Subscriber Additions Up 35% YTD, including 284,000 RGUs in
Q3
Operating Income up 60% YoY in Europe and 108% for LiLAC in
Q3
Rebased OCF Growth >5% in Q3 for both Europe (ex Ziggo)
& LiLAC
Additional LiLAC/CWC Synergies of $150 Million by Year End
2020
Repurchased ~$640 Million of Equity in Q3, Totaling $1.6
Billion YTD
Liberty Global plc ("Liberty Global") (NASDAQ: LBTYA, LBTYB,
LBTYK, LILA and LILAK), today announces financial and operating
results for the three months ("Q3") and nine months ("YTD") ended
September 30, 2016 for the Liberty Global Group1 and the LiLAC
Group1.
CEO Mikes Fries stated, "As we signaled on our last investor
call, our Q3 results reflect the acceleration in operating
performance that we anticipated in Europe (excluding Ziggo), where
we generated over 5% rebased2 OCF3 growth. This result was the
by-product of strong performances at Unitymedia and Virgin Media,
which posted 7% and 6% rebased OCF growth, respectively, as well as
operating efficiencies from our Liberty Go program. With respect to
top-line drivers, our YTD subscriber additions in Europe were up
nearly 50%, while customer ARPU4 in Q3 increased 3% year-over-year.
This growth was due in part to our success with quad-play offers
and our advanced video and OTT services. Our B2B5 business in
Europe delivered another quarter of solid results, bringing our YTD
rebased revenue growth to 9%. In addition, our new build
activities, which are underway in nearly all markets, continue to
deliver promising results. At the end of Q3, we had built nearly
850,0006 new homes across Europe this year, and we are on pace to
deliver over 1.3 million homes by year end. We are confirming our
full-year 2016 financial targets for our European business,
including better cash flow growth in Q4, but we expect to end up at
the lower end of our 4-5% rebased OCF growth range due to the
phasing of our new build program and the impact of certain
commercial initiatives in the U.K."
"On the M&A front, we continue to expect that our joint
venture with Vodafone in the Netherlands will close around the end
of the year. During the quarter, we took steps to recapitalize the
combined entity's balance sheet and raised an additional $3.2
billion of debt, of which we expect to receive 50% of the proceeds
at closing. We will also receive up to an additional €1 billion at
closing, subject to adjustment, from Vodafone to equalize ownership
in the JV. Also of note, we announced the proposed acquisition of
the third largest cable operator in Poland, Multimedia Polska, in
October. This will significantly expand the reach of our
market-leading platform in that market, and will allow us to drive
further efficiencies across our business."
"LiLAC, our Latin American and Caribbean tracking stock,
reported 5% rebased OCF growth in Q3. CWC's7 Q3 financial results
were below our expectations, but we have already started laying the
groundwork for improved future performance. We now expect LiLAC
Group, excluding Cable & Wireless, to achieve 6% rebased OCF
growth for full year 2016. With respect to CWC, we expect that the
business will deliver OCF between $215 and $225 million8 in Q4
2016, including the estimated negative impact of Hurricane Matthew.
To further support future growth, we have now reviewed our combined
asset base and we expect to deliver $150 million of new LiLAC/CWC
synergies by year-end 2020, which are over and above the $125
million of efficiencies already announced between CWC and Columbus.
Our view of LiLAC’s combined OCF growth remains robust, and within
the previously disclosed 7-9% target range over the next few
years.”
"Our balance sheet remains in great shape with nearly $4.6
billion of total liquidity9, including around $500 million of cash
on hand for each of Liberty Global and LiLAC Group. During the
quarter, we aggressively purchased approximately $640 million of
Liberty Global Group stock, upping our year-to-date total to $1.6
billion of buybacks. Over the next five quarters, we look forward
to purchasing an additional $2.4 billion of additional Liberty
Global Group equity, fulfilling our $4 billion stock repurchase
program by the end of 2017."
European Highlights
- YTD organic RGU10 additions up 47%
year-over-year, including 257,000 additions in Q3
- Supported by a 40% year-over-year
decline in video attrition in Q3
- Virgin Media (U.K.) generated 92,000
RGU adds, its best Q3 result in seven years
- 89,000 RGU additions in Germany, driven
by September "Highspeed Weeks" promotion
- Supported by new build investments, we
added 27,000 organic customer relationships13 in Q3
- Q3 operating income up 60% YoY, rebased
OCF growth excluding Ziggo of 5.2%
- New build program delivered 843,0006
homes YTD, over 1.3 million expected by YE 2016
Liberty Global Group (Europe)
Q3 2016
YOY Growth* YTD 2016
YOY Growth*
Subscribers
RGU Net Adds 256,500 (13 )% 622,400 47 %
Financial (in USD
millions, unless noted)
Revenue
$
4,313 2
%
$
13,068 3 % OCF 2,060 3
%
6,128 2 % Operating Income 764 60
%
1,799 17 % Adjusted FCF 11 558 - 970 - Cash provided by
operating activities 1,253 - 3,814 - Cash used by investing
activities (430 ) - (2,833 ) - Cash used by financing activities
(1,106 ) - (1,215 ) -
* Revenue and OCF YoY Growth Rates are
Rebased Growth Rates
LiLAC Group Highlights
- Legacy LiLAC Group (VTR + LCPR)
expected to achieve ~6% rebased OCF growth in 2016
- Cable & Wireless ("CWC") Q4 U.S.
GAAP OCF results expected to be $215-$225 million
- Additional synergies due to LiLAC/CWC
integration expected to total $150 mm by 2020
- Approximately 50% of synergies are
OCF-related and 50% are capex-related
Liberty Latin America & Caribbean Q3 2016
YOY Growth* YTD 2016
YOY Growth*
Subscribers
RGU Net Adds 27,200 16
%
94,200 (8 )%
Financial (in USD
millions, unless noted)
Revenue
$
894 (1 )%
$
1,801 1
%
OCF 355 5
%
708 5
%
Operating Income 139 108
%
178 (4 )% Adjusted FCF (39 ) - (55 ) - Cash provided by
operating activities 122 - 228 - Cash used by investing activities
(137 ) - (308 ) - Cash provided (used) by financing activities (13
) - 270 -
* Revenue and OCF YoY Growth Rates are
Rebased Growth Rates
Subscriber Statistics - Liberty Global Group (Europe)
At the end of Q3, the Liberty Global Group provided 26 million
unique customers with 54 million fixed-line subscription services
("RGUs") across our footprint of 50 million homes passed12 in
Europe. During Q3, we increased our subscriber base by 257,000
organic RGUs, resulting in 22.5 million video, 17.3 million
broadband internet and 14.4 million fixed-line telephony
subscribers at September 30, 2016. Supported by new build
initiatives across most of our markets, we added 27,000 organic
customer relationships13, our best quarterly result in nearly two
years. We ended Q3 2016 with a bundling ratio of 2.1 RGUs per
customer, as 46% of our customers subscribed to triple-play (11.9
million), 18% to double-play (4.5 million) and 36% to single-play
products (9.3 million).
Regionally, our Q3 2016 organic subscriber growth consisted of
159,000 and 98,000 RGU additions in Western Europe and Central and
Eastern Europe ("CEE"), respectively. In the U.K., Virgin Media
added 92,000 RGUs, its best Q3 performance in seven years,
supported by a combination of our attractive bundles featuring
superior broadband speeds and new build activity. Our German
operation reported 89,000 RGU additions in Q3, powered by the
reintroduction of our "Highspeed Weeks" campaign in September,
which drove 75% of sales into our high-tier bundles. In the
Netherlands, we reported an 11,000 subscriber loss, our lowest
quarterly RGU attrition in two years. This result was mainly due to
higher sequential sales related to our successful marketing
campaigns and lower year-over-year churn associated with
investments in our product propositions and customer service
programs.
Elsewhere in Europe, Telenet added 4,000 RGUs, a decline from
the prior year period, primarily as a result of lower telephony
additions. Of note, our innovative, converged product "WIGO"
resonated well in the Belgian market as Telenet sold 100,000
quad-play bundles during Q3. Meanwhile, in Switzerland, UPC lost
13,000 RGUs during Q3, a result identical to the prior-year period,
as improvements in video churn were offset by weakness in broadband
internet and fixed-line telephony. In late September we launched
new product portfolios in Switzerland. The "Connect" portfolio
features significantly faster broadband speeds along with a basic
TV offer, with the option to upgrade to include Horizon TV and
increased broadband speeds. In terms of our video performance, we
lost 39,000 subscribers in Q3 2016, which was a significant
improvement versus our video attrition of 62,000 in Q3 2015. This
result was mainly driven by 11,000 net video additions in the U.K.
on the back of Project Lightning, as well as lower churn in the
Netherlands, where Ziggo's video attrition dropped 56% from 44,000
in the prior-year period to 19,000 in Q3 2016.
At the end of Q3, we had 14.3 million enhanced video
subscribers14 , representing 66% penetration15 , and 7.4 million
basic video subscribers16 . With respect to our next-generation17
video subscriber base, which includes TiVo, Horizon TV (including
Horizon-Lite) and Yelo TV, we added 278,000 subscribers in Q3 2016.
Horizon TV (excluding Horizon-Lite), added 155,000 subscribers,
including 79,000 in the Netherlands. As of mid-October, we also
began offering Horizon TV in Austria, confirming our product
leadership in that market. Meanwhile, Horizon-Lite, which provides
a Horizon-like user interface on legacy set-top boxes, continued to
grow in Hungary, Slovakia and the Czech Republic as our base
expanded by 53,000 in Q3 2016. Rounding out our next-generation
platforms, Virgin Media (U.K.) and Telenet added 67,000 and 3,000
next-generation video subscribers in Q3 to the TiVo and Yelo TV
platforms, respectively. Over 7.4 million subscribers, or 38% of
our total video base, subscribed to one of our innovative
next-generation TV platforms as of September 30, 2016, a
substantial increase as compared to 6.2 million or 31% at the end
of Q3 last year.
In addition to improvements in our video performance, organic
subscriber growth was bolstered by our broadband internet and
fixed-line telephony results. During the quarter, we added 178,000
broadband internet subscribers, led by 60,000 and 56,000 additions
in the U.K. and Germany, respectively. On the fixed-line telephony
front, our European operations delivered 117,000 organic RGU
additions.
Turning to our wireless business, we ended Q3 2016 with 6.8
million mobile subscribers18 . This was a sequential increase of
65,000 as compared to Q2 2016 and was driven by the addition of
122,000 postpaid subscribers that was only partially offset by a
decrease of 57,000 lower-ARPU prepaid subscribers. The increase was
mainly driven by our Western European operations with net
subscriber growth of 56,000, while our CEE countries contributed
9,000 additions. Our strong mobile growth in Western Europe was
primarily driven by solid performances in the Netherlands and
Switzerland, gaining 20,000 and 15,000 mobile subscribers,
respectively. In the U.K., our postpaid base grew by 24,000
subscribers, driven by SIM-only products and our split-contracts19
Freestyle proposition, which was partially offset by a decrease of
17,000 prepaid subscribers. Another notable performance in Q3 was
in Belgium, where our new converged WIGO offering has been
supporting postpaid growth, with net adds accelerating to 52,000 in
the quarter. This was partially offset by the loss of 40,000
prepaid subscribers from the former BASE business. Meanwhile, in
Switzerland, we added another 15,000 mobile subscribers during Q3
on the back of our "Mega Deal" campaign and continued to leverage
our retail presence as part of our Mobilezone retail store
agreement. We also added a combined 12,000 mobile subscribers in
Austria, Ireland, CEE and Germany. On the product innovation front,
our U.K. mobile 4G launch is anticipated by mid-November, while
during Q3 we introduced our split-contracts proposition and new
mobile B2B offerings in Austria.
Revenue - Liberty Global Group (Europe)
Revenue attributed to the Liberty Global Group increased 1% to
$4.3 billion and 2% to $13.1 billion for the three and nine months
ended September 30, 2016, respectively, as compared to the
corresponding 2015 periods. For both periods, our reported revenue
growth was driven primarily by the inclusion of BASE in Belgium and
organic revenue growth, partially offset by negative foreign
currency ("FX") movements, mainly related to the strengthening of
the U.S. dollar against the British pound. When adjusting to
neutralize the impact of acquisitions, dispositions and FX, our
operations attributed to the Liberty Global Group achieved
year-over-year rebased revenue growth of 2% and 3% during the three
and nine months ended September 30, 2016, respectively. When
excluding Ziggo, rebased revenue growth of the Liberty Global Group
for the Q3 and YTD period was 3% and 3.5%, respectively, as
compared to the corresponding 2015 periods.
Our rebased revenue performance during the Q3 and YTD periods
included the net effect of certain nonrecurring or non-operational
items. The most significant of these items during the three-month
comparison was a $9 million reduction in cable subscription revenue
resulting from a change in the regulations governing payment
handling fees that Virgin Media charges its customers in the U.K.
For the YTD comparison, the most significant of these items was (i)
a $19 million reduction in cable subscription revenue resulting
from the aforementioned regulatory change in the U.K. and (ii) the
favorable $12 million impact of higher amortization of deferred
upfront fees on B2B contracts in the U.K. Our rebased revenue
performance during the Q3 and YTD periods was also impacted by the
net negative impact of upfront recognition of mobile handset
revenue, primarily in connection with our split-contract programs
in the U.K., Belgium and Switzerland of $26 million and $5.5
million, respectively.
Geographically, we delivered 2% rebased revenue growth in
Western Europe during the quarter, while our Central and Eastern
European operations generated 4% rebased revenue growth. From a
country specific perspective, our Q3 performance was led by 6%
rebased revenue growth in Germany, driven by higher cable
subscription revenue as a result of increases to ARPU per RGU and
subscribers. Our largest operation, Virgin Media in the U.K. and
Ireland, recorded 3% rebased revenue growth. This performance was
attributable to the net benefit of higher cable subscription
revenue, primarily due to subscriber growth and improvements in
ARPU per RGU, increases in other revenue, primarily as a result of
an $8 million benefit in Q3 from higher mobile handset sales
pursuant to our split-contract program, and higher business
revenue, all of which was partially offset by lower mobile
subscription revenue, largely due to a $28 million decline from the
split-contract program in the U.K. Turning to the Netherlands,
Ziggo reported a nearly flat rebased revenue performance in Q3, our
best result in six quarters, as a lower average number of RGUs was
partially offset by higher ARPU per RGU and an increase in mobile
subscription revenue. Elsewhere in Western Europe, our
Switzerland/Austria segment posted 1% rebased revenue growth in Q3
as higher mobile revenue growth and an increase in ARPU per RGU was
partially offset by lower subscriber volumes. In Belgium, Telenet
reported 1% rebased revenue growth primarily due to higher cable
subscription revenue. Finally, our CEE region posted 4% rebased
revenue growth, mainly driven by subscriber growth, primarily in
Romania, Poland and Hungary, partially offset by lower ARPU per RGU
across the region.
Our B2B (including SOHO) and mobile (including interconnect and
handset sales)20, businesses reported 10% and 1% rebased revenue
growth, respectively, for the nine months ended September 30, 2016,
respectively.
Operating Income - Liberty Global Group (Europe)
For the three and nine months ended September 30, 2016,
operations attributed to the Liberty Global Group reported
operating income of $764 million and $1.8 billion, respectively,
representing increases of 60% and 17%, respectively, when compared
to the prior-year periods. These increases were primarily due to
(i) decreases in depreciation and amortization and (ii) decreases
in share-based compensation expense.
Operating Cash Flow - Liberty Global Group (Europe)
OCF for the operations attributed to the Liberty Global Group
remained flat at $2.1 billion and $6.1 billion for the three and
nine months ended September 30, 2016, respectively. The outcome for
both periods was the result of organic OCF growth and the
aforementioned inclusion of BASE21 being fully offset by the
adverse impact of FX movements, mainly related to the appreciation
of the U.S. dollar relative to the British pound. On a rebased
basis, the operations attributed to the Liberty Global Group
reported OCF growth for the three and nine months ended September
30, 2016 of 3% and 2%, respectively. When excluding Ziggo, the
rebased OCF growth of the Liberty Global Group for the Q3 and YTD
periods was 5% and 3%, respectively, as compared to the
corresponding 2015 periods.
The Liberty Global Group rebased OCF performance for the Q3
comparison included the net negative impact of certain items, the
most significant of which were the aforementioned nonrecurring or
non-operational revenue items. From a YTD perspective, our rebased
OCF performance included the net unfavorable revenue items
mentioned above and other items. The most significant of these
items were the $18 million negative impact of reduced network
infrastructure charges in the U.K. in YTD 2015 and the $24 million
positive impact of lower year-over-year Ziggo integration expenses
in the Netherlands.
Regionally, our operations in Western Europe posted 3% rebased
OCF growth in Q3 2016, while our CEE operations delivered 2%
rebased OCF growth. The CEE performance was our best quarterly
result in two years, supported by strong performances in Hungary
and our DTH business.
Looking at the Liberty Global Group's five largest operations,
our Q3 performance was driven by Unitymedia in Germany and Virgin
Media in the U.K./Ireland, which reported 7% and 6% rebased OCF
growth, respectively. Our performance in Germany was the result of
the aforementioned revenue drivers, while Virgin Media benefited
from higher revenue and a year-over-year margin expansion,
partially attributable to cost controls that more than offset
increased programming costs. Our operation in Belgium delivered 3%
rebased OCF growth, supported by marginal revenue growth and
operating efficiencies, partially offset by BASE integration costs.
In Switzerland/Austria, UPC reported 2% rebased OCF growth
primarily attributable to the net effect of revenue increases,
higher direct costs including mobile handsets and lower
staff-related costs associated with the Swiss/Austria integration.
Finally, in the Netherlands, Ziggo posted a 4% rebased OCF
contraction, reflecting the net effect of revenue declines, lower
indirect expenses related to declines in integration-related costs
stemming from the merger of Ziggo and UPC Netherlands and higher
direct costs, including increases in content costs related to Ziggo
Sport.
The Liberty Global Group reported OCF margins22 of 47.8% and
46.9% for the three and nine months ended September 30, 2016,
respectively, as compared to the 48.1% and 47.8% margins that were
reported for the corresponding prior-year periods. Both
year-over-year declines were primarily affected by the inclusion of
BASE, which has structurally lower OCF margins than our fixed-line
cable business in Belgium.
Net Earnings (Loss) - Liberty Global Group (Europe)
For the three and nine months ended September 30, 2016,
operations attributed to the Liberty Global Group reported net
losses of $137 million and $247 million, respectively, as compared
to net earnings (loss) of $111 million and ($853 million),
respectively, during the corresponding prior-year periods.
Property and Equipment Additions - Liberty Global Group
(Europe)
Operations attributed to Liberty Global Group reported property
and equipment ("P&E") additions23 of $1.1 billion or 25.2% of
revenue for the three months ended September 30, 2016, as compared
to $981 million or 22.9% of revenue in the prior-year period. On a
YTD basis, we reported P&E additions of $3.1 billion or 23.8%
of revenue during 2016 as compared to $2.8 billion or 22.1% of
revenue for the corresponding prior-year period.
The increase in our absolute P&E additions for the YTD
period was due to higher spend for line extensions,
upgrades/rebuild and scalable infrastructure, higher spend on
support capital, spend related to the acquisition of BASE and
higher spend on customer premises equipment ("CPE"), partially
offset by the strengthening of the U.S. dollar against the British
pound. The drivers for the increase in absolute P&E additions
for the Q3 period were similar to the YTD drivers.
With regard to the allocation of our Q3 2016 P&E additions
by category, our Q3 2016 P&E additions by category, 48% was
related to line extensions, upgrade/rebuild and scalable
infrastructure, 24% pertained to CPE and 28% was categorized as
support capital.
Condensed Consolidated Statements of Cash Flows - Liberty
Global Group (Europe)
For the nine months ended September 30, 2016, the Liberty Global
Group's net cash provided by operating activities was $3,814
million, as compared to $3,958 million during the prior-year
period. This decrease in cash provided is primarily attributable to
the net effect of (i) higher payments for interest, (ii) higher
cash receipts related to derivative instruments and (iii) higher
payments for taxes.
For the nine months ended September 30, 2016, the Liberty Global
Group's net cash used by investing activities was $2,833 million,
as compared to $2,531 million during the prior-year period. This
increase in cash used is primarily attributable to the net effect
of (i) an increase in cash used of $1,336 million associated with
higher cash paid in connection with acquisitions, (ii) a decrease
in cash used of $681 million associated with lower cash paid
related to investments in and loans to affiliates and others, (iii)
a decrease in cash used of $119 million related to the sale of
investments, (iv) an increase in cash of $112 million related to
net inter-group cash payments and receipts, (v) a decrease in cash
used of $79 million due to lower capital expenditures and (vi) a
decrease in cash used of $70 million as a result of cash proceeds
received in the 2016 period in connection with the settlement of
certain litigation.
For the nine months ended September 30, 2016, the Liberty Global
Group's net cash used by financing activities was $1,215 million,
as compared to $1,621 million during the prior-year period. This
decrease in cash used is primarily attributable to the net effect
(i) an increase in cash used of $334 million related to lower net
borrowings of debt, (ii) $271 million due to lower payments for
financing costs and debt premiums, (iii) $259 million due to lower
payments related to derivative instruments, (iv) $142 million
related to purchases of additional shares of our subsidiaries
during the 2015 period (v) $130 million associated with an increase
in cash received from call option contracts on Liberty Global
ordinary shares and (vi) $100 million due to higher repurchases of
Liberty Global ordinary shares.
Adjusted Free Cash Flow - Liberty Global Group
(Europe)
For the three and nine months ended September 30, 2016, our
operations attributed to the Liberty Global Group generated
adjusted free cash flow of $558 million and $970 million,
respectively, as compared to $759 million and $1.7 billion,
respectively, in the prior-year periods.
The decline in our adjusted FCF in Q3 2016, as compared to the
prior-year period, was attributable to the net effect of (i) higher
interest payments (including related derivative instruments), (ii)
lower benefits from capital-related vendor financing activities,
(iii) improvements in cash provided from OCF and related working
capital items, including benefits from operating expense-related
vendor financing activities, and (iv) favorable movements in FX.
The YTD year-over-year decrease was attributable to the net effect
of (a) lower benefits from capital-related vendor financing
activities, (b) higher interest payments (including related
derivative instruments), (c) favorable movements in FX and (d) a
decrease in cash provided from OCF and related working capital
items, including benefits from operating expense-related vendor
financing activities.
Leverage, Liquidity & Shares Outstanding - Liberty Global
Group (Europe)
We had total third-party debt and capital lease obligations of
$38.2 billion and cash and cash equivalents of $506 million
attributed to the Liberty Global Group at September 30, 2016. Our
total third-party debt and capital lease obligations decreased by
$7.7 billion from Q2 2016, due primarily to the application of
held-for-sale accounting in connection with the pending formation
of the Dutch JV. In this regard, the outstanding third-party debt
and capital lease obligations of Ziggo Group Holding and certain of
its subsidiaries are now classified as long-term liabilities
associated with assets held for sale and, accordingly, are not
reflected in our third-party debt balances.
After excluding $2.3 billion of debt backed by shares we hold in
ITV plc, Sumitomo Corporation and Lions Gate Entertainment Corp.,
the Liberty Global Group's consolidated adjusted gross and net
leverage ratios24 at September 30, 2016 were 5.1x and 5.0x,
respectively, which were broadly in-line with our reported numbers
at June 30, 2016.
At the end of September 2016, the Liberty Global Group's average
tenor25 of third-party debt was over seven years, with more than
90% of such third-party debt not due until 2021 or beyond. In
addition, at September 30, 2016, the blended fully-swapped
borrowing cost26 of our third-party debt was 4.8% and our
consolidated liquidity position was approximately $3.6 billion,
including $506 million of cash and the aggregate unused borrowing
capacity under our credit facilities27 of $3.1 billion.
At October 27, 2016, we had 907 million Liberty Global Group
shares outstanding, including 257 million Class A ordinary shares,
11 million Class B ordinary shares and 639 million Class C ordinary
shares.
Subscriber Statistics - LiLAC Group
At the end of Q3, the LiLAC Group provided 2.9 million customers
with 5.4 million subscription services across its footprint of 6.1
million homes passed, predominantly within Latin America and the
Caribbean. During the third quarter of 2016, we increased our
subscriber base by 27,000 RGUs driven by 30,000 broadband gains and
5,000 video additions, partially offset by 7,000 fixed-line
telephony losses. At September 30, 2016, we had 1.7 million video,
2.0 million broadband internet and 1.7 million fixed-line telephony
subscriptions. We ended Q3 2016 with a bundling ratio of 1.85 RGUs
per customer, providing ample runway for growth, as 29% of our
customers subscribed to triple-play (0.8 million), 27% to
double-play (0.8 million) and 44% to single-play products (1.3
million).
Our organic RGU performance resulted from contributions from all
three of our geographically diverse entities. In Chile, our third
quarter results showed continuation of the operating momentum that
we established during the first half of the year, as year-over-year
improvements in our video and broadband internet subscriber growth
supported a total of 13,000 RGU additions in Q3. During the third
quarter of 2016, VTR added 4,000 video subscribers, our best Q3
result in three years due to continued traction of our “Vive Más”
bundles, which feature Chile's most robust HD channel line-up. We
experienced similar success in our broadband internet performance,
as we added 21,000 subscribers during Q3, our strongest third
quarter result in nearly ten years. Finally, we lost 12,000
fixed-line telephony subscribers in Chile as we continue to see
customers opting for mobile-only telephony solutions.
At Cable & Wireless, we added 9,000 RGUs during the quarter,
with subscriber growth across all three products. In terms of
broadband internet, we added 7,000 organic subscribers on the back
of 5,000 RGU additions in Jamaica. In Panama, we recently launched
our "Mast3r" bundles featuring HD, play from start, live pause and
rewind functionality and 300 Mbps broadband speeds. From a video
perspective, we added 1,000 RGUs, primarily driven by the success
of our DTH business in Panama, where we have seen strong demand for
our prepaid TV product.
Our Q3 2016 organic RGU additions of 5,000 in Puerto Rico were
broadly in line with our prior-year performance with gains in
broadband internet and fixed-line telephony, offset by video
attrition. Our continued subscriber growth has been a testament to
our market-leading broadband speeds and innovative TV offerings,
including our lower-ARPU Spanish language packages, as we continue
to face macroeconomic headwinds on the island.
Turning to our wireless business, the LiLAC Group lost 20,000
mobile subscribers on an organic basis, ending the quarter with a
total of 3.6 million subscribers. Our postpaid subscriber count
increased by 18,000 during the quarter, while we experienced
organic prepaid attrition of 39,000 subscribers. Our Chilean mobile
performance continues to enjoy a resurgence with 14,000 subscriber
additions during the quarter, our highest quarterly result in
nearly four years. At quarter end, our mobile base in Chile stood
at 153,000 subscribers, which is the largest in VTR's history. The
continued success of our mobile offering can be attributed to
operational improvements, including refreshed packages, that were
implemented earlier this year at VTR. Elsewhere in the region, we
added 4,000 and 3,000 mobile subscribers in the Bahamas and
Jamaica, respectively.
Acquisition of Cable & Wireless - LiLAC Group
On May 16, 2016, a subsidiary of Liberty Global acquired CWC.
Accordingly, CWC has been included in our financial results under
Liberty Global's U.S. GAAP accounting policies effective May 16,
2016.
Revenue - LiLAC Group
For the three and nine months ended September 30, 2016, revenue
for the operations attributed to the LiLAC Group increased 190% to
$894 million and 98% to $1.8 billion for the three and nine months
ended September 30, 2016, as compared to the corresponding
prior-year periods. Our reported growth for the Q3 period was
primarily driven by the acquisition of CWC and, to a lesser extent,
organic growth in VTR and Puerto Rico, partially offset by adverse
movements in foreign currencies. For the YTD period, our reported
revenue growth was primarily driven by the acquisitions of CWC and
Choice, as well as organic growth in VTR and Puerto Rico, offset by
adverse FX movements. Adjusted for acquisitions and FX movements,
our operations attributed to the LiLAC Group reported a rebased
revenue decline of 1% in the Q3 2016 period and rebased revenue
growth of 1% for the YTD 2016 period.
Geographically, VTR in Chile delivered 6% year-over-year rebased
revenue growth in Q3 2016, primarily due to an increase in cable
subscription revenue. During Q3 in Puerto Rico, we had relatively
flat year-over-year rebased revenue growth, as increases in revenue
from our B2B business and higher subscriber volume was partially
offset by a decline in ARPU per RGU.
Finally, our recently acquired CWC business, reported a 4%
rebased revenue contraction during Q3 2016, as strength in Jamaica,
driven by continued subscriber growth compared to the corresponding
prior-year period, was more than offset by competitive and
macroeconomic factors, including in the Bahamas, Barbados and
Trinidad and Tobago. In Panama, we experienced sustained intense
competition in the mobile market, however we maintained mobile
revenue in-line with the corresponding prior-year period as we
focused on the acquisition and retention of high-ARPU postpaid
subscribers. Overall revenue in Panama during Q3 2016 declined
compared to the prior-year period due to the completion of certain
non-recurring B2B projects in the prior year.
Operating Income - LiLAC Group
For the three and nine months ended September 30, 2016,
operations attributed to the LiLAC Group reported operating income
of $139 million and $178 million, respectively, representing an
increase (decrease) of 108% and (4%) when compared to the
corresponding prior-year periods. These changes were primarily due
to the net effect of (i) increases in OCF, as described below, (ii)
increases in depreciation and amortization and (iii) increases in
impairment, restructuring and other operating items, net. The
changes in these factors were primarily due to the inclusion of
CWC.
Operating Cash Flow - LiLAC Group
Our OCF attributed to the LiLAC Group increased by 177% to $355
million and 95% to $708 million for the three and nine months ended
September 30, 2016, as compared to the same prior-year periods. Our
reported growth for each period was primarily driven by the
acquisition of CWC and organic growth in Chile and Puerto Rico.
Growth in the YTD period was partially offset by adverse FX
movements, primarily associated with the depreciation of the
Chilean Peso against the U.S. Dollar. On a rebased basis, LiLAC
posted OCF growth of 5% for each of the three and nine month
periods ended September 30, 2016.
Regionally, our Q3 performance was led by our Puerto Rican
operation, which delivered 21% rebased OCF growth in the quarter.
Our Puerto Rico result benefited significantly from the reversal of
a previously-recorded provision and related indemnification asset
in connection with a favorable ruling on an outstanding legal case.
Cost controls, primarily over our indirect expenses, also
contributed to this growth. Elsewhere in the region, VTR reported
3% rebased OCF growth in the quarter, as the aforementioned revenue
drivers were partially offset by higher costs for programming and
increased staff-related costs. The higher programming costs were
due in part to an increase in enhanced video subscribers and the
impact of foreign currency exchange rate fluctuations on our U.S.
dollar-denominated programming contracts, while the higher
staff-related costs primarily reflect higher incentive
compensation.
Rounding out our operations, CWC delivered 2.5% rebased OCF
growth during Q3 2016, despite the aforementioned decline in
revenue. This growth was driven by the continued realization of
staff- and network-related synergies following the Columbus
acquisition, further cost discipline across CWC’s markets and
reduced integration costs. These factors were partially offset by a
significant increase in content costs, as compared to the prior
year quarter, largely due to the amortization of acquired Premier
League rights starting in Q3 2016.
We reported OCF margins for the LiLAC Group of 39.7% and 39.3%
for the three and nine months ended September 30, 2016. In the
corresponding prior-year periods, LiLAC Group's OCF margins were
41.4% and 40.0%, respectively. The year-over-year declines in each
period were primarily related to the inclusion of CWC's lower OCF
margin from the date of acquisition. Excluding CWC, LiLAC Group's
YTD OCF margin improved from 40.0% in YTD 2015 to 41.4% in YTD
2016.
Net Earnings (Loss) - LiLAC Group
For the three and nine months ended September 30, 2016,
operations attributed to the LiLAC Group reported net losses of $68
million and $222 million, respectively, as compared to net earnings
of $30 million and $62, respectively, during the corresponding
prior-year periods.
CWC Historical Financials - LiLAC Group
The following table provides a reconciliation of CWC's
previously-disclosed Adjusted EBITDA under International Financial
Reporting Standards, as adopted by the European Union ("EU-IFRS)"
based on CWC's pre-acquisition definitions and policies to OCF
under U.S. GAAP using Liberty Global's definitions and policies.
The OCF amounts below have been or will be used for purposes of
computing rebased growth rates, as further adjusted for foreign
currency impacts. Amounts presented below are subject to adjustment
as we continue the accounting integration process.
Q2 2015 Q3 2015
Q4 2015 Q1 2016 Revenue
in millions CWC U.S. GAAP Revenue(i) $ 584.6 $ 598.7 $ 597.2
$ 607.5 Definitional difference (2.5 ) (2.7 ) (2.8 ) (3.0 ) Other
Differences 0.6 0.6 0.6 0.6 CWC EU-IFRS
Revenue $ 582.7 $ 596.6 $ 595.0 $ 605.1
OCF CWC U.S. GAAP OCF (i) $ 199.3 $ 211.4 $ 223.2 $
267.8 Definitional differences: Integration costs (ii) 4.4 17.9
19.9 0.3 Other (0.5 ) 2.3 (1.0 ) 1.2 Policy and other differences
(iii) (2.7 ) (4.9 ) (4.5 ) 15.6 CWC EU-IFRS Adjusted EBITDA
200.5 226.7 237.6 284.9 Share-based
compensation expense (1.9 ) (3.2 ) (2.9 ) (6.4 ) Depreciation,
amortization and impairment(iv) (98.9 ) (102.2 ) (103.0 ) (66.6 )
Integration and restructuring costs (4.6 ) (19.2 ) (34.9 ) 26.2 Net
other operating income (expense) (13.8 ) 6.0 (30.0 ) (2.4 )
Total operating profit 81.3 108.1 66.8 235.7
Finance expense, net(v) (86.9 ) (104.0 ) (80.5 ) (43.3 )
Income tax expense (16.3 ) (2.5 ) (16.2 ) (16.6 ) Profit (loss) $
(21.9 ) $ 1.6 $ (29.9 ) $ 175.8
______________________________ (i) Represents the historical
revenue and OCF of CWC, as adjusted for identified differences
between CWC's pre-acquisition EU-IFRS policies and Liberty Global's
U.S. GAAP policies and, with respect to OCF, as further adjusted to
conform to Liberty Global's definition of OCF. (ii) Represents
integration costs primarily associated with CWC's acquisition of
Columbus, which CWC excluded from Adjusted EBITDA but which is
included in OCF under Liberty Global's definition. (iii) Primarily
represents the impact of identified accounting policy differences
between CWC and Liberty Global. The Q1 2016 amount includes the
release of certain accrued penalties and interest related to a tax
contingency upon favorable settlement of the contingency. The
release of these accruals was reflected as a component of SG&A
in CWC's historical records, as allowed by EU-IFRS. Liberty
Global's policy is to reflect accruals and accrual releases for
interest and penalties on tax contingencies as a component of
income tax expense and, therefore, these items are not included
within OCF. Other policy differences primarily relate to immaterial
differences in capitalization policy and differences in accounting
for certain leases. (iv) Q1 2016 includes a $74 million reversal of
impairment charges related to a change in the expected timing of
the migration plan associated with specific assets in the Columbus
overlapping markets and islands. (v) Finance expense, net,
primarily includes (i) interest expense, (ii) fair value gains and
losses on derivative instruments, (iii) foreign currency
transaction gains and losses on financing activities and (iv)
interest income.
Synergies - LiLAC Group
As a result of a review undertaken following the CWC
acquisition, we expect the LiLAC Group, through its combination
with CWC, to deliver $150 million of synergies by year-end 2020.
Fifty percent of the anticipated savings represents OCF
improvements, primarily in the form of recurring operating costs
reductions, and the remaining 50% represents recurring and
nonrecurring capital expenditure reductions. These amounts have not
been reduced for related one-time integration costs.
Areas of savings include the elimination of public company
expenses, further corporate and administrative rationalization of
existing LiLAC Group operations with those of CWC, leveraging the
combined scale in areas such as content, procurement, and product
development, and capitalizing on CWC’s terrestrial and submarine
network assets, B2B expertise and product portfolio to further
drive savings in the combined operations.
Property and Equipment Additions - LiLAC Group
The LiLAC Group incurred P&E additions of $160 million or
17.9% of revenue for the three months ended September 30, 2016 as
compared to $59 million or 19.1% of revenue in Q3 2015. From a YTD
perspective, the LiLAC Group reported P&E additions of $365
million or 20.3% of revenue in Q3 2016 as compared to $185 million
or 20.4% of revenue in Q3 2015.
For the Q3 period, the increase in absolute P&E additions
was due to the acquisition of CWC, higher spend on CPE and the
appreciation of the Chilean peso against the U.S. dollar, partially
offset by decreases in support capital and scalable infrastructure.
The increase in absolute P&E additions for the YTD period was
driven by the acquisition of CWC and, to a much lesser extent,
Choice in Puerto Rico, higher spend on CPE, higher spend for line
extensions, upgrade/rebuild and scalable infrastructure and higher
spend on support capital, partially offset by the depreciation of
the Chilean peso against the U.S. dollar.
In terms of our Q3 P&E additions by category, excluding CWC,
55% was spent on CPE, 34% on scalable infrastructure, line
extensions and upgrade/rebuild activity and 11% on support
capital.
Condensed Consolidated Statements of Cash Flows - LiLAC
Group
For the nine months ended September 30, 2016, the LiLAC Group's
net cash provided by operating activities was $228 million, as
compared to $202 million during the prior-year period. This
increase in cash provided is primarily attributable to the net
effect of (i) an increase in cash provided by OCF and related
working capital items due to the impact of the acquisition of CWC,
(ii) higher payments for interest and (iii) higher payments for
taxes.
For the nine months ended September 30, 2016, the LiLAC Group's
net cash used by investing activities was $308 million, as compared
to $440 million during the prior-year period. This decrease in cash
used is primarily attributable to the net effect of (i) an increase
in cash received of $290 million in connection with acquisitions
and (ii) an increase in cash used of $173 million related to higher
payments for capital expenditures.
For the nine months ended September 30, 2016, the LiLAC Group's
net cash provided by financing activities was $270 million, as
compared to $378 million during the prior-year period. This
decrease in cash provided is primarily attributable to the net
effect of (i) a decrease in cash of $112 million related to net
inter-group payments and receipts, (ii) an increase in cash
provided of $86 million due to higher net borrowings of debt and
(iii) a decrease in cash provided of $25 million due to higher
payments for financing costs and debt premiums.
Adjusted Free Cash Flow - LiLAC Group
For the three and nine months ended September 30, 2016, our
operations attributed to the LiLAC Group reported negative adjusted
FCF of $39 million and $55 million, respectively, as compared to
positive FCF of $12 million and $40 million, respectively, in the
prior-year periods.
The year-over-year declines for both Q3 and YTD, as compared to
the prior-year periods, were primarily the result of including the
negative adjusted free cash flow attributable to CWC's business.
Excluding the impact of CWC, both periods were also impacted by
negative changes in working capital and higher income taxes
payments. In addition, the increase in P&E additions was
largely offset by benefits stemming from our vendor financing
program.
Leverage, Liquidity & Shares Outstanding - LiLAC
Group
At the end of Q3, we had approximately $6.0 billion of total
third-party debt and capital lease obligations and $471 million of
cash and cash equivalents attributed to the LiLAC Group. The LiLAC
Group third-party debt and cash balances stayed relatively stable
as compared to Q2 2016.
With respect to our leverage position at September 30, 2016, we
had consolidated gross and net leverage ratios associated with debt
attributed to the LiLAC Group of 4.2x and 3.9x, respectively.
The LiLAC Group's average tenor of third-party debt was
approximately five and a half years, with less than 10% of such
third-party debt due prior to 2021. In addition, at September 30,
2016, the blended fully-swapped borrowing cost of our third-party
debt was 6.5% and our consolidated liquidity position was
approximately $1.0 billion, including $471 million of cash and $598
million of aggregate unused borrowing capacity under our credit
facilities27.
At October 27, 2016, we had 174 million LiLAC shares
outstanding, including 51 million Class A ordinary shares, 2
million Class B ordinary shares and 121 million Class C ordinary
shares.
Forward-Looking Statements
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; expected RGU additions;
expected future revenue, OCF (including with respect to CWC) and
adjusted FCF growth; expectations with respect to the development,
enhancement and expansion of our superior networks and innovative
and advanced products and services, including the roll-out of our
4G mobile product in the U.K.; plans and expectations relating to
new build and network extension opportunities, including estimated
number of homes to be constructed; the expected impact of Hurricane
Matthew on our operations in the Bahamas; the acquisition of CWC,
the pending joint venture in the Netherlands and the proposed
acquisition of Multimedia Polska and the anticipated benefits,
costs and synergies in connection therewith; expectations regarding
our share buyback program; the strength of our balance sheet and
tenor of our third-party debt; 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
services and their willingness to upgrade to our more advanced
offerings; our ability to meet challenges from competition, to
manage rapid technological change or to maintain or increase rates
to our subscribers or to pass through increased costs to our
subscribers; the effects of changes in laws or regulation; our
ability to maintain certain accreditations; general economic
factors; our ability to obtain regulatory approval and satisfy
regulatory conditions associated with acquisitions and
dispositions; our ability to successfully acquire and integrate new
businesses and realize anticipated efficiencies from businesses we
acquire; the availability of attractive programming for our video
services and the costs associated with such programming; our
ability to achieve forecasted financial and operating targets; the
outcome of any pending or threatened litigation; the ability of our
operating companies to access cash of their respective
subsidiaries; the impact of our operating companies' 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 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
and Form 10-Qs. 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.
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 enables
us to develop market-leading products delivered through
next-generation networks that connect our 29 million customers who
subscribe to over 60 million television, broadband internet and
telephony services. We also serve 10 million mobile subscribers and
offer WiFi service across seven 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, Ziggo, Unitymedia, Telenet and
UPC. The LiLAC Group operates in over 20 countries in Latin America
and the Caribbean under the consumer brands VTR, Flow, Liberty, Mas
Movil and BTC. In addition, the LiLAC Group operates a sub-sea
fiber network throughout the region in over 30 markets.
For more information, please visit www.libertyglobal.com
Footnotes
1
On July 1, 2015, Liberty Global completed
the "LiLAC Transaction" pursuant to which each holder of Liberty
Global’s then-outstanding ordinary shares remained a holder of the
same amount and class of new Liberty Global ordinary shares and
received one share of the corresponding class of LiLAC ordinary
shares for each 20 then-outstanding Liberty Global ordinary shares
held as of the record date for such distribution, with cash issued
in lieu of fractional LiLAC ordinary shares. The Liberty Global
ordinary shares following the LiLAC Transaction 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
reflect or “track” the economic performance of the Liberty Global
Group and the LiLAC Group (each as defined and described below),
respectively. For more information regarding the tracking shares,
see note 1 to our condensed consolidated financial statements
included in our quarterly report on Form 10-Q filed on November 3,
2016 (the "10-Q"). “Liberty Global Group” does not represent a
separate legal entity, rather it represents those businesses,
assets and liabilities that have been attributed to that group. The
Liberty Global Group comprises our businesses, assets and
liabilities not attributed to the LiLAC Group, including Virgin
Media, Unitymedia, UPC Holding BV, Telenet and Ziggo Group Holding.
“LiLAC Group” does not represent a separate legal entity, rather it
represents those businesses, assets and liabilities that have been
attributed to that group. The LiLAC Group comprises our operations
in Latin America and the Caribbean and has attributed to it CWC,
VTR and Liberty Puerto Rico. The condensed consolidated financial
statements 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.
2
Please see Revenue and Operating Cash Flow
for information on rebased growth.
3
Please see OCF Definition and
Reconciliation for our Operating Cash Flow ("OCF") definition and
the required reconciliations.
4
Average Revenue Per Unit (“ARPU”) refers
to the average monthly subscription revenue per average customer
relationship or mobile subscriber, as applicable, and is calculated
by dividing the average monthly cable subscription revenue
(excluding mobile services, B2B services, interconnect, channel
carriage fees, mobile handset sales and installation fees) or
mobile subscription revenue, as applicable, for the indicated
period, by the average of the opening and closing balances for
customer relationships or mobile subscribers, as applicable, for
the period. Customer relationships of entities acquired during the
period are normalized. Unless otherwise indicated, ARPU per
customer relationship or mobile subscriber, as applicable, for the
Liberty Global Group and LiLAC Group are not adjusted for currency
impacts. ARPU per RGU refers to average monthly subscription
revenue per average RGU, which is calculated by dividing the
average monthly cable subscription revenue for the indicated
period, by the average of the opening and closing balances of 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.
5
Total B2B includes subscription (SOHO) and
non-subscription revenue. Non-subscription revenue includes the
amortization of deferred upfront installation fees and deferred
nonrecurring fees received on B2B contracts where we maintain
ownership of the installed equipment. Most of this deferred revenue
relates to Virgin Media's B2B contracts, and in connection with the
application of the Virgin Media acquisition accounting, we
eliminated all of Virgin Media's B2B deferred revenue as of the
June 7, 2013 acquisition date. Due primarily to this acquisition
accounting, the amortization of Virgin Media's B2B deferred revenue
is accounting for $2.8 million and $11.6 million of the increase in
Liberty Global Group's total B2B revenue for the three and nine
months ended September 30, 2016, respectively.
6
Consistent with how our guidance was
developed, the 843,000 new homes that we built across Europe
through September 30, 2016 include 60,000 upgraded homes in
Germany.
7
On May 16, 2016, pursuant to a scheme of
arrangement and following shareholder approvals, we acquired Cable
& Wireless
Communications Limited (formerly Cable
& Wireless Communications Plc) ("CWC").
8
A reconciliation of our CWC OCF guidance
for Q4 2016 to a U.S. GAAP measure is not provided as 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. For example, impairments or other operating
charges such as direct acquisition costs are contingent upon the
underlying activity, which cannot be reasonably forecasted.
9
Liquidity refers to cash and cash
equivalents plus the maximum undrawn commitments under subsidiary
borrowing facilities, without regard to covenant compliance
calculations.
10
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, 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.
11
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
including in our 10-Q.
12
Please see Footnotes for Operating Data
and Subscriber Variance Tables for the definition of Homes
Passed.
13
Please see Footnotes for Operating Data
and Subscriber Variance Tables for the definition of Customer
Relationships.
14
Enhanced Video Subscriber - please see
Footnotes for Operating Data and Subscriber Variance Tables for our
Enhanced Video
Subscriber definition.
15
Enhanced video penetration is calculated
by dividing the number of enhanced video RGUs by the total number
of basic and enhanced
video RGUs.
16
Please see Footnotes for Operating Data
and Subscriber Variance Tables for the definition of Basic Video
Subscriber.
17
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.
18
Our mobile subscriber count represents the
number of active subscriber identification module (“SIM”) cards in
service rather than services provided. For example, if a mobile
subscriber has both a data and voice plan on a smartphone this
would equate to one mobile subscriber. Alternatively, a subscriber
who has a voice and data plan for a mobile handset and a data plan
for a laptop (via a dongle) would be counted as two mobile
subscribers. Customers who do not pay a recurring monthly fee are
excluded from our mobile telephony subscriber counts after periods
of inactivity ranging from 30 to 90 days, based on industry
standards within the respective country.
19
In the U.K., Belgium and Switzerland we
now offer our customers the option to purchase a mobile handset
pursuant to a contract that is independent of a mobile airtime
services contract ("split-contract programs"). Revenue associated
with handsets sold under our split-contract programs is recognized
upfront and included in other non-subscription revenue. We
generally recognize the full sales price for the mobile handset
upon delivery, regardless of whether the sales price is received
upfront or in installments. Revenue associated with the airtime
services is recognized as mobile subscription revenue over the
contractual term of the airtime services contract. Prior to our
split-contract programs, all revenue from handset sales that was
contingent upon delivering future airtime services was recognized
over the life of the customer contract as part of the monthly fee
and included in mobile subscription revenue.
20
Liberty Global Group's (4.2%) rebased
mobile contraction (including interconnect and mobile handset sales
revenue) and 0.7% growth for Q3 2016 and YTD 2016, respectively,
includes the positive impact of our split-contract and
non-subsidized handset sale programs in the U.K., Belgium,
Switzerland, Ireland and Hungary, as further described above. Our
split-contract and non-subsidized handset sale programs in the
U.K., Belgium and Switzerland had net negative effects on our
mobile subscription and handset revenue of $26.0 million in Q3 2016
and $5.5 million in YTD 2016. The net negative effects of the
split-contract and non-subsidized handset sale programs are
comprised of (i) increases in handset revenue of $5.4 million and
$78.0 million and (ii) decreases in mobile subscription revenue of
$31.3 million and $83.5 million during Q3 2016 and YTD 2016,
respectively.
21
On February 11, 2016, pursuant to a
definitive agreement and following regulatory approval, Telenet
acquired Telenet Group BVBA, formerly known as BASE Company NV
("BASE").
22
OCF margin is calculated by dividing OCF
by total revenue for the applicable period.
23
Our property and equipment additions
include our capital expenditures on an accrual basis and amounts
financed under vendor financing or capital lease arrangements.
24
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 ratios are
adjusted to exclude debt and OCF of Ziggo Sport and Ziggo and its
subsidiaries.
25
For purposes of calculating our average
tenor, total third-party debt excludes vendor financing.
26
Our blended fully-swapped debt borrowing
cost represents the weighted average interest rate on our aggregate
variable- and fixed-rate indebtedness (excluding capital lease 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.
27
Our aggregate unused borrowing capacity of
$3.7 billion represents the maximum undrawn commitments under our
subsidiaries' applicable facilities without regard to covenant
compliance calculations. This consists of $3.1 billion attributed
to the Liberty Global Group and $598 million attributed to LiLAC
Group. Upon completion of the relevant September 30, 2016
compliance reporting requirements for our credit facilities, and
assuming no further changes from quarter-end borrowing levels, we
anticipate that our subsidiaries' borrowing capacity would be $3.3
billion. This consists of $2.8 billion attributed to the Liberty
Global Group and $454 million attributed to the LiLAC Group.
Balance Sheets, Statements of Operations and Statements of
Cash Flows
The condensed 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.
Revenue and Operating Cash Flow
In the following tables, we present revenue and operating cash
flow by reportable segment for the three and nine months months
ended September 30, 2016, as compared to the corresponding
prior-year periods. All of our reportable segments derive their
revenue primarily from consumer and B2B services, including video,
broadband internet and fixed-line telephony services and, with the
exception of Puerto Rico, mobile services. For detailed information
regarding the composition of our reportable segments, see note 14
to our condensed consolidated financial statements included in our
10-Q.
For purposes of calculating rebased growth rates on a comparable
basis for all businesses that we owned during 2016, we have
adjusted our historical revenue and OCF for the three and nine
months ended September 30, 2015 to (i) include the pre-acquisition
revenue and OCF of certain entities acquired during 2015 and 2016
in our rebased amounts for the three and nine months ended
September 30, 2015 to the same extent that the revenue and OCF of
such entities are included in our results for the three and nine
months ended September 30, 2016, (ii) exclude the pre-disposition
revenue and OCF of "offnet" subscribers in the U.K. that were
disposed in the fourth quarter of 2014 and the first half of 2015
from our rebased amounts for the three and nine months ended
September 30, 2015 to the same extent that the revenue and OCF of
these disposed subscribers is excluded from our results for the
three and nine months ended September 30, 2016, (iii) exclude the
revenue and OCF related to a partner network agreement that was
terminated shortly after the Ziggo acquisition from our rebased
amounts for the nine months ended September 30, 2015 to the same
extent that the revenue and OCF from this partner network is
excluded from our results for the nine months ended September 30,
2016, (iv) exclude the pre-disposition revenue, OCF and associated
intercompany eliminations of Film1, which was disposed in the third
quarter of 2015, from our rebased amounts for the three and nine
months ended September 30, 2015 to the same extent that the
revenue, OCF and associated intercompany eliminations are excluded
from our results for the three and nine months ended September 30,
2016, (v) 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 three and nine months ended September
30, 2015 to the same extent that the revenue and OCF of these
subscribers is excluded from our results for the three and nine
months ended September 30, 2016 and (vi) reflect the translation of
our rebased amounts for the three and nine months ended September
30, 2015 at the applicable average foreign currency exchange rates
that were used to translate our results for the three and nine
months ended September 30, 2016. We have included CWC, BASE and two
small entities in whole or in part in the determination of our
rebased revenue and OCF for the three months ended September 30,
2015. We have included CWC, BASE, Choice and two small entities in
whole or in part in the determination of our rebased revenue and
OCF for the nine months ended September 30, 2015. We have reflected
the revenue and OCF of the acquired entities in our 2015 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. Therefore, we believe our rebased growth
rates are not a non-U.S. GAAP financial measure as contemplated by
Regulation G or Item 10 of Regulation S-K.
The following table provides adjustments made to the 2015
amounts to derive our rebased growth rates for the Liberty Global
Group and the LiLAC Group:
Revenue OCF
Three
monthsendedSeptember 30,2015
Nine monthsendedSeptember
30,2015
Three
monthsendedSeptember 30,2015
Nine monthsendedSeptember
30,2015
Liberty Global Group in millions Acquisitions $ 189.4
$ 474.5 $ 40.5 $ 100.0 Dispositions (4.3 ) (19.4 ) (3.2 ) (4.3 )
Foreign Currency (255.4 ) (486.0 ) (109.9 ) (217.8 ) Total decrease
$ (70.3 ) $ (30.9 ) $ (72.6 ) $ (122.1 )
LiLAC Group
Acquisitions $ 598.2 $ 926.6 $ 211.4 $ 326.8 Foreign Currency (4.5
) (50.6 ) (0.2 ) (17.5 ) Total increase $ 593.7 $ 876.0
$ 211.2 $ 309.3
In each case, the following tables present (i) the amounts
reported by each of our reportable segments for the comparative
periods, (ii) the U.S. dollar change and percentage change from
period to period and (iii) the percentage change from period to
period on a rebased basis:
Three months ended
Increase Increase September 30,
(decrease) (decrease) Revenue 2016
2015 $ %
Rebased % in millions, except % amounts
Liberty Global Group: European Operations Division: U.K./Ireland $
1,581.4 $ 1,783.3 $ (201.9 ) (11.3 ) 2.8 The Netherlands 681.8
681.4 0.4 0.1 (0.3 ) Germany 639.4 603.5 35.9 5.9 5.6 Belgium 693.4
512.5 180.9 35.3 0.8 Switzerland/Austria 439.3 437.9
1.4 0.3 1.1 Total Western Europe 4,035.3
4,018.6 16.7 0.4 2.1 Central and Eastern Europe 274.5 266.2 8.3 3.1
3.8 Central and other (1.9 ) 0.1 (2.0 ) N.M. * Total
European Operations Division 4,307.9 4,284.9 23.0 0.5 2.2 Corporate
and other 18.0 8.3 9.7 116.9 * Intersegment eliminations (12.8 )
(4.6 ) (8.2 ) N.M. * Total Liberty Global Group 4,313.1
4,288.6 24.5 0.6 2.2 LiLAC
Group: LiLAC Division: CWC 568.5 — 568.5 * (3.6 ) Chile 221.3 204.3
17.0 8.3 6.0 Puerto Rico 104.8 104.5 0.3 0.3
0.3 Total LiLAC Division 894.6
308.8
585.8 189.7 (0.9 ) Intersegment eliminations (0.5 ) — (0.5 )
N.M. * Total LiLAC Group 894.1 308.8 585.3
189.5 (0.9 ) Total $ 5,207.2 $ 4,597.4
$ 609.8 13.3 1.7 Total Liberty Global
Group excluding the Netherlands (1) 2.7 LiLAC Group excluding CWC
(2) 4.1
______________________________
* - Omitted; N.M. - Not Meaningful
Nine months
ended Increase Increase September 30,
(decrease) (decrease) Revenue 2016
2015 $ %
Rebased % in millions, except % amounts
Liberty Global Group: European Operations Division: U.K./Ireland $
4,985.6 $ 5,254.3 $ (268.7 ) (5.1 ) 3.2 The Netherlands 2,030.4
2,072.7 (42.3 ) (2.0 ) (2.0 ) Germany 1,900.0 1,792.4 107.6 6.0 5.9
Belgium 2,010.9 1,515.5 495.4 32.7 3.0 Switzerland/Austria 1,319.7
1,326.0 (6.3 ) (0.5 ) 1.7 Total Western Europe
12,246.6 11,960.9 285.7 2.4 2.5 Central and Eastern Europe 814.6
801.6 13.0 1.6 3.2 Central and other (5.2 ) (3.7 ) (1.5 ) N.M.
* Total European Operations Division 13,056.0
12,758.8 297.2 2.3 2.5 Corporate and other 47.8 33.9 13.9 41.0 *
Intersegment eliminations (35.4 ) (19.9 ) (15.5 ) N.M. *
Total Liberty Global Group 13,068.4 12,772.8
295.6 2.3 2.6 LiLAC Group: LiLAC Division: CWC
854.1 — 854.1 * (2.7 ) Chile 631.9 633.9 (2.0 ) (0.3 ) 6.0 Puerto
Rico 315.6 274.1 41.5 15.1 1.4
Total LiLAC Division 1,801.6
908.0 893.6 98.4 0.9 Intersegment eliminations (0.7 ) — (0.7
) N.M. * Total LiLAC Group 1,800.9 908.0
892.9 98.3 0.9 Total $ 14,869.3
$ 13,680.8 $ 1,188.5 8.7 2.4
Total Liberty Global Group excluding the Netherlands 3.5 LiLAC
Group excluding CWC 4.4
* - Omitted; N.M. - Not Meaningful
Three months
ended Increase Increase September 30,
(decrease) (decrease) OCF 2016
2015 $ % Rebased %
in millions, except % amounts Liberty Global Group:
European Operations Division: U.K./Ireland $ 696.0 $ 777.0 $ (81.0
) (10.4 ) 5.6 The Netherlands 375.5 388.6 (13.1 ) (3.4 ) (3.7 )
Germany 408.0 380.9 27.1 7.1 6.7 Belgium 311.1 258.3 52.8 20.4 3.0
Switzerland/Austria 273.4 269.6 3.8 1.4
2.1 Total Western Europe 2,064.0 2,074.4 (10.4 ) (0.5 ) 3.1
Central and Eastern Europe 120.4 119.0 1.4 1.2 1.8 Central and
other (77.0 ) (74.0 ) (3.0 ) N.M. * Total European
Operations Division 2,107.4 2,119.4 (12.0 ) (0.6 ) 3.1 Corporate
and other (47.4 ) (55.3 ) 7.9 14.3 * Total
Liberty Global Group 2,060.0 2,064.1 (4.1 ) (0.2 )
3.4 LiLAC Group: LiLAC Division: CWC 214.5 — 214.5 * 2.5
Chile 86.9 82.5 4.4 5.3 3.0 Puerto Rico 56.1 46.4
9.7 20.9 20.9 Total LiLAC Division
357.5 128.9 228.6 177.3 5.1 Corporate and other (2.9 ) (1.1 ) (1.8
) N.M. * Total LiLAC Group 354.6 127.8
226.8 177.5 4.6 Total $ 2,414.6 $
2,191.9 $ 222.7 10.2 3.6 Total
Liberty Global Group excluding the Netherlands and BASE 5.9 Total
Liberty Global Group excluding the Netherlands (1) 5.2 LiLAC Group
excluding CWC (2) 8.0
Operating Income Liberty Global
Group $ 763.9 $ 478.6 $ 285.3 59.6 LiLAC Group 138.8 66.9
71.9 107.5 Total $ 902.7 $ 545.5
$ 357.2 65.5
* - Omitted; N.M. - Not Meaningful
Nine months
ended Increase Increase September 30,
(decrease) (decrease) OCF 2016
2015 $ % Rebased %
in millions, except % amounts Liberty Global Group:
European Operations Division: U.K./Ireland $ 2,206.1 $ 2,345.9 $
(139.8 ) (6.0 ) 3.4 The Netherlands 1,107.5 1,127.5 (20.0 ) (1.8 )
(1.8 ) Germany 1,187.7 1,111.8 75.9 6.8 6.7 Belgium 892.2 766.1
126.1 16.5 2.2 Switzerland/Austria 795.1 778.1 17.0
2.2 4.5
Total Western Europe
6,188.6 6,129.4 59.2 1.0 3.0 Central and Eastern Europe 345.9 355.5
(9.6 ) (2.7 ) (1.0 ) Central and other (243.7 ) (214.6 ) (29.1 )
N.M. * Total European Operations Division 6,290.8
6,270.3 20.5 0.3 2.4 Corporate and other (162.6 ) (159.7 ) (2.9 )
(1.8 ) * Total Liberty Global Group 6,128.2 6,110.6
17.6 0.3 2.3 LiLAC Group: LiLAC
Division: CWC 315.5 — 315.5 * 2.8 Chile 245.0 246.1 (1.1 ) (0.4 )
5.7 Puerto Rico 152.9 120.7 32.2 26.7
11.1 Total LiLAC Division 713.4 366.8 346.6 94.5 5.5
Corporate and other (5.8 ) (3.2 ) (2.6 ) N.M. * Total
LiLAC Group 707.6 363.6 344.0 94.6 5.2
Total $ 6,835.8 $ 6,474.2 $ 361.6 5.6
2.6 Total Liberty Global Group excluding the
Netherlands and BASE 3.8 Total Liberty Global Group excluding the
Netherlands (1) 3.3 LiLAC Group excluding CWC (2) 7.1
Operating Income (Loss) Liberty Global Group $ 1,799.2 $
1,543.1 $ 256.1 16.6 LiLAC Group 177.9 184.8 (6.9 )
(3.7 ) Total $ 1,977.1 $ 1,727.9 $ 249.2 14.4
* - Omitted; N.M. - Not Meaningful
(1) We provide a rebased OCF growth rate for the Liberty
Global Group that excludes Ziggo in light of the deconsolidation of
Ziggo that will occur when our joint venture in the Netherlands
with Vodafone Group closes. This is also the basis on which we
provide our 2016 OCF guidance for the Liberty Global Group.
(2) We provide a rebased OCF growth rate for the LiLAC Group that
excludes CWC in light of the fact that CWC is only included in our
2016 results from the May 16, 2016 acquisition date. This is also
the basis on which we provide our 2016 OCF guidance for the LiLAC
Group.
OCF Definition and Reconciliation
As used herein, OCF has the same meaning as the term "Adjusted
OIBDA" that is referenced in our 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 total segment OCF to our operating
income is presented below.
Three months ended Nine
months ended September 30, September 30,
2016 2015 2016
2015 Consolidated Liberty Global in millions
in millions Total segment OCF $ 2,414.6 $ 2,191.9 $ 6,835.8
$ 6,474.2 Share-based compensation expense (62.8 ) (125.0 ) (206.4
) (253.0 ) Depreciation and amortization (1,416.9 ) (1,458.4 )
(4,405.4 ) (4,387.6 ) Impairment, restructuring and other operating
items, net (32.2 ) (63.0 ) (246.9 ) (105.7 ) Operating income $
902.7 $ 545.5 $ 1,977.1 $ 1,727.9
Liberty Global Group Total segment OCF $ 2,060.0 $
2,064.1 $ 6,128.2 $ 6,110.6 Share-based compensation expense (57.1
) (123.3 ) (195.7 ) (250.8 ) Inter-group fees and allocations 2.2
2.1 6.4 2.1 Depreciation and amortization (1,216.2 ) (1,404.1 )
(4,026.3 ) (4,226.8 ) Impairment, restructuring and other operating
items, net (25.0 ) (60.2 ) (113.4 ) (92.0 ) Operating income $
763.9 $ 478.6 $ 1,799.2 $ 1,543.1
LiLAC Group Total segment OCF $ 354.6 $ 127.8 $ 707.6
$ 363.6 Share-based compensation expense (5.7 ) (1.7 ) (10.7 ) (2.2
) Inter-group fees and allocations (2.2 ) (2.1 ) (6.4 ) (2.1 )
Depreciation and amortization (200.7 ) (54.3 ) (379.1 ) (160.8 )
Impairment, restructuring and other operating items, net (7.2 )
(2.8 ) (133.5 ) (13.7 ) Operating income $ 138.8 $ 66.9
$ 177.9 $ 184.8
Summary of Debt, Capital Lease Obligations and Cash and Cash
Equivalents
The following table1 details the U.S. dollar equivalent balances
of our third-party consolidated debt, capital lease obligations and
cash and cash equivalents at September 30, 2016:
Capital Debt
& Capital Cash Lease
Lease and Cash Debt2 Obligations
Obligations Equivalents in millions
Liberty Global and Liberty Global
Group unrestricted subsidiaries
$ 2,461.2 $ 62.1 $ 2,523.3 $ 425.5 Virgin Media3 14,719.0 110.7
14,829.7 26.8 UPC Holding 6,823.3 28.0 6,851.3 26.5 Unitymedia
8,089.6 706.3 8,795.9 1.5 Telenet 4,854.4 393.6
5,248.0 25.7 Total Liberty Global Group 36,947.5
1,300.7 38,248.2 506.0 LiLAC Group unrestricted
subsidiaries — — — 74.5 CWC 3,564.7 19.6 3,584.3 230.7 VTR Finance
1,435.7 0.7 1,436.4 115.2 Liberty Puerto Rico 942.5 0.2
942.7 50.6 Total LiLAC Group 5,942.9 20.5
5,963.4 471.0 Total $ 42,890.4 $ 1,321.2
$ 44,211.6 $ 977.0
Property and Equipment Additions and Capital
Expenditures
The tables below highlight the categories of the property and
equipment additions attributed to the Liberty Global Group and the
LiLAC Group for the indicated periods and reconciles those
additions to the capital expenditures that are presented in the
attributed statement of cash flows information included in Exhibit
99.1 to our 10-Q:
Liberty Global Group
Three months ended Nine
months ended September 30, September 30,
2016 2015 2016
2015 in millions, except % amounts Customer premises
equipment $ 259.8 $ 271.8 $ 856.2 $ 823.4 Scalable infrastructure
219.0 212.5 630.6 583.8 Line extensions 183.7 125.5 489.8 325.9
Upgrade/rebuild 114.4 139.8 334.0 388.4 Support capital & other
308.7 231.6 799.0 699.3 Property and
equipment additions 1,085.6 981.2 3,109.6 2,820.8 Assets acquired
under capital-related vendor financing arrangements4 (476.2 )
(414.7 ) (1,405.6 ) (1,090.6 ) Assets acquired under capital leases
(31.4 ) (14.8 ) (73.0 ) (89.3 ) Changes in current liabilities
related to capital expenditures (70.0 ) (21.0 ) (28.5 ) 40.8
Capital expenditures5 $ 508.0 $ 530.7 $ 1,602.5
$ 1,681.7 Property and equipment additions as
% of revenue 25.2 % 22.9 % 23.8 % 22.1 %
LiLAC Group
Three months ended Nine
months ended September 30, September 30,
2016 2015 2016
2015 in millions, except % amounts Customer premises
equipment $ 38.1 $ 26.3 $ 112.3 $ 95.4 Scalable infrastructure 9.8
13.5 35.4 38.8 Line extensions 9.5 8.4 30.6 15.6 Upgrade/rebuild
4.2 2.4 7.7 5.0 Support capital & other 7.2 8.3 34.1 30.0 CWC
P&E Additions 91.3 — 144.9 —
Property and equipment additions 160.1 58.9 365.0 184.8 Assets
acquired under capital-related vendor financing arrangements (16.7
) — (33.7 ) — Assets acquired under capital leases (4.8 ) — (5.0 )
—
Changes in current liabilities and cash
derivatives related to capital expenditures
22.3 (0.5 ) 16.2 (15.0 ) Capital expenditures $ 160.9
$ 58.4 $ 342.5 $ 169.8 Property
and equipment additions as % of revenue 17.9 % 19.1 % 20.3 % 20.4 %
______________________________ 1
Except as otherwise indicated, the amounts
reported in the table include the named entity and its
subsidiaries.
2
Debt amounts for UPC Holding and Telenet
include notes issued by special purpose entities that are
consolidated by the respective subsidiary. Due to the application
of held-for-sale accounting in connection with the pending
formation of the Dutch JV, the outstanding third-party debt and
capital lease obligations of Ziggo Group Holding and certain of its
subsidiaries are now classified as long-term liabilities associated
with assets held for sale and, accordingly, are not reflected in
the table above.
3
The Virgin Media borrowing group includes
certain subsidiaries of Virgin Media, but excludes Virgin Media.
The cash and cash equivalents amount includes cash and cash
equivalents held by the Virgin Media borrowing group, but excludes
$0.3 million of cash and cash equivalents held by Virgin Media.
This amount is included in the amount shown for Liberty Global and
Liberty Global Group unrestricted subsidiaries. In addition, the
$55 million principal amount of the 6.5% convertible notes of
Virgin Media is excluded from the debt of the Virgin Media
borrowing group and included in the debt of Liberty Global and
Liberty Global Group unrestricted subsidiaries.
4
Amounts exclude related VAT of $65 million
and $50 million during the three months ended September 30, 2016
and 2015, respectively, and $193 million and $139 million during
the nine months ended September 30, 2016 and 2015, respectively,
that were also financed by our vendors under these
arrangements.
5
The capital expenditures that we report in
our condensed consolidated statements of cash flows do not include
amounts that are financed under vendor financing or capital lease
arrangements. Instead, these expenditures are reflected as non-cash
additions to our property and equipment when the underlying assets
are delivered, and as repayments of debt when the related principal
is repaid.
Adjusted Free Cash Flow Definition and Reconciliation
We define adjusted free cash flow as net cash provided by our
operating activities, plus (i) excess tax benefits related to the
exercise of share-based incentive awards, (ii) cash payments for
third-party costs directly associated with successful and
unsuccessful acquisitions and dispositions and (iii) expenses
financed by an intermediary, less (a) capital expenditures, as
reported in our condensed consolidated statements of cash flows,
(b) principal payments on amounts financed by vendors and
intermediaries and (c) principal payments on capital leases
(exclusive of the portions of the network lease in Belgium and the
duct leases in Germany that we assumed in connection with certain
acquisitions), with each item excluding any cash provided or used
by our discontinued operations. We believe that our presentation of
adjusted free cash flow provides useful information to our
investors because this measure can be used to gauge our ability to
service debt and fund new investment opportunities. Adjusted free
cash flow should not be understood to represent our ability to fund
discretionary amounts, as we have various mandatory and contractual
obligations, including debt repayments, which are not deducted to
arrive at this amount. Investors should view adjusted free cash
flow as a supplement to, and not a substitute for, U.S. GAAP
measures of liquidity included in our condensed consolidated
statements of cash flows. Beginning with the third quarter of 2016,
we changed the name of this metric from "free cash flow" to
"adjusted free cash flow." We have not changed how we calculate
this metric. The following table provides the reconciliation of our
net cash provided by operating activities to adjusted FCF for the
indicated periods:
Three months ended Nine
months ended September 30, September 30,
2016 2015 2016
2015 in millions Consolidated Liberty Global
Net cash provided by operating activities $ 1,374.9 $ 1,473.5 $
4,041.5 $ 4,159.3 Excess tax benefits from share-based
compensation6 0.8 9.1 4.0 27.0 Cash payments for direct acquisition
and disposition costs 3.5 10.7 89.5 249.5 Expenses financed by an
intermediary7 213.8 81.1 607.0 132.8 Capital expenditures (668.9 )
(589.1 ) (1,945.0 ) (1,851.5 ) Principal payments on amounts
financed by vendors and intermediaries (375.3 ) (177.6 ) (1,796.2 )
(909.7 ) Principal payments on certain capital leases (29.8 ) (37.4
) (85.7 ) (114.8 ) Adjusted FCF $ 519.0 $ 770.3 $
915.1 $ 1,692.6
Liberty Global Group
Net cash provided by operating activities $ 1,253.2 $ 1,405.6 $
3,814.0 $ 3,957.7 Excess tax benefits from share-based compensation
0.8 7.3 4.0 23.3 Cash payments for direct acquisition and
disposition costs 1.9 10.1 26.8 244.9 Expenses financed by an
intermediary 212.7 81.1 605.9 132.8 Capital expenditures (508.0 )
(530.7 ) (1,602.5 ) (1,681.7 ) Principal payments on amounts
financed by vendors and intermediaries (375.3 ) (177.6 ) (1,796.2 )
(909.7 ) Principal payments on certain capital leases (27.0 ) (37.0
) (82.2 ) (114.2 ) Adjusted FCF $ 558.3 $ 758.8 $
969.8 $ 1,653.1
LiLAC Group Net cash
provided by operating activities $ 121.7 $ 67.9 $ 227.5 $ 201.6
Excess tax benefits from share-based compensation — 1.8 — 3.7 Cash
payments for direct acquisition and disposition costs 1.6 0.6 62.7
4.6 Expenses financed by an intermediary 1.1 — 1.1 — Capital
expenditures (160.9 ) (58.4 ) (342.5 ) (169.8 ) Principal payments
on certain capital leases (2.8 ) (0.4 ) (3.5 ) (0.6 ) Adjusted FCF
$ (39.3 ) $ 11.5 $ (54.7 ) $ 39.5
________________________________ 6
Excess tax benefits from share-based
compensation represent the excess of tax deductions over the
related financial reporting share-based compensation expense. The
hypothetical cash flows associated with these excess tax benefits
are reported as an increase to cash flows from financing activities
and a corresponding decrease to cash flows from operating
activities in our condensed consolidated statements of cash
flows.
7
For purposes of our condensed consolidated
statements of cash flows, expenses financed by an intermediary are
treated as
hypothetical operating cash outflows and
hypothetical financing cash inflows when the expenses are incurred.
When we pay the financing intermediary, we record financing cash
outflows in our condensed consolidated statements of cash flows.
For purposes of our adjusted free cash flow definition, we add back
the hypothetical operating cash outflow when these financed
expenses are incurred and deduct the financing cash outflows when
we pay the financing intermediary.
ARPU per Customer Relationship8
The following table provides ARPU per customer relationship for
the indicated periods:
Three months ended September 30,
% FX-Neutral9 2016
2015 Change % Change
Liberty Global Consolidated $ 43.28 $ 44.63 (3.0 )% 1.7
%
Liberty Global Group € 38.38 € 39.48 (2.8 )% 2.9
%
U.K. & Ireland (Virgin Media) £ 49.69 £ 48.38 2.7
%
1.4
%
Germany (Unitymedia) € 24.45
€ 23.10 5.8
%
5.8
%
Belgium (Telenet) € 53.47 € 50.77 5.3
%
5.3
%
The Netherlands (Ziggo) € 45.73 € 44.62 2.5
%
2.5
%
Other Europe (UPC Holding) € 26.96 € 27.00 (0.1 )% 1.1
%
LiLAC Group10 $ 47.23 $ 56.00 (15.7 )% (17.0 )% Chile (VTR) CLP
33,670 CLP 33,042 1.9
%
1.9
%
CWC $ 33.46 $ N/A N/A N/A Puerto Rico $ 78.12 $ 78.66 (0.7 )% (0.7
)% ____________________________ 8
The amounts presented for the 2016 period
reflect the post-acquisition revenue for CWC, which was acquired on
May 16, 2016. The impact of CWC is not included in the three months
ended September 30, 2015.
9
The FX-neutral change represents the
percentage change on a year-over-year basis adjusted for FX impacts
and is calculated by adjusting the prior-year figures to reflect
translation at the foreign currency rates used to translate the
current year amounts.
10
The decrease in the LiLAC Group ARPU is
primarily due to the inclusion of CWC. Excluding CWC, the LiLAC
Group ARPU was $57.23 for the three months ended September 30,
2016.
Mobile Statistics
The following tables provide ARPU per mobile subscriber11 and
mobile subscribers12 for the indicated periods:
ARPU per Mobile Subscriber Three months
ended Sept. 30, %
FX-Neutral 2016 2015
Change % Change Liberty Global Group: Including
interconnect revenue $ 19.57 $ 22.80 (14.2 )% (4.6 )% Excluding
interconnect revenue $ 16.09 $ 19.03 (15.4 )% (5.5 )% LiLAC
Group: Including interconnect revenue $ 17.97 $ 25.53 (29.6 )%
(31.2 )% Excluding interconnect revenue $ 16.51 $ 23.31 (29.2 )%
(30.8 )%
Mobile Subscribers Sept.
30, 2016 June 30, 2016
Change Liberty Global Group: U.K. 3,028,400 3,021,400 7,000
Belgium 3,020,000 3,007,900 12,100 Germany 356,400 358,700 (2,300 )
The Netherlands 227,000 207,200 19,800 Switzerland 70,100 55,600
14,500 Austria 24,300 21,100 3,200 Ireland 13,600 11,800
1,800 Total Western Europe 6,739,800 6,683,700
56,100 Hungary 56,700 47,400 9,300 Poland 5,800
6,200 (400 ) Total CEE 62,500 53,600
8,900 Liberty Global Group 6,802,300 6,737,300 65,000
LiLAC Group: Panama13 1,760,200 2,002,300 (242,100 ) Jamaica
888,800 886,200 2,600 Bahamas 309,200 305,300 3,900 Barbados
129,000 129,800 (800 ) Other 379,100 376,700 2,400
CWC Total 3,466,300 3,700,300 (234,000 ) Chile 152,800
139,000 13,800 LiLAC Group 3,619,100
3,839,300 (220,200 ) Grand Total 10,421,400
10,576,600 (155,200 ) _______________________________ 11
Our ARPU per mobile subscriber calculation
that excludes interconnect revenue refers to the average monthly
mobile subscription revenue per average mobile subscribers in
service and is calculated by dividing the average monthly mobile
subscription revenue (excluding activation fees, handset sales and
late fees) for the indicated period, by the average of the opening
and closing balances of mobile subscribers in service for the
period. Our ARPU per mobile subscriber calculation that includes
interconnect revenue increases the numerator in the above-described
calculation by the amount of mobile interconnect revenue during the
period. The amounts for the three months ended September 30, 2015
do not include the impact of CWC and BASE in Belgium. The decrease
in ARPU per mobile subscriber for the Liberty Global Group is
largely due to our split-contract programs. The decrease in ARPU
per mobile subscriber for the LiLAC Group is primarily due to the
inclusion of CWC. Excluding CWC, the LiLAC Group ARPU per mobile
subscriber for the three months ended September 30, 2016 was $26.89
(including interconnect) and $24.82 (excluding interconnect).
12
In a number of countries, our mobile
subscribers received mobile services pursuant to prepaid contracts.
As of September 30, 2016, the prepaid mobile subscriber count
included the following: Panama (1,586,600), Belgium (942,000),
Jamaica (866,300), U.K. (660,100), Bahamas (271,000), Barbados
(98,500), Chile (8,500) and twelve remaining CWC geographies
(322,500).
13
The decline includes a 205,700 nonorganic
adjustment to prepaid mobile subscribers to comply with Liberty
Global subscriber counting policies.
RGUs, Customers and Bundling14
The following table provides information on the breakdown of our
RGUs and customer base and highlights our customer bundling metrics
at September 30, 2016, June 30, 2016, and September 30, 2015:
September 30,2016
June 30,2016
September 30,2015
Q3’16 / Q2’16(% Change)
Q3’16 / Q3’15(% Change)
Liberty Global
Group
Total RGUs Video RGUs 22,477,000 22,508,100 22,764,700 (0.1
%) (1.3 %) Broadband Internet RGUs 17,287,900 17,105,800 16,572,700
1.1 % 4.3 % Telephony RGUs 14,378,200 14,261,600
13,809,400 0.8 % 4.1 % Total Liberty Global Group 54,143,100
53,875,500 53,146,800 0.5 % 1.9 %
Customers
Single-Play Customers 9,297,700 9,409,000 9,913,100 (1.2 %) (6.2 %)
Dual-Play Customers 4,536,600 4,478,800 4,216,300 1.3 % 7.6 %
Triple-Play Customers 11,924,100 11,836,300
11,600,400 0.7 % 2.8 % Total Liberty Global Group 25,758,400
25,724,100 25,729,800 0.1 % 0.1 % % of Single-Play Customers
36.1 % 36.6 % 38.5 % (1.4 %) (6.2 %) % of Dual-Play Customers 17.6
% 17.4 % 16.4 % 1.1 % 7.3 % % of Triple-Play Customers 46.3 % 46.0
% 45.1 % 0.7 % 2.7 % RGUs per customer relationship 2.10
2.09 2.07 0.5 % 1.4 %
LiLAC
Group
Total RGUs Video RGUs 1,733,700 1,739,500 1,291,200 (0.3 %)
34.3 % Broadband Internet RGUs 2,031,900 2,013,600 1,307,100 0.9 %
55.5 % Telephony RGUs 1,667,400 1,685,600 889,800
(1.1 %) 87.4 % Total LiLAC Group 5,433,000 5,438,700
3,488,100 (0.1 %) 55.8 %
Customers Single-Play
Customers 1,298,700 1,307,100 561,200 (0.6 %) 131.4 % Dual-Play
Customers 802,900 807,000 367,400 (0.5 %) 118.5 % Triple-Play
Customers 842,800 839,200 730,700 0.4 % 15.3 %
Total LiLAC Group 2,944,400 2,953,300 1,659,300 (0.3 %) 77.4 %
% of Single-Play Customers 44.1 % 44.3 % 33.9 % (0.5 %) 30.1
% % of Dual-Play Customers 27.3 % 27.3 % 22.1 % — % 23.5 % % of
Triple-play Customers 28.6 % 28.4 % 44.0 % 0.7 % (35.0 %)
RGUs per customer relationship 1.85 1.84 2.10 0.5 % (11.9 %)
_____________________________ 14 The September 30, 2015
figures do not include the impact of the CWC acquisition.
Consolidated Operating Data — September 30, 2016
Video
HomesPassed(1)
Two-wayHomesPassed(2)
CustomerRelationships(3)
TotalRGUs(4)
Basic
VideoSubscribers(5)
EnhancedVideoSubscribers(6)
DTHSubscribers(7)
TotalVideo
InternetSubscribers(8)
TelephonySubscribers(9)
U.K. 13,154,500 13,139,100 5,249,900 13,000,200 — 3,723,500
— 3,723,500 4,867,900 4,408,800 Germany 12,878,700 12,685,200
7,157,000 12,741,000 4,865,800 1,564,300 — 6,430,100 3,263,500
3,047,400 The Netherlands(10) 7,070,000 7,056,200 4,013,100
9,649,300 703,500 3,289,000 — 3,992,500 3,132,700 2,524,100 Belgium
2,973,700 2,973,700 2,156,300 4,873,900 297,600 1,731,000 —
2,028,600 1,594,300 1,251,000 Switzerland(10) 2,226,900 2,226,900
1,289,800 2,485,000 584,200 660,400 — 1,244,600 744,600 495,800
Austria 1,385,800 1,385,800 652,800 1,402,000 120,400 368,300 —
488,700 498,000 415,300 Ireland 842,100 792,600
457,700 1,028,200 28,700 283,500 —
312,200 363,800 352,200 Total Western Europe
40,531,700 40,259,500 20,976,600 45,179,600
6,600,200 11,620,000 — 18,220,200
14,464,800 12,494,600 Poland 3,095,200 3,031,400
1,429,700 2,925,000 216,800 990,300 — 1,207,100 1,086,100 631,800
Hungary 1,692,200 1,674,700 1,112,300 2,146,800 141,400 519,300
295,400 956,100 620,500 570,200 Romania 2,811,400 2,752,400
1,259,400 2,225,800 272,100 629,600 349,500 1,251,200 524,900
449,700 Czech Republic 1,445,100 1,411,800 709,800 1,217,900
134,100 353,000 113,600 600,700 465,700 151,500 Slovakia 559,800
535,700 270,600 448,000 30,100
142,400 69,200 241,700 125,900 80,400
Total CEE 9,603,700 9,406,000 4,781,800
8,963,500 794,500 2,634,600 827,700
4,256,800 2,823,100 1,883,600
Total Liberty Global
Group 50,135,400 49,665,500
25,758,400 54,143,100 7,394,700
14,254,600 827,700
22,477,000 17,287,900 14,378,200
Chile 3,198,400 2,689,300 1,317,800 2,785,200 82,400 962,400
— 1,044,800 1,076,800 663,600 CWC Panama 415,700 240,200 396,100
520,600 — 51,000 43,500 94,500 124,600 301,500 Jamaica 469,800
459,800 301,100 497,000 — 105,500 — 105,500 173,200 218,300
Trinidad & Tobago 310,500 310,500 169,500 272,100 — 121,600 —
121,600 123,400 27,100 Barbados 121,800 121,800 94,500 169,900 —
19,900 — 19,900 66,100 83,900 Bahamas 155,000 155,000 55,000 80,800
— 900 — 900 24,900 55,000 Other 354,300 334,500
212,500 318,200 12,100 73,800 —
85,900 119,500 112,800 Total CWC 1,827,100
1,621,800 1,228,700 1,858,600 12,100
372,700 43,500 428,300 631,700 798,600
Puerto Rico 1,085,800 1,085,800 397,900
789,200 — 260,600 — 260,600
323,400 205,200
Total LiLAC Group 6,111,300
5,396,900 2,944,400
5,433,000 94,500 1,595,700
43,500 1,733,700
2,031,900 1,667,400 Grand Total
56,246,700 55,062,400 28,702,800
59,576,100 7,489,200
15,850,300 871,200 24,210,700
19,319,800 16,045,600
Subscriber Variance Table - September 30, 2016 vs June 30,
2016
Video
HomesPassed(1)
Two-wayHomesPassed(2)
CustomerRelationships(3)
TotalRGUs(4)
Basic
VideoSubscribers(5)
EnhancedVideoSubscribers(6)
DTHSubscribers(7)
TotalVideo
InternetSubscribers(8)
TelephonySubscribers(9)
U.K. 82,200 82,100 49,000 91,800 — 10,900 — 10,900 59,900
21,000 Germany 70,000 70,700 9,400 89,400 (36,000 ) 20,700 —
(15,300 ) 56,000 48,700 The Netherlands(10) 17,000 16,600 (20,200 )
(11,300 ) (16,700 ) (2,500 ) — (19,200 ) 14,300 (6,400 ) Belgium
10,200 10,200 (5,000 ) 3,700 (11,300 ) 2,900 — (8,400 ) 7,600 4,500
Switzerland(10) 10,200 10,200 (9,900 ) (11,500 ) (6,800 ) (3,400 )
— (10,200 ) 900 (2,200 ) Austria 5,700 5,700 600 8,900 (5,600 )
2,100 — (3,500 ) 4,400 8,000 Ireland 4,500 8,200
(3,800 ) (11,400 ) (1,100 ) (10,000 ) — (11,100 ) (400 ) 100
Total Western Europe 199,800 203,700 20,100
159,600 (77,500 ) 20,700 — (56,800 )
142,700 73,700 Poland 35,900 36,900 (4,500 ) 24,300
(7,500 ) 10,500 — 3,000 8,000 13,300 Hungary 31,900 31,900 4,800
27,500 (9,900 ) 14,600 — 4,700 12,300 10,500 Romania 74,000 79,500
14,200 43,800 (2,500 ) 12,300 4,600 14,400 12,600 16,800 Czech
Republic 15,100 15,100 800 8,700 7,500 (200 ) (1,700 ) 5,600 5,200
(2,100 ) Slovakia 15,500 12,600 (1,100 ) 3,700
(1,500 ) (600 ) 100 (2,000 ) 1,300 4,400 Total
CEE 172,400 176,000 14,200 108,000
(13,900 ) 36,600 3,000 25,700 39,400
42,900 Total Liberty Global Group 372,200 379,700
34,300 267,600 (91,400 ) 57,300 3,000
(31,100 ) 182,100 116,600 Chile 47,800
50,700 14,000 13,200 (5,000 ) 9,100 — 4,100 20,600 (11,500 ) CWC
Panama — — 4,300 2,400 — (800 ) 4,300 3,500 (200 ) (900 ) Jamaica —
— 1,100 12,600 — 700 — 700 5,100 6,800 Trinidad & Tobago — —
(15,300 ) (20,000 ) — (13,900 ) — (13,900 ) (8,600 ) 2,500 Barbados
— — (1,800 ) (3,900 ) — (500 ) — (500 ) (1,300 ) (2,100 ) Bahamas
14,400 14,400 (6,500 ) (6,100 ) — 300 — 300 100 (6,500 ) Other —
— (5,800 ) (8,700 ) (700 ) 1,500 — 800
400 (9,900 ) Total CWC 14,400 14,400
(24,000 ) (23,700 ) (700 ) (12,700 ) 4,300 (9,100 ) (4,500 )
(10,100 ) Puerto Rico 7,200 7,200 1,100 4,800
— (800 ) — (800 ) 2,200 3,400
Total LiLAC Group 69,400 72,300 (8,900 ) (5,700 )
(5,700 ) (4,400 ) 4,300 (5,800 ) 18,300 (18,200 )
Grand Total 441,600 452,000
25,400 261,900 (97,100
) 52,900 7,300 (36,900
) 200,400 98,400
Subscriber Variance Table - September 30, 2016 vs June 30, 2016
Video
HomesPassed(1)
Two-wayHomesPassed(2)
CustomerRelationships(3)
TotalRGUs(4)
Basic
VideoSubscribers(5)
EnhancedVideoSubscribers(6)
DTHSubscribers(7)
TotalVideo
InternetSubscribers(8)
TelephonySubscribers(9)
Organic Change
Summary:
U.K. 82,200 82,100 49,000 91,800 — 10,900 — 10,900 59,900 21,000
Germany 22,300 32,100 9,400 89,400 (36,000 ) 20,700 — (15,300 )
56,000 48,700 The Netherlands 17,000 16,600 (20,200 ) (11,300 )
(16,700 ) (2,500 ) — (19,200 ) 14,300 (6,400 ) Belgium 10,200
10,200 (5,000 ) 3,700 (11,300 ) 2,900 — (8,400 ) 7,600 4,500 Other
Europe 185,400 192,700 (6,100 ) 82,900 (34,700
) 25,200 3,000 (6,500 ) 40,200 49,200
Total Liberty Global Group 317,100
333,700 27,100 256,500
(98,700 ) 57,200 3,000
(38,500 ) 178,000 117,000
Chile 47,800 50,700 14,000 13,200 (5,000 ) 9,100 — 4,100 20,600
(11,500 ) CWC Panama — — 4,300 2,400 — (800 ) 4,300 3,500 (200 )
(900 ) Jamaica — — 1,100 12,600 — 700 — 700 5,100 6,800 Trinidad
& Tobago — — — 3,400 — (3,500 ) — (3,500 ) 2,400 4,500 Barbados
— — (1,800 ) (3,900 ) — (500 ) — (500 ) (1,300 ) (2,100 ) Bahamas
14,400 14,400 (5,300 ) (4,700 ) — 300 — 300 300 (5,300 ) Other —
— — (600 ) (700 ) 1,500 — 800
400 (1,800 ) Total CWC 14,400 14,400
(1,700 ) 9,200 (700 ) (2,300 ) 4,300 1,300
6,700 1,200 Puerto Rico 7,200 7,200
1,100 4,800 — (800 ) — (800 ) 2,200
3,400
Total LiLAC Group 69,400
72,300 13,400 27,200
(5,700 ) 6,000 4,300
4,600 29,500 (6,900 )
Total Organic Change 386,500 406,000 40,500
283,700 (104,400 ) 63,200 7,300 (33,900 )
207,500 110,100
Q3 2016
Adjustments:
Q3 2016 Trinidad adjustments — — (15,300 ) (23,400 ) — (10,400 ) —
(10,400 ) (11,000 ) (2,000 ) Q3 2016 Bahamas adjustments — — (1,200
) (1,400 ) — — — — (200 ) (1,200 ) Q3 2016 Other CWC adjustments —
— (5,800 ) (8,100 ) — — — — — (8,100 ) Q3 2016 Switzerland
adjustments — — — 1,100 1,000 (200 ) — 800 1,300 (1,000 ) Q3 2016
Acquisitions - Romania 7,400 7,400 7,200 10,000 6,300 300 — 6,600
2,800 600 Q3 2016 Germany adjustments 47,700 38,600 —
— — — — — — —
Net Adjustments 55,100 46,000 (15,100 )
(21,800 ) 7,300 (10,300 ) — (3,000 ) (7,100 ) (11,700
)
Net Adds (Reductions) 441,600 452,000 25,400
261,900 (97,100 ) 52,900 7,300 (36,900
) 200,400 98,400
Footnotes for Operating Data and Subscriber Variance Tables
(1) Homes Passed are homes, residential multiple dwelling
units or commercial units that can be connected to our networks
without materially extending the distribution plant, except for DTH
homes. Our Homes Passed counts are based on census data that can
change based on either revisions to the data or from new census
results. We do not count homes passed for DTH. Due to the fact that
we do not own the partner networks (defined below) used in
Switzerland and the Netherlands (see note 10) we do not report
homes passed for Switzerland’s and the Netherlands’ partner
networks. (2) Two-way Homes Passed are Homes Passed by those
sections of our networks that are technologically capable of
providing two-way services, including video, internet and telephony
services. (3) Customer Relationships are the number of customers
who receive at least one of our video, internet or telephony
services that we count as Revenue Generating Units (“RGUs”),
without regard to which or to how many services they subscribe. To
the extent that RGU counts include equivalent billing unit (“EBU”)
adjustments, we reflect corresponding adjustments to our Customer
Relationship counts. For further information regarding our EBU
calculation, see Additional General Notes to Tables. Customer
Relationships generally are counted on a unique premises basis.
Accordingly, if an individual receives our services in two premises
(e.g., a primary home and a vacation home), that individual
generally will count as two Customer Relationships. We exclude
mobile-only customers from Customer Relationships. (4) RGU is
separately a Basic Video Subscriber, Enhanced Video Subscriber, DTH
Subscriber, Internet Subscriber or Telephony Subscriber (each as
defined and described below). A home, residential multiple dwelling
unit, or commercial unit may contain one or more RGUs. For example,
if a residential customer in our Austrian market subscribed to our
enhanced video service, fixed-line telephony service and broadband
internet service, the customer would constitute three RGUs. Total
RGUs is the sum of Basic Video, Enhanced Video, DTH, Internet and
Telephony Subscribers. RGUs generally are counted on a unique
premises basis such that a given premises does not count as more
than one RGU for any given service. On the other hand, if an
individual receives one of our services in two premises (e.g., a
primary home and a vacation home), that individual will count as
two RGUs for that service. Each bundled cable, internet or
telephony service is counted as a separate RGU regardless of the
nature of any bundling discount or promotion. Non-paying
subscribers are counted as subscribers during their free
promotional service period. Some of these subscribers may choose to
disconnect after their free service period. Services offered
without charge on a long-term basis (e.g., VIP subscribers, free
service to employees) generally are not counted as RGUs. We do not
include subscriptions to mobile services in our externally reported
RGU counts. In this regard, our September 30, 2016 RGU counts
exclude our separately reported postpaid and prepaid mobile
subscribers. (5) Basic Video Subscriber is a home, residential
multiple dwelling unit or commercial unit that receives our video
service over our broadband network either via an analog video
signal or via a digital video signal without subscribing to any
recurring monthly service that requires the use of
encryption-enabling technology. Encryption-enabling technology
includes smart cards, or other integrated or virtual technologies
that we use to provide our enhanced service offerings. With the
exception of RGUs that we count on an EBU basis, we count RGUs on a
unique premises basis. In other words, a subscriber with multiple
outlets in one premises is counted as one RGU and a subscriber with
two homes and a subscription to our video service at each home is
counted as two RGUs. In Europe, we have approximately 156,600
“lifeline” customers that are counted on a per connection basis,
representing the least expensive regulated tier of video cable
service, with only a few channels. (6) Enhanced Video Subscriber is
a home, residential multiple dwelling unit or commercial unit that
receives our video service over our broadband network or through a
partner network via a digital video signal while subscribing to any
recurring monthly service that requires the use of
encryption-enabling technology. Enhanced Video Subscribers that are
not counted on an EBU basis are counted on a unique premises basis.
For example, a subscriber with one or more set-top boxes that
receives our video service in one premises is generally counted as
just one subscriber. An Enhanced Video Subscriber is not counted as
a Basic Video Subscriber. As we migrate customers from basic to
enhanced video services, we report a decrease in our Basic Video
Subscribers equal to the increase in our Enhanced Video
Subscribers. Subscribers to enhanced video services provided by our
operations in Switzerland and the Netherlands over partner networks
receive basic video services from the partner networks as opposed
to our operations. (7) DTH Subscriber is a home, residential
multiple dwelling unit or commercial unit that receives our video
programming broadcast directly via a geosynchronous satellite. (8)
Internet Subscriber is a home, residential multiple dwelling unit
or commercial unit that receives internet services over our
networks, or that we service through a partner network. Our
Internet Subscribers exclude 48,500 and 47,500 digital subscriber
line (“DSL”) subscribers within Belgium and Austria, respectively,
who are not serviced over our networks. Our Internet Subscribers do
not include customers that receive services from dial-up
connections. In Switzerland, we offer a 2 Mbps internet service to
our Basic and Enhanced Video Subscribers without an incremental
recurring fee. Our Internet Subscribers in Switzerland include
101,100 subscribers who have requested and received this service.
(9) Telephony Subscriber is a home, residential multiple dwelling
unit or commercial unit that receives voice services over our
networks, or that we service through a partner network. Telephony
Subscribers exclude mobile telephony subscribers. Our Telephony
Subscribers exclude 36,500 subscribers within Austria that are not
serviced over our networks. In Switzerland, we offer a basic phone
service to our Basic and Enhanced Video Subscribers without an
incremental recurring fee. Our Telephony Subscribers in Switzerland
include 66,500 subscribers who have requested and received this
service. (10) Pursuant to service agreements, Switzerland and, to a
much lesser extent, the Netherlands offer enhanced video, broadband
internet and telephony services over networks owned by third-party
cable operators (“partner networks”). A partner network RGU is only
recognized if there is a direct billing relationship with the
customer. At September 30, 2016, Switzerland’s partner networks
account for 141,400 Customer Relationships, 289,700 RGUs, 106,100
Enhanced Video Subscribers, 108,800 Internet Subscribers, and
74,800 Telephony Subscribers.
Additional General Notes to
Tables:
As a result of our decision to discontinue our Multi-channel
Multipoint Distribution System (“MMDS”) service in Ireland, we have
excluded subscribers to our MMDS service from our externally
reported operating statistics effective January 1, 2016, which
resulted in a reduction to Homes Passed, RGUs, and Customer
Relationships in Ireland and Slovakia of 22,200 and 500,
respectively.
Most of our broadband communications subsidiaries provide
telephony, broadband internet, data, video or other B2B services.
Certain of our B2B revenue is derived from small or home office
(“SOHO”) subscribers that pay a premium price to receive enhanced
service levels along with video, internet or telephony services
that are the same or similar to the mass marketed products offered
to our residential subscribers. All mass marketed products provided
to SOHOs, whether or not accompanied by enhanced service levels
and/or premium prices, are included in the respective RGU and
customer counts of our broadband communications operations, with
only those services provided at premium prices considered to be
“SOHO RGUs” or “SOHO customers.” SOHO customers of CWC are not
included in our respective RGU and customer counts as of September
30, 2016. With the exception of our B2B SOHO subscribers, we
generally do not count customers of B2B services as customers or
RGUs for external reporting purposes.
Certain of our residential and commercial RGUs are counted on an
EBU basis, including residential multiple dwelling units and
commercial establishments such as bars, hotels and hospitals in
Chile and Puerto Rico and certain commercial and residential
multiple dwelling units in Europe (with the exception of Germany
and Belgium, where we do not count any RGUs on an EBU
basis). Our EBUs are generally calculated by dividing the bulk
price charged to accounts in an area by the most prevalent price
charged to non-bulk residential customers in that market for the
comparable tier of service. As such, we may experience variances in
our EBU counts solely as a result of changes in rates. In Germany,
homes passed reflect the footprint and two-way homes passed reflect
the technological capability of our network up to the street
cabinet, with drops from the street cabinet to the building
generally added, and in-home wiring generally upgraded, on an as
needed or success-based basis. In Belgium, Telenet leases a portion
of its network under a long-term capital lease arrangement. These
tables include operating statistics for Telenet's owned and leased
networks.
While we take appropriate steps to ensure that subscriber
statistics are presented on a consistent and accurate basis at any
given balance sheet date, the variability from country to country
in (i) the nature and pricing of products and services, (ii) the
distribution platform, (iii) billing systems, (iv) bad debt
collection experience and (v) other factors add complexity to the
subscriber counting process. We periodically review our subscriber
counting policies and underlying systems to improve the accuracy
and consistency of the data reported on a prospective basis.
Accordingly, we may from time to time make appropriate adjustments
to our subscriber statistics based on those reviews.
Subscriber information for acquired entities, including CWC, is
preliminary and subject to adjustment until we have completed our
review of such information and determined that it is presented in
accordance with our policies.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20161103006848/en/
Liberty GlobalInvestor Relations:Oskar
Nooij, +1 303 220 4218Christian Fangmann, +49 221 84 62 5151John
Rea, +1 303 220 4238orCorporate
Communications:Matt Beake, +44 20 8483 6428Rebecca Pike,
+44 20 8483 6216
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