Liberty Global Ltd (LBTYK) 2017 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 2017 investor call. As a reminder, the first portion of the call will focus on Liberty Global's European results, and the second portion to begin at approximately 10:30 a.m. Eastern, will focus on the results of 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 expressed written consent of Liberty Global is strictly prohibited. (Operator Instructions) Today's formal presentation materials can be found under the Investor Relations section of Liberty Global's website at www.libertyglobal.com. (Operator Instructions) As a reminder, this call is being recorded on this date, November 2, 2017.

Page 2 of the slides details the company's safe harbor statement regarding forward-looking statements. Today's presentation may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including the company's expectations with respect 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 forms 10-Q and 10-K as amended. Liberty Global disclaims any obligation to update any of these forward-looking statements to reflect any change in its expectations or in the conditions on which any such statement is based. Also note that nothing stated on today's call constitutes an offer of any securities for sale.

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

All right, thank you, operator, and welcome, everybody. Appreciate you joining our call today. We're going to start, of course, with Liberty Global, and then in about an hour, we'll have a LiLAC call, if you can join that as well. We're going to keep our prepared remarks sort of efficient today. We're going to jump right in, and Troy and I are going to take care of the operating and financial highlights. And then, I'll ask others from the management team, many of whom are on here, to chime in on the Q&A as needed.

We are talking from slides, as we always do, and hope you can get those downloaded or access those. I'm going to begin on Slide 4, with what we believe are the 5 key takeaways for the third quarter in Europe.

Beginning with our top line results, which came in at 3%, rebased revenue growth, up from 2% in the first half of the year. Several factors contributed to this uplift, including another great quarter of B2B, which continues to ramp with 13% rebased revenue growth in the quarter. Revenue in our mobile business was also up year-over-year after declining through the first half, and we had strong mid-single-digit growth in markets like Germany and Central and Eastern Europe.

Now as you know, the fixed residential business remains competitive in Europe. Nothing has really changed on that front. But every quarter, it just reinforces our strategy, which is to grow scale through new builds, drive market share with the best broadband products and fantastic video experiences and to improve customer retention and happiness with quad-play bundles. And as you'll see, we believe that strategy is working. And despite these competitive challenges, we continue to drive operating cash flow growth. That's the second big takeaway. Rebased OCF growth was up 4% in the quarter, bringing-the-year to date figure to around 5%, which is our guidance for the full year. And I'll dig into this a bit more in a moment. But we continue to drive our operating margins up in Europe. We now are at 47% for the 9 months. That's up 120 basis points over last year. And the good news is we're not done realizing scale-based efficiencies.

When you dig into the numbers, you'll also see that operating cash flow performance was strong across Europe. So every market grew rebased operating cash flow between 4% and 7% in the third quarter, with the exception of Switzerland, which had a more difficult quarter due principally to the launch of our new sports service and the impact of those content costs as well as a tough competitive environment.

We understand the concern around recent performance in Switzerland, right? Swisscom, in particular, has responded to pressure on fixed-to-mobile pricing. But it's largely a rational market with only 3 mobile players, improving year-to-date RGU trends and for us, a growing B2B in mobile business. It's going to take time to regain OCF momentum there. That's for sure. But we have a good plan and also some interesting strategic opportunities as well.

The third key message is that while subscriber growth of over 200,000 RGUs was a bit lower than the prior year, there are some really positive trends here. The most important of which is a steady and consistent improvement in our video business, especially in contrast to the U.S. pay TV market, which you're all familiar with. As you can see on the bottom right, through 9 months, we lost 60,000 video RGUs in our core markets. That compares to nearly 200,000 losses just 2 years ago in that same period, excluding Holland. And the good news is even in Holland, we've seen that same sort of improvement. So 2 years ago, we lost 150,000 video subs in the first 9 months; in this 9 months, 60,000. Really 3 key things happening here: First and foremost, our video platform has totally transformed with beautiful user interfaces, multi-device access, great content, great apps. And secondly, we're succeeding in our new-build market, right. When we show up, folks subscribe. And third, the quad-play really does reduce churn. All of these factors bode well for continued strong retention, even growth in some markets of our video sub base.

Now certainly, our largest market is the U.K., and all eyes are on Virgin Media. So the fourth big takeaway for us is that we're seeing improved operating momentum at Virgin. Our recent price increase, which kicked in yesterday, in fact, has landed better than last year, which means a better NPS impact, better retention, lower disconnects -- and I'll have a bit more on that in a moment. And RGU volume continues to strengthen and that is supported by, of course, new marketable homes from Project Lightning; but also the success of our V6 box, which is now in 20% of our video homes; and the quality improvements we're making in the broadband business with the Connect Box and better capacity and network management.

Now lastly, we're confirming our guidance today for the full year of around 5% operating cash flow growth. Maybe said a different way, we believe our year-to-date operating cash flow results should carry through to the fourth quarter. And with about $1 billion of new build expenditures relating mostly, of course, to released homes and work in progress, our CapEx in sells should be in line as well at 29% to 31% and our adjusted free cash flow at $1.5 billion.

Three more quick points before I move on from this opening slide. As you all know, or should know, the new electronic communications code in Europe is working its way through the political process, with some progress expected, perhaps by June, and new policies in place, perhaps by early 2019. Everybody involved in this is supportive of creating a favorable investment client -- climate, especially as 5G and other big initiatives, are on the horizon. But the battle lines have been drawn, let me be clear, around national regulators and how much authority they're going to have to manage competition, to define market power going forward. We remain totally aligned with the EU commission on this and, in fact, totally aligned with other telcos, in our view that the current rules are sufficient in Europe, in fact, should be deregulated, not regulating more. The parliament and the European Council are grappling with their own interpretations, their own biases. And we'll have to keep you posted on how that process unfolds.

And second, you may have heard or read that the European Court ruled recently that the EU has to now reexamine the original approval of our UPC and Ziggo merger years ago, really on technical grounds. And the technical grounds are that they didn't properly address the sports market. To be honest with you, we view this as more of a nuisance. It's, again, a highly technical matter. And given that the Dutch market is meaningfully more competitive today than it was when we first got there or got the approval, we're pretty confident of a new clearance in due course.

And then finally, I have to say I couldn't be happier or more proud of my colleague, Balan Nair, who has accepted the role of CEO for Liberty Latin America after we split off the business at year-end. You all know this, but as CTO over the last 10 years for us, he has put in place all the building blocks we need in Europe to be competitive for the long haul, including a robust technology and network platform that is gigabit ready and fit for fixed-to-mobile convergence; a product roadmap that allows us to compete on every level for every customer against all comers, including the big OTT guys; and perhaps most importantly, a centralized operating model that capitalizes on our scale and really turbocharges innovation. And even though he's moving to a different floor here in Denver, he's going to remain a part of the family and will continue to work closely together with us to realize global scale on procurement, technology and products across both regions. So congratulations to Balan.

Now with that as a scene setter, I'm going to quickly run through a few more slides, and then I'll hand it over to Charlie. And I'm going to turn to Slide 5. As most of you know, we are rapidly approaching year 3 of our Liberty GO operating plan. And I think it's important that we keep reporting on our progress here on the key initiatives that we set out for ourselves, 2 of which are highlighted here in the slide. First, of course, is our aggressive plan to contain costs and execute on skill-based efficiencies. The chart on the left tells that story very well. And despite building out and marketing to nearly 2 million new homes in our footprint in the last 7 quarters since we got started, despite launching new and competitive video and broadband services over that time period and adding 1.6 million new RGUs, we have been able to keep our indirect costs flat year-over-year. That is a significant achievement. And we're not done yet, as I said. Charlie's going to walk through a few examples of how we found synergies and what we're doing to drive scale-based efficiencies across our business. And you can see in the middle of the page, we've pretty much reinvested most of that savings into growth. So labor costs are down 3% and other external costs are largely flat, up 1% due primarily to higher network taxes in the U.K. But our investments in sales and marketing is up 2%. So some of that money, of course, is going into our B2B business, another big Liberty GO initiative. And you can see on the right-hand side of the slide how that's been going; as I mentioned, double-digit revenue growth.

Our strategy in B2B is clear in our view, that we're focused on superior speed, convergence and simplicity as we grab market share in the SOHO and SME segments. And those 2 segments now make up over 40% of our B2B revenue. Our investments in products, like 500 megabit broadband speeds, static IP, managed Wi-Fi, hosted voice, cloud-based services and, of course, mobility, really allows us to be super competitive on service and disruptive on pricing. And when you exclude Holland, we passed around 4 million SOHOs and now over 450,000 SME premises. So there is a significant runway for growth in this space.

Two other important Liberty GO initiatives are covered on Slide 6. Starting with our new build program, which is not only fueling growth today but is laying the strategic foundation for sustainable growth for years to come. Since we got started, we've built and released over 2.7 million new homes, including over 900,000 in the U.K. And over that time period, we've been able to add 0.5 million new customers and 1.2 million new RGUs on this extended footprint, 40% of those just in the first 9 months of this year. And we're on track for 2017 to be our biggest build year yet, over 800,000 new premises released in the first 9 months. And I'm going to show you some Project Lightning numbers in a second. But all in all, our new build program has really worked out. It is paying off. We can toggle the pace of construction and capital investment, and we can accurately monitor the build cost, the subscriber adds and the financial returns to optimize growth in cash flow in any way we want. And we continue, it's a flywheel, in my view, for subscriber growth, sure, but also scale, strategic scale and B2B.

Now the right-hand side of the slide summarizes Q2 results in our mobile business, which showed a return to nominal growth compared to the first half, as I mentioned. And that's largely attributable to strong handset sales in Germany and the U.K.; better mobile interconnect result, particularly in Belgium; and some good postpaid growth, especially in Switzerland, where we kind of rolled out a disruptive offering with free EU roaming.

Now we're still going backward in subscription revenue, you can see that in the callout on the right-hand side. But there are plenty of initiatives underway in every market to turn that around. Now Virgin's going to kick off their migration to the new full MVNO deal with BT with some aggressive products rolling out in the first quarter, and that will keep the momentum going. And Telenet is marching forward, as they do, on the integrated quad-play bundle. We call it, WIGO. And importantly for cost here, finalizing the migration of their MVNO subs to the MNO platform, and that's going to certainly have a big impact on synergies and operating cash flow growth next year.

So I'll wrap up my remarks with a few quick updates on our largest operation, Virgin Media, which by the way, delivered its best OCF growth quarter of the year. I'm going to focus on 3 key topics here, beginning with the price rise, which took effect yesterday. And as we foreshadowed all along, this year's pricing approach has landed very well compared to last year on just about every measure. So the NPS impact is better. Churn is lower. Call volumes have subsided, and this can be attributed, in our view, to a handful of key tactics that Tom and Dana have implemented this time around. And most importantly, we've tailored the timing of the customer notification letters, the marketing message and the retention offers by customer segment. So some people were offered a speed boost; others a new bundle, a new -- and still others, a CPE upgrade like the V6 box or a new Connect Box. And these same tools are helping us stabilize ARPU, together with a more tightly managed discounting strategy, implementing agent-level revenue tracking and using our data and new digital tools to tailor win back and upsell strategies. These programs have worked. And even more importantly, they're going to help us retain more of the 4.7% price increase through the rest of the fourth quarter and into 2018.

Here's another point that I feel has been sort of lost a bit, perhaps as a result of our bumpy start to the year. We're generating 3x as much RGU growth today at Virgin Media than we did 2 years ago. Through 9 months, we've added nearly 330,000 new RGUs. In 2015, the year before Liberty GO and Project Lightning really began, that number was 90,000. And with Lightning representing about half of that growth year-to-date, that means growth in our existing footprint accelerated.

Since the beginning of Project Lightning, we released over 900,000 cumulative homes for marketing in the U.K. and Ireland, with steady growth in the build program. You can see that again on the top right of Slide 7. From an average of 60,000, that then grew to 80,000 homes per quarter last year. We're just in the third quarter of this year, we released 150,000 homes. So we've had a nice, steady pick up in our capacity. We have a very good handle on build costs, partner capacity and permitting at this stage. And we continue to penetrate at very good levels. At the bottom right, you can see we're reaching 30% penetration on average after 2 years. And over the course of the project, we've already added 180,000 new customers in the U.K. and Ireland, about 400,000 RGUs since we got started. So as we continue to build and release more homes, add customers and scale through early marketing and acquisition costs, we're going to begin to generate meaningful, sustainable cash flow growth for some time in this market. So we're actually pretty excited about it. I like the approach we're taking today in terms of pacing ourselves appropriately. But it's going to pay off. It's already starting to pay off.

Charlie, I'll turn it over to you.

Thanks, Mike. I will walk you through the Liberty Global Group financials for the third quarter, and then provide some color on our segment performance, and then highlight some benefits that we're seeing in combining fixed and mobile products in addition to showing an update on our procurement savings that we've been able to secure.

So I'm on Slide 9 now, where we present our Q3 financial results. And in terms of our revenue performance, as you can see on the upper left, we grew our rebased revenue by 3% to $3.9 billion for the quarter. This was a sequential improvement from 2% growth in Q2 and our best quarter results so far this year. Now where's it coming from? Well, our fixed residential business was broadly flat, while our B2B operations had another very strong growth quarter with 13% growth. We also had improvements in residential mobile, including handsets and interconnect, which Mike spoke about earlier.

On the OCF front, we generated rebased growth of 4% for the quarter to reach $1.8 billion. Now this was driven by our operations in Central and Eastern Europe, Telenet and Virgin Media, with each of those businesses posting rebased OCF growth of 7%, 6% and 4%, respectively, in Q3.

On a year-to-date basis, our rebased OCF growth was 5% in Europe. Our Q3 P&E additions increased to $1.3 billion or 33% of revenue. And on a year-to-date basis, our capital intensity stood at 30.5%. The main driver for the year-over-year increase in both absolute terms and as a percentage of revenue was, once again, higher new build activity, particularly with respect to Project Lightning in the U.K. as well as a higher CPE spend partly related to the continued penetration of our next-generation video and Wi-Fi boxes across Europe.

Adjusted free cash flow was approximately $750 million in Q3. And for the full year, we continue to target $1.5 billion of adjusted free cash flow, with the majority of our free cash flow to be weighted towards Q4, a similar phasing to prior years.

With respect to our European balance sheet, we ended the quarter with total third-party debt and capital leases at $42 billion as well as liquidity of nearly $5 billion. After excluding $2.3 billion of debt backed by shares that we hold in ITV, Sumitomo and Lions Gate, and including our derivative assets, our consolidated adjusted gross and net leverage ratios in Europe stood at 5.2x and 5x, respectively, at September 30.

We made great progress during Q3 in the refinancing front and extended our average tenure to 7.5 years. While our blended fully-swapped borrowing costs stood at 4.5%.

Post quarter end, we remained active and refinanced approximately $3 billion at our UPC credit pool at attractive terms and launched new term loans in our Unitymedia credit pool, pushing out our average tenure close to 8 years. And finally, we repurchased $400 million of our stock in Q3 with a similar number to go in Q4 under this year's $3 billion repurchase plan.

Turning to Slide 10 in our segment reporting. Our combined Virgin Media business in the U.K. and Ireland posted rebased revenue growth of 1.5%. Virgin Media's revenue improved sequentially, but as expected, remained impacted by flat ARPU. Virgin also decreased its mobile revenue headwinds as the Q3 decline of 2.5% was a significant improvement over an 8% decline in Q2, with the improvement driven by much higher handset sales. Rebased OCF at Virgin Media grew 4% in Q3, reflecting revenue growth as well as the net effect of lower marketing and employee costs as well as higher network taxes and programming costs.

Unitymedia in Germany delivered 5% rebased revenue growth in the quarter, while rebased OCF grew 3.5%. Bear in mind that we switched off our analog signal and related to that, lost around $7.5 million of carriage fees in the third quarter. And we expect a similar headwind in Q4.

In Belgium, Telenet posted 2.5% rebased revenue growth in Q3 that was mainly driven by strong growth in B2B partially offset by mobile headwinds. Telenet's rebased OCF increased 6% in Q3 as we continued migrating our legacy MVNO customers from Orange to our own mobile network.

In Switzerland and Austria, we achieved rebased revenue growth of 1% after 2 quarters of declines, and while rebased OCF decreased 3% in Q3. Now the rebased revenue growth resulted from a higher mobile revenue contribution and higher growth in B2B, partially offset by lower ARPU per RGU, which is primarily related to a weaker tier-mix and competitive pressures. OCF growth was negative due largely to the increased content costs related to the launch of our MySports platform in Q3. And we expect another negative OCF quarter in Q4 due in part to the fact that it will be the first full quarter with these higher content costs.

Diving a little deeper on operations in Switzerland. Our refreshed Connect & Play portfolio is delivering better incoming ARPUs of CHF 80 plus, although volume growth in fixed was still impacted by competition in Q3. B2B is delivering, and on the mobile front, we had better subscriber volume since the introduction of free EU roaming as part of our Swiss mobile portfolio that we launched in June.

The new MySports platform, launched in early September, is resonating in the market and the early take-up of our premium MySports Pro premium package is promising. Rounding out operations, our CEE segment posted 5% rebased revenue and 7% rebased OCF growth, largely driven by B2B and growth in residential cable.

Slide 11 gives you an overview of the significant synergies that we are seeing from combining fixed and mobile assets as well as an update on our procurement savings. So a quick update on Telenet and our fixed-mobile convergence transformation there. The modernization of our mobile network is well underway, and the migration of customers from our MVNO platform to the network is ahead of plan. 54% of MVNO mobile subs have already been migrated at the end of Q3, and we're now targeting a full migration to be complete by the end of Q1 2018 rather than later next year. Now remember that a good chunk of our anticipated EUR 220 million in synergies is coming from MVNO savings.

The quality of the 4 base mobile network has improved significantly, and 4G Plus technology is now available in over 80% of Flanders and also in parts of Wallonia. And in WIGO, our refreshed quad-play bundles, we're seeing good take-up. And now 12% of all Telenet cable customers have bought or migrated to a WIGO subscription, and nearly 4% have some kind of quad-play combination.

Looking at VodafoneZiggo. The Non Stop Gratis Extra's converged offers in the Dutch market have been on the market for about 6 months. And the JV is continuing to see very good adoption rates within its customer base. At the end of Q3, the JV had nearly 800,000 households and over 1.1 million mobile subscribers enjoying JV's new quad-play benefits. So put differently, over 24% of the joint venture's broadband base and over 55% of the Vodafone mobile postpaid customers in the consumer segment are now fixed-mobile convergence customers. The 2 biggest benefits the joint venture is seeing from the fixed-mobile convergence customers are higher NPS scores and significant churn reduction.

On the cost front, the joint venture is confident in delivering on the OpEx and CapEx synergy plans over the next few years. Mobile, as seen so far, is confirming those views. The synergies this year are still minimal, but the joint venture remains on track to deliver over EUR 210 million of cost synergies longer term. To give you a feel of the split of those synergies, we believe that around 1/4 will come from IT savings, another quarter from redundancies, with the rest coming in marketing and sales savings, termination of rented fiber and other items.

On the right of this slide, I want to highlight some achievements in securing savings to our cost base from a revamped procurement process. We've focused our efforts on establishing a standardized end-to-end procurement process that allows us to leverage our scale and reduce the number of vendors we work with. This has allowed us to reduce our unit costs, and we estimate that we've be able to achieve approximately 5% savings across the organization, most of which benefited our capital spend. Just to be clear, we are expanding our network and spending more in absolute terms, especially on the new build activity and CPE front. But we've achieved meaningful price-per-unit reductions.

As you can see on the slide, we are grouping our procurement spend into different buckets namely: access service and delivery platform, core network and IT, customer service and business services. We've achieved significant savings in 3 of the buckets already, as detailed on the slide. And the biggest savings have been achieved in the core network category, that includes outsourced IT and network components. We estimate that we're achieving 8% unit savings in this bucket this year.

In the access and service delivery platform categories, which mainly represent our HFC plant and head-ends, and on a combined basis, totals roughly $3.4 billion of spend, our increased scale from the new build initiatives has helped drive an estimated 3% price per unit saving versus last year.

And lastly, on the customer-facing front, where pricing has come down an estimated 4%, we've reduced unit pricing by, among other things, negotiating more favorable sales and marketing contracts and leveraging our mobile handset spend across the group to achieve estimated per unit savings of 10%. So all in all, we've made some good progress on the procurement front and have a clear roadmap that will allow us to achieve additional savings through further standardization and vendor optimization.

So Slide 12. To summarize, we delivered a 4.6% of rebased OCF growth in the first 9 months of the year and showed sequential improvement in most of our Western European markets in Q3. Virgin's results improved sequentially, and Project Lightning just delivered its strongest quarterly build to date. We continued to make good progress on delivering the savings from our cost efficiencies. And from a balance sheet perspective, we remain in great shape with long-tenured maturities and near-record low borrowing rates, complemented by nearly $5 billion of liquidity. So we're confirming around 5% rebased OCF growth for the full year as well as our adjusted free cash flow target for $1.5 billion.

And with that, operator, I would like to turn over for questions.

(Operator Instructions) And our first question comes from Robert Grindle with Deutsche Bank.

My question is with regard the preparations for the LiLAC spin. Clearly, you're getting very close to that now and have confirmed the timing. What remains in terms of the work to affect the spin at this stage? And are there costs within the corporate part of reporting that will either increase or decrease when the spin takes effect?

Well, thanks, Robert. As we said, we're on track for year-end completion of that transaction. The major step between here and there is a filing again with the SEC our S-1 document, which we'll do in the next couple of weeks. And once that is approved, we'll be shipping out and mailing those documents. So we don't see any real impediments beyond (inaudible) at all between today and getting that transaction complete. And the costs will be -- essentially are going to be shared if you will. So the point of view is that LiLAC now, as a separate public company, will have to assume responsibility for certain of its expenses, whether they be public company expenses or otherwise. But they're not material, and so we have to treat these companies as separate companies. And with an arm's length agreement between them, there will be a lot of things we will try to do together in terms of, as Charlie mentioned, procurement and the global scale benefits that would come from a relationship. So there'll be quite a detailed framework agreement summarized in the S-1 that will explain exactly how the 2 companies will interact and share resources and expertise and knowledge in its arm's length. And that would be quite straightforward.

We'll move now to Jonathan Dann with Royal Bank of Canada.

It's a question for Charlie. I think in the credit docs, you talk about upstreaming cash within the sort of few weeks or months. Could you sort of -- how does that -- it looks to me like it's about $2 billion. How does that balance -- is that -- effectively, is that preparing for the 2018 buyback? And then I have a slightly -- I'll follow-up my U.K. question in a second.

I think -- I know the question you're referring to, we actually had very little cash, as you can see from the bond filings, in any of the opcos. Because it is our company policy that we always sweep cash. What it means is into the holding company. What we do have though, as you know, is significant undrawn revolvers. I think all our revolvers are undrawn as of today in Europe. So we always have the ability, should we choose to do that, to draw the revolvers and move the money upstairs. To be honest, we have no plans or no need to do any of that. Why would be draw debt and pay interest on it if we don't need the cash? But it's generally, the cash we have on the balance sheet represent the excess liquidity we have today. So whilst we're not giving guidance for next year's buybacks, it is a fair statement that we are in a very liquid position, both in terms of cash in the bank but also in undrawn revolvers.

And then, can I ask a U.K. Project Lightning question. I accidentally -- I drove past one of the builds in Wales. It occurred to me that unlike last year, there must be a large backlog of homes that have been [trapped] and are basically ready to go but they're not yet counted in the homes passed. I mean, could you give us some idea of sort of how big the backlog of sort of homes that are weeks away from being connected?

We're not really going to discontinue that kind of guidance, but you're correct when you say that as we build, what you see on the balance sheet for capital expenditures include both work in progress and homes released. And a home doesn't show up as a "home passed" until we've actually released it to marketing. So there's always going to be a backlog of homes, both homes that we have constructed but are requiring some kind of wayleave or permit, or homes that we've identified that we didn't know existed on our existing footprint. And there's always going to be quite a sizable backlog, but we're not going to quantify that on a quarterly basis.

We'll move now to Jeff Wlodarczak with Pivotal Research.

I wanted to get some additional color on the European Electronic Communications Code review. Realistically, when are we going to have an idea whether the EU's going to be taking sort of the original deregulatory stance or a regulatory stance? And then I've got a follow-up.

Well, as I've mentioned in my prepared remarks, Jeff, the expectation is that by midyear this trialogue that's occurring between the council, the commission and the parliament, should be concluded. So it's going to be 6, 7, 8 months. And it's a fluid process. I mean, we believe that industry and the commission, quite frankly, are aligned on the need for clarity and need for a level playing field and the need to encourage investment. And I think it's parliament and the council itself that are being persuaded by, in some instances, local regulators to have greater control. So it's a bit of a tussle and I don't think we'll have significant clarity on it until midyear. But Manuel, do you want to add anything to that?

You said it all, Mike. The council decision is planned for April, May. Parliament negotiations with council are going on as we speak. And there's still various shades of gray. So there's not -- it's not going to be a black and white decision, and we're reasonably confident that reason will prevail.

And on the U.K., do you all expect a material ARPU increase in the fourth quarter? I mean, you've got customers coming off retention. You've got the November price increase. You changed the packaging promotions, and I assume Project Lightning's probably a positive.

Yes. I think it's fair to say that with the price increase kicking in this week for the remainder of the fourth quarter, we will have the benefit of that price increase in our ARPU. So I think that's a fair assumption.

And so it's fair to say the U.K. ARPU issues that sort of freaked the market out were more sort of Virgin operational issues rather than sort of a broader market issue being able to take price?

Well, I think -- and I'll let Tom chime in here, we think the market is still very rational. Price increases are common among our competitors. I think it's fair to say that last year at this time, we were doing things differently. We had -- it was our second price increase. We were managing the call volumes and customer reactions in a different manner. So it's kind of apples and oranges. This time around, it's one increase. It's been managed in a much more sophisticated manner. And so far, the reaction has been more positive. So in some respects, yes, how we go about promoting and managing reaction to the price increase, and what we're offering customers that's going to make them happy and keep them on board. It's very different approach this year that I think is paying off. So a part of that is, as you say, is in our control. Tom, you want to add anything to that?

The only thing I might add, Mike, is the evidence in the results today from BT would be that ARPU was a bright spot for BT. So the possibility continuing to take price in the U.K. continues, and it is a common market practice. So I think the answer is yes, we will see an ARPU improvement, and it is a market factor.

By the way, based on BT's results today, we estimate that on our footprint, we're still getting approximately 100% of all new net adds in the broadband business. So clearly, price has an impact with that.

We'll go now to UBS' Polo Tang.

Just 2 points. The first one is, can you expand on your comments about having strategic opportunities in Switzerland? So was this a reference to mobile or fixed line? And the follow-up question is really just on the U.K. ARPU. So just if you look at the pricing, I think the price rises, on average, have been about 4.5%. So mechanically, can we just expect ARPU to rise by 4.5% after kind of Q4? Or are there offsetting factors to consider?

Yes, Tom, I'll let you address that ARPU point. On Switzerland, Polo, in every market, we have strategic opportunities. Sometimes, they come in, in greater focus. I think Switzerland, certainly, has those opportunities. You mentioned a couple of them. There are some opportunities to extend through fiber our reach in the market, and that -- we are putting some money behind that. And that's going to have a positive impact. And then secondly, it's a market that we see down the road, an opportunity to potentially get involved in the mobile business in a more concrete way. Today, our mobile business is growing around 40% quarter-over-quarter as we add customers and we're being a bit disruptive. But we do believe there's an opportunity there to look at strategic options. And I can't be more specific than that. Tom, do you want to address the ARPU point?

Outlook on the ARPU, I think the simple answer is no, it's not a mechanical percentage up and immediate flow through your ARPU. One of the obvious reasons is it's only partway through the quarter. And in any case, it's effectively a 6-week impact on the quarter. But of course, there is a reaction to the price rise. We never get the full yield. We're managing that, I think, much better this year with Dana Strong and the team with her and a combination of a bit of network performance -- box performance, particularly with the V6, the EOS Liberty Global box they're operating in the U.K. So there's a lot of things helping us maintain that yield. And inevitably, there will be some spin down, and that will flow through ARPU price rise and also, to some degree, through Q1. But net-net, we are definitely getting to a better result than last year. In particular, we are seeing a fundamental improvement in the churn rate compared to what we had at this time. Not evident in the Q -- this time last year. It's not evident in the Q3 numbers. Of course, we track prospective churn very closely, and I think we'll see that flow through into Q4.

We'll go now to Vijay Jayant with Evercore.

A couple, if I could. First, on Switzerland, I think you called out EBITDA pressure into next quarter. So I'm just trying to understand how much of the MySports costs have sort of flowed in. You'd mentioned that there's 26,000 subscribers on that premier tier. What is sort of the breakeven? Is there a reduction in churn? Any benefit of having this inflated cost on the Switzerland operations? And Mike, just more on the structural question. Obviously, in LiLAC, you have some potential breach of covenants in the Puerto Rican bank facility, which could be cured in many different ways. Is there any way that the European operations could be a source of those cures or is this completely siloed already in your mind between the 2 companies?

Yes, I think on the second question regarding LiLAC. LiLAC has the liquidity and the resources to solve whatever covenant issues might arise. We're going to address that in more detail on the LiLAC call. But I think your -- the answer is it should be and most likely -- not should be, and will be is the answer. Should be and will be addressed by LiLAC and the liquidity that they have. In Switzerland, the programming costs, I think, are ranging in the EUR 25 million to EUR 30 million per annum amount. And it's mostly all sports rights related. And we believe the business should be next year, if you look at the gross margin line, not breaking even but it doesn't need a massive number of customers to break even. So it's going to impact Q4, Q1, Q2 as the business starts to scale and as sports subscribers start to be added to the network. But over time, it should be a small positive to the gross margin line, if you just isolate the revenue from sports and the cost of the sports.

Mike, if I could add one quick one more on Project Lightning. Obviously, that's helping your top line growth already. Is there a timeframe you can help us with when that can actually improve EBITDA growth -- OCF growth?

Yes. The Lightning -- and Charlie, you can jump in here. Lightning, we believe to date is generating positive operating cash flow. Of course, there's a lot of costs in starting up that project and reaching customers. But it'll start to scale, we think, in the next 2 to 3 years materially. It is providing cash flow to Virgin's bottom line today. Any color on that, Charlie?

Well, the only thing I would say is that the impact would depend on the pace you go at. So for example, there's a big drag as every time you add a customer, you pay an upfront subscriber acquisition cost, which sometimes is in the form of sale commission. Sometimes, it's in a form of a discount. So at a 10,000 per view, the faster you go, the more near-term EBITDA hits. So for those of you who've been investors with us for in some time, you may remember when the broadband waves came in the early in 2000s, we had a concept of EBITDA precisely because we were adding lots and lots of broadband customers on a relatively small base. We had a loss of upfront marketing costs. So the phasing of when you'll see the benefits for Lightning will depend on pace of build. And I think Mike made the point in his remarks, and we are clearly thinking about the best way to optimize that from a shareholder point of view.

We'll go now to Michael Bishop with Goldman Sachs.

Just 2 questions from me. Firstly, on the direction of build costs in the U.K., I think you'd said previously that you were going to look towards building fewer but bigger new builds. And so I was just wondering if this means that the current build cost that you're disclosing today should stabilize around that level in the future or whether that should come down again because of the size of the builds increasing. And then secondly, all of the cost metrics are very helpful in assessing Liberty GO, but I was just wondering if you could give us some indication of where you are versus the original $1 billion growth savings. Because it feels like you've obviously got a lot of cost-cutting coming through the numbers already.

Yes, I'll handle the second one. Charlie, you may want to prepare a comment on the build costs and what we are or aren't disclosing. In terms of the $1 billion, that, remember, was -- how we -- it wasn't so much savings. Meaning, it wasn't taking 2015 OpEx and bringing it down $1 billion. It was looking out over 3 years and saying that in the normal course, as we grew the revenues, as we grew customers, as we rolled out Project Lightning, we expected cost to go up by a certain amount, and we're not going to let them go up. So the $1 billion in savings is really $1 billion in costs that we have basically deferred or not realized at all, and that's impactful to the margins. I'd say, we're 3/4 of the way there, plus or minus. And this year -- not this year. Going into the budget, obviously, we're looking to finish that out. But more or less, we've hit most of our targets on that billion, at least through the first 2 years. Charlie, you want to talk about build costs in Lightning?

Yes, and I'll obviously echo Mike's point about that I think he said it in his remarks. We still think there's opportunities on the cost side as we continue to simplify processes, drive procurement scale and obviously, use our best practice benchmarking. But depending on the new build, we tried this quarter to give you quite a lot of disclosure because it's actually quite a complicated question. And I won't go through all of it now, but I'd encourage you to read the disclosure we put which I think is in the 10-Q, and it's also in the press release. The 10,000 for what we've done is we've given you our estimated cost per home, which is the cost of extending the access network, which is the bit from the kind of the hub to the home. On top of that, we've also made the point that this has an assumption about homes that we've built in the past but haven't connected because either the customer today doesn't want to be connected or hasn't permitted us to do that last little dig. And to the extent to which those customers convert -- and our experience in Ireland was over a period of time, they did convert, clearly, the build cost would go down from the number we've given you. We've also disclosed that in the process of the Project Lightning project, which is what we expected, as we review our records and the existing state of the network, we've discovered a number of homes that weren't probably recorded before we bought the company, which has expanded our addressable customer base. And we've also discovered that the stranded homes, if you like, people that -- with a very small incremental dig that you could build to, that a number of these homes weren't properly recorded either in our records. Now whether or not we can convert them, we don't know. But at least, we can now market to them on a cost-effective basis. And it's similar to what we do in Germany. So there's a lot of reasons to believe that the number we gave in the disclosure possibly is a very narrow definition and possibly a little higher than what you might expect to be a blended average. In terms of future guidance, I think we say it very clearly. We want to get out of the game of future guidance because it will depend on a mix. It'll depend on how many of these stranded homes we can convert, how many fiber builds we do, whether we decide to go into certain areas or other areas. But we also have made the point that we will continue -- we are mindful of the return on capital these get. We will only do stuff that we think is very accretive to our -- to return on capital. And we also think there's a lot of opportunities along that basis. And in terms of the cost per home, that's only one way of looking at it. And to the extent which is a material deviation, we'll clearly keep you informed. But for the time being, we think what we've given you is a pretty good indication of where we're at.

We'll move now to Jefferies, Ulrich Rathe.

The first one from me would be on Germany. Could you maybe shed a little bit of color on what timescale you expect the situation after the spectrum sort of reallocation to normalize there? And so in that context, also talk about the specific benefits you expect from gaining more capacity on the network. How are you going to use it? And what timescale are the benefits going to come through? So that would be my first question. The second one is on the U.K., on the set-top box strategy. You mentioned the V6 box several times in the presentation as a supporter factor. I wanted to ask a bit about the strategy there. We have seen announcement from TiVo that you renewed a platform and IP deal there recently. But I also do remember that some time ago, you talked about the TiVo platform as sort of looking a bit tired and potentially, pointing towards a rollout of more something like Horizon in the U.K. I was just wondering how do we sort of put all this together vis-à-vis the set-top box strategy in particular in the U.K.?

Okay, Balan, I'll let you and Tom prepare for the V6 box question, in particular, as it relates to TiVo. Lutz, I believe you're on the line as well. Do you want to address the German spectrum reallocation issue?

Yes, Mike.

And how you -- how that's impacted your Q3 in terms of truck rolls and where you intend to go?

Yes. So I think the biggest benefit now from the analog switch off is that we are now able to roll out DOCSIS 3.1. And the first city which will be completely enabled for a 1-gigabit download speed is Bochum. So first of April, very tangible benefit out of the analog shutoff. Also, we used the now freed-up capacity to offer more HD channels, so we have now added 9 HD channels on top. The analog shutoff and the lineup change have been now executed completely. We haven't seen any increase in video churn out of that. So it was -- overall, it was managed in a very well way.

Balan or Tom, you want to...

Tom here. I think we've mentioned several times, we are very happy how the V6, which is the EOS box is deploying in the U.K., we have gone well past 800,000 customers on that box already. We've got an ambitious program for continuing that deployment through next year, and see churn significantly better through customer experience. So we think we are well-placed with the product we have at the moment. We're getting a synergy benefit across the group while using the EOS box. And so we'll continue with that customer-focused strategy there and make other decisions going forward as we see necessary.

On the TiVo contract, what we had announced, really 2 components to that. One, where we've restructured how we pay TiVo for the maintenance of the existing software on existing boxes in the U.K. And the second part was an IPR deal. We had an existing IPR deal with Rovi that became TiVo. And we just extended the patent portfolio onto that and extended it on a pan-European and Latin America basis. So it was a good win-win deal for both us and Rovi, or the new TiVo, on that. And that V6 box that we're deploying, sorry, it's the EOS box. It's a 4K box that we plan on deploying on a pan-European basis in every country as well. It's a great box.

Right. That's the point I was going to make. You should appreciate that we are heading towards a common video platform everywhere in Europe, which has massive benefits from the point of view of product innovation, time-to-market, procurement benefits and cost. And the U.K. is doing great, and we'll push even more of those out next year. But we intend, at some point, to have the entire European digital footprint operating on a common platform and perhaps a common UI and user experience. And that's where we need to be. I think that should be clear to folks.

We'll go to Saroop Purewal with Redburn.

I just have a more general question on convergence. So you've had a couple of quarters now, 3 quarters, where you've been managing the VodafoneZiggo entity. And I just wanted -- I just wondered if you could share with us what you've learned about convergence and how that might apply and benefit you in other markets through an MNO purchase.

Sure, I'll handle a few of those. I mean, the first thing we've learned is the synergies are real, that you can, in fact, achieve what appear at the outset perhaps ambitious synergy targets when you put these 2 networks and 2 operations together. So in both instances, if you look at Telenet with the acquisition of BASE or the VodafoneZiggo JV, I think we have gone in with one set of expectations around synergies, and the more you dig in, they're probably even bigger than we thought. So synergies are real. The second big takeaway is when you can converge customers, when you can offer them a mobile product or a fixed product and you can give them the benefits of a quad-play bundle, NPS goes up and churn goes down. And in this competitive B2C environment we're in, those are 2 huge drivers of growth and value creation. So that is also quite real. There's a lot of work to do around the product, and I think Telenet's a little bit farther along than the VodafoneZiggo JV is, although they'll be there in terms of how you continue to evolve and innovate around the product. Is it simply just a EUR 5 discount or double data, if you take all 4, things of that nature? Or are you actually providing them with a sophisticated product around broadband, content? And I think we believe that in the end, you've got to get to that place that WIGO is today in Belgium. So I think it's been -- I think the fourth -- probably the fourth learning is that the mobile-only business, when it's not converged, can be a challenging business. There are meaningful headwinds in the mobile-only space, as you would all know. Some are regulatory, some are competitive. There's a lot -- it's a highly transactional and promotional business line. And that it really needs, and I would think, thrives in the context of a fixed operation. Because you've got, not just the benefits of synergies but it's much easier to sell a mobile product to a fixed customer than it is to sell a fixed product to a mobile customer. So, so far so good. We've learned a ton. That relationship in Holland, in particular, has been super strong. The management team has blended very well, and I think both parties have learned from each other.

We'll move now to Simon Weeden with Citi.

I wondered if you could elaborate a bit about the backlog in Germany and what you see happening to RGUs or RGU adds as you free up engineering resource and start going through that backlog. What sort of size are we talking about between now and maybe the middle of next year, or something like that? And also, I wondered if you're seeing, as you look across your TV customer base, if you're seeing customers trading down? And if you're seeing customers retaining broadband or switching to OTT players? If any -- if that's happening in any one country more than another, perhaps?

Yes. I'll handle the second question. Lutz, maybe you can prepare to -- add to what you already said around Germany and the backlog there. As I made mention in my prepared remarks, we feel like we are doing pretty well and not just retaining video customers, but in many markets like the U.K., growing our video customer base. And that has a lot to do with the ecosystem we're creating around our video products, in particular, the user experience, the ability to use -- to basically consume your content that you're paying us for on any device, adding things like Netflix onto the box. I mean, those things are allowing our customers to stick around longer, I think report higher NPS, and consume more video. And that's all good stuff. No question about it that Netflix and Amazon and other OTT applications are in Europe and are gaining meaningful share. And Netflix in particular is a huge source of traffic on our networks. But we know that we put them into our ecosystem and they become an app within our environment, they actually have greater viewership and, in our opinion, all customers are happier. So it's not the U.S. We don't have a satellite business like the U.S. is showing that's sort of hemorrhaging or experiencing challenges in the face of inexpensive over-the-top services or skinny bundles. We don't have that issue in Europe. It's a market-by-market thing. But for the most part, if you look at our trends, we went from losing hundreds of thousands of video subs a year to maybe tens of thousands. And that's a pretty good sign that we're investing in the right things in our video platform. And also I think, an indication that Europe is experiencing a different type of competitive environment around OTT. Doesn't mean that Netflix isn't popular. Of course, it is. But remember, when you unbundle the bundle, when you disaggregate the pricing that resides within our bundle, we're charging a relatively low price for video, in the teens, in some cases, or lower. So it's a pretty good deal in Europe. And it's -- when you add in 100- to 200-megabit broadband speeds and you add in a mobile product and voice services, the video product becomes really inexpensive. And by the way, you're not sacrificing anything. You get all the content you want. We'll throw Netflix in, and you can watch it on any device. And so a pretty good approach, we think. We have to be better and smarter about the next generation of consumers, and we're launching products in many markets that are focused on alternative ways of reaching younger consumers, and we can talk about that on the next call. But I think, so far, we're feeling pretty good about it. Lutz, anything to add on Germany?

Yes. So the broadband order intake is stable if you compare it to the previous quarter. So we have still good demand. The backlog has increased a bit on top to last quarter, so it's now overall 15,000 customers. So that means for the customer, a longer time until the product is deployed. However, we manage the expectation of the customers that way that they are not churning in the implementation process. It will take us until Q1 next year until the entire backlog is gone, yes. But it is under control. The good -- for me, the good thing is demand is there, customers are treated well, expectation is managed in the right way and customers wait until they get our product.

Well it's the bottom of the hour, and we've got to slide over to the Latin America call. So we certainly appreciate everybody joining us this morning and this afternoon, wherever you may be. Feel free to stay with us, if you're interested in what we're doing in the Latin American region and the spin that's coming up. We certainly appreciate your support. We're excited about the quarter we just had. We feel good about the fourth quarter. And as we work on our budgets for next year, I think a lot of the things that we've been talking about will come to fruition. So we'll speak to you soon, and take care.

Ladies and gentlemen, this concludes Liberty Global's Third Quarter 2017 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. The Third Quarter 2017 Investor Call for Liberty Global's LiLAC Group will begin shortly.

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Liberty Global's Third Quarter 2017 Investor Call for its LiLAC's 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 expressed written consent of Liberty Global is strictly prohibited. (Operator Instructions) Today's 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 call is being recorded on this date, November 2, 2017.

Page 2 of the slides details the company's Safe Harbor statement regarding forward-looking statements.

Today's presentation may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including the company's expectations with respect to its outlook and future growth prospects and other information and statements that are not historical fact.

These forward-looking statements involve certain risks and uncertainties that could cause actual results to differ maturity from those expressed or implied by the 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-Q and 10-K as amended.

Liberty Global disclaims any obligation to update any of these forward-looking statements to reflect any change in its expectations or in the conditions on which any such statement is based. Also note that nothing stated on today's call constitutes an offer of any securities for sale.

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

Greetings, operator. And welcome, everybody to part 2 of our results call today, where we're going to focus on Liberty Latin America or LiLAC for the next hour. To help dig into the operations and the numbers, I'm joined by Betzalel Kenigsztein, who's COO for the region; John Reid, who runs Cable & Wireless, the largest operating unit; and Chris Noyes, Chief Financial Officer. And they're going to make some brief prepared remarks as well. And I'm thrilled to also have with us today Balan Nair, who was just announced as incoming President and CEO of our Latin American business after the split off occurs. And while he's not technically on the job yet, he is going to say a few words before we go into Q&A and then, of course, be available to address questions as needed.

Now on Slide 41, one of the small benefits of becoming an Executive Chairman of this group going forward is that you won't have to listen to me drone on for half the call, so today, I'm just going to hit the highlights and then hand it over to the team. And I'm going to start with a quick update on the hurricanes that recently swept through the Caribbean and Betzalel, John and Chris will get into more details but 5 of our markets were hit pretty badly, and Puerto Rico is the largest. And together, these islands represent about 15% of our revenue in the Latin American group. And I think, first and foremost, we are pleased that all of our colleagues survived the storms safely although many of them have seen their lives turned upside down, as you can imagine. It's going to take time and capital to get our fixed and mobile businesses in these markets back on track. And certainly, while we're committed to restoring service, we're also focused on helping to rebuild the communities where our customers live and work as are many others. Lots of progress has been made in assessing the damage, getting networks operational and customers back online but we have a long way to go, especially in Puerto Rico. I visited that island a couple of weeks ago. The team is 100% engaged and focused. But the loss of power is the key impediment to getting our systems and services back up and running, and Betzalel will get into more detail on Puerto Rico and Chris will address the financial indications as we currently see them.

But needless to say, while we are super confident about the long-term opportunity here, we have to reduce our 2017 guidance as a result of the hurricanes, and Chris will focus on that.

In terms of our Q3 performance overall, if you net out the OCF impact of the hurricanes of roughly $24 million in Q3, the operations were actually tracking to our full year guidance and throughout the region, we did 40,000 net RGU adds. And again, Chris will take you through some of that in more detail.

Switching to Cable & Wireless. It was good to see another quarter of stability on the top line. And despite the hurricane challenges, revenue grew across the entire region. Other than the Bahamas, just the one market there, which is still managing the effects of the second mobile entrant. And with the changes we've made and the opportunity ahead, I'm excited about what Cable & Wireless can still achieve going forward.

The fourth point is we remain committed to the split off at the end of the year and continue to work with the SEC to finalize the documents, which is a big step in that direction, of course, with the announcement of Balan as the CEO coming in when the transaction closes. And as many of you should know or do know, for the last 10 years Balan has helped manage our European product and technology platform, overseeing 7,500 employees and a $5 billion operating and capital budget. He's incredibly talented. He's a terrific operator and leader and he will have an immediate and tangible impact on this business. He's also going to make sure that Liberty Latin America continues to benefit from the framework agreements that we're going to put in place with Liberty Global and to be sure, especially around products and technology procurement that we're getting the scale opportunities we all want to achieve here. We also announced that the new board which I'll chair, will consist of John Malone as well, plus 2 Liberty Global board members, Paul Gould and Miranda Curtis along with Charlie Bracken, our CFO and then Balan, of course, and three additional Directors who will provide, I think, important regional perspective, Eric Zinterhofer, who is the Founder of Searchlight Capital. He's currently the lead board Director at Charter and a former Chairman of Charter, also a shareholder of our Puerto Rican business; Alfonso de Angoitia, who is co-CEO of Televisa, you all know him well. Brendan Paddick, who is Founder and former CEO of Columbus Communications and was a Cable & Wireless board member before we bought the business. It's a great team and I can speak for all of them when I say we're excited to complete this split-off and begin this new phase of growth and strategic opportunity for Liberty Latin America. And with that, Betzalel, over to you.

Thank you, Mike. I will now provide an update on our business in Puerto Rico and Chile. Starting with Puerto Rico on Slide 5, having been there with the team on a number of occasions when the hurricane hit, and as Mike mentioned, the island is going from an extremely difficult time at the moment. As the number of our customers connected to the network is still relatively low, we thought it would be more helpful to update you on what we're doing to get our operations get back up to speed.

Firstly, we've kicked off the recovery process. Thanks to the commitment of our colleagues, we now have a good view of the damage that has been sustained and is working proactively to get the network repaired so that when power returns, we are ready to serve our customers. We have mentioned power previously as a key factor of driving whether we can deliver our services and we are working hand in hand with PREPA, the local proper authority, to ensure that we coordinate our rollout with theirs. We expect that the more densely populated metropolitan areas will be restored as a priority. And this has also corresponded to where most of our customers are. As an example, approximately 40% of our revenues were generated in the greater San Juan area. Clearly, this is a key focus for us and we have dedicated as many people as possible to the restoration efforts.

Moving to the network in more detail. Last week, we completed the restoration of our fiber optic backbone rings. This is the foundation for providing our services, so it was a significant milestone. All of our main and remote hubs are also operational. This allows us to deliver all of our services and products as power returns across the island. And we are ramping up our workforce in anticipation of power and demand for our services rising. The current numbers of all crews are set to increase from 60 today to 100 by mid-November. As well as focusing on restoring connectivity as soon as possible, we're also increasing the resilience of the network for future events.

Finally, we are being as proactive as we can be to ensure that our residential and business customers stay connected during this difficult time. A new product that we're excited about is a video streaming service. When launched in a few days, it will enable customers to access certain video content while they are on the move, providing the flexibility that customers are demanding today. Mobile services also tend to recover more quickly at times such as this, something we have learned at Cable & Wireless. So our customers will have another way to access our video services. We've also been provided WiFi hotspots since the hurricane hit and are now up to 18 locations in total across Puerto Rico. This has been very popular for consumers, whether they are our existing customers or not.

We have also launched a mobile WiFi tour car event, converting satellite connectivity to free WiFi access for remote communities. The 3 mobile WiFi vehicles are leading a caravan of locally provided goodwill and services such as FEMA, banking, insurance, food, water, medical supplies and doctors to 29 remote towns that we do not currently have Internet connectivity.

Finally, for our B2B and solar customers, we have been helping them advertise that they are still open through our Go Back to Business program. Our largest B2B customers have been a focus as we have been restoring connectivity, and we are close to 30% of our customers online.

So it's still relatively early in the recovery process, but we are making good progress and are committed to Liberty Puerto Rico for the long haul. The situation is very fluid, but based on what we know today, we suspect that it will be a long road to full recovery of the network and certainly well into 2018 at the earliest.

Moving to Slide 6 and VTR, our Chilean business. Following a strong start to the year, Q3 saw continued excellent commercial and operational execution as we added 20,000 customers, which was an increase of more than 40% compared to the prior year.

RGU were 19,000 higher, primarily driven by broadband addition, which was modestly higher year-over-year at 21,000 in Q3. This performance is a clear reflection of our leading speed and service quality compared to other operators. Q3 saw a significant ramping of our WiFi Connect Box rollout as we increased our deployment unit count by 100,000 or nearly 40%, with many more of our customers now benefiting from improved in-home WiFi coverage, driving greater customer satisfaction.

Looking at video net adds. Our innovative best-in-class VOD product continues to be received very well by customers, and penetration has doubled over the past year to 30% in Q3.

Switching to mobile. We broke through the 200,000 subscriber mark in Q3 and continue to grow our base at a healthy rate. And these are nearly all postpaid customers. Of our 206,000 mobile customers, 97% are postpaid and with less than 10% of our fixed customer base taking a mobile product from us today, we think there is a long runway for us to keep building this business, albeit in a highly competitive market.

We've also continued to make progress in solar on the foundations of the network strength, product and service quality, which has driven our consumer and solar segment. During the quarter, we added over 6,000 solar subscribers and now have 52,000 in total, with double-digit revenue growth sequentially.

Finally, in terms of our Chilean footprint. We added or upgraded more than 50,000 homes in Q3, taking the year-to-date total to over 150,000. To wrap up, VTR had another strong quarter, and I'll now hand over to John who will run through Cable & Wireless performance.

Thank you, Betzalel, and hello, everyone. I'm pleased to tell you that Cable & Wireless continue to make good progress in Q3, both in terms of our KPIs and our financial performance. Of course, as Mike just discussed, there was some impact in the quarter from Hurricanes Irma and Maria, which obviously put some pressure both on revenue and OCF. However, despite Mother Nature, we were able to increase RGUs, revenue and OCF year-over-year.

As I've said, before, we're on a journey to transform Cable & Wireless, starting with ensuring we have the right resources and cost base in place to deliver a winning customer experience and also ensuring that we have the best value propositions across our markets. While there's still a way to go, it was encouraging that we generated growth of 20,000 new RGUs in the quarter. Our technology team did a great job in the quarter of ramping up our upgrade and new build program with an additional 85,000 homes passed, taking our year-to-date total to 165,000 upgraded households.

To share some highlights, I'll start with Panama, which is our largest market, contributing just over 1/4 of CWC's revenue. Here we've seen the positive impact of the new master bundles with 5,000 RGU additions in the quarter. In mobile, we did see a nominal decline with 22,000 fewer subscribers, but our mobile gross margin held steady as the base become more profitable, consistent with our strategy.

In Jamaica, our investment has focused on upgrading much of our copper network to BDSL, and we saw the benefits of this in Q3 as we grew across all product lines with 18,000 new additions in total.

We also refined our go-to-market strategy with the launch of our new Ultra bundle during Q3, helping drive solid revenue growth across triple play services. Part of the reason for Ultra's success across the wider Caribbean is that we've included all of our exclusive premier league games in the bundle to drive upsell and ARPU uplift. Leveraging must-watch exclusive sports content remains very much part of our core strategy.

In mobile, we've seen growth in data usage and our price increases have landed well, driving our Jamaican mobile revenue up close to 20% on a rebased basis year-over-year.

Our third-largest business is the Bahamas. And the story here has been how we are continuing to adapt to mobile competition following the entry of the new competitor late last year. We're continuing to see aggressive offers from the competition, particularly in terms of handsets, and this led to mobile subscribers falling 19,000 during the quarter.

Partially offsetting some of this headwind was good revenue growth across all product lines on the fixed line services as we spin off our unrivaled Fiber-to-the-Home offering. In an increasingly competitive market, it's obviously critical to have the best team in place. We continue to improve our management strength in the Bahamas with 4 new executives recently joining us from our competitor, Cable Bahamas.

Wrapping up, we also saw growth in our networks in the managed services businesses. In networks, we have an unwatched subsea footprint as evidenced by C&W being recognized for the fifth straight year as the best wholesale carrier in our region. In managed services, we saw good growth in a number of markets. Revenue was up over 20% in Jamaica, 5% across the broader Caribbean footprint and 9% in the Bahamas.

This segment brings it all together for us. Our strength in broadband, mobile, international connectivity and managed solutions are unrivaled and the growth opportunity remains significant across the 25 markets where we offer B2B services.

While we saw good performance in the quarter, the hurricanes, of course, were particularly damaging for the region and we're working hard to help our communities rebuild and restore services as quickly as possible, for example, through the $10 credits we gave to prepaid customers ahead of and after the hurricanes and our recently established Cable & Wireless Charitable Foundation. Rebuilding will take time and is expected to weigh on results in the impacted markets. But with this comes the opportunity to upgrade and drive efficiencies in plant and technology. Mobile has been quicker to restore, with most of our customers back on the network. Overall, we're proud of how our customers, our employees and our partners came together to help the region, which really showcased the best of Cable & Wireless and brought to life our mission of connecting communities and transforming lives.

So in summary, it's been another good quarter despite the negative impact of the hurricanes as we make further progress on our journey to transform C&W.

Looking further ahead, we're all convinced there is a significant opportunity for growth across our markets as we deliver a leading suite of products to an unparalleled end-to-end customer experience.

And with that, I'll pass you over to Chris, who will take you through the LiLAC financials.

Thank you, John. I'll begin on Slide 9 and provide a high-level summary of our Q3 financial results. Important to note that absent the hurricanes, and as Mike indicated, we showed continued progress in our financial performance during the quarter. And in terms of our reported results, we have not yet recognized any potential insurance proceeds related to the hurricane losses. We delivered $908 million in revenue and $359 million in OCF, a flat year-over-year rebased result. Continuing the theme throughout this presentation, we estimate that the hurricanes adversely impacted our performance by over $20 million in each of revenue and OCF. P&E additions totaled $193 million in the quarter, representing 21% of revenue as compared to $160 million in the prior-year period or 18% of revenue.

The year-over-year increase was driven predominantly by C&W, due in part to our construction activity this past quarter in markets like Panama and Jamaica. Free cash flow, as illustrated in the bottom left corner of the slide, was a negative $110 million. The principal driver of this, as we highlighted on the Q2 call, was a $130 million pension contribution in July at C&W. Reported leverage, as seen in the bottom right chart, sits at 4.5x gross and 4.1x net. During the quarter, we completed the refinancing of the Columbus debt at C&W with a combination of bank and high-yield debt, reducing our overall borrowing costs and lengthening maturity.

On Slide 10, I'll take you through the third quarter of performance for each of our operations. Starting with the LCPR, we generated $89 million of revenue and $40 million of OCF, reflecting a year-over-year decline of approximately $16 million for each or a 16% rebased decline for revenue and a 29% decline for OCF. Specifically, the storms accounted for a roughly $19 million impact to revenue and a $15 million impact to OCF, largely stemming from customer credits associated with service interruptions.

Moving to VTR in Chile, our largest single market, once again posted strong quarterly results. Revenue was underpinned by solid organic growth across fixed, B2B and mobile, resulting in a 6% rebased top line increase over Q3 2016. Operating leverage in both direct costs and SG&A helped VTR deliver 9% rebased OCF growth, resulting in an OCF margin topping 40% for the quarter.

Turning to Cable & Wireless. C&W reported $579 million of revenue in Q3, up 1% on a rebased basis. From a product perspective, our wholesale, broadband and managed services delivered good growth, while both mobile and fixed telephony contracted modestly year-over-year.

C&W generated $224 million of OCF or 4% rebased growth during Q3. This was a particularly encouraging performance given a negative hurricane impact of around $9 million in the quarter. Our underlying performance was supported by a substantial decline in SG&A costs, reflecting, in part, reductions in marketing and consultancy costs.

Moving to Slide 11. We thought it would be helpful for investors to quantify the expected revenue and OCF impact for the fourth quarter, resulting from the hurricanes and our initial expectation on the spend required to restore our markets to 100% capability. These amounts represent our best estimates to date, however, the situation in markets remains fluid. Ultimately, many variables will impact our rebuilding efforts and financial results, including the timing of power restoration.

Starting with Puerto Rico. Financially, given the limited extent of our customers able to receive service today and our outlook for restoration of the power grid, we estimate that we'll experience a reduction in revenue ranging between $80 million to $100 million and a reduction in OCF between $60 million to $80 million in Q4 2017.

In terms of OCF specifically, this would result in negative OCF for the quarter. We expect these negative impacts will lessen as our network is restored and customers are reconnected. However, we expect the adverse impacts of the hurricanes will continue through 2018 and potentially beyond. In terms of overall rebuild, we currently estimate that it will require more than $100 million to fully restore LCPR's infrastructure.

With respect to C&W, we expect a much more limited overall impact and we currently estimate that the storms will adversely affect C&W's Q4 revenue and OCF by between $15 million and $25 million.

In terms of restoration of the networks across the impacted markets, preliminary estimates indicate amounts in excess of $50 million for a full rebuild. In terms of insurance, we have an integrated group property and business interruption insurance policy as part of our natural catastrophe risk management program, covering us up to a limit of $75 million per occurrence, subject to approximately $15 million per occurrence of self-insurance, so $60 million maximum per occurrence in proceeds to the group. We expect there to be at least 2 occurrences under our policy across the group.

Our corporate and operating teams are working with our insurance advisors to efficiently pull together supporting material to document the extent of the damages and to be in a position to work through the claims process with our lead multinational insurance carriers. Of course, it'll take time to move through the process and we will have more information to share on our year-end earnings call in February.

Regardless, we believe, at a minimum, this process will take well into 2018, and we'll be looking for interim payments starting in the first half next year.

Moving to the upper right of the slide, we present a guidance update for the group. Including the impact of hurricanes, we now expect to deliver OCF of approximately $1.35 billion in 2017, reflecting an aggregate estimated hurricane impact of between $100 million and $130 million. Adjusted free cash flow is now expected to be negative principally due to the reduction of OCF from the hurricanes, and we continue to expect our capital intensity in the range of 19% to 21% of revenue at the consolidated level.

Finally, bottom right on the slide summarizes our liquidity position. At the end of Q3, we had $1.5 billion of liquidity, including $0.5 billion of cash and roughly $1 billion under our collective credit lines.

To wrap it up on Slide 12. First, the hurricanes had a major impact on Puerto Rico, and to a much lesser extent, Cable & Wireless. The restoration work is in full swing. The majority of our mobile markets are up and running again, and we are now fully focused on repairing our fixed infrastructure.

VTR delivered another set of strong operational and financial results while C&W showed encouraging underlying performance, with improvements on a number of fronts. Looking ahead, Q4 is going to be especially difficult for our businesses in Puerto Rico and several of the smaller islands in C&W. However, we remain committed to our businesses in these markets and believe in their potential. Certainly, the hurricanes have created a speed bump in our immediate plans, but they have not altered our vision for this region.

And with that, I'll hand the call back to Mike.

Thanks, Chris. That's certainly well said, your last remark there. And before we jump to Q&A, I would just like to officially welcome Balan to the Liberty Latin American Company. He escaped the obligation to speak to any slide, but I'll just point out that he has been involved in these operations all along as our Global Chief Technology Officer, providing product and technology guidance and wisdom and helping these local operations throughout on their T&I plans. As I mentioned, he's a terrific executive. He's going to provide just the right kind of leadership and focus we need right now. So I'd ask Balan to make a couple of remarks and then we'll get your questions. Balan?

Thank you, Mike, that's quite kind. I'd like to take a moment to say a few words before we move into questions. The announcement of my appointment as CEO earlier this week as well as a new leadership team for Liberty's Latin American and Caribbean operation is an exciting development in this business. I'm really looking forward to working closely with team members across the group to grow the business organically or through M&A to create value, and deliver cutting-edge fixed mobile and converged products to our customers and build a culture of which we can all be proud. I've got a number of ideas as to how we can build a stronger business and I'll be particularly focused on growing our revenue in these underpenetrated and underserved markets.

With our fixed and mobile platforms and innovation engine, we have the opportunity to capitalize on trends that favor a seamless access to mobile data, to more data and benefit from the expansion of our services as well as the economic growth that'll take place in these markets in which we operate.

As Mike mentioned, I think it's important to note that while after the split off, we will be a separate company, we will still benefit from Liberty Global's scale, its ability to negotiate attractive pricing with vendors and its investments in technologies such as next-gen set-top boxes, fast broadband connectivity, IoT, mobile and new forms of customer service. The halo effect of Liberty's brand is incredibly powerful and I've seen it firsthand in my current role, and one we will all use to our collective benefit. And lastly, I must say I am so happy to work with Mike Fries on this venture. He is one of the smartest CEOs in our industry. I will definitely leverage his experience and insight as we build an amazing company here. With that, I'll pass it to the operator for your questions.

(Operator Instructions) Our first question comes from David Joyce with Evercore.

You've made a lot of progress with new home builds. I was hoping you could talk about comparing and contrasting the growth addition activity in those build-out areas versus your legacy operations. Since you've been building out in basically all your operating areas, if you could touch on all of those, that would be great.

Yes. Let's see, you want to start, Betzalel, in Chile?

Yes, thank you, Mike. In Chile, in the last quarter, we had another 50,000 homes and they are delivering great results. We are making sure that we are attracting the right segments in the market where we have high penetration. And it's a massive driver of our growth in the last quarters and like we discussed before, also for Europe, it's a base to keep on growing in the coming quarters as well. So technology wise, we're extending our network with the same as HFC did with fiber and it's paying off, delivering the best experience in the market today.

John, you want to talk about the islands where we're building?

Yes. We're starting to see some -- certainly some traction. And I'll start with Jamaica where we are upgrading our ADSL footprint. That's not overlapped by our competitors and so we're starting to see some traction there as evidenced by the RGU growth in the quarter. A couple of projects we're a little bit late in getting the traction we want in terms of the build, but we're back on track now and we'll hit our objectives for the rest of the year. So we'll start to see the revenue and OCF coming through there particularly in Jamaica over the final quarter and into next year. In Panama, as I indicated, the master build and upgrade plan is doing well and on schedule. Our attention as well focuses much, I guess, on the ADSL network that either needs migration or upgrade to VDSL. And so while we are expanding our footprint and we're also upgrading our HFC to 2 way, which is near completion, we're also focusing in the next couple of quarters on the VDSL upgrade from ADSL or certainly, migrating to the HFC plant because we still have a considerable number of customers on the old copper network that we need to upgrade and provide a new suite of services to. So overall, I think 85,000 new homes upgraded in the quarter, on track for the year, as I indicated and starting -- we should start to see actually even more positive outcome, a net positive outcome from those upgrades in the subsequent quarters.

Yes. I mean, not dissimilar for Europe, not dissimilar from Europe data, the opportunity in the region, particularly on the fixed side, I mean the mobile network always need to be advanced and upgraded and that's happening. But in the Cable & Wireless footprint, in particular, fixed is a relatively small part of the business. So wherever possible, the group is focused on identifying and rolling out upgrading fixed networks to make that quad-play or that converged opportunity real and live in those core markets. That's a great -- certainly one of the areas that Balan's going to be super helpful in having overseen the newbuild program in Europe, which is quite sizable. I think that's just one of the many areas where he's going to have immediate value.

We'll go now to Jose Quintana with Scotiabank.

Yes. This is actually Andres Coello. I just want to confirm if I heard correctly that 30% of your customers in Puerto Rico are already online. And I am asking this question because I am wondering if the percentage of your customers online is in line with the number of electricity restoration, say, the percentage of homes in Puerto Rico that already have access to electricity, which I understand, is also around 30%? And also, I would like to know your view on the government's expectation to have around, over 90% of homes reconnected to electricity by mid-December. So I'm just wondering how you are performing against all versus the electricity restoration.

I don't think we have -- do we have Naji on the phone, Betzalel?

No, but I can answer the question, Mike, if I...

Yes, sure. Yes, go ahead, go ahead.

I think that there was maybe a misunderstanding. The 30% that was mentioned before is regarding our main B2B customers. Since most of those customers are connected with fiber, we were able to accelerate the reconnect of those B2B customers and we are close to 30% of our main B2B customers reconnected. On the residential part, we have to be careful how we read the reports of PREPA because they were reporting the consumption, not necessarily the number of homes connected. So if we look -- and it was not very accurately reported. So if we go back to the number of homes connected or customers connected, I would say, on the residential segment, we are less than 10%. And that's quite aligned with the number of homes that have electricity today. On the pace of restoring power, I haven't seen a 90%, I think that it's well -- it's not realistic that 90% of the homes will have power by the end of the year. But I would leave that to PREPA to report on that. We don't see that pace at the moment. We are seeing only this week the termination of the main power line reconnected out of 3. So we expect in the coming days to see more and more homes getting power in the San Juan area. But yes, we would be happy to see 90% by the end of the year -- I would be surprised. But to me, that's up to PREPA.

Yes, I agree that's not -- it's not -- we're not in control of that, but I know Naji and the local team are heavily engaged and involved in the day-to-day. Having flown over the island recently, this is Mike, the issue is the transmission lines. The distribution network, a lot of it is up, down streets, down -- not all of it, of course. But the distribution -- the transmission network in the center of the island, that's a challenge. So if that's -- if they can get that up, that would make a big difference in the local markets.

We'll go now to Julio Arciniegas with Royal Bank of Canada.

This is related, again, with the network. Can you give us some color of what is required to get the network running? Let's say, because for example, they were mentioning that more or less 10% of the subscribers, they are already up and running which is actually quite similar to the percentage of basically households with power. So could we assume that once power has been turned on, basically, the company will be able to start delivering the service? And when would you expect to start having revenues to the same level as you used to have in Puerto Rico? And the second question is regarding the debt covenants. How -- does this situation in Puerto Rico have any impact on the debt covenants in Puerto Rico?

Chris, why don't you start with the debt covenant issue. And then Balan and Betzalel can address the network. Go ahead.

Yes, I mean on the debt covenants, on the LCPR facility, we will be compliant when we file the Q3 results. And we'll continue to monitor the liquidity in the business as we go along. We had, from a liquidity perspective, and I think that's probably a question folks will have, we had roughly $46 million worth of cash in the business at the end of Q3. We made the October interest payments. And so you have sort of a net roughly $30 million. We drew the $40 million revolver subsequent to quarter end, so you have roughly $70 million of cash starting the -- if you look through October moving forward. So we'll continue to monitor liquidity as we go and with the build, future sources of liquidity could include certainly insurance proceeds and support from the shareholders of the business.

If I might follow-up...

Yes, you want your first question answered? Or you want to follow up on the debt covenants?

Well, actually, yes. You mentioned about the insurance proceeds, when should we see these proceeds coming in?

We can't give you that timeframe today. I mean, Chris and the team and a whole series of outside consultants and lawyers are working very, very hard on getting that, but we don't have today an estimate of when that would be. That takes time. I mean, anyone who's been involved in this region, of course, we went through a similar experience in the Bahamas last year, it takes time to get that process and you want to do it right in terms of defining the events and demonstrating business interruption and things of that nature. When would you be saying anything publicly, Chris? Sometime next year, I imagine.

Yes, I mean, I would say, I mean we're certainly -- we're working hard on it to the extent -- interim payments could start flowing in the first half of next year. But that -- obviously, lots of variables that could impact that. But it's going to take quite a while to resolve the claim, we would expect, in its entirety.

Betzalel, you want to address the network question and its reliance on the power for (inaudible)?

Yes. I would say, and I mentioned that before, there are 2 key elements when you look at the network. One is the main backbone, fiber backbone that we finished restoring. The good news is that we have our main backbone restored, the main hubs connected and ready to go. The moment that the power -- we are working very closely with PREPA and we are on top of their -- and they share with us exactly their progress and their plans. So we are -- our crews are working just behind PREPA. And the moment that we have power connected, either immediately or a matter of days, our customers get the service. So we are just chasing and going step by step behind PREPA.

Partially because we also rely on their poles for our infrastructure. It's not just power, it's also infrastructure.

We'll go now to Citi's Jason Bazinet.

Sorry to keep going back to Puerto Rico. Is it fair to say that in your $80 million to $100 million revenue impact in Puerto Rico, you're just assuming that service sort of if not restored at all in the fourth quarter and then we just have to decide how much this dribbles into next year? And then my second question is, I think -- maybe I have my numbers wrong, but your old full-year OCF guide of $1.4 billion going to $1.350 billion if I back out the 3Q, 4Q hurricane impact, there's still sort of a $20 million to $50 million shortfall roughly. Can you just elaborate on what organically sort of changed other than the hurricane? Was it the Bahamas or did something else change relative to your prior outlook?

Chris -- I think your first point is accurate, though. Chris, you want to address that?

Yes. I mean, on the first point, it's still relatively low amount of customers through the quarter which will generate a fairly low level of revenue. As Betzalel mentioned, we have less than 10% residential customers up today. In terms of your second question, Jason, relative to the guidance. If we look at the overall OCF impact on Q3 plus the impact for Q4, that equates to $100 million to $130 million. Take that off of the $1.5 million and we also factored in some variability in FX. And that's how you get to the $1.35 billion.

Okay, so it's only FX, nothing really fundamentally. Okay.

Buckingham's Matthew Harrigan has our next question.

I actually have 2 questions relating to Mike's comments at SCTE. Firstly you said you were really all in on the wireless business, and you even said to Tom Rutledge you will be 2 in 3 years, implying even more than at MVNO. Is all that really conditioned on what you're already seeing and the benefits from the quad-play? Or if you look longer term, you actually did a study, [RFCD Loyola] and talked about EUR 250 billion benefits over in Europe at that GIGAWorld presentation. Did some of that apply to Latin America? And certainly, it's too fanciful to put it even in the 5-year analyst forecast. I mean when you really think about the business on a 10-year timeline, does that layer in? And then the second question, you said that it was pretty difficult to recruit talent on the engineering side when you're competing with Silicon Valley. Sometimes I looked around the room, and I thought you and I were probably the 2 youngest people in the room, I was a little amazed. Does that give you any pause or are you really able to ride on some of the innovation out in California and in Asia? And are you going to both hire younger people and honestly, be able to replace Balan over on the Liberty Global side, without too much angst? I know you can't really replace Balan, if you know what I mean.

That's -- no, it's a good -- of course, you can't replace Balan. Good questions. On the quad-play, listen, remember that fixed mobile convergence has 2 sources, it's defensive and it's offensive. And in Europe, not to distract, but in Europe, the defensive component of it is not unimportant. Meaning that if a telco incumbent is going to offer a national mobile and a national fixed bundle, we have to respond. So in some respects, being in the mobile business in Europe is beneficial to us in terms of both retaining and growing our customer base in the context of that competition. There are also significant benefits to your own churn, NPS and revenue growth. So it's not simply defensive because we know it's easier to sell mobile to fixed customers. And they like you more and they pay you more and they stick around longer. So it's a nice virtuous cycle. Remember in this part of the world, mobile is already a large part of the revenue stream, much larger than it is in Europe because much of the cable and wireless businesses were originally mobile assets. And so they're entering the fixed business on a secondary basis. But I think the same logic applies. And here, I think, okay, my personal view is Cable & Wireless will be able to dictate the pace and market benefits of convergence as opposed to have to respond to third parties or other competitive agents. So I think it's in a great position to do that. And John can respond a little bit more on that. But let me jump to a question on innovation. I don't know a company that's, I think, as far along on an innovation curve as ours when it comes to both the video platform, cooperating with the key Silicon Valley companies, whether it be Netflix or Apple or others or Google. We have good strong relationships with them. We understand the trend and the way things are trending whether it's in the use of data or advertising or subscription television. So -- and Balan has been instrumental, no question, in maintaining those relationships and ensuring that we are front and center, not just on things that are developing and happening in that market, but also having concrete and tangible relationships. So I think it'll be a huge value to LiLAC to have someone like Balan in that role. They would have probably had that benefit indirectly if he were to remain in his current position because we want the framework agreement to benefit both parties. And he will certainly be difficult to replace. But as he would tell you himself, it's always a healthy thing to get a new fresh set of eyes on some of the things that we're doing. There aren't many people like Balan, but we're certainly in the process of trying to find the best and brightest, who will step into a much stronger technology and IT and innovation platform than the one he assumed and built from scratch, basically, over the last 10 years. The new job won't be quite as daunting in the sense that they'll be handed quite a lot of what are the necessary elements to build value going forward. John, do you want to comment on quad-play at all in your markets?

Yes, the only thing I'd say, I'd add, Mike, is that the -- I guess, the luxury of having a fragmented asset base is that we have numerous, what we would call sandbox markets to trial FMC. And we're already looking for -- looking at possible deployments this coming year. So I think that's what I would say, is that we have very small assets. We have medium sized, obviously Panama and some others, Jamaica, that is a decent size. But we have smaller assets, in which we can, I guess trial and error different value propositions and also bring together, obviously, common billing platforms. So that's certainly on our radar for '18.

Balan, do you want to give any perspective on Matt's question on innovation?

Well, sure. I would really echo what you said about relationships with the Silicon Valley companies. But remember, most talent is attracted to growth businesses. And whether it's Liberty Global in Europe, Liberty in Latin America, I'll tell you, we are a growth business. And you'll see us all increasingly move towards more software and you'll get a lot of great talent joining us. We see that already in building the platforms that Mike described in Europe.

We'll go now to Soomit Datta with New Street Research.

Yes, a couple of questions please. One, back to Puerto Rico. What are your thoughts looking to 2018 as to the potential impact from DTH alternatives and wireless alternatives, which might be able to get back to market more quickly than the HFC network? I mean, particularly, I think your fixed line competitor was talking about offering wireless solutions to fixed customers, I think its own fixed customers which may be -- not be up and running soon, but that could apply to your customers. I wondered if there's some potential structural shift you might see in the market away from the cable to DTH and wireless solutions? And then secondly, if I could, please, just on the buyback, again, what are you thinking into next year? Is it essentially not really being considered given events in Puerto Rico?

I think on the buyback, I would say it's too soon to talk about that. Generally, we update our buyback guidance when we update our -- at the year-end, so that would be a February kind of decision. And by then, we'll know a lot more about both insurance and damage assessment and how we're trending. The only thing I'd say on your first question, and I'll let Betzalel expand on it, as he did mention, we are working on our own IP streaming product that would use the wireless networks to provide our customers with access and content in the interim. But I think you raise a good point. I mean certainly, a small generator can run a satellite dish and our issue is relying more on terrestrial power both for our own network and for the customer's home. But we're also building great goodwill. I mean, as I was down there, you can see it. Dozens and dozens of people benefiting from our WiFi hotspots. And any strategic opportunity to secure customer happiness and loyalty, I know the local market and Naji and his team are doing. Do you want to expand on that at all, Betzalel?

You're absolutely right, Mike. I think that, yes, there is a risk. The DTH is there and can offer the service without power. On the other hand, our product before the hurricane is definitely the most robust product in the market and will remain that way after the hurricane. So we believe that our broadband proposition is extremely strong. Customers are, as we know, across the market, they prefer fixed over mobile broadband and that's what is driving our penetration and our customer satisfaction. So we will -- as power restores, the commercial restoration is part of the program as well and that's definitely on our radar screen.

We'll go now to Steve Malcolm with Arete Research.

I'm sorry to come back to Puerto Rico, but I'm going to ask a couple of questions if I can. First of all, can you confirm in Puerto Rico, is LCPR a single occurrence under your global insurance contract? Would you only be able to only make 1 claim or could there be multiple claims as the result of the 2 hurricanes? And secondly, just coming back to the covenants, I mean you very helpfully put a note in, I think on Page 31 of the Q, in which you kind of admit that it seems very likely you'll breach the covenants at the end of the fourth quarter, which is kind of obvious when you look at the OCF guidance you've given. But you've also mentioned that there are sort of carveouts around the way you can treat one-off impacts. Because when you run the numbers, obviously, the trailing 6-month OCF is going to be negative, which implies that the necessary cures are massive to try and recapitalize the business. Can you maybe just sort of walk us through how that might play out and what the add backs might be in the hurricanes and how should we think about those cures and the recapitalization of that business?

Chris, why don't you tackle the insurance one and then I know both -- between you and Charlie, you can address the covenants.

Sure. I mean as it -- Steve, we did discuss that we see at least 2 occurrences. I would say the one thing to keep -- bear in mind is the policy is an integrated policy. So it's for, call it, the greater region. So with that, that could pick up multiple jurisdictions. So at this point, we're not disclosing what exactly is the occurrence and number of claims besides (inaudible).

I think the point there is the beneficiary is Liberty Global Latin America, and then how it uses those proceeds is TBD.

Right, okay. But I mean, okay, but I mean clearly, most of the losses are going to be in Puerto Rico. So it's relevant as to how many occurrences apply there, right? If it's more than 1 there, that could cover a lot of your losses. And if it's only 1, you're going to be quite substantially out of pocket in Puerto Rico. I guess that's the point I was trying to make.

I would say, obviously, there're 2 hurricanes, there's Irma and there's Maria. So you can certainly infer that there is an incurrence for each one. And there are a number of variables that impact what is defined as an occurrence. So we're working through that as we speak. In terms of the covenants, you're correct in terms of referring to the disclosure. No doubt, the maintenance tests that are in place will have -- will be -- with negative EBITDA, that will be challenging. We have the ability to cure the covenants. We can cure them 2 successive quarters and so we will obviously be focused on that as we get into Q4.

Well, Chris, why don't you reference the current liquidity of the overall Liberty Latin America Group?

Yes. Good point, Mike. Today, we have $1.5 billion of overall liquidity within the group, $0.5 billion of cash, $1 billion on the lines. So from a LiLAC perspective, we have ample liquidity to handle the situation in Puerto Rico as it relates to the covenants.

Just to be clear, would you be -- most about -- is cash in the CWC [RCF]? I mean would you be prepared to upstream a lot of cash from CWC to make the cures? And one follow up is what do you think the proportionate leverage of the group is when you don't add back covenants and things like that?

Yes, good question. I mean I would say, from an overall liquidity perspective, we have a number of sources. CWC is one, but I would also point you to VTR. We have a significant cash balance in Chile and we have a $200-million plus line there. So that is one key funding pool for us today. No doubt, our covenants, as we disclosed in the CWC release, it's 4.1x and that is proportionate covenant on that credit pool. So if you look across the group, we reported 4.5x gross, 4.1x net. You do a true proportionate, you have to take it up a little a bit for the quarter.

The final question comes from Kevin Roe with Roe Equity Research.

Two quick questions. First, for Chris on your integrated insurance policy, you mentioned the $15 million self-insurance deductible. Is there a copay or quota share? And one question for John. How close are we to revenue stabilization at BTC? And just any update on the competitive dynamic there would be helpful.

Yes, with respect to your first question, the answer is, no.

Okay, Kevin, that was pretty quick, so I can jump in. I think our expectation is that the mobile market is still pretty volatile and certainly in the short term, I think that's fair to say. Our projections are probably pretty bang on where we kind of thought we would be after year 1, really now, or close enough to it. So the emphasis for us is on, obviously on the fixed line business. We will see some more homes pass, upgrade homes pass come on over the next couple of quarters. And so I think it's probably fair to say as well that we've been a little bit disappointed in the pace of the FTTH sale through and that's why we've attracted some pretty capable executives that we've known personally for about 20 years from Cable Bahamas to drive both the operating side of that as well, to be frank, the entire sales channel. So I think our view on the Bahamas, mobile will continue to sort of find its way over the next few quarters. But at the same time, we will definitely see an uptick in the fixed line business. But recognizing that mobile still represents a significant piece of the income statement. So I think it'll be a few more quarters before we get a real good sense for how we're going to land. But certainly, more positive after year 1 in terms of where we thought we would be. And I guess more of the outlook in terms of the network capability as well as really the capability of driving execution.

All right. That wraps it. Appreciate everybody joining us for the second call here. A lot of update and information hopefully on the hurricane that gives you some clarity both in the 10-Q and on the call here. Super excited for Balan to step in as soon as the split off occurs, which is still expected to happen year-end. I think that'll be a great moment for Liberty Latin America to continue to take advantage, not just of the operating opportunity it has, but then start drilling in more aggressively on some of the strategic value creation opportunities as well. So appreciate your support and we'll speak soon.

Ladies and gentlemen, this concludes Liberty Global's Third Quarter 2017 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.