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Liberty Global Reports Q2 and H1 2017 Results

DENVER, Colorado--(BUSINESS WIRE)--

Liberty Global plc ("Liberty Global") (NASDAQ: LBTYA, LBTYB, LBTYK, LILA and LILAK), today announces financial and operating results for the three months ("Q2") and six months ("YTD" or "H1") ended June 30, 2017 for the Liberty Global Group1 and the LiLAC Group1.

CEO Mike Fries stated, "During the first six months of the year, we added 406,000 RGUs2 across our European markets, including a 16%3 year-over-year improvement in Western Europe, underpinned by our strongest H1 video performance since 2006 and continued network expansion. Our next-generation4 video platforms, which include elegant user-interfaces, in-and-out of the home viewing capabilities and robust content line-ups, continue resonating with consumers, as we've added 1 million subscribers across Europe during the last twelve months. In the U.K., we have been proactively rolling out our new 4k-enabled, Virgin TV V6 set-top box, where we are seeing strong demand from both new and existing customers. In our other markets, we continue expanding the reach of Horizon TV and over 40% of our video base in Europe now subscribes to one of our next-generation TV platforms. On the connectivity front, nearly one-third of our 15 million broadband subscribers enjoy our high-speed Connect Box, which provides an impeccable WiFi user experience throughout the home, and our subscribers can now seamlessly access 10 million WiFi spots across Europe."

"From a financial perspective, our Q2 rebased5 OCF6 result in Europe showed both sequential and year-over-year improvement, as we delivered 6% rebased OCF growth. This result was fueled by strong performances in Germany, Belgium and CEE, which delivered Q2 rebased OCF growth of 6%, 5% and 7%, respectively, and was further supported by our company-wide indirect cost efficiencies. On top-line growth, we reported a 2% rebased improvement as our B2B7 business delivered 14% rebased revenue growth in the quarter, partly offset by continued challenges in our mobile business which contracted 6%. As expected, cable ARPU8 and revenue growth at Virgin Media remained soft, as the discounting and mix effects that impacted growth in Q1 continued in the second quarter. At the same time, we are seeing some early signs of progress and expect the ARPU headwind in the U.K. to lessen in Q4 of this year. We continue to anticipate approximately 5% rebased OCF growth for Liberty Global Group in 2017."

"With respect to Project Lightning, we've made significant strides in solidifying the foundation of the program through the appointment of a dedicated new leadership team9, as well as an overhaul of key processes and procedures. During Q2, we built 127,000 new premises at Virgin Media, including a record monthly build performance in June, and our cumulative total now stands at nearly 800,000 premises since the project's inception. Meanwhile, on the European continent, the number of new build and upgraded homes in markets like Germany and CEE continue to broadly track our expectations. In these regions, we have added a cumulative total of 1.4 million newly marketable premises over the last 2 years."

"At LiLAC, we delivered 10.5% rebased OCF growth in Q2 due to double-digit improvements at both VTR and CWC10. In the case of CWC, we've taken actions that should help drive organic revenue growth and cost efficiencies in the future. With regard to our planned spin-off of the LiLAC Group, we are pleased to report that we submitted a draft registration statement with the SEC on a confidential basis in July, and we still expect to complete the transaction around the end of the year. We believe the spin-off will benefit LiLAC shareholders by creating a stand-alone, asset-backed equity, while enhancing its potential attractiveness as an acquisition currency for consolidation opportunities in the highly-fragmented Latin American and Caribbean telecommunications markets. In terms of guidance, we continue to anticipate approximately $1.5 billion11 of OCF for full-year 2017 at LiLAC."

"We remained active in the credit markets during the first half of the year, refinancing over $11 billion of long-term debt in Europe and Latin America combined. At the end of June, our fully-swapped borrowing cost12 for Liberty Global plc was 4.8%, our average tenor13 exceeded seven years and we had substantial liquidity14 of over $6 billion. With respect to our share buyback programs, we took advantage of recent trading levels and repurchased a record $2.2 billion of LBTY equity, as well as $41 million of LiLAC Group stock during the first half of 2017. Going forward, we will continue to manage our business through the lens of our long-standing levered-equity strategy, and will continue to be opportunistic when our stock prices look especially attractive."

European Highlights Q2 2017

  • 162,000 RGU adds as softer broadband & voice growth was partially offset by better video trends
  • 99,000 organic Q2 postpaid mobile additions15, driven by a strong performance at Telenet
    • 35% of our Virgin Media postpaid mobile base has migrated to 4G
  • Closed the acquisition of SFR in Belgium in mid-June, adding 91,000 customers
  • German analog switch-off successfully finalized in early July with limited video churn
  • Rebased revenue increased 2%, impacted by lower growth at Virgin Media and Switzerland
    • Residential fixed16 of $2.7 billion, up 1% year-over-year
    • B2B up 14% year-over-year to $0.5 billion
    • Residential mobile (incl. handset & interconnect) declined 6% YoY to $0.4 billion
  • Operating income decreased 5% year-over-year
  • Rebased OCF growth of 6% with improved sequential growth from nearly all segments
    • Includes a $32 million nonrecurring benefit associated with a telecom operator's agreement to compensate Virgin Media for prior-period contractual breaches
  • Connected/built new premises totaling around 500,000 YTD and 295,000 in Q2, of which 127,000 were at Virgin Media in Q2
Liberty Global Group (Europe)     Q2 2017    

YOY
Growth/(Decline)*

    YTD 2017    

YOY
Growth/(Decline)*

 

Subscribers

Organic RGU Net Additions 161,900 (37.5 %) 406,200 (6.3 %)
 

Financial (in USD millions, unless noted)

Revenue $ 3,664 1.6 % $ 7,183 1.9 %
OCF $ 1,733 6.0 % $ 3,338 5.0 %
Operating income $ 483 (5.0 %) $ 914 (11.7 %)
 
Adjusted FCF(17) $ 325 N.M. $ (8 ) N.M.
Cash provided by operating activities $ 1,509 $ 2,412
Cash provided (used) by investing activities $ (926 ) $ 965
Cash used by financing activities $ (1,662 ) $ (3,445 )

* For the RGU growth rate, the Netherlands is excluded from the 2016 figures; Revenue and OCF YoY growth rates are on a rebased basis.
N.M. - Not Meaningful

LiLAC Highlights Q2 2017

  • Added 8,000 organic customers18, bringing the H1 total to 41,000
  • Subscriber additions of 16,000 in Q2 2017 & 58,000 in H1 2017
    • VTR's 34,000 net adds partially offset by losses totaling 18,000 at CWC & LCPR
  • Rebased revenue growth of 2%, including 8% in Chile and 1% at CWC and LCPR
  • Operating income of $159 million versus a $21 million operating loss in Q2 2016
  • Rebased OCF growth of 10.5%
    • CWC & VTR each delivered 11% rebased growth
    • LCPR delivered 7% rebased OCF growth despite macroeconomic headwinds
  • Lowering P&E additions as a % of revenue forecast to 19%-21% for 2017
Liberty Latin America & Caribbean     Q2 2017    

YOY
Growth/(Decline)*

    YTD 2017    

YOY
Growth/(Decline)*

 

Subscribers

Organic RGU Net Additions 15,700 (65.6 %) 57,600 (14.0 %)
 

Financial (in USD millions, unless noted)

Revenue $ 921 2.4 % $ 1,832 0.8 %
OCF $ 368 10.5 % $ 722 (0.4 %)
Operating income $ 159 N.M. $ 297 N.M.
 
Adjusted FCF $ 114 N.M. $ 56 N.M.
Cash provided by operating activities $ 224 $ 299
Cash used by investing activities $ (123 ) $ (253 )
Cash provided (used) by financing activities $ (27 ) $ 2

* Revenue and OCF YoY growth rates are on a rebased basis.
N.M. - Not Meaningful

Subscriber Growth - Liberty Global Group (Europe)

    Three months ended     Six months ended
June 30, June 30,
2017     2016 2017     2016
 
Organic RGU net additions (losses) by product (excluding NL)(3) (excluding NL)(3)
Video (16,100 ) (39,500 ) (31,200 ) (137,200 )
Data 100,100 150,800 254,500 296,000
Voice 77,900   147,700   182,900   274,700  
Total Liberty Global Group 161,900   259,000   406,200   433,500  
 
Organic RGU net additions (losses) by market
U.K./Ireland 78,100 50,100 236,100 143,000
Germany 53,800 109,300 106,200 132,900
Belgium (15,300 ) 17,600 (27,300 ) 23,900
Switzerland/Austria 10,600 (9,700 ) 8,200 (21,700 )
Central and Eastern Europe 34,700   91,700   83,000   155,400  
Total Liberty Global Group 161,900   259,000   406,200   433,500  
 
Organic Mobile SIM additions (losses) by product
Postpaid 98,700 94,700 189,900 183,300
Prepaid (92,900 ) (52,500 ) (165,900 ) (119,000 )
Total Liberty Global Group 5,800   42,200   24,000   64,300  
 
Organic Mobile SIM additions (losses) by market
U.K./Ireland (7,500 ) 25,300 (4,100 ) 9,200
Belgium (6,300 ) (8,700 ) 400 9,100
Other 19,600   25,600   27,700   46,000  
Total Liberty Global Group 5,800   42,200   24,000   64,300  
 
  • Cable Product Performance: we added 406,000 RGUs in H1, down 6% year-over-year. During Q2 we gained 162,000 RGUs, a decline of 37% over the prior-year period due to lower additions in CEE, Germany and Belgium. From a Q2 product perspective, our video RGU performance improved, while our broadband and telephony growth slowed year-over-year
    • The better video result was primarily driven by Virgin Media, which improved its Q2 performance by 50,000 RGUs supported by the relaunch of Virgin TV and the successful rollout of our Virgin TV V6 set-top box. The overall video performance was particularly strong given our focus on the completion of the analog switch-off in Germany, which caused only minimal disruption to our German operations
  • Next-Generation TV platforms (including Horizon TV, Horizon-Lite, TiVo, Virgin TV V6 and Yelo TV): we added 302,000 subscribers in Q2, as our next-generation subscriber base reached 7.2 million, representing 41% of our total cable video base (excluding DTH). Notable Q2 performances included the U.K. (78,000 additions), Belgium (69,000 additions) and Poland (53,000 additions)
    • Our new 4K enabled Virgin TV V6 set-top box is resonating with consumers in the U.K. and by June 30, 2017 nearly 10% of video subscribers in the U.K. had a new box. Subscribers to the Virgin TV V6 box have significantly higher NPS scores than those on legacy boxes
  • WiFi Connect Box: we increased the number of WiFi Connect boxes by more than 800,000 during Q2, ending the quarter with 4.5 million boxes installed across Europe. This represents a 31% penetration of our broadband base of 14.7 million
  • U.K./Ireland: posted RGU growth of 78,000 additions in Q2, up 56% YoY in a seasonally slower quarter, and improved in both Lightning new build areas and our existing footprint. Similar to Q1, our U.K. video performance materially improved on a year-over-year basis with 35,000 RGU additions, a 42,000 subscriber improvement. Our Q2 U.K. internet RGU growth of 31,000 slowed due to higher year-over-year churn levels but still took an estimated 46% share of national broadband net adds and an even higher share of broadband net adds on our cable footprint in the U.K. during Q2. Our Irish RGU performance returned to positive territory with improvements across all products due to our latest spring campaign
  • Germany: reported 54,000 RGU additions in Q2, around half of our Q2 2016 result. The main operational focus in Q2 was the switch-off of the analog TV signal across our video base of 6 million subscribers. The migration to a digital-only video experience was successful, including better year-over-year video performance. We experienced weaker internet and fixed voice RGU growth, partially as a result of (1) a more competitive environment and (2) certain delays in installations for new customers as truck rolls were prioritized for existing customers to assist with the analog switch-off in June. In addition, we have reduced discounts since February 2017, while in the prior-year period we ran our "Highspeed Weeks" promotion
  • Belgium: Q2 attrition of 15,000 RGUs was broadly in-line with Q1 results, but down year-over-year primarily due to intensified competition. While video losses improved sequentially, internet and telephony performance softened. Our all-in-one converged package "WIGO" reached 224,000 subscribers at June 30, 2017, including a robust Q2 inflow of 36,000 net new "WIGO" subscribers. In addition, Telenet closed its acquisition of SFR Belux in June, resulting in 190,000 nonorganic fixed subscriber additions in Q2 2017
  • Switzerland/Austria: 11,000 RGU additions in Q2, supported by a sequential and year-over-year improvement across all fixed-line products. This result was driven by our refreshed Swiss Connect & Play portfolio, which launched in mid-May. With respect to this new portfolio, we lowered price points of our high-tier bundles, while lifting price points on the low-end to drive a better tier-mix. We expect to launch our MySports channels in early September featuring exclusive content, such as Swiss, Russian and Swedish ice hockey, and German and Portuguese soccer
  • CEE: delivered 35,000 RGU additions in Q2, a decline versus the 92,000 gained in Q2 2016. This weaker performance was primarily due to softer RGU performances in Poland, Slovakia and our DTH business. Hungary's strong RGU additions partially offset these weaker results
  • Mobile15: added 6,000 mobile subscribers in total in Q2, as our 99,000 postpaid subscriber additions, were largely offset by attrition in the prepaid subscriber base
    • Virgin Media's Q2 subscriber base in the U.K. declined by 20,000 as low-ARPU prepaid subscriber losses of 30,000 more than offset the 10,000 postpaid additions. Of note, 4G subscriptions in the U.K. increased by 347,000 in Q2 and now represent 34% of the U.K.'s total postpaid mobile base. Ireland delivered a record 13,000 additions during Q2, supported by our attractive SIM-only postpaid mobile promotion
    • Telenet in Belgium gained 60,000 postpaid additions in Q2, supported by the continued success of "WIGO" and a refreshed BASE19 postpaid offering with doubled data allowance. This sequential and year-over-year improvement was offset by a decline in our prepaid base of 63,000 during Q2, mainly due to the deactivation of 53,000 prepaid SIM cards following a legislative change to register all legacy prepaid SIMs by June 15, 2017
    • Switzerland/Austria posted 15,000 postpaid SIM additions on the back of the continued "10 for 10" promotion in Austria and a refreshed mobile portfolio in Switzerland, now including free EU roaming

Revenue Highlights - Liberty Global Group (Europe)

The following table presents (i) revenue of each of our consolidated reportable segments for the comparative periods, and (ii) the percentage change from period to period on a reported and a rebased basis:

    Three months ended   Increase/(decrease)   Six months ended   Increase/(decrease)
June 30, June 30,
Revenue 2017   2016 %   Rebased % 2017   2016 %   Rebased %
in millions, except % amounts
 
European Division:
U.K./Ireland $ 1,566.1 $ 1,717.7 (8.8 ) 0.9 $ 3,070.5 $ 3,404.2 (9.8 ) 1.3
Belgium 686.0 707.3 (3.0 ) 0.7 1,347.4 1,317.5 2.3 0.9
Germany 655.8 643.5 1.9 4.6 1,284.9 1,260.6 1.9 5.1
Switzerland/Austria 435.1 447.0 (2.7 ) (1.5 ) 858.8 880.4 (2.5 ) (1.4 )
The Netherlands   678.8   N.M. N.M.   1,348.6   N.M. N.M.
Total Western Europe 3,343.0 4,194.3 (20.3 ) 1.2 6,561.6 8,211.3 (20.1 ) 1.6
Central and Eastern Europe 288.6 274.0 5.3 6.4 559.9 540.1 3.7 5.8
Central and other 31.6   (0.9 ) N.M. N.M. 60.3   (3.3 ) N.M. N.M.
Total European Division 3,663.2 4,467.4 (18.0 ) 1.6 7,181.8 8,748.1 (17.9 ) 1.9
Corporate and other 0.5 15.2 (96.7 ) N.M. 0.9 29.8 (97.0 ) N.M.
Intersegment eliminations   (11.4 ) N.M. N.M.   (22.6 ) N.M. N.M.
Total Liberty Global Group $ 3,663.7   $ 4,471.2   (18.1 ) 1.6   $ 7,182.7   $ 8,755.3   (18.0 ) 1.9  

N.M. - Not Meaningful

  • Reported revenue for the three and six months ended June 30, 2017, declined 18% year-over-year in each period
    • These results were primarily driven by the net impact of (i) the deconsolidation of our operations in the Netherlands in connection with the completion of our joint venture with Vodafone Group plc (the "VodafoneZiggo JV"), (ii) negative foreign exchange ("FX") movements, mainly related to the strengthening of the U.S. dollar against the British pound, and (iii) our organic revenue growth
  • Rebased revenue grew 2% during each of the Q2 and H1 2017 periods and included the net negative impact of certain items, the most significant of which included:
    • A reduction in cable subscription revenue of $3 million and $12 million, respectively, resulting from a change in U.K. regulations governing payment handling fees that Virgin Media charges its customers
    • The favorable $6 million impact in the YTD period of the expected recovery of VAT paid in prior periods with respect to copyright fees in Belgium, which benefited revenue in Q1 2017
  • In Q2 and H1 2017, we recognized $32 million and $63 million of revenue from the VodafoneZiggo JV pursuant to the framework services agreement. Our rebased growth calculations include an estimate of the revenue from the framework agreement for the Q2 and H1 2016 periods, as if the framework agreement had been in place at the beginning of 2016
  • Effective April 1, 2017, we changed the categories that we present in our product revenue table in order to align with our internal reporting. These changes were retroactively reflected in the prior-year periods. The new table presents Residential Cable, Residential Mobile and B2B (Fixed and Mobile) sections, with each section including subscription and non-subscription elements. Our definitions of subscription revenue and ARPU have not changed. For additional details and definitions of our product revenue, see note 15 to the condensed consolidated financial statements included in our quarterly report on Form 10-Q filed on August 7, 2017 (the "Form 10-Q")
  • Our B2B7 business (including SOHO and non-subscription revenue) reported rebased revenue growth of 14% and 12% in Q2 2017 and H1 2017, respectively
  • Our residential mobile (including interconnect and handset sales) business posted 6% and 7% rebased revenue contractions during Q2 2017 and H1 2017, respectively
    • Contraction of mobile revenue was due to rebased revenue declines in Belgium and the U.K., which together represent over 90% of our mobile business
      • The U.K. declines were mainly related to reductions in revenue from Virgin Media's subsidized handset base of $31 million and $67 million, respectively, which more than offset increases related to growth in Virgin Media's split-contract program of $14 million and $29 million, respectively
      • Additionally, declines in mobile interconnect revenue negatively impacted mobile revenue in both the U.K. and Belgium

Q2 2017 Rebased Revenue Growth - Segment Highlights

  • U.K./Ireland: the rebased revenue growth of 1% in Q2 2017 was driven by:
    • Rebased residential cable revenue (~70% of total revenue) growth of 2%, driven by the net effect of (i) growth in subscription revenue resulting from RGU additions and (ii) a relatively flat year-over-year Q2 ARPU performance on an FX-neutral basis
    • Rebased residential mobile revenue (including interconnect and mobile handset revenue) decline of 8%, primarily due to the net reduction in revenue in the U.K., as mentioned above
    • Rebased business revenue growth of 4%, mainly driven by SOHO and SME
  • Belgium: rebased revenue growth rate of 1% in Q2 was mainly driven by the net effect of (i) strong growth in B2B, (ii) mobile headwinds, partly related to lower mobile subscribers and handset sales and (iii) lower cable revenue, primarily due to RGU attrition
  • Germany: Q2 rebased revenue growth of 5% was mainly driven by (i) higher cable subscription revenue (~90% of total revenue), as a result of a larger subscriber base and an increase in ARPU per RGU, (ii) higher low-margin mobile handset revenue and (iii) B2B growth in the SOHO segment. Looking ahead, we expect H2 2017 to be adversely impacted by the analog switch-off, as the related loss of analog carriage fees is expected to result in a reduction of revenue and OCF of approximately €7.5 ($8.6) million per quarter
  • Switzerland/Austria: rebased revenue declined by 1.5% in Q2, mainly driven by the net effect of (i) lower ARPU per RGU, primarily related to a weaker tier-mix and competitive pressures and (ii) a higher contribution from B2B. At the same time, mobile revenue growth was limited as the contribution from the mobile subscriber growth was offset by lower handset sales
  • CEE: rebased revenue growth of 6% in Q2 driven mainly by (i) strong growth in our B2B business and (ii) higher cable revenue supported by solid RGU additions totaling 302,000 over the LTM period, partly offset by a 1% decline in the ARPU per RGU on an FX-neutral basis

Operating Income - Liberty Global Group (Europe)

  • Operating income of $483 million and $509 million in Q2 2017 and Q2 2016, respectively, representing a decrease of 5%. For the six months ended June 30, 2017, the operating income of $914 million reflects a decline of 12% as compared to $1.0 billion in H1 2016
  • The decreases in operating income during both periods primarily resulted from lower OCF, as further described below, and declines in depreciation and amortization. The declines in OCF and depreciation and amortization are primarily attributable to the fact that our Netherlands segment is not included in our 2017 consolidated results

Operating Cash Flow Highlights - Liberty Global Group (Europe)

The following table presents (i) OCF of each of our consolidated reportable segments for the comparative periods, and (ii) the percentage change from period to period on a reported and a rebased basis:

    Three months ended   Increase/(decrease)   Six months ended   Increase/(decrease)
June 30, June 30,
OCF 2017   2016 %   Rebased % 2017   2016 %   Rebased %
in millions, except % amounts
 
European Division:
U.K./Ireland $ 709.8 $ 765.5 (7.3 ) 3.9 $ 1,358.3 $ 1,510.1 (10.1 ) 2.4
Belgium 317.8 311.3 2.1 5.4 615.7 581.1 6.0 6.8
Germany 412.8 400.3 3.1 5.8 795.6 779.7 2.0 5.2
Switzerland/Austria 266.9 263.6 1.3 2.3 522.0 521.7 0.1 1.0
The Netherlands   364.1   N.M. N.M.   732.0   N.M. N.M.
Total Western Europe 1,707.3 2,104.8 (18.9 ) 4.4 3,291.6 4,124.6 (20.2 ) 3.7
Central and Eastern Europe 122.9 114.6 7.2 7.2 233.9 225.5 3.7 5.5
Central and other (51.2 ) (82.1 ) 37.6   4.8   (93.2 ) (166.4 ) 44.0   14.3
Total European Division 1,779.0 2,137.3 (16.8 ) 4.9 3,432.3 4,183.7 (18.0 ) 4.4
Corporate and other (45.7 ) (62.7 ) 27.1   25.0   (94.3 ) (115.5 ) 18.4   14.6
Total Liberty Global Group $ 1,733.3   $ 2,074.6   (16.5 ) 6.0   $ 3,338.0   $ 4,068.2   (17.9 ) 5.0
 
OCF Margin 47.3 % 46.4 % 46.5 % 46.5 %

N.M. - Not Meaningful

  • Reported OCF for the three and six months ended June 30, 2017, declined 16.5% and 18% year-over-year, respectively
    • These results were primarily driven by the net impact of (i) the deconsolidation of our operations in the Netherlands, (ii) the aforementioned adverse impact of FX movements and (iii) our organic OCF growth
  • Rebased OCF growth of 6% and 5% in Q2 and H1 2017, respectively, included the net positive impact of certain items, the most significant of which included:
    • The net unfavorable revenue items discussed in the "Revenue Highlights" section above
    • A favorable $32 million benefit recognized in Q2 associated with a telecom operator's agreement to compensate Virgin Media for prior-period contractual breaches related to network charges
    • A $13 million network tax increase following an April 1, 2017 increase in the rateable value of our existing U.K. and Irish networks
    • The negative impact of an $8 million favorable MVNO settlement in Belgium in Q2 2016
  • As compared to the prior-year periods, our Q2 and H1 2017 OCF margins20 were up 90 basis points to 47.3% and flat at 46.5% year-over-year, respectively. Of note, the OCF margins during the 2017 periods were negatively impacted by the deconsolidation of the Netherlands

Q2 2017 Rebased Operating Cash Flow Growth - Segment Highlights

  • U.K./Ireland: OCF increased 4% in Q2 on a rebased basis, including the favorable impact of the $32 million benefit mentioned above. Excluding this benefit, OCF declined marginally on a rebased basis as revenue growth was offset by the aforementioned network tax increase, as well as higher marketing and programming costs
  • Belgium: rebased OCF growth of 5% in Q2 was largely driven by less mobile handset subsidies, lower sales and marketing, lower integration costs and indirect cost containment following the BASE acquisition
  • Germany: increased OCF by 6% in Q2 on a rebased basis, primarily due to the net effect of (i) an increase in revenue, (ii) higher direct costs, primarily due to higher mobile handset sales, partially offset by lower fixed-line telephony call volumes and interconnect rates and (iii) cost containment of indirect costs
  • Switzerland/Austria: rebased OCF growth of 2% in Q2 as the rebased revenue contraction of 1.5% was more than offset by lower direct and indirect costs across the various functions
  • CEE: rebased OCF growth of 7% in Q2 was largely driven by the aforementioned revenue growth
  • Central and other: the Q2 year-over-year improvement on a rebased basis was driven by general cost containment, including lower consultancy and contingent labor costs, and savings arising from the establishment of our group-wide Technology & Innovation organization. Of note, in the prior-year period, we incurred higher nonrecurring costs associated with the implementation of our Liberty Go initiative

Net Loss - Liberty Global Group (Europe)

  • Net loss was $637 million for the three months ended June 30, 2017, as compared to net earnings of $204 million for the prior-year period. On a YTD basis, the net loss was $930 million and $126 million, in H1 2017 and H1 2016, respectively

Property and Equipment Additions - Liberty Global Group (Europe)

The details of our property and equipment additions21 are as follows:

    Three months ended     Six months ended
June 30, June 30,
2017     2016 2017     2016
in millions, except % amounts
Customer premises equipment $ 304.2 $ 229.9 $ 600.2 $ 466.1
New Build & Upgrade 305.5 203.6 495.3 354.6
Capacity 163.0 159.8 279.6 266.1
Baseline 200.9 219.2 357.2 393.7
Product & Enablers 230.2   142.9   355.9   260.3  
Property and equipment additions (excluding the Netherlands(3)) 1,203.8 955.4 2,088.2 1,740.8
The Netherlands   143.1     283.2  
Total property and equipment additions $ 1,203.8   $ 1,098.5   2,088.2   2,024.0  
Property and equipment additions as % of revenue (excluding NL(3)) 32.9 % 25.2 % 29.1 % 23.5 %
 
  • Increases in property and equipment additions in absolute terms and as a percentage of revenue in both the Q2 and YTD periods were primarily driven by (i) increased new build activities across our footprint, particularly in the U.K., (ii) higher CPE spend year-over-year and (iii) higher product & enablers spend, due in part to a new DTH transponder lease agreement in CEE, partly offset by (iv) lower baseline spend

Consolidated Statements of Cash Flows - Liberty Global Group (Europe)

        Six months ended    
June 30,  
2017     2016 Variance
in millions
Net cash provided (used) by:
Operating Activities $ 2,411.5 $ 2,564.0 $ (152.5 )
Investing Activities $ 964.7 $ (2,402.9 ) $ 3,367.6
Financing Activities $ (3,444.8 ) $ (112.4 ) $ (3,332.4 )
 
  • Operating Activities: the decrease in cash provided was primarily attributable to the net effect of (i) a decrease in cash provided by OCF and related working capital items due to the completion of the VodafoneZiggo JV transaction, (ii) an increase in cash provided due to (a) lower payments of interest, (b) higher cash receipts related to derivative instruments and (c) higher cash dividends primarily received from the VodafoneZiggo JV and (iii) a decrease due to unfavorable movements in FX
  • Investing Activities: the change in net cash provided (used) by investing activities was primarily attributable to an increase in cash related to (i) higher distributions received from affiliates, (ii) lower payments for acquisitions and (iii) the equalization payment received in Q1 2017 in connection with the completion of the VodafoneZiggo JV transaction
  • Financing Activities: the increase in net cash used by financing activities was primarily attributable to increases associated with (i) the repurchase of shares, (ii) higher net repayments of debt and (iii) an increase in cash collateral associated with a June 2017 debt transaction

Adjusted Free Cash Flow - Liberty Global Group (Europe)

        Three months ended     Six months ended
June 30, June 30,
2017     2016 2017     2016
in millions in millions
Adjusted Free Cash Flow $ 325.1 $ 516.4 $ (7.5 ) $ 411.5
 
  • The adjusted free cash flow17 decrease of $191 million in Q2 and $419 million in H1 2017, as compared to the prior-year periods, was attributable to the net effect of:
    • Lower cash provided from OCF and related working capital items
    • Lower interest payments (including related derivative instruments)
    • Favorable movements in FX
    • Higher dividends received
    • Lower capital expenditures
    • Lower cash taxes in the Q2 period and higher cash taxes in the H1 period
  • The impact of the VodafoneZiggo JV transaction accounted for a significant portion of these items
  • On a net basis, our vendor financing programs resulted in approximately $59 million and $84 million higher adjusted free cash flow in Q2 and H1 2017, respectively, as compared to the prior-year periods

Leverage and Liquidity - Liberty Global Group (Europe - at June 30, 2017)

  • Total capital leases and principal amount of third-party debt: $40.7 billion
  • Leverage ratios: our adjusted gross and net leverage ratios22 at June 30, 2017 were 5.2x and 5.1x, respectively
  • Average debt tenor13 : 7.5 years, with ~90% not due until 2021 or beyond
  • Borrowing costs12 : blended fully-swapped borrowing cost of our third-party debt was 4.5%
  • Liquidity: $4.7 billion, including (i) $1.1 billion of cash at June 30, 2017 and (ii) aggregate unused borrowing capacity23 under our credit facilities of $3.6 billion

VodafoneZiggo Joint Venture (not consolidated) - Liberty Global Group

Our noncontrolling 50% interest in the VodafoneZiggo JV is attributed to Liberty Global Group. VodafoneZiggo is a leading Dutch company that provides fixed, mobile and integrated communication and entertainment services to consumers and businesses. The unaudited financial and operating information set forth below is preliminary and subject to change. All financial and operating information presented in this section is presented in accordance with VodafoneZiggo's policies.

VodafoneZiggo highlights for Q2 2017(a):

  • Lower fixed RGU attrition with a loss of 10,000 RGUs in Q2 as compared to a loss of 28,000 in Q2 2016; mobile contract net additions improved to 19,000, compared to a pro forma loss of 2,000 in Q2 2016
  • Total revenue declined by 3% on a pro forma basis in Q2 to €997 million, reflecting continuing mobile competition, notably in the B2B segment; fixed-line performance was stable
  • Consumer cable revenue declined by 1% on a pro forma basis as ARPU growth was offset by a lower customer base
  • Consumer mobile service revenue declined by 7% on a pro forma basis in Q2 driven by increased competition and lower roaming revenue
  • B2B revenue declined by 7% on a pro forma basis in Q2 as mobile pressures were only partially offset by cable growth (led by SOHO subscribers)
  • Operating income of €46 million in Q2; remained flat on a pro forma basis compared with Q2 2016
  • Q2 OCF(b) declined by 1% on a pro forma basis to €428 million as lower revenue was partially offset by lower marketing expenses, reduced handset costs driven by a higher proportion of SIM-only sales and lower interconnect costs driven by lower voice and SMS usage
  • Successful launch in April of converged offer to 633,000 households with 872,000 mobile SIMs. Offer includes double mobile data allowance, an extra premium TV package and an internet security package at no incremental cost
(a)   VodafoneZiggo (formerly known as Ziggo Group Holding B.V.) is a wholly-owned subsidiary of VodafoneZiggo Group Holding B.V. ("VodafoneZiggo JV"), a 50:50 joint venture between Vodafone Group plc ("Vodafone") and Liberty Global. Prior to December 31, 2016, the predecessor of VodafoneZiggo was a wholly-owned subsidiary of Liberty Global. On December 31, 2016, Liberty Global and Vodafone completed a transaction (the "JV Transaction") whereby (i) VodafoneZiggo became a wholly-owned subsidiary of the VodafoneZiggo JV and (ii) Vodafone Libertel B.V. ("Vodafone NL"), the entity that owns Vodafone’s mobile operations in the Netherlands, became a wholly-owned subsidiary of VodafoneZiggo. In connection with the closing of the JV Transaction, the VodafoneZiggo JV recorded all of its assets and liabilities at fair value. As the entity contributed to the VodafoneZiggo JV by Liberty Global is considered to be the predecessor of VodafoneZiggo for financial reporting purposes, the historical consolidated financial statements for VodafoneZiggo do not include Vodafone NL for periods prior to December 31, 2016. In order to provide meaningful comparisons, the preliminary financial and operating information presented herein for the 2016 periods are presented on a pro forma basis that gives effect to, among other items, (i) the inclusion of the financial and operating information of Vodafone NL (excluding Vodafone Thuis) as of and for the three and six months ended June 30, 2016, (ii) the impacts of the fair value accounting applied to the opening balance sheet of VodafoneZiggo in connection with the closing of the JV Transaction, (iii) the services provided to VodafoneZiggo by Vodafone and Liberty Global pursuant to a “Framework Agreement” that was entered into in connection with the JV Transaction; (iv) the elimination of historical related-party charges from Vodafone and Liberty that will not continue in the periods following the JV Transaction, with each adjustment recorded as if the JV Transaction had occurred on January 1, 2016. The pro forma depreciation and amortization amounts for the 2016 periods are based on the fair values and estimated useful lives assigned to VodafoneZiggo's long-lived assets in the preliminary acquisition accounting and do not provide for the impacts of property and equipment additions or retirements during the applicable 2016 periods. VodafoneZiggo financial information is denominated in euro, its functional currency, and reported in accordance with U.S. GAAP. The pro forma financial information has not been prepared with a view towards complying with Article 11 of Regulation S-X.
 
(b) OCF for VodafoneZiggo is defined on a basis consistent with Liberty Global. For the definition of OCF see note 6. A reconciliation of operating income to OCF is presented below (in millions).
        Three months ended June 30,     Six months ended June 30,
2017     2016 2017     2016
Pro forma Pro forma
 
Operating income 46.1 45.9 99.3 121.9
Share-based compensation expense 1.5 2.8 4.2 5.6
Depreciation and amortization 378.0 378.2 753.3 755.0
Impairment, restructuring and other operating items, net 2.5   5.6   2.7   8.3
OCF 428.1   432.5   859.5   890.8
 

The following table sets forth selected operating statistics of VodafoneZiggo:

        June 30,
2017     2016

Fixed-line Subscribers (RGUs)

Basic Video 592,500 720,200
Enhanced Video 3,341,100   3,291,500
Total Video 3,933,600 4,011,700
Internet 3,197,200 3,118,400
Telephony 2,544,800   2,530,500
Total RGUs 9,675,600   9,660,600
 
Fixed Customer Relationships 3,936,300 4,033,300
 

Mobile Subscribers (pro forma for June 30, 2016)

Postpaid 4,085,800 4,059,800
Prepaid (c) 964,200   1,184,600
Total Mobile subscribers 5,050,000   5,244,400

____________________________

(c)   Under the VodafoneZiggo definition of prepaid subscribers, customers who do not pay a recurring monthly fee are excluded from VodafoneZiggo's prepaid mobile telephony subscriber counts after a period of inactivity of 15 months.
 
 

Subscriber Growth - LiLAC Group

    Three months ended     Six months ended
June 30, June 30,
2017     2016 2017     2016
 
Organic RGU net additions (losses) by product
Video 6,300 9,700 11,500 13,200
Data 23,200 30,700 61,800 56,200
Voice (13,800 ) 5,300   (15,700 ) (2,400 )
Total LiLAC Group 15,700   45,700   57,600   67,000  
 
Organic RGU net additions (losses) by market
CWC (15,600 ) 6,500 (5,700 ) 6,500
Chile 33,800 36,800 59,200 53,000
Puerto Rico (2,500 ) 2,400   4,100   7,500  
Total LiLAC Group 15,700   45,700   57,600   67,000  
 
Organic Mobile SIM additions (losses) by product
Postpaid 10,400 10,600 22,500 11,600
Prepaid (44,300 ) (4,800 ) (17,300 ) (5,800 )
Total LiLAC Group (33,900 ) 5,800   5,200   5,800  
 
Organic Mobile SIM additions (losses) by market
CWC (48,200 ) (1,200 ) (21,600 ) (1,200 )
Chile 14,300 7,000 26,800 7,000
Puerto Rico        
Total LiLAC Group (33,900 ) 5,800   5,200   5,800  
 
  • Product Additions: organic RGU additions of 16,000 in Q2 2017
    • Net additions in Chile, were offset by losses at CWC and in Puerto Rico. Across all three businesses we saw declines in voice subscribers
  • Chile: VTR added 34,000 RGUs driven by 26,000 broadband subscriber adds, with over 60% of new sales taking packages containing speeds of 120 Mbps or higher. We also delivered 12,000 additional video RGUs during Q2, our strongest quarterly video performance in two years, as our best-in-class HD channel offering and cutting-edge video-on-demand user interface attracted customers
  • Puerto Rico: LCPR reported subscriber losses of 3,000 as our telephony performance weakened and we saw slightly greater video subscriber decline relative to the prior-year period. Broadband RGU performance was marginally better year-over-year as our market-leading speeds, including 400 Mbps for our top-tier offering, continue to resonate with our customer base
  • Panama: we added 10,000 organic RGUs during the quarter, including 4,000 internet and 3,000 cable video RGUs, as we continued to generate momentum behind our refreshed bundled offers and network improvement activities which enabled faster speeds of up to 300 Mbps. We also continued to grow our DTH base, adding 3,000 organic RGUs in Q2
  • Jamaica: RGUs decreased by 12,000 as subscribers declined across all fixed-line categories
  • Bahamas: we reported a small RGU decline of 1,000 in Q2 as continued penetration of our growing Fiber-to-the-Home (FttH) network, which generated 2,000 video adds, was offset by a decline of 3,000 voice subscribers
  • Barbados: RGUs declined by 4,000, primarily due to lower fixed-line telephony subscribers and, to a lesser extent, declines in broadband and video caused by competition
  • Mobile: mobile subscribers declined by 34,000 in the second quarter as continued postpaid success in Chile (15,000) and prepaid gains in Jamaica (3,000) were more than offset by losses across other CWC businesses, including Panama (18,000) and the Bahamas (24,000)
    • Panama: an 18,000 decline in subscribers was mainly driven by reduced low-ARPU prepaid subscribers
    • Jamaica: subscribers grew by 3,000 as we continued to target increased market share
    • Bahamas: our subscriber base fell by 24,000 following the entry of a new competitor into the market in late 2016
    • Chile: added 14,000 subscribers in total, a record quarter, as we continued to successfully focus on penetrating our fixed subscriber base with our postpaid product

Revenue Highlights - LiLAC Group

On May 16, 2016, a subsidiary of Liberty Global acquired CWC. Accordingly, CWC has been included in our financial results under our U.S. GAAP accounting policies since the acquisition date. The following table presents (i) revenue of each of our consolidated reportable segments for the comparative periods and (ii) the percentage change from period to period on a reported and a rebased basis:

    Three months ended   Increase   Six months ended   Increase/(decrease)
June 30, June 30,
Revenue 2017   2016 %   Rebased % 2017   2016 %   Rebased %
in millions, except % amounts
 
LiLAC Division:
CWC $ 582.7 $ 285.6 104.0 0.7 $ 1,158.3 $ 285.6 305.6 (1.8 )
Chile 231.1 210.6 9.7 7.6 460.4 410.6 12.1 7.4
Puerto Rico 108.3   106.9   1.3   1.3   215.0   210.8   2.0   2.0  
Total LiLAC Division 922.1 603.1 52.9 2.4 1,833.7 907.0 102.2 0.8
Intersegment eliminations (1.2 ) (0.2 ) N.M. N.M. (1.9 ) (0.2 ) N.M. N.M.
Total LiLAC Group $ 920.9   $ 602.9   52.7   2.4   $ 1,831.8   $ 906.8   102.0   0.8  

N.M. - Not Meaningful

  • Reported revenue for the three and six months ended June 30, 2017 increased by 53% and 102%, respectively
    • The Q2 and YTD results were primarily driven by the acquisition of CWC and organic growth
  • From a rebased perspective, revenue increased 2% and 1% for the three and six months ended June 30, 2017, respectively, and included a favorable $6 million and $8 million impact in each of the Q2 and YTD periods, respectively, for wholesale revenue recognized on a cash basis related to services provided to a significant customer in prior quarters

Q2 2017 Rebased Revenue Growth - Segment Highlights

  • CWC: rebased revenue grew 1% overall. Our Caribbean region reported rebased revenue growth of 3% in Q2, including growth of 15% in Jamaica, with strength across all products, in particular mobile and managed services, more than offsetting weakness in other markets. Revenue from wholesale connectivity across our sub-sea and terrestrial networks and B2B in Latin American markets also grew strongly, rising by 13% on a rebased basis. Revenue declined by 2% on a rebased basis in Panama, as growing fixed-line services were offset by lower managed services, and by 12% on a rebased basis in the Bahamas, primarily due to weak mobile performance caused by the increased competition mentioned above
  • Chile: robust rebased revenue growth of 8% for Q2 2017 primarily related to higher ARPU per RGU and an increase in the average number of subscribers as well as increased mobile subscription revenue, driven by subscriber growth
  • Puerto Rico: rebased revenue growth of 1% was driven by subscriber growth over the last twelve months and Puerto Rico's B2B business

Operating Income - LiLAC Group

  • Operating income (loss) of $159 million and ($21 million) in Q2 2017 and Q2 2016, respectively, and $297 million and $39 million for the six months ended June 30, 2017 and 2016, respectively
  • These increases were primarily driven by the net effect of (i) increases in OCF, as further described below, (ii) increases in depreciation and amortization, largely due to the inclusion of CWC, and (iii) declines in impairment, restructuring and other operating items, net

Operating Cash Flow Highlights - LiLAC Group

The following table presents (i) OCF of each of our consolidated reportable segments for the comparative periods and (ii) the percentage change from period to period on a reported and a rebased basis:

    Three months ended   Increase/(decrease)   Six months ended   Increase/(decrease)
June 30, June 30,
OCF 2017   2016 %   Rebased % 2017   2016 %   Rebased %
in millions, except % amounts
 
LiLAC Division:
CWC $ 224.1 $ 101.0 121.9 11.4 $ 437.2 $ 101.0 332.9 (6.1 )
Chile 92.3 81.8 12.8 10.6 183.9 158.1 16.3 11.3
Puerto Rico 53.8   50.0   7.6   7.4   105.1   96.8   8.6   8.6  

Total LiLAC Division

370.2 232.8 59.0 10.6 726.2 355.9 104.0 (0.2 )
Corporate and other (2.2 ) (1.7 ) (29.4 ) (37.5 ) (4.3 ) (2.9 ) (48.3 ) (53.6 )
Total segment OCF $ 368.0   $ 231.1   59.2   10.5   $ 721.9   $ 353.0   104.5   (0.4 )
 
OCF Margin 40.0 % 38.3 % 39.4 % 38.9 %
 
  • Reported OCF for the three and six months ended June 30, 2017 increased 59% and 105%, respectively, primarily as a result of the acquisition of CWC
  • From a rebased perspective, OCF increased 10.5% and remained flat for the three and six months ended June 30, 2017, respectively

Q2 2017 Rebased OCF Growth - Segment Highlights

  • CWC: rebased OCF growth of 11% was driven by (i) the aggregate favorable impact of higher integration costs and higher bad debts in Q2 2016 and the reassessment of certain accruals in Q2 2017, (ii) an increased gross margin contribution from our managed services business, boosted by an improved mix of services in Q2 2017, and (iii) reduced pension, consultancy, travel and office expenses. These factors were partially offset by higher content costs, primarily related to the Premier League rights
  • Chile: rebased OCF increase of 11% was driven by the aforementioned revenue growth and ongoing cost efficiencies
  • Puerto Rico: rebased OCF growth of 7% was primarily supported by lower direct costs and an increase in revenue

Net Loss - LiLAC Group

  • Net losses were $22 million and $115 million for the three months ended June 30, 2017 and 2016, respectively, and $33 million and $154 million for the six months ended June 30, 2017 and 2016, respectively

Property and Equipment Additions - LiLAC Group

    Three months ended     Six months ended
June 30, June 30,
2017     2016 2017     2016
in millions, except % amounts
Customer premises equipment $ 36.2 $ 33.1 $ 81.6 $ 71.7
New Build & Upgrade 12.0 10.7 26.6 24.5
Capacity 8.3 14.7 17.7 22.3
Baseline 8.7 17.3 16.3 22.3
Product & Enablers 5.3 4.0 7.0 10.5
CWC 100.4   53.6   160.9   53.6  
Property and equipment additions $ 170.9   $ 133.4   $ 310.1   $ 204.9  
 
Property and equipment additions as % of revenue 18.6 % 22.1 % 16.9 % 22.6 %
 
  • The increase in property and equipment additions in absolute terms was driven primarily by (i) an increase due to the impact of the CWC acquisition and (ii) an increase in expenditures for the purchase and installation of customer premises equipment
  • We now expect the percentage of revenue represented by our property and equipment additions to range from 19% to 21% for the LiLAC Group in 2017. This represents a decrease from our previous guidance of 21% to 23%

Consolidated Statements of Cash Flows - LiLAC Group

        Six months ended    
June 30,
2017     2016 Variance
in millions
Net cash provided (used) by:
Operating Activities $ 299.4 $ 105.8 $ 193.6
Investing Activities $ (252.6 ) $ (170.8 ) $ (81.8 )
Financing Activities $ 2.2 $ 282.9 $ (280.7 )
 
  • Operating Activities: the increase in cash provided was primarily attributable to the net effect of (i) an increase in cash provided by OCF and related working capital items and (ii) higher interest payments
  • Investing Activities: the increase in cash used was primarily due to higher payments for capital expenditures
  • Financing Activities: the decrease in net cash provided was primarily attributable to lower net borrowings of debt, partially offset by higher cash payments associated with the repurchase of shares

The inclusion of CWC in the 2017 period accounted for the majority of these changes.

Adjusted Free Cash Flow - LiLAC Group

    Three months ended     Six months ended
June 30, June 30,
2017     2016 2017     2016
in millions
Adjusted Free Cash Flow $ 114.0 $ (35.3 ) $ 56.0 $ (15.4 )
 
  • The Q2 increase, as compared to the prior-year period, was attributable to:
    • Higher cash provided from OCF and related working capital items
    • Lower cash taxes, partially driven by a $27 million tax refund received from the Chilean government
    • Lower interest payments (including related derivative instruments)
    • Lower capital expenditures
  • The YTD increase, as compared to the prior-year period, was attributable to the net effect of:
    • Higher cash provided from OCF and related working capital items
    • Higher interest payments (including related derivative instruments)
    • Higher capital expenditures
    • Lower cash taxes
  • The inclusion of CWC in the full-2017 periods impacted the variances mentioned above
  • On a net basis, our vendor financing programs resulted in approximately $21 million and $26 million of higher adjusted free cash flow in Q2 and YTD 2017, respectively, as compared to the prior-year periods
  • All three LiLAC Group credit pools generated positive Adjusted FCF in H1 2017

Leverage and Liquidity - LiLAC Group (at June 30, 2017)

  • Total capital leases and principal amount of third-party debt: $6.2 billion
  • Leverage ratios: consolidated gross and net leverage ratios22 of 4.2x and 3.8x, respectively
  • Average debt tenor13: over 5.0 years, with over 90% not due until 2021 or beyond
  • Borrowing costs12: blended fully-swapped borrowing cost of our third-party debt was 6.4%
  • Liquidity: approximately $1.6 billion, including $599 million of cash and $1.0 billion of aggregate unused borrowing capacity23 under our credit facilities

Forward-Looking Statements and Disclaimer

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements with respect to our strategies, future growth prospects and opportunities; our expectations with respect to subscribers, revenue, ARPU per RGU, OCF and Adjusted FCF; expectations with respect to the development, enhancement and expansion of our superior networks and innovative and advanced products and services; statements regarding our planned spin-off of the businesses attributed to the LiLAC Group and the anticipated impacts and benefits of such transaction; future P&E additions as a percentage of revenue; expectations regarding our share buyback programs; the strength of our balance sheet and tenor of our third-party debt; statements regarding our JV in the Netherlands 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 materially from those expressed or implied by these statements. These risks and uncertainties include the continued use by subscribers and potential subscribers of our and our affiliates’ services and their willingness to upgrade to our more advanced offerings; our and our affiliates’ ability to meet challenges from competition, to manage rapid technological change or to maintain or increase rates to subscribers or to pass through increased costs to subscribers; the effects of changes in laws or regulation; general economic factors; our and our affiliates’ ability to obtain regulatory approval and satisfy regulatory conditions associated with acquisitions and dispositions; our and affiliates’ ability to successfully acquire and integrate new businesses and realize anticipated efficiencies from acquired businesses; the availability of attractive programming for our and our affiliates’ video services and the costs associated with such programming; our and our affiliates’ ability to achieve forecasted financial and operating targets; the outcome of any pending or threatened litigation; the ability of our operating companies and affiliates to access cash of their respective subsidiaries; the impact of our operating companies' and affiliates’ future financial performance, or market conditions generally, on the availability, terms and deployment of capital; fluctuations in currency exchange and interest rates; the ability of suppliers and vendors (including our third-party wireless network providers under our MVNO arrangements) to timely deliver quality products, equipment, software, services and access; our and our affiliates’ ability to adequately forecast and plan future network requirements including the costs and benefits associated with network expansions; and other factors detailed from time to time in our filings with the Securities and Exchange Commission, including our most recently filed Form 10-K, as amended, and Form 10-Q. These forward-looking statements speak only as of the date of this release. We expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

Nothing in this press release constitutes an offer of any securities for sale.

About Liberty Global

Liberty Global is the world’s largest international TV and broadband company, with operations in more than 30 countries across Europe, Latin America and the Caribbean. We invest in the infrastructure that empowers our customers to make the most of the digital revolution. Our scale and commitment to innovation enable us to develop market-leading products delivered through next-generation networks that connect our 25 million customers who subscribe to 51 million television, broadband internet and telephony services. We also serve over 10 million mobile subscribers and offer WiFi service across 10 million access points.

Liberty Global’s businesses are comprised of two stocks: the Liberty Global Group (NASDAQ: LBTYA, LBTYB and LBTYK) for our European operations, and the LiLAC Group (NASDAQ: LILA and LILAK, OTC Link: LILAB), which consists of our operations in Latin America and the Caribbean.

The Liberty Global Group operates in 12 European countries under the consumer brands Virgin Media, Unitymedia, Telenet and UPC. The Liberty Global Group also owns 50% of VodafoneZiggo, a Dutch joint venture, which has 4 million customers, 10 million fixed-line subscribers and 5 million mobile subscribers. The LiLAC Group operates in over 20 countries in Latin America and the Caribbean under the consumer brands VTR, Flow, Liberty, Más Móvil and BTC. In addition, the LiLAC Group operates a sub-sea fiber network throughout the region connecting over 40 markets.

For more information, please visit www.libertyglobal.com or contact:

Investor Relations:         Corporate Communications:
Oskar Nooij +1 303 220 4218 Matt Beake     +44 20 8483 6428
Christian Fangmann +49 221 84 62 5151 Rebecca Pike +44 20 8483 6216
John Rea +1 303 220 4238
 

Footnotes

1   The Liberty Global ordinary shares and the LiLAC ordinary shares are tracking shares. Tracking shares are intended by the issuing company to reflect or “track” the economic performance of a particular business or “group,” rather than the economic performance of the company as a whole. The Liberty Global ordinary shares and the LiLAC ordinary shares are intended to “track” the economic performance of the Liberty Global Group and the LiLAC Group, respectively (each as defined and described below). For more information regarding the tracking shares, see note 1 to our condensed consolidated financial statements included in our Form 10-Q. While the LiLAC Group and the Liberty Global Group have separate collections of businesses, assets and liabilities attributed to them, neither group is a separate legal entity. The LiLAC Group comprises our operations in Latin America and the Caribbean and has attributed to it CWC, VTR and Liberty Puerto Rico. The Liberty Global Group comprises our businesses, assets and liabilities not attributed to the LiLAC Group, including Virgin Media, Unitymedia, UPC Holding, Telenet and, through December 31, 2016, Ziggo Group Holding. The condensed consolidated financial statements of Liberty Global are included in our Form 10-Q. For attributed financial information of the Liberty Global Group and the LiLAC Group, see Exhibit 99.1 to our Form 10-Q.
2

Please see Footnotes for Operating Data and Subscriber Variance Tables for the definition of RGUs. Organic figures exclude RGUs of acquired entities at the date of acquisition and other nonorganic adjustments, but include the impact of changes in RGUs from the date of acquisition. All subscriber/RGU additions or losses refer to net organic changes, unless otherwise noted.

3 As we no longer consolidate the Netherlands effective December 31, 2016, we have removed the Netherlands from certain information presented for periods prior to December 31, 2016 to enhance comparability.
4 Our next-generation video base consists of Horizon TV, TiVo (in the U.K.), Digital TV with a Horizon-like user interface (Yelo in Belgium) as well as Horizon-Lite set-top boxes.
5

Please see Revenue and Operating Cash Flow for information on rebased growth.

6

Please see OCF Definition and Reconciliation for our Operating Cash Flow ("OCF") definition and the required reconciliations.

7 Total B2B includes subscription (SOHO) and non-subscription revenue.
8 Average Revenue Per Unit (“ARPU”) refers to the average monthly subscription revenue (subscription revenue excludes interconnect, channel carriage fees, mobile handset sales, late fees and installation fees) per average customer relationship or mobile subscriber, as applicable. ARPU per average customer relationship is calculated by dividing the average monthly subscription revenue from residential cable and SOHO services by the average of the opening and closing balances for customer relationships for the period. ARPU per average mobile subscriber is calculated by dividing residential mobile and SOHO revenue for the indicated period by the average of the opening and closing balances for mobile subscribers for the period. Unless otherwise indicated, ARPU per customer relationship or mobile subscriber is not adjusted for currency impacts. ARPU per RGU refers to average monthly revenue per average RGU, which is calculated by dividing the average monthly subscription revenue from residential and SOHO services for the indicated period, by the average of the opening and closing balances of the applicable RGUs for the period. Unless otherwise noted, ARPU in this release is considered to be ARPU per average customer relationship or mobile subscriber, as applicable. Customer relationships, mobile subscribers and RGUs of entities acquired during the period are normalized.
9 Please see Liberty Global's 8-K/A filed on March 28, 2017.
10 On May 16, 2016, we acquired Cable & Wireless Communications Limited ("CWC").
11 A reconciliation of our LiLAC OCF guidance for 2017 to a U.S. GAAP measure is not provided due to the fact that not all elements of the reconciliation is projected as part of our forecasting process, as certain items may vary significantly from one period to another. For example, impairments or other operating charges such as direct acquisition costs are contingent upon the underlying activity, which cannot be reasonably forecasted. FX rates as of February 12, 2017.
12 Our blended fully-swapped debt borrowing cost represents the weighted average interest rate on our aggregate variable- and fixed-rate indebtedness (excluding capital leases and including vendor financing obligations), including the effects of derivative instruments, original issue premiums or discounts and commitment fees, but excluding the impact of financing costs.
13 For purposes of calculating our average tenor, total third-party debt excludes vendor financing.
14 Liquidity refers to cash and cash equivalents plus the maximum undrawn commitments under subsidiary borrowing facilities, without regard to covenant compliance calculations.
15

Please see Footnotes for Operating Data and Subscriber Variance Tables for the definition of mobile subscribers.

16 Our residential fixed business consists of our fixed-line triple-play and DTH businesses, but excludes SOHO services. Residential fixed also excludes the framework services revenue from the VodafoneZiggo JV and our small Irish broadcasting businesses.
17

Please see Adjusted Free Cash Flow Definition and Reconciliation for information on Adjusted Free Cash Flow (“FCF”) and the required reconciliations. For more detailed information concerning our operating, investing and financing cash flows, see the condensed consolidated statements of cash flows included in our Form 10-Q. A reconciliation of our 2017 FCF guidance to a U.S. GAAP measure is not provided due to the fact that not all elements of the reconciliation are projected as part of our forecasting process, as certain items may vary significantly from one period to another. Adjusted FCF guidance is based on FX rates as of February 12, 2017.

18

Please see Footnotes for Operating Data and Subscriber Variance Tables for the definition of Customer Relationships.

19 On February 11, 2016, Telenet acquired Telenet Group BVBA ("BASE").
20 OCF margin is calculated by dividing OCF by total revenue for the applicable period.
21 Our property and equipment additions include our capital expenditures on an accrual basis and amounts financed under vendor financing or capital lease arrangements.
22 Our gross and net debt ratios are defined as total debt and net debt to annualized OCF of the latest quarter. Net debt is defined as total debt less cash and cash equivalents. For purposes of these calculations, debt is measured using swapped foreign currency rates, consistent with the covenant calculation requirements of our subsidiary debt agreements, and, in the case of the Liberty Global Group, excludes the loans backed or secured by the shares we hold in ITV plc, Sumitomo Corporation and Lions Gate Entertainment Corp. For Liberty Global Group, our gross and net leverage ratios are adjusted to reflect the €600 million ($685 million) redemption of certain UPC Holding senior notes that took place on July 7, 2017. The net proceeds from the June financing transaction used to redeem these notes were held in escrow at June 30, 2017.
23 Our aggregate unused borrowing capacity of $4.6 billion represents the maximum undrawn commitments under our subsidiaries' applicable facilities without regard to covenant compliance calculations. This consists of $3.6 billion attributed to the Liberty Global Group and $1.0 billion attributed to the LiLAC Group. Upon completion of the relevant June 30, 2017 compliance reporting requirements for our credit facilities, and assuming no further changes from quarter-end borrowing levels, with the exception of (i) the €600 million ($685 million) redemption of certain UPC Holding senior notes that took place on July 7, 2017 and (ii) the July 3, 2017 drawdown of $50.0 million under the CWC Revolving Credit Facility and the removal of the limitation related to letters of credit issued in connection with certain CWC pension obligations, we anticipate that our subsidiaries' borrowing capacity would be $4.5 billion. This consists of $3.5 billion attributed to the Liberty Global Group and $958 million attributed to the LiLAC Group. LiLAC cash of $599 million includes $325 million of cash held by CWC, substantially all of which is held by CWC subsidiaries. For information regarding limitations on CWC's ability to access this cash, see the discussion under "Material Changes in Financial Condition" in our Form 10-Q.
 
 

Balance Sheets, Statements of Operations and Statements of Cash Flows

The consolidated balance sheets, statements of operations and statements of cash flows of Liberty Global are included in our 10-Q. For attributed financial information of the Liberty Global Group and the LiLAC Group, see Exhibit 99.1 to our 10-Q.

Rebase Information

For purposes of calculating rebased growth rates on a comparable basis for all businesses that we owned during 2017, we have adjusted our historical revenue and OCF for the three and six months ended June 30, 2016 to (i) include the pre-acquisition revenue and OCF of certain entities acquired during 2016 and 2017 in our rebased amounts for the three and six months ended June 30, 2016 to the same extent that the revenue and OCF of such entities are included in our results for the three and six months ended June 30, 2017, (ii) exclude the revenue and OCF of Ziggo Group Holding and a sports channel that were contributed to the VodafoneZiggo JV at the end of December 31, 2016, (iii) include revenue for the framework services agreement with the VodafoneZiggo JV and certain associated operating and SG&A expenses that had been allocated to our Netherlands segment during the 2016 periods in our rebased amounts for the three and six months ended June 30, 2016 as if the framework services agreement had been in place at the beginning of 2016, (iv) exclude the revenue and OCF of multi-channel multi-point (microwave) distribution system subscribers in Ireland that have disconnected since we announced the switch-off of this service effective April 2016 for the six months ended June 30, 2016 to the same extent that the revenue and OCF of these subscribers is excluded from our results for the six months ended June 30, 2017 (v) exclude the revenue and OCF of two small disposals made in Belgium during Q1 2017 to the same extent that the revenue and OCF of these disposed businesses is excluded from our results for the three and six months ended June 30, 2017 and (vi) reflect the translation of our rebased amounts for the three and six months ended June 30, 2016 at the applicable average foreign currency exchange rates that were used to translate our results for the three and six months ended June 30, 2017. We have included CWC, SFR and five small entities in whole or in part in the determination of our rebased revenue and OCF for the three months ended June 30, 2016. We have included CWC, SFR, BASE and five small entities in whole or in part in the determination of our rebased revenue and OCF for the six months ended June 30, 2016. We have reflected the revenue and OCF of the acquired entities in our 2016 rebased amounts based on what we believe to be the most reliable information that is currently available to us (generally pre-acquisition financial statements), as adjusted for the estimated effects of (a) any significant differences between Generally Accepted Accounting Principles in the United States (“U.S. GAAP”) and local generally accepted accounting principles, (b) any significant effects of acquisition accounting adjustments, (c) any significant differences between our accounting policies and those of the acquired entities and (d) other items we deem appropriate. We do not adjust pre-acquisition periods to eliminate nonrecurring items or to give retroactive effect to any changes in estimates that might be implemented during post-acquisition periods. As we did not own or operate the acquired businesses during the pre-acquisition periods, no assurance can be given that we have identified all adjustments necessary to present the revenue and OCF of these entities on a basis that is comparable to the corresponding post-acquisition amounts that are included in our historical results or that the pre-acquisition financial statements we have relied upon do not contain undetected errors. The adjustments reflected in our rebased amounts have not been prepared with a view towards complying with Article 11 of Regulation S-X. In addition, the rebased growth percentages are not necessarily indicative of the revenue and OCF that would have occurred if these transactions had occurred on the dates assumed for purposes of calculating our rebased amounts or the revenue and OCF that will occur in the future. The rebased growth percentages have been presented as a basis for assessing growth rates on a comparable basis, and are not presented as a measure of our pro forma financial performance.

The following table provides adjustments made to the 2016 amounts to derive our rebased growth rates for the Liberty Global Group and the LiLAC Group:

    Revenue     OCF

Three months
ended June 30,

   

Six months
ended June 30,

Three months
ended June 30,

   

Six months
ended June 30,

2016 2016 2016 2016
Liberty Global Group in millions
Acquisitions $ 18.1 $ 104.2 $ 0.2 $ 13.9
Contribution of Ziggo Group Holding to the VodafoneZiggo JV and other dispositions (a) (659.7 ) (1,308.9 ) (341.5 ) (686.4 )
Foreign Currency (224.9 ) (501.3 ) (97.7 ) (218.1 )
Total decrease $ (866.5 ) $ (1,706.0 ) $ (439.0 ) $ (890.6 )
 
LiLAC Group
Acquisitions $ 296.9 $ 902.5 $ 101.6 $ 368.8
Foreign Currency (0.7 ) 7.6   0.2   2.8  
Total increase $ 296.2   $ 910.1   $ 101.8   $ 371.6  
(a)   In connection with the December 31, 2016 closing of the VodafoneZiggo JV transaction, we entered into a Framework Agreement that provides for the terms under which we provide services to the VodafoneZiggo JV. These adjustments to revenue and OCF are net of $32 million and $63 million of revenue for Q2 and YTD 2016, respectively, that we assumed would have been earned if the Framework Agreement had been in place on January 1, 2016.
 
 

OCF Definition and Reconciliation

As used herein, OCF has the same meaning as the term "Adjusted OIBDA" that is referenced in our Form 10-Q. OCF is the primary measure used by our chief operating decision maker to evaluate segment operating performance. OCF is also a key factor that is used by our internal decision makers to (i) determine how to allocate resources to segments and (ii) evaluate the effectiveness of our management for purposes of annual and other incentive compensation plans. As we use the term, OCF is defined as operating income before depreciation and amortization, share-based compensation, provisions and provision releases related to significant litigation and impairment, restructuring and other operating items. Other operating items include (a) gains and losses on the disposition of long-lived assets, (b) third-party costs directly associated with successful and unsuccessful acquisitions and dispositions, including legal, advisory and due diligence fees, as applicable, and (c) other acquisition-related items, such as gains and losses on the settlement of contingent consideration. Our internal decision makers believe OCF is a meaningful measure because it represents a transparent view of our recurring operating performance that is unaffected by our capital structure and allows management to (1) readily view operating trends, (2) perform analytical comparisons and benchmarking between segments and (3) identify strategies to improve operating performance in the different countries in which we operate. We believe our OCF measure is useful to investors because it is one of the bases for comparing our performance with the performance of other companies in the same or similar industries, although our measure may not be directly comparable to similar measures used by other public companies. OCF should be viewed as a measure of operating performance that is a supplement to, and not a substitute for, operating income, net earnings or loss, cash flow from operating activities and other U.S. GAAP measures of income or cash flows. A reconciliation of our operating income to total segment OCF is presented in the following table:

    Three months ended     Six months ended
June 30, June 30,
2017     2016 2017     2016
in millions
Consolidated Liberty Global
Operating income $ 641.9 $ 487.8 $ 1,211.1 $ 1,074.4
Share-based compensation expense 56.4 74.6 95.4 143.6
Depreciation and amortization 1,371.4 1,553.0 2,693.6 2,988.5
Impairment, restructuring and other operating items, net 31.6   190.3   59.8   214.7  
Total segment OCF $ 2,101.3   $ 2,305.7   $ 4,059.9   $ 4,421.2  
 
Liberty Global Group
Operating income $ 483.2 $ 508.7 $ 914.4 $ 1,035.3
Share-based compensation expense 53.4 71.4 86.8 138.6
Inter-group fees and allocations (3.0 ) (2.1 ) (6.0 ) (4.2 )
Depreciation and amortization 1,178.5 1,426.9 2,306.8 2,810.1
Impairment, restructuring and other operating items, net 21.2   69.7   36.0   88.4  
Total segment OCF $ 1,733.3   $ 2,074.6   $ 3,338.0   $ 4,068.2  
 
LiLAC Group
Operating income (loss) $ 158.7 $ (20.9 ) $ 296.7 $ 39.1
Share-based compensation expense 3.0 3.2 8.6 5.0
Inter-group fees and allocations 3.0 2.1 6.0 4.2
Depreciation and amortization 192.9 126.1 386.8 178.4
Impairment, restructuring and other operating items, net 10.4   120.6   23.8   126.3  
Total segment OCF $ 368.0   $ 231.1   $ 721.9   $ 353.0  
 
 

Summary of Debt, Capital Lease Obligations and Cash and Cash Equivalents

The following table1 details the U.S. dollar equivalent balances of the outstanding principal amount of our debt, capital lease obligations and cash and cash equivalents at June 30, 2017:

...
        Capital     Debt & Capital     Cash
Lease Lease and Cash
Debt2 Obligations Obligations Equivalents
in millions
Liberty Global and Liberty Global Group unrestricted subsidiaries