market. It's a quad play market because every incumbent telco who has nationwide fixed coverage has a nationwide mobile coverage. And it wasn't beyond the wit of man to assume at some point they're going to put those bundles together and we have done the same thing with great success. We have over 4.7 million mobile subs today and the bundling effect, the reduction in churn is real, and the revenue growth is real and the margins are good.

We feel very positive about our approach today which is capital light, variable cost. We feel pretty good, I would say, about each of our MVNO contracts and we have 4G or a path to 4G in almost every market. And we will look selectively, based on the market, based on the opportunities, but just as you have known us to do over time we will look selectively and very carefully at an acquisition of additional assets like an MNO, when and where it makes sense. But I think you can trust us on that. What is your follow up?

Your guidance for mid single rebase to EBITDA, that implies to me if I'm wrong a 5% plus EBITDA growth in the fourth quarter. And then Liberty 3.O was a $7 million drag in third quarter, should we expect that to be contributing to EBITDA growth in the fourth quarter, or is it something more into 2016?

We're right in the middle of our budgeting process as you can imagine. And we did have some extraordinary costs like Ziggo negative synergies and Liberty 3.0, which the accountants never let us breakout on paper, and we understand that. And of course our EBITDA, sorry our operating cash flow result was impacted by those things and that is investment, investment in the future.

Going forward, we will certainly, we believe see some benefit from Liberty 3.0 in 2016. Fourth quarter wouldn't seem too soon to me. And it is again though, as a reminder, a three-year program. We want you to know this is not about cost-cutting as I have said. This is not about slashing and burning. This is about building an incredible relationship with customers, it's about having the best products in our market and it is about being smarter and more efficient on an already efficient platform, in terms of how we operate.

It is a balanced approach, it is the right approach and I think it is going to take a little time to implement it. It's not going happen overnight, and there will be some startup costs. But we'll try to do the best we can in terms of identifying those for you, and giving you a sense of the curve as we approach it.

Tim Boddy, Goldman Sachs.

I wanted to ask about your pricing. You obviously took some more aggressive moves this year than you have done in the past, and we've seen obviously some impact in the customer base, and particularly this quarter in Switzerland where the KPIs have weakened further.

Are you thinking that for next year it might be better to be more prudent in terms of the consummate price that you take, or perhaps the way that you take it? Then the alternative explanation is maybe you feel that it's not pricing that has been a challenge for the KPIs, it's more the quad play pushed by the incumbents. If that is the issue, how do you plan to respond?

I think on the second point you know how we are responding. We're rolled out in ten markets. We've got bundled offerings in every case. So the truth is we feel very good about our ability to be aggressive, disruptive or just flat out accretive on a mobile offer and a quad play offer, so, I do not believe that is what it is. I think we learned a lot this year in the first half of the year about our pricing abilities, about our price value relationships about our customers' elasticity.

We are a lot smarter going into this budgeting process than we were perhaps going into the last budgeting process and that is what you would expect me to say, of course. But we are going to always be, I would say, careful and targeted in when and where we take rate increases. In some markets it's a very normal and ordinary course reality. In UK people understand, customers understand, there's a cost of doing business and it's usually something we can predict and they can easily.

In other markets we have to be more thoughtful. And incumbents, as I mentioned in my remarks are quite aggressive and very clever. There are responding, it is a bit of a cat and mouse game, but you can bet and you can expect that looking at our price value relationship we will continue to be a major source of both revenue and cash flow growth for us over the next three years.

It's not something that we are abandoning because of the first two quarters of subscriber growth. It is something that we are just recommitting to, but in a slightly more intelligently as we get smarter about the elasticity in our market. That is how I would answer that.

Do you think we will see similar price tight next in aggregate or a bit more cautious? How would you balance that, or is it too soon to say?

Really market by market. You've got back book, front book issues. In some cases last year we took prices up on the acquisition portfolio more than we should. It is a lot of moving parts in there, Tim. I do not want to get too specific for you. But I'll just simply say that you should expect that we will continue to adjust the price value relationship of our products and services as appropriate, not meaningfully inconsistent with prior years.

Michael Lawrence, Morgan Stanley.

First question is for those of us who were a little bit newer at following your company, how should we be thinking about the synergies in cross-border M&A? Secondly you mentioned, I think in reference to Europe you were talking about how you are giving OTT a run for its money, I think, is the expression used. What are you seeing on that front in LatAm and are you seeing much growth in terms of broadband subscribers who are not taking your pay TV offerings?

Good questions. On the cross-border effect, they vary, of course, by market and by industry. In our case, the cross-border effects are meaningful and substantial. Our ability to procure equipment centrally, and our ability to provide IP backbone in data and bandwidth efficiently; our ability to procure and secure content and develop content relationships across Europe. Our ability to use best practices, revenue and otherwise; the relationships we develop with suppliers, strategic and otherwise.

So I think the cross-border benefits of our footprint are substantial and you are seeing that in a consistently increasing EBITDA margin or OCF margin over the last five years, as we have made acquisitions. And you're going see that hopefully in our Liberty 3.0 plan which will take that cross-border opportunity to the next level in our opinion, in terms of how we manage and run and operate our businesses. They are substantial in our business.

In the LatAm space, [and Dot Su Wah ] I think you are on. You are welcome to chime in here, I think it is really early days for OTT, there a couple of platforms that folks have launched Pay TV does not have high penetration in the region. In some cases it is a bit expensive; in other cases it is not. There's an opportunity for both OTT and for traditional video platforms, and we see that across the markets that we have investigated. We intend, we expect, as everywhere, just like everyone on the planet there will be video opportunities online and internet driven video, we don't doubt that for a second.

But if you look at what we have done in Europe, we have been able to create essentially look alike OTT products, hard bundled them into our traditional video platforms, and more importantly our innovative cloud- based video platforms. And provide those to customers essentially at no additional cost. And that really is one of the things that gives us confidence in OTT generally as we look at it as a competitive factor, is our ability to essentially duplicate the experience and have 10 times the amount of content.

So how about if I said to you, you get the same exact experiences, Netflix or Amazon, pick your provider, but oh by the way, you don't have to give up on your broadcast network, you don't have to give up on free to air, which is 80% of your programming viewing anyway, you don't have to give up on sports, you get all of that too. That is really the approach we'll take everywhere including LatAm.

Frank Knowles, New Street Research.

Quick question as you are thinking about rolling out network extension projects in other markets that come to the UK, just wondered how broadly you are examining that? Is it going to be a similar pattern as in the UK, just essentially very close to the existing network in certain gaps? Or are you considering a more broader extension pattern and would you expect a hurdle payback to be similar as you've expressed in the UK? Then I did have a slightly more detailed question, just on if you could explain the impact of, revenue impact of moving to split contracts on the mobile side in Belgium and the UK. Is it possible to quantify how that impacted revenues?

I will let Tom and maybe Diederik address the split contract question. On the network new build, as I mentioned, we are with success so far, and we know the opportunity there. We are looking at it more aggressively across -- and we think there are pockets. They don't always look the same. It is not always a simple network extension leaders.

Sometimes it is an in-fill, sometimes it is an upgrade. Sometimes it is creating a better activation opportunity within existing home pass. There are lots of -- and it differs by markets, so I really can't generalize for you, I don't want to generalize for you. As we get smarter about those opportunities, as we begin to commit to those opportunities, you can bet we will help you understand them. I promise you that we will do it.

They do exist in multiple markets, Germany as you describe, we're looking for comparable IRRs and paybacks, and it is something that we're pretty excited about. So I really can't say much more about that, and Tom or Diederik, you're welcome to address the contract question.

It's Tom here, certainly in the term in the UK with split mobile contracts is proving a very significant success for us. The customer finds it particularly attractive to have the opportunity to own their handset and have the air-time paid under a separate contract and that has accelerated our growth into the postpaid contracts, so we're very pleased with it. Of course it does bring forward our revenue because in effect we are selling those handsets. S it does enhance the revenue growth and it contributes to our overall growth in a way which is very positive for the customers and is enhancing our whole product base.

That's really helpful. Is there any way of quantifying how much of your revenue growth in the UK was as a result of bringing forward revenues in that way?

I think on that question I understand we do not split out the numbers to that detail. It has not been the practice in the past. It has contributed, but many other things have contributed, as well. We continue to take price rises through the period. You're probably aware that a number of operators in the UK have done that and typically we make an announcement towards the end of the year, so you might look for that very shortly in the UK.

I think we can take a well-judged price rise across our cable customers and secure revenue there. We have good growth in our B2B segment and very positive growth and in the mobile, as I mentioned, we have good growth there also and with additional services. I think you will see we've got a broad pattern of growth based around price and volume in the United Kingdom, and are very much expect that going forward.

I would just add that there is a positive and negative impact from split contracts. Revenue upfront, but it also impacts how you -- revenue over the long. It evens out, let's put it that way.

Saroop Purewal, Redburn.

Thanks, everyone. It is Saripe here, from Redburn. Can I just ask, would any of the MVNO contracts that you've currently entered prevent you from bidding on an MNO in that market, should you see any opportunity there? Or is there anything material we need to know in terms of your commitment from your MVNOs?

The answer to that question is no. These contracts are [subordinate] agreements, they don't generally deal with anything related to assets or M&A.

Michael Bishop, RBC.

I have got two quick ones please. Firstly, the growth in Eastern Europe seems to be picking up nicely, so I was wondering if you could update us on your strategy and view of the region. Clearly there's been a couple of tough years over the last few years, but do you think it is about building scale now and sticking in all the different regions within that area, or is it a case of being more selective? Then, secondly on the UK, clearly a very good broadband member, could you give us some indication of how many of those net adds were coming from Project Lightning and newbuilds versus success in the existing footprint?

On Europe, two points, as I mentioned in my remarks we have now consolidated that group underneath Switzerland and Austria. So you should expect that that region as a whole, Switzerland, Austria and Central and Eastern Europe in our markets there will start to generate efficiencies as a group as we manage them differently, as we find ways to reduce overhead, be more efficient et cetera.

I think as a group you will see that region perform better since Eastern Europe is -- I think Romania included, has seen some uptick in RGUs, which is great, and I think it is a function of a few things, most importantly our ability to launch new products. We have our Horizon go service, Horizon go type -- launch in most markets. We're pushing aggressively our broadband speeds, just like we are in Western Europe.

Part of it is just where we are in the cycle and I think -- we think the opportunity in the next three years in that market certainly looks better than the last three years. Is it going to be Western European level in Romania, Hungary, Czech, Slovak, and Poland, Western European level growth? Not necessarily. But the will, we believe, become accretive and positive growth and that is something that is encouraging.

Do you want to hit the UK point, Tom?

At Virgin Media we estimate in the UK we took nearly 60% of broadband and market share in Q3, and overwhelmingly that was off the existing network. The Lightning Project is certainly underway, we are in the beginnings of the build process, we're getting those homes to market, but to market and sell and in the store is a process. So a portion of those homes that we did acquire in the quarter is from Lightning, but a very small portion. Within that portion we're certainly getting the penetration rates that we targeted and given the ARPU that we targeted. But overwhelmingly, the growth in Q3 has come from the existing base, of course, as we progressively move forward, we will continue to work existing base and add the Lightning homes to it.

Vijay Jayant, Evercore ISI.

Hi Mike, two questions. First on broadly on the B2B side, which seems to be a good growth area for you, can you help us really understand what the total addressable market is, how you segment your revenues right now, what is growing and how fast, and really want to understand the run rate for growth longer term. Second, with EuroDOCSIS 3.1 coming along, and also the telcos talking about GFAS and some other dso technologies, can you talk about the speed differential longer term? And is that something you can really monetize by some form of user-based pricing for the faster speed, or is that purely going to be a differentiation on getting subscribers?

Vijay, would you repeat your first question for me really quickly, summary of it?

I just wanted to understand the B2B market between large enterprise, SOHO and medium enterprises. Where are we -- in really understanding how big the market is for, across your footprint, where we are in penetration, really understand the run rate for growth across the various segments, within the business to business.

On the B2B front it is, we have the complexion of opportunities varies. In most of our markets, almost all of our markets we are underpenetrated in SOHO and SME, so we have made a concerted effort and you'll see in our numbers, to penetrate we think up to 50% is achievable of our SOHO's on footprint.

And so there is a massive push. If you looked at SOHO revenue you would see that it is growing 25% to 30% a year, quarter over quarter, year over year, and that growth, and it is becoming an increasingly larger and larger part of our overall B2B platform. That is going to be the engine of growth for us in the B2B space. So we have to invest in products, we have to invest in people, we have got to find and penetrate the small, medium, and particularly the SOHO marketplace, that is an exciting growth initiative for us.

Secondly there are markets where we have virtually no B2B at all, or we have very small B2B footprint, like Germany. Take those opportunities, those revenue drivers and we apply them to new markets, that is almost organic of the best type. The third element of B2B for us obviously is our medium and large enterprise business, which is harder to predict, and over time a smaller and smaller percentage of our revenue, and going to be generally lower growth. Because that is where we are competing with the BTs and the KPNs.

Not to say that we aren't emphasizing that. We will emphasize it, it is a huge -- it's two-thirds of our revenue today or more, 70% I believe. So we're going to grow that and grow that steadily, but the real excitement of B2B is coming from SOHO. And I think I have quantified in the past exactly how many SOHOs we think are in our footprint, it's a big number. And we think a goal of penetrating half of those should be achievable over the medium term and that's what we're trying to do.

The last element of course is mobile. We think that as our mobile products improve, as our mobile footprint grows, having a mobile offer for B2B customers is increase. Ask anyone; ask Modafone. There's a real upside in mobile as well for us.

On the 3.1 point, I know Balan is on here, and he can talk about it. And I mentioned that we have a road map to 1 gig. We have a road map to 10 gig, asking this question all the time. I think we can get to those places pretty efficiently. We competitive technology.

We know that in the vast majority of our competitor markets there's little to no fiber in the home and there is anticipated to be little to no fiber to the home. Really other than Holland, which has about 30% coverage. We don't see anybody building fiber to the home, we don't expect them to build fiber.

So what we are competing with principally is VDSL and in some case vectoring, maybe overtime G.FAS which will take a large amount of money and capacity and time to develop. But either way we don't see anything -- if those technologies are putting us at a disadvantage or materially impacting our competitive advantage as we continue to push much more cost efficiently those same buttons on speed. I hope that answers your question.

We're not go to get there any faster than we need to get there. We've offered and launched 500 mg products, not a lot of customers today. But we have it out there as a signature product. A year ago I would have said, hey 80 to 100 meg, that is our sweet spot, today it's 150 to 200 meg. The sweet spot is growing every year and that is really a good problem to have.

One last point, we are very very encouraged by the net neutrality position of the European government in the European commission. What they've approved recently to us is a very balanced, healthy approach to innovation, to growth in that marketplace. We are allowed -- there are no restrictions in volume-based building. There are no restrictions on specialized services, there are no restrictions on zero rating. Where is the ability to manage your traffic. There is no obligation to provide essentially free access to over the top providers.

It is a very healthy approach to a vibrant, rapidly changing ecosystem that does not need regulation, and those things will pay dividends for us you can bet over time. We incorporate them into our plan. When? We'll let you know. But trust me when I say that the environment we operated in Europe is really very encouraging and positive when it comes to allowing companies like us to invest, grow, build, innovate, and that is going to be the best thing for customers.

If that is the last question I'll thank you all again for joining us this morning. I realize our comments and our prepared comments were a bit longer than perhaps normal, we will do a better job next time a keeping those tighter. We had a lot to say and we're pretty excited about our results today. We are busy, busy, busy in the fourth quarter and we look forward to talking to you about those in the new year. Take care everybody and thank you.

Ladies and gentlemen, this concludes Liberty Global's third-quarter 2015 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.