Exceeded full-year FCF guidance; achieved all other guidance
targets
Record year for share repurchases with $3.2 billion spent in
2019
2019 operating income down 11% YoY for continuing
operations
Full-year OFCF1 grew 35% YoY fueled by 22% decrease in
capital intensity
Liberty Global plc today announced its full-year 2019 and Q4
2019 financial results. Our former operations in Austria, Germany,
Hungary, Romania and the Czech Republic, along with our DTH
business (collectively, the "Discontinued Operations") have been
accounted for as discontinued operations. Unless otherwise
indicated, the information in this release relates only to our
continuing operations.
CEO Mike Fries stated, "2019 was a transformational year on many
fronts. In July, we sold our operations in Germany, Hungary,
Romania and the Czech Republic to Vodafone for over $21 billion. We
are now geographically concentrated in five attractive Western
European markets, while enjoying substantial financial firepower
with over $11 billion of total liquidity.
Technologically, we continued to push the boundaries of our
fiber-rich HFC networks by accelerating our gigabit broadband
rollouts to more European homes and businesses. As a result,
millions of our customers currently have access to 1 gigabit
download speeds, far surpassing what our competitors are able to
offer across the vast majority of our footprint.
In the U.K., our largest market, our focus on fixed-mobile
convergence drove record mobile subscription growth in 2019. Last
fall, we announced a transformational MVNO deal with Vodafone,
which will allow Virgin Media to launch 5G mobile speeds. Combined
with our fixed-line gigabit broadband speeds, our cutting-edge FMC
bundles place us in an enviable position as we continue to extend
the reach of our network with Project Lightning. And while we
expect some unavoidable headwinds in 2020, we believe the
medium-term outlook in the U.K. remains attractive, especially as
we evaluate strategic options for value creation. From a leadership
perspective, we recently appointed Severina Pascu as CFO and Deputy
CEO of Virgin Media, and expect her depth of operating expertise to
make a significant impact over the coming years.
In Switzerland, we are encouraged by the continued success of
our turnaround plan. In January, we announced the appointment of
Baptiest Coopmans as the incoming CEO of UPC Switzerland. He brings
a wealth of experience to this important role. Meanwhile, we
continue to believe the Swiss market remains ripe for fixed-mobile
convergence over the medium term, and in addition to our organic
growth, we will consider other strategic options in due course.
Looking ahead to 2020, for the full year we are forecasting a
mid-single-digit rebased1 OCF decline, mid-single-digit rebased1
OFCF growth and approximately $1 billion of Adjusted FCF2, which
represents 30% year-over-year growth. Also, our Board of Directors
has authorized a new $1 billion share repurchase plan."
Full Year and Q4 Highlights (on a continuing operations basis
unless otherwise noted)
- FY and Q4 rebased1 revenue decreased 0.6% and 0.5%,
respectively
- Q4 residential cable revenue3 decreased 0.9% YoY to $1,902.1
million
- Results driven by revenue contractions in Switzerland, Belgium
and U.K./Ireland
- Q4 residential mobile revenue3 increased 5.2% YoY to $429.9
million
- Performance driven by strong Swiss result
- Q4 B2B5 revenue3 decreased 0.8% YoY to $490.9 million
- Strong growth in Switzerland and CEE offset by declines at our
other operations
- FY operating income decreased 11.2% YoY to $745.5 million
- Q4 operating income increased 12.0% YoY to $282.5 million
- FY rebased1 OCF4 declined 3.1% to $4,859.5 million, including a
4.1% decrease in Q4
- Q4 property & equipment additions spend at 28.2% of revenue
as compared to 32.9% in Q4 2018
- Built 191,000 new premises during Q4, including 154,000 new
premises in the U.K. & Ireland
- Solid balance sheet with $11.1 billion of liquidity6 at Q4
- Net leverage7 of 3.7x at Q4
- Fully-swapped borrowing cost of 4.1% on debt balance of $27.6
billion
Q4 2019
YoY Growth(i)
YTD 2019
YoY Growth(i)
Subscribers
Organic Net RGU Losses
(128,300
)
(208,700
)
Organic Customer Losses
(25,500
)
(73,900
)
Financial (in
millions, except percentages)
Revenue
$
2,982.2
(0.5
%)
$
11,541.5
(0.6
%)
Operating income
$
282.5
12.0
%
$
745.5
(11.2
%)
OCF
$
1,273.8
(4.1
%)
$
4,859.5
(3.1
%)
P&E additions
$
840.4
(13.5
%)
$
2,880.5
(22.3
%)
OFCF
$
433.4
18.2
%
$
1,979.0
34.5
%
Cash provided by operating activities
$
1,493.9
$
3,714.1
Cash provided (used) by investing
activities
$
(268.3
)
$
9,541.0
Cash used by financing activities
$
(487.5
)
$
(6,922.3
)
Adjusted FCF8 Pro forma continuing
operations(ii)
$
774.7
$
770.1
(i)
Revenue, OCF and OFCF YoY growth rates are
on a rebased basis
(ii)
Pro forma Adjusted FCF gives pro forma
effect to certain adjustments to our recurring cash flows that we
have or expect to realize following the disposition of the
Discontinued Operations. For additional details, see the
information and reconciliation included within the Glossary. Based
on reported Adjusted FCF including PF Adjustments
Customer and Subscriber Growth
Three months ended
Year ended
December 31,
December 31,
2019
2018
2019
2018
Organic customer net additions (losses)
by market
U.K./Ireland
(9,400
)
9,000
7,100
72,400
Belgium
(6,900
)
(20,700
)
(42,900
)
(75,400
)
Switzerland
(22,700
)
(32,000
)
(73,600
)
(121,000
)
Continuing CEE (Poland and Slovakia)
13,500
17,600
35,500
12,900
Total
(25,500
)
(26,100
)
(73,900
)
(111,100
)
Organic RGU net additions (losses) by
market
U.K./Ireland
(110,900
)
23,500
(109,300
)
285,900
Belgium
(18,600
)
(54,400
)
(110,300
)
(154,200
)
Switzerland
(34,300
)
(48,600
)
(119,300
)
(187,600
)
Continuing CEE (Poland and Slovakia)
35,500
47,000
130,200
85,900
Total
(128,300
)
(32,500
)
(208,700
)
30,000
Organic RGU net additions (losses) by
product
Data
15,700
24,800
78,500
98,100
Video
(91,300
)
(74,900
)
(272,400
)
(160,400
)
Voice
(52,700
)
17,600
(14,800
)
92,300
Total
(128,300
)
(32,500
)
(208,700
)
30,000
Organic Mobile SIM additions (losses)
by product
Postpaid
130,500
73,800
496,000
328,700
Prepaid
(43,000
)
(40,500
)
(157,500
)
(163,400
)
Total
87,500
33,300
338,500
165,300
Organic Mobile SIM additions by
market
U.K./Ireland
42,100
17,400
153,700
68,300
Belgium
29,500
7,500
124,500
66,300
Other
15,900
8,400
60,300
30,700
Total
87,500
33,300
338,500
165,300
- Customer Relationships: During Q4
we lost 26,000 customer relationships, representing a slight
year-over-year improvement
- U.K./Ireland: U.K./Ireland lost
9,000 customer relationships in Q4, as growth from new build areas
was offset by attrition in the non-Lightning footprint as
competitor discounting increased
- Belgium: Q4 losses of 7,000
customer relationships was a significant year-over-year improvement
as compared to a loss of 21,000 in Q4 2018, primarily driven by
successful quad-play bundles and end-of-year promotional
campaigns
- Switzerland: Customer attrition of
23,000 in Q4 represents a strong year-over-year improvement,
primarily driven by lower churn. Q4 volumes are generally impacted
by annual billing cycles
- Continuing CEE (Poland and
Slovakia): CEE added 14,000 customer relationships in Q4, as
customer growth from new build areas has been largely in-line
year-over-year
- Mobile Subscribers: Added 88,000
mobile subscribers in Q4, as 131,000 postpaid additions were only
partially offset by continued attrition in our low-ARPU prepaid
base
- Q4 U.K./Ireland postpaid mobile net adds of 76,000 were
supported by the launch of our FMC bundles which drove an
acceleration in Virgin Media's fixed-mobile converged penetration
to 21.2% in Q4
- Belgium added 30,000 mobile subscribers during Q4, including
39,000 net postpaid additions. This growth was supported by our
converged WIGO offering
- Switzerland added 12,000 mobile subscribers in Q4 driven by
bundling success and a revamped mobile offer following our MVNO
switch in January 2019
Revenue Highlights
The following table presents (i) revenue of each of our
consolidated reportable segments for the comparative periods and
(ii) the percentage change from period to period on both a reported
and rebased basis:
Three months ended
Increase/(decrease)
Year ended
Increase/(decrease)
December 31,
December 31,
Revenue
2019
2018
%
Rebased %
2019
2018
%
Rebased %
in millions, except %
amounts
Continuing operations:
U.K./Ireland
$
1,715.1
$
1,694.3
1.2
1.3
$
6,600.3
$
6,875.1
(4.0
)
0.4
Belgium
746.0
733.3
1.7
(0.7
)
2,893.0
2,993.6
(3.4
)
(1.2
)
Switzerland
316.1
325.6
(2.9
)
(3.5
)
1,258.8
1,326.0
(5.1
)
(3.5
)
Continuing CEE
120.0
119.1
0.8
3.5
475.4
492.2
(3.4
)
2.7
Central and Corporate
85.0
76.8
10.7
(21.8
)
316.4
274.2
15.4
(9.5
)
Intersegment eliminations
—
—
N.M.
N.M.
(2.4
)
(3.2
)
N.M.
N.M.
Total continuing operations
$
2,982.2
$
2,949.1
1.1
(0.5
)
$
11,541.5
$
11,957.9
(3.5
)
(0.6
)
______________________________
N.M. - Not Meaningful
- Reported revenue for the three months and year ended December
31, 2019 decreased 1.1% and 3.5% year over year, respectively
- The full-year result was primarily driven by the impact of (i)
negative foreign exchange ("FX") movements, mainly related to the
weakening of the British Pound and Euro against the U.S. dollar,
and (ii) organic revenue contraction
- Rebased revenue declined 0.5% and 0.6% in the Q4 and YTD
periods, respectively. This result included:
- Favorable impact of $2.2 million and $7.8 million for Q4 and
YTD, respectively, related to revenue recognized by Virgin Media in
connection with the sale of rights to future commission payments on
customer handset insurance arrangements
Q4 2019 Rebased Revenue Growth - Segment
Highlights
- U.K./Ireland: Rebased revenue
increased 1.3% in Q4 driven by the net effect of (i) an increase in
residential cable revenue due to an increase in cable ARPU,
partially offset by a decline in cable RGUs and a decrease in cable
non-subscription revenue, (ii) an increase in residential mobile
revenue driven by the take-up of higher-value postpaid data bundles
and the aforementioned revenue benefit arising from the sale of
future commission payments on customer handset insurance
arrangements and (iii) a decline in B2B revenue due to a reduction
in revenue from data services, equipment sales and installations,
which offset the benefit of dark fibre wholesale contract wins in
the quarter and an increase in subscription revenue due to growth
in SOHO RGUs
- Belgium: Rebased revenue declined
0.7% in Q4 driven by the net effect of (i) lower B2B
non-subscription revenue driven by a decrease in revenue from
wholesale services and interconnect revenue, (ii) an increase in
B2B subscription revenue due to an increase in SOHO RGUs, (iii)
lower residential cable revenue driven by a decrease in
subscribers, partially offset by higher ARPU and (iv) an increase
in mobile revenue due to higher revenue from the sale of mobile
handsets and other devices
- Switzerland: Rebased revenue
declined 3.5% YoY in Q4 primarily due to the net effect of (i) a
decrease in residential cable subscription revenue driven by
subscriber volume loss and lower ARPU (ii) an increase in mobile
revenue driven by an increase in both subscribers and handset
sales
- Continuing CEE (Poland and
Slovakia): Rebased revenue grew 3.5% YoY in Q4 due to an
increase in residential cable subscription revenue driven by new
build areas
- Central and Corporate: Rebased
revenue decreased 21.8% in Q4 primarily due to a decrease in CPE
sales to the VodafoneZiggo JV. Commencing in Q3, TSA revenue
received from Vodafone has been rebased
Operating Income
- Operating income was $282.5 million and $252.2 million in Q4
2019 and Q4 2018, respectively, representing an increase of 12.0%
YoY. For the year ended December 31, 2019, our operating income of
$745.5 million reflects a decrease of 11.2% as compared to $839.1
million for the 2018 period
- The changes in operating income in the QTD and YTD periods
primarily resulted from the net effect of (i) lower OCF, as further
described below, (ii) decreases in depreciation and amortization
expense, (iii) increases in share-based compensation expense and
(iv) lower impairment, restructuring and other operating items,
net
Operating Cash Flow Highlights
The following table presents (i) OCF of each of our consolidated
reportable segments for the comparative periods, and (ii) the
percentage change from period to period on both a reported and
rebased basis:
Three months ended
Increase/(decrease)
Year ended
Increase/(decrease)
December 31,
December 31,
OCF
2019
2018
%
Rebased %
2019
2018
%
Rebased %
in millions, except %
amounts
Continuing operations:
U.K./Ireland
$
763.0
$
773.3
(1.3
)
(1.4
)
$
2,800.5
$
2,995.5
(6.5
)
(2.3
)
Belgium
339.1
355.3
(4.6
)
(4.1
)
1,386.1
1,480.0
(6.3
)
(2.0
)
Switzerland
151.6
174.0
(12.9
)
(13.1
)
627.9
712.0
(11.8
)
(10.3
)
Continuing CEE
52.5
60.0
(12.5
)
(10.7
)
215.0
233.6
(8.0
)
(2.3
)
Central and Corporate
(32.4
)
(60.7
)
46.6
(0.8
)
(171.1
)
(257.8
)
33.6
3.5
Intersegment eliminations
—
(0.3
)
N.M.
N.M.
1.1
(11.8
)
N.M.
N.M.
Total continuing operations
$
1,273.8
$
1,301.6
(2.1
)
(4.1
)
$
4,859.5
$
5,151.5
(5.7
)
(3.1
)
______________________________
N.M. - Not Meaningful
- Reported OCF for the three months and year ended December 31,
2019 decreased 2.1% and 5.7% year over year, respectively
- The YTD result was primarily driven by (i) the aforementioned
negative impact of FX movements and (ii) an organic OCF
decline
- Our rebased OCF decline of 4.1% and 3.1% in the Q4 and YTD
periods, respectively, included:
- The aforementioned favorable impacts of certain items of our
revenue, as discussed in the "Revenue Highlights" section
above
- The following current year impacts:
- Unfavorable network tax increases of $12.6 million and $42.2
million for Q4 and YTD, respectively, following an increase in the
rateable value of our U.K. networks, which is being phased in over
a six-year period ending in 2022
- For the YTD period, higher severance costs in U.K./Ireland of
$6.7 million
- For the YTD period, an unfavorable increase in personnel costs
in Central and Corporate recorded during the second quarter of 2019
related to a $5.0 million cash bonus associated with the renewal of
an existing executive employment contract on similar terms
- The following prior year impacts:
- Lower costs of $2.6 million and $9.4 million for the Q4 and YTD
periods, respectively, due to the reassessment of an accrual in
U.K./Ireland in 2018
- For the YTD period, higher costs of $5.3 million due to the
impact of a credit recorded during the second quarter of 2018 in
connection with a telecommunications operator's agreement to
compensate Virgin Media and other communications providers for
certain prior-period contractual breaches related to network
charges
Q4 2019 Rebased Operating Cash Flow Growth
- Segment Highlights
- U.K./Ireland: Rebased OCF decline
of 1.4% reflects the aforementioned revenue performance which was
more than offset by a net increase in our cost base due to (i) a
$12.6 million net increase in network taxes, (ii) a reduction in
B2B cost of sales, (iii) higher mobile data costs, (iv) higher
marketing spend and (v) an increase in programming costs
- Belgium: Rebased OCF decline of
4.1% was largely driven by the Medialaan MVNO contract loss,
certain regulatory headwinds and higher programming costs
- Switzerland: Rebased OCF declined
13.1% in Q4, largely due to (i) the aforementioned loss of
residential cable subscription revenue and (ii) higher interconnect
and roaming costs
- Continuing CEE (Poland and
Slovakia): Rebased Segment OCF decreased 10.7% in Q4, as an
increase in programming and project related external spend was only
partially offset by the aforementioned increase in residential
cable subscription revenue
OFCF Highlights
The following table presents (i) OFCF of each of our
consolidated reportable segments for the comparative periods and
(ii) the percentage change from period to period on a rebased
basis:
Three months ended
Year ended
December 31,
December 31,
OFCF
2019
2018
Rebased %
2019
2018
Rebased %
in millions, except %
amounts
Continuing operations:
U.K./Ireland
$
313.5
$
280.2
11.9
$
1,222.5
$
1,006.6
26.4
Belgium
193.6
129.1
49.3
848.9
689.2
27.8
Switzerland
80.9
89.3
(9.1
)
350.0
462.4
(22.8
)
Continuing CEE
11.7
6.3
93.4
108.0
80.8
42.7
Central and Corporate
(166.3
)
(174.4
)
(20.9
)
(551.5
)
(781.3
)
18.1
Intersegment eliminations
—
(0.3
)
N.M.
1.1
(11.8
)
N.M.
Total continuing operations
$
433.4
$
330.2
18.2
$
1,979.0
$
1,445.9
34.5
Net Earnings (Loss) Attributable to Liberty Global
Shareholders
- Net earnings (loss) attributable to Liberty Global shareholders
was ($1,386.5 million) and $25.1 million for the three months ended
December 31, 2019 and 2018, respectively, and $11,521.4 million and
$725.3 million for the year ended December 31, 2019 and 2018,
respectively. The earnings during the year ended December 31, 2019
includes a $12.2 billion gain on the sale of our operations in
Germany, Hungary, Romania and the Czech Republic recognized during
the third quarter of 2019.
Leverage and Liquidity
- Total principal amount of debt and
finance leases: $28.3 billion for continuing operations
- Leverage ratios7: At December 31,
2019, our adjusted gross and net leverage ratios were 5.4x and
3.7x, respectively
- Average debt tenor9: Approximately
7 years, with ~74% not due until 2025 or thereafter for continuing
operations
- Borrowing costs: Blended
fully-swapped borrowing cost of our debt was 4.1% for continuing
operations
- Liquidity6: $11.1 billion for our
continuing operations, including (i) $8.1 billion of cash at
December 31, 2019 and (ii) aggregate unused borrowing capacity10
under our credit facilities of $3.0 billion.
Share Repurchase Program
As announced today, our Board of Directors has authorized a new
$1 billion share repurchase program. Under the program, Liberty
Global may acquire from time to time its Class A ordinary shares,
Class C ordinary shares, or any combination of Class A and Class C
ordinary shares. The program may be effected through open market
transactions and/or privately negotiated transactions, which may
include derivative transactions. The timing of the repurchase of
shares pursuant to the program will depend on a variety of factors,
including market conditions and applicable law. The program may be
implemented in conjunction with brokers for the Company and other
financial institutions with whom the Company has relationships
within certain pre-set parameters and purchases may continue during
closed periods in accordance with applicable restrictions. The
program may be suspended or discontinued at any time.
Forward-Looking Statements and Disclaimer
This press release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995, including statements with respect to our strategies, future
growth prospects and opportunities; expectations with respect to
our rebased OCF decline, our rebased OFCF growth and our Adjusted
FCF; expectations with respect to our share repurchase plan;
expected launch of 5G speeds at Virgin Media; anticipated headwinds
in 2020; our medium-term outlook in the U.K. as well as in
Switzerland; expected impacts of new leadership at Virgin Media and
in Switzerland; expectations with respect to the development,
launch and benefits of our innovative and advanced products and
services; 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 events that are outside of
our control, such as the continued use by subscribers and potential
subscribers of our and our affiliates’ services and their
willingness to upgrade to our more advanced offerings; our and our
affiliates’ ability to meet challenges from competition, to manage
rapid technological change or to maintain or increase rates to
subscribers or to pass through increased costs to subscribers; the
effects of changes in laws or regulation; the effects of the U.K.'s
exit from the E.U.; general economic factors; our and our
affiliates’ ability to obtain regulatory approval and satisfy
regulatory conditions associated with acquisitions and
dispositions; our and affiliates’ ability to successfully acquire
and integrate new businesses and realize anticipated efficiencies
from acquired businesses; the availability of attractive
programming for our and our affiliates’ video services and the
costs associated with such programming; our and our affiliates’
ability to achieve forecasted financial and operating targets; the
outcome of any pending or threatened litigation; the ability of our
operating companies and affiliates to access cash of their
respective subsidiaries; the impact of our operating companies' and
affiliates’ future financial performance, or market conditions
generally, on the availability, terms and deployment of capital;
fluctuations in currency exchange and interest rates; the ability
of suppliers, vendors and contractors to timely deliver quality
products, equipment, software, services and access; our and our
affiliates’ ability to adequately forecast and plan future network
requirements including the costs and benefits associated with
network expansions; and other factors detailed from time to time in
our filings with the Securities and Exchange Commission, including
our most recently filed Form 10-K. 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 (NASDAQ: LBTYA, LBTYB and LBTYK) is one of the
world’s leading converged video, broadband and communications
companies, with operations in six European countries under the
consumer brands Virgin Media, Telenet and UPC. We invest in the
infrastructure and digital platforms that empower our customers to
make the most of the digital revolution. Our substantial scale and
commitment to innovation enable us to develop market-leading
products delivered through next-generation networks that connect 11
million customers subscribing to 25 million TV, broadband internet
and telephony services. We also serve 6 million mobile subscribers
and offer WiFi service through millions of access points across our
footprint.
In addition, Liberty Global owns 50% of VodafoneZiggo, a joint
venture in the Netherlands with 4 million customers subscribing to
10 million fixed-line and 5 million mobile services, as well as
significant investments in ITV, All3Media, ITI Neovision,
Lionsgate, the Formula E racing series and several regional sports
networks. For more information, please visit www.libertyglobal.com
or contact:
Balance Sheets, Statements of Operations and Statements of
Cash Flows
The consolidated balance sheets, statements of operations and
statements of cash flows of Liberty Global are in our 10-K.
Rebase Information
For purposes of calculating rebased growth rates on a comparable
basis for all businesses that we owned during 2019, we have
adjusted our historical revenue, OCF and OFCF for the three months
and year ended December 31, 2018 to (i) include the pre-acquisition
revenue, OCF and P&E additions of entities acquired during 2019
in our rebased amounts for the three months and year ended December
31, 2018 to the same extent that the revenue, OCF and P&E
additions of these entities are included in our results for the
three months and year ended December 31, 2019, (ii) include revenue
and costs for the temporary elements of transitional and other
services provided to the VodafoneZiggo JV, Vodafone, Deutsche
Telekom (the buyer of UPC Austria), Liberty Latin America and M7
Group (the buyer of UPC DTH), to reflect amounts related to these
services equal to those included in our results for the three
months and year ended December 31, 2019 and (iii) reflect the
translation of our rebased amounts for the three months and year
ended December 31, 2018 at the applicable average foreign currency
exchange rates that were used to translate our results for the
three months and year ended December 31, 2019. We have reflected
the revenue, OCF and P&E additions of these acquired entities
in our 2018 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 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, OCF
and OFCF 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, OCF and OFCF that would have occurred if
these transactions had occurred on the dates assumed for purposes
of calculating our rebased amounts or the revenue, OCF and OFCF
that will occur in the future. The rebased growth percentages have
been presented as a basis for assessing growth rates on a
comparable basis, and are not presented as a measure of our pro
forma financial performance.
The following table provides adjustments made to the 2018
amounts to derive our rebased growth rates for our continuing
operations:
Revenue
OCF
OFCF
Three months ended December
31,
Year ended December
31,
Three months ended December
31,
Year ended December
31,
Three months ended December
31,
Year ended December
31,
2018
2018
2018
2018
2018
2018
in millions
Acquisitions
$
40.7
$
96.9
$
9.1
$
14.6
$
9.1
$
12.2
Dispositions(i)
33.4
87.7
27.7
71.3
27.7
71.3
Foreign Currency
(27.4
)
(531.6
)
(10.8
)
(225.0
)
(0.3
)
(58.4
)
Total increase (decrease)
$
46.7
$
(347.0
)
$
26.0
$
(139.1
)
$
36.5
$
25.1
_____________________
(i)
Includes rebase adjustments related to agreements to provide
transitional and other services to the VodafoneZiggo JV, Vodafone,
Liberty Latin America, Deutsche Telekom and M7 Group. These
adjustments result in an equal amount of fees in both the 2019 and
2018 periods for those services that are deemed to be temporary in
nature. The net amount of these adjustments resulted in increases
in revenue of $33.6 million and $88.4 million and OCF of $28.0
million and $73.9 million for the three months and year ended
December 31, 2018, respectively.
Summary of Debt, Finance Lease Obligations & Cash and
Cash Equivalents
The following table(i) details the U.S. dollar equivalent
balances of the outstanding principal amount of our continuing
operations debt, finance lease obligations and cash and cash
equivalents at December 31, 2019:
Finance
Debt & Finance
Cash
Lease
Lease
and Cash
Debt(ii), (iii)
Obligations
Obligations
Equivalents
in millions
Liberty Global and unrestricted
subsidiaries
$
1,689.7
$
50.2
$
1,739.9
$
7,957.9
Virgin Media(iv)
15,854.9
70.1
15,925.0
45.7
UPC Holding
4,335.0
22.8
4,357.8
24.8
Telenet
5,768.5
474.0
6,242.5
114.0
Total
$
27,648.1
$
617.1
$
28,265.2
$
8,142.4
______________________
(i)
Except as otherwise indicated, the amounts reported in the table
include the named entity and its subsidiaries.
(ii)
Debt amounts for UPC Holding and Telenet include notes issued by
special purpose entities that are consolidated by the respective
subsidiary.
(iii)
Debt amounts for UPC Holding include those amounts that were not
direct obligations of the entities that were disposed of within the
UPC Holding borrowing group.
(iv)
The Virgin Media borrowing group includes certain subsidiaries
of Virgin Media, but excludes the parent entity, Virgin Media Inc.
The cash and cash equivalents amount includes cash and cash
equivalents held by the Virgin Media borrowing group, but excludes
cash and cash equivalents held by Virgin Media Inc. This amount is
included in the amount shown for Liberty Global and unrestricted
subsidiaries.
Property and Equipment Additions and Capital
Expenditures
The table below highlights the categories of the property and
equipment additions of our continuing operations for the indicated
periods and reconciles those additions to the capital expenditures
of our continuing operations that are presented in the consolidated
statements of cash flows in our 10-K.
Three months ended
Year ended
December 31,
December 31,
2019
2018
2019
2018
in millions, except %
amounts
Customer premises equipment
$
138.6
$
202.1
$
657.2
$
930.3
New build & upgrade
176.4
166.4
629.9
698.1
Capacity
92.3
128.5
319.9
434.3
Baseline
256.4
291.2
695.5
922.4
Product & enablers
176.7
183.2
578.0
720.5
Total P&E additions
840.4
971.4
2,880.5
3,705.6
Reconciliation of P&E additions to
capital expenditures:
Assets acquired under capital-related
vendor financing arrangements(i)
(423.8
)
(519.2
)
(1,727.0
)
(2,175.5
)
Assets acquired under capital leases
(19.7
)
(34.6
)
(66.9
)
(102.4
)
Changes in current liabilities related to
capital expenditures
(53.9
)
(103.2
)
156.5
25.3
Total capital expenditures, net(ii)
$
343.0
$
314.4
$
1,243.1
$
1,453.0
Capital expenditures, net:
Third-party payments
$
347.9
$
340.8
$
1,323.9
$
1,552.7
Proceeds received for transfers to related
parties(iii)
(4.9
)
(26.4
)
(80.8
)
(99.7
)
Total capital expenditures, net
$
343.0
$
314.4
$
1,243.1
$
1,453.0
P&E additions as % of revenue
28.2
%
32.9
%
25.0
%
31.0
%
____________________________
(i)
Amounts exclude related VAT of $72.0 million and $79.5 million
for the three months ended December 31, 2019 and 2018,
respectively, and $286.1 million and $347.3 million for the year
ended December 31, 2019 and 2018, respectively, that were also
financed by our vendors under these arrangements.
(ii)
The capital expenditures that we report in our consolidated
statements of cash flows do not include amounts that are financed
under vendor financing or finance 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.
(iii)
Primarily relates to transfers of centrally-procured property
and equipment to our Discontinued Operations and the VodafoneZiggo
JV.
ARPU per Cable Customer Relationship
The following table provides ARPU per cable customer
relationship for the indicated periods:
Three months ended December
31,
%
Rebased
2019
2018
Change
% Change
Liberty Global
$
60.22
$
60.18
0.1
%
0.8
%
U.K. & Ireland (Virgin Media)
£
52.44
£
51.71
1.4
%
1.6
%
Belgium (Telenet)
€
58.38
€
57.11
2.2
%
2.2
%
UPC
€
36.90
€
37.57
(1.8
%)
(4.0
%)
Mobile ARPU
The following tables provide ARPU per mobile subscriber for the
indicated periods:
ARPU per Mobile
Subscriber
Three months ended December
31,
%
Rebased
2019
2018
Change
% Change
Liberty Global:
Including interconnect revenue
$
16.15
$
18.19
(11.2
%)
(2.0
%)
Excluding interconnect revenue
$
13.98
$
14.49
(3.5
%)
(2.0
%)
Consolidated Operating Data —
December 31, 2019
Video
Homes Passed
Fixed-Line Customer
Relationships
Internet
Subscribers(i)
Basic Video
Subscribers(ii)
Enhanced Video
Subscribers
Total Video
Telephony
Subscribers(iii)
Total RGUs
Total Mobile
Subscribers(vi)
Continuing operations:
U.K.
14,894,400
5,518,100
5,271,000
—
3,687,400
3,687,400
4,605,500
13,563,900
3,179,500
Belgium
3,385,200
2,072,100
1,664,400
164,700
1,701,900
1,866,600
1,212,500
4,743,500
2,808,400
Switzerland(v)
2,372,800
1,038,800
661,400
418,700
593,200
1,011,900
506,500
2,179,800
200,700
Ireland
939,900
435,400
378,200
—
280,400
280,400
335,100
993,700
97,600
Poland
3,547,800
1,483,800
1,229,600
196,600
1,067,000
1,263,600
674,400
3,167,600
9,000
Slovakia
619,000
193,000
140,600
28,800
142,500
171,300
87,100
399,000
—
Total continuing operations
25,759,100
10,741,200
9,345,200
808,800
7,472,400
8,281,200
7,421,100
25,047,500
6,295,200
Subscriber Variance Table —
December 31, 2019 vs. September 30, 2019
Video
Homes Passed
Fixed-Line Customer
Relationships
Internet
Subscribers(ii)
Basic Video
Subscribers(i)
Enhanced Video
Subscribers
Total Video
Telephony
Subscribers(iii)
Total RGUs
Total Mobile
Subscribers(vi)
Continuing operations:
U.K.
145,900
(8,100
)
1,900
—
(77,600
)
(77,600
)
(28,100
)
(103,800
)
42,500
Belgium
9,900
(6,900
)
5,200
(11,700
)
(3,400
)
(15,100
)
(8,700
)
(18,600
)
29,500
Switzerland(v)
9,300
(22,700
)
(9,800
)
(17,000
)
(4,800
)
(21,800
)
(2,700
)
(34,300
)
11,800
Ireland
(6,500
)
(1,300
)
(1,000
)
—
3,500
3,500
(9,600
)
(7,100
)
(400
)
Poland
23,100
13,200
18,200
12,600
6,200
18,800
(4,600
)
32,400
4,100
Slovakia
1,100
300
1,200
300
600
900
1,000
3,100
—
Total continuing operations
182,800
(25,500
)
15,700
(15,800
)
(75,500
)
(91,300
)
(52,700
)
(128,300
)
87,500
Organic Change Summary:
U.K.
145,900
(8,100
)
1,900
—
(77,600
)
(77,600
)
(28,100
)
(103,800
)
42,500
Belgium
9,900
(6,900
)
5,200
(11,700
)
(3,400
)
(15,100
)
(8,700
)
(18,600
)
29,500
Other Europe
37,100
(10,500
)
8,600
(4,100
)
5,500
1,400
(15,900
)
(5,900
)
15,500
Total Organic Change
192,900
(25,500
)
15,700
(15,800
)
(75,500
)
(91,300
)
(52,700
)
(128,300
)
87,500
Q4 2019 Adjustments:
Q4 2019 Adjustment - Ireland
(10,100
)
—
—
—
—
—
—
—
—
Total adjustments
(10,100
)
—
—
—
—
—
—
—
—
Footnotes for Consolidated Operating
Data and Subscriber Variance Tables
(i)
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 70,400
subscribers who have requested and received this service
(ii)
We have approximately 27,900 “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.
(iii)
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 183,300
subscribers who have requested and received this service.
(iv)
In a number of countries, our mobile subscribers receive mobile
services pursuant to prepaid contracts. As of December 31, 2019,
our mobile subscriber count included 444,600 and 263,900 prepaid
mobile subscribers in Belgium and the U.K., respectively.
(v)
Pursuant to service agreements, Switzerland offers broadband
internet, enhanced video 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 December 31, 2019, Switzerland’s
partner networks account for 118,300 Fixed-Line Customer
Relationships, 299,300 RGUs, which include 109,400 Internet
Subscribers, 104,200 Enhanced Video Subscribers and 85,700
Telephony Subscribers. Subscribers to our enhanced video services
provided over partner networks receive basic video services from
the partner networks as opposed to our operations. Due to the fact
that we do not own these partner networks, we do not report homes
passed for Switzerland’s partner networks.
Additional General Notes to
Tables:
Most of our broadband communications subsidiaries provide
telephony, broadband internet, data, video or other B2B services.
Certain of our B2B revenue is derived from 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.” To the extent our existing customers upgrade from a
residential product offering to a SOHO product offering, the number
of SOHO RGUs or SOHO customers will increase, but there is no
impact to our total RGU or customer counts. 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.
In Belgium, Telenet leases a portion of its network under a
long-term finance 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 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.
Footnotes
1
The indicated growth rates are rebased for acquisitions,
dispositions, FX and other items that impact the comparability of
our year-over-year results. Please see Rebase Information for
information on rebased growth.
2
A reconciliation of our 2020 guidance targets for Adjusted FCF
to a U.S. GAAP measure is not provided due to the fact that not all
elements of the reconciliation are projected as part of our
forecasting process, as certain items may vary significantly from
one period to another. Absolute full-year 2020 U.S. dollar guidance
figures based on FX rates of EUR/USD 1.13 and GBP/USD 1.33.
3
Includes subscription and non-subscription revenue. For
additional information regarding how we define our revenue
categories, see note 20 to the consolidated financial statements
included in our 10-K.
4
During the fourth quarter of 2019, we changed the presentation
of our consolidated reportable segments with respect to certain
operating costs related to our centrally-managed technology and
innovation function. For additional information and detail of the
impact to our consolidated reportable segments, see the
Appendix.
5
Total B2B includes subscription (SOHO) and non-subscription
revenue. B2B and SOHO growth rates include upsell from our
residential businesses.
6
Liquidity refers to cash and cash equivalents plus the maximum
undrawn commitments under subsidiary borrowing facilities, without
regard to covenant compliance calculations.
7
Our debt and net debt ratios are defined as total debt and net
debt, respectively, divided by OCF for the last twelve months (LTM
OCF). Prior to December 31, 2019, we presented our debt and net
debt ratios under an annualized OCF approach using the OCF from the
most recent quarter (LQA OCF). For comparative purposes we have
included both the debt and net debt ratios under the LQA method
below. 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
excludes the loans backed or secured by the shares we hold in ITV
plc and Lions Gate Entertainment Corp. For additional information
on our investments, see note 7 to the consolidated financial
statements included in our 10-K. The following table details the
calculation of our debt and net debt to LTM OCF and LQA OCF ratios
as of December 31, 2019 (in millions, except ratios):
As of and for the twelve months ended
December 31, 2019
Debt to LTM OCF:
Debt and finance lease obligations before
deferred financing costs, discounts and premiums
$
28,265.2
Principal related projected derivative
cash payments
(435.3
)
ITV Collar Loan
(1,435.5
)
Lionsgate Collar Loan
(55.3
)
Adjusted debt and finance lease
obligations before deferred financing costs, discounts and
premiums
$
26,339.1
LTM OCF
$
4,859.5
Debt to LTM OCF ratio
5.4
Net Debt to LTM OCF:
Adjusted debt and finance lease
obligations before deferred financing costs, discounts and
premiums
$
26,339.1
Cash and cash equivalents
(8,142.4
)
Adjusted net debt and finance lease
obligations before deferred financing costs, discounts and
premiums
$
18,196.7
LTM OCF
$
4,859.5
Net debt to LTM OCF ratio
3.7
As of and for the quarter ended December
31, 2019
Debt & Net Debt to LQA OCF:
LQA OCF
$
5,095.2
Debt to LQA OCF
5.2
Net debt to LQA OCF
3.6
8
Our Adjusted FCF is presented on a pro forma basis, consistent
with our 2019 guidance, that gives effect to (i) the removal of our
estimate of interest and related derivative payments that were made
by UPC Holding associated with our discontinued operations in
Hungary, Romania and the Czech Republic during the respective
period and (ii) the net cash flows that we would have received from
transitional services agreements if the sale of the Discontinued
Operations had occurred on January 1, 2019.
9
For purposes of calculating our average tenor, total third-party
debt excludes vendor financing.
10
Our aggregate unused borrowing capacity of $3.0 billion
represents the maximum undrawn commitments under the applicable
facilities without regard to covenant compliance calculations. Upon
completion of the relevant December 31, 2019 compliance reporting
requirements for our credit facilities, and assuming no further
changes from quarter-end borrowing levels, we anticipate that the
full unused borrowing capacity will continue to be available, with
the exception of the VM Credit Facilities, which will have
borrowing capacity limited to £921.6 million ($1,222.3 million),
and the UPC Holding Bank Facility, which will have borrowing
capacity limited to €828.8 million ($930.6 million), each with no
additional restriction to loan or distribute. Our above
expectations do not consider any actual or potential changes to our
borrowing levels or any amounts loaned or distributed subsequent to
December 31, 2019.
Glossary
10-Q or 10-K: As used herein, the
terms 10-Q and 10-K refer to our most recent quarterly or annual
report as filed with the Securities and Exchange Commission on Form
10-Q or Form 10-K, as applicable.
Adjusted Free Cash Flow (FCF): net
cash provided by our operating activities, plus (i) cash payments
for third-party costs directly associated with successful and
unsuccessful acquisitions and dispositions and (ii) expenses
financed by an intermediary, less (a) capital expenditures, as
reported in our consolidated statements of cash flows, (b)
principal payments on amounts financed by vendors and
intermediaries and (c) principal payments on finance leases
(exclusive of the portions of the network lease in Belgium 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 consolidated statements of cash flows.
The following table provides a reconciliation of our net cash
provided by operating activities from continuing operations to
Adjusted Free Cash Flow for the indicated periods. In addition, in
order to provide information regarding our Adjusted Free Cash Flow
that excludes the Discontinued Operations, we also present Adjusted
Free Cash Flow on a pro forma basis for the three months and year
ended December 31, 2019 as if the sale of the Discontinued
Operations had been completed on January 1, 2019.
Three months ended
Year ended
December 31,
December 31,
2019
2018
2019
2018
in millions
Continuing operations:
Net cash provided by operating
activities
$
1,493.9
$
1,277.5
$
3,714.1
$
3,985.0
Cash payments (receipts) for direct
acquisition and disposition costs(i)
(37.0
)
9.0
(13.5
)
23.0
Expenses financed by an
intermediary(ii)
532.2
459.8
2,171.4
1,883.7
Capital expenditures, net
(343.0
)
(314.5
)
(1,243.1
)
(1,453.0
)
Principal payments on amounts financed by
vendors and intermediaries
(865.5
)
(340.0
)
(3,934.7
)
(4,258.0
)
Principal payments on certain finance
leases
(5.9
)
(13.9
)
(62.9
)
(72.9
)
Adjusted FCF
$
774.7
$
1,077.9
631.3
$
107.8
Pro forma adjustments related to the sale
of the Discontinued Operations:
Interest and derivative payments(iii)
49.6
Transitional services agreements(iv)
89.2
Pro forma Adjusted FCF(v)
$
770.1
_______________
(i)
The 2019 amounts include an adjustment to exclude from adjusted
free cash flow a $50.4 million cash receipt associated with a
termination fee received from Sunrise Communications Group AG
during the fourth quarter in connection with the termination of a
share purchase agreement to sell our operations in Switzerland.
(ii)
For purposes of our 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 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.
(iii)
Represents the estimated interest and related derivative
payments made by UPC Holding associated with our discontinued UPC
Holding operations in Hungary, Romania and the Czech Republic
during the applicable period. These estimated payments are
calculated based on Hungary, Romania and the Czech Republic’s pro
rata share of UPC Holding's OCF and UPC Holding's aggregate
interest and derivative payments during the applicable period.
Although we believe this adjustment to interest and related
derivative payments results in a reasonable estimate of the annual
ongoing interest and related derivative payments that will occur in
relation to the continuing UPC Holding operations, no assurance can
be given that the actual interest and derivative payments will be
equivalent to the amounts presented. No pro forma adjustments were
required with respect to Unitymedia's interest and derivative
payments as substantially all of Unitymedia’s debt and related
derivative instruments were direct obligations of the entities
being disposed. As a result, the interest and related derivative
payments associated with such debt and derivative instruments of
Unitymedia are included in discontinued operations.
(iv)
Represents our preliminary estimate of the net cash flows that
we would have received from transitional services agreements if the
sale of the Discontinued Operations had occurred on January 1,
2019. The estimated net cash flows are based on the estimated
revenue that we expect to recognize from our transitional services
agreements during the first 12 months following the completion of
the sale of the Discontinued Operations, less the estimated
incremental costs that we expect to incur to provide such
transitional services. As a result, the pro forma adjustments
during the year ended December 31, 2019 include $88.2 million
related to our discontinued operations in Germany, Hungary, Romania
and the Czech Republic and $1.0 million related to our discontinued
DTH business.
(v)
Represents the Adjusted FCF that we estimate would have resulted
if the sale of the Discontinued Operations had been completed on
January 1, 2019. Actual amounts may differ from the amounts assumed
for purposes of this pro forma calculation. For example, our Pro
forma Adjusted FCF does not include any future benefits related to
reductions in our corporate costs as a result of our operating
model rationalization or any other potential future operating or
capital cost reductions attributable to our continuing or
discontinued operations.
ARPU: Average Revenue Per Unit is
the average monthly subscription revenue per average cable customer
relationship or mobile subscriber, as applicable. Following the
adoption of ASU 2014-09, subscription revenue excludes interconnect
fees, channel carriage fees, mobile handset sales and late fees,
but includes the amortization of installation fees. Prior to the
adoption of ASU 2014-09, installation fees were excluded from
subscription revenue. ARPU per average cable customer relationship
is calculated by dividing the average monthly subscription revenue
from residential cable and SOHO services by the average number of
fixed-line customer relationships for the period. ARPU per average
mobile subscriber is calculated by dividing residential mobile and
SOHO revenue for the indicated period by the average number of
mobile subscribers for the period. Unless otherwise indicated, ARPU
per cable customer relationship or mobile subscriber is not
adjusted for currency impacts. ARPU per RGU refers to average
monthly revenue per average RGU, which is calculated by dividing
the average monthly subscription revenue from residential and SOHO
services for the indicated period, by the average number of the
applicable RGUs for the period. Unless otherwise noted, ARPU in
this release is considered to be ARPU per average cable customer
relationship or mobile subscriber, as applicable. Fixed-line
customer relationships, mobile subscribers and RGUs of entities
acquired during the period are normalized. In addition, for
purposes of calculating the percentage change in ARPU on a rebased
basis, we adjust the prior-year subscription revenue, fixed-line
customer relationships, mobile subscribers and RGUs, as applicable,
to reflect acquisitions, dispositions, FX and the January 1, 2018
adoption of the new revenue recognition standard (ASU 2014-09,
Revenue from Contracts with Customers) on a comparable basis with
the current year, consistent with how we calculate our rebased
growth for revenue and OCF, as further described in the body of
this release.
ARPU per Mobile Subscriber: Our
ARPU per mobile subscriber calculation that excludes interconnect
revenue refers to the average monthly mobile subscription revenue
per average mobile subscriber and is calculated by dividing the
average monthly mobile subscription revenue (excluding 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.
Basic Video Subscriber: 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. 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.
Blended fully-swapped debt borrowing
cost: the weighted average interest rate on our aggregate
variable- and fixed-rate indebtedness (excluding finance leases and
including vendor financing obligations), including the effects of
derivative instruments, original issue premiums or discounts and
commitment fees, but excluding the impact of financing costs.
B2B: Business-to-Business.
Customer Churn: the rate at which
customers relinquish their subscriptions. The annual rolling
average basis is calculated by dividing the number of disconnects
during the preceding 12 months by the average number of customer
relationships. For the purpose of computing churn, a disconnect is
deemed to have occurred if the customer no longer receives any
level of service from us and is required to return our equipment. A
partial product downgrade, typically used to encourage customers to
pay an outstanding bill and avoid complete service disconnection,
is not considered to be disconnected for purposes of our churn
calculations. Customers who move within our cable footprint and
upgrades and downgrades between services are also excluded from the
disconnect figures used in the churn calculation.
Enhanced Video Subscriber: 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 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.
Fixed-Line Customer Relationships:
the number of customers who receive at least one of our internet,
video or telephony services that we count as RGUs, without regard
to which or to how many services they subscribe. Fixed-Line
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 Fixed-Line Customer
Relationships. We exclude mobile-only customers from Fixed-Line
Customer Relationships.
Fixed-Mobile Convergence (FMC):
Fixed-mobile convergence penetration represents the number of
customers who subscribe to both a fixed broadband internet service
and postpaid mobile telephony service, divided by the total number
of customers who subscribe to our fixed broadband internet
service.
Homes Passed: homes, residential
multiple dwelling units or commercial units that can be connected
to our networks without materially extending the distribution
plant. Certain of our Homes Passed counts are based on census data
that can change based on either revisions to the data or from new
census results.
Internet Subscriber: a home,
residential multiple dwelling unit or commercial unit that receives
internet services over our networks, or that we service through a
partner network.
MDU: Multiple Dwelling Unit.
Mobile Subscriber Count: the number
of active 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 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. In a number of countries,
our mobile subscribers receive mobile services pursuant to prepaid
contracts.
MVNO: Mobile Virtual Network
Operator.
NPS: Net Promoter Score.
OCF: As used herein, OCF has the
same meaning as the term "Adjusted OIBDA" that is referenced in our
10-K. OCF is the primary measure used by our chief operating
decision maker to evaluate segment operating performance. OCF is
also a key factor that is used by our internal decision makers to
(i) determine how to allocate resources to segments and (ii)
evaluate the effectiveness of our management for purposes of annual
and other incentive compensation plans. As we use the term, OCF is
defined as operating income before depreciation and amortization,
share-based compensation, provisions and provision releases related
to significant litigation and impairment, restructuring and other
operating items. Other operating items include (a) gains and losses
on the disposition of long-lived assets, (b) third-party costs
directly associated with successful and unsuccessful acquisitions
and dispositions, including legal, advisory and due diligence fees,
as applicable, and (c) other acquisition-related items, such as
gains and losses on the settlement of contingent consideration. Our
internal decision makers believe OCF is a meaningful measure
because it represents a transparent view of our recurring operating
performance that is unaffected by our capital structure and allows
management to (1) readily view operating trends, (2) perform
analytical comparisons and benchmarking between segments and (3)
identify strategies to improve operating performance in the
different countries in which we operate. We believe our OCF measure
is useful to investors because it is one of the bases for comparing
our performance with the performance of other companies in the same
or similar industries, although our measure may not be directly
comparable to similar measures used by other public companies. OCF
should be viewed as a measure of operating performance that is a
supplement to, and not a substitute for, operating income, net
earnings or loss, cash flow from operating activities and other
U.S. GAAP measures of income or cash flows.
A reconciliation of our operating income to total OCF for our
continuing operations is presented in the following table:
Three months ended
Year ended
December 31,
December 31,
2019
2018
2019
2018
in millions
Operating income
$
282.5
$
252.4
$
745.5
$
839.1
Share-based compensation expense
77.5
75.0
305.8
206.0
Depreciation and amortization
897.9
924.0
3,652.2
3,858.2
Impairment, restructuring and other
operating items, net
15.9
50.2
156.0
248.2
Total OCF
$
1,273.8
$
1,301.6
$
4,859.5
$
5,151.5
OCF margin: calculated by dividing
OCF by total revenue for the applicable period.
OFCF: As used herein, Operating
Free Cash Flow or "OFCF" represents OCF less property and equipment
additions. OFCF is an additional metric that we use to measure the
performance of our operations after considering the level of
property and equipment additions incurred during the period. For
limitations of OFCF, see the definition of OCF.
A reconciliation of our total OCF to total OFCF for our
continuing operations is presented in the following table:
Three months ended
Year ended
December 31,
December 31,
2019
2018
2019
2018
in millions
Total OCF
$
1,273.8
$
1,301.6
$
4,859.5
$
5,151.5
Property and equipment additions
(840.4
)
(971.4
)
(2,880.5
)
(3,705.6
)
Total OFCF
$
433.4
$
330.2
$
1,979.0
$
1,445.9
OFCF margin: OFCF margin is
calculated by dividing OFCF by total revenue for the applicable
period.
Property and equipment additions (P&E
additions): includes capital expenditures on an accrual
basis, amounts financed under vendor financing or finance lease
arrangements and other non-cash additions.
RGU: A Revenue Generating Unit is
separately a Basic Video Subscriber, Enhanced Video Subscriber,
Internet Subscriber or Telephony Subscriber. A home, residential
multiple dwelling unit, or commercial unit may contain one or more
RGUs. For example, if a residential customer in our U.K. 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, 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 or 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 RGU counts exclude our separately
reported postpaid and prepaid mobile subscribers.
SIM: Subscriber Identification
Module.
SOHO: Small or Home Office
Subscribers.
Telephony Subscriber: 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.
U.S. GAAP: Accounting principles
generally accepted in the United States.
YoY: Year-over-year.
Appendix - Supplemental OCF, P&E and OFCF
information
The following table presents (i) OCF, (ii) property and
equipment additions, (iii) OFCF and (iv) percentage change from
period to period for OCF and OFCF on a rebased basis for each of
our consolidated reportable segments:
Increase/(decrease)
Year ended December
31,
Rebased %
2019
2018
2017
2019
2018
in millions, except %
amounts
OCF(i):
U.K./Ireland
$
2,800.5
$
2,995.5
$
2,831.2
(2.3
)
3.3
Belgium
1,386.1
1,480.0
1,300.3
(2.0
)
7.9
Switzerland
627.9
712.0
800.3
(10.3
)
(11.3
)
Continuing CEE
215.0
233.6
220.1
(2.3
)
1.4
Central and Corporate
(171.1
)
(257.8
)
(317.3
)
3.5
19.0
Intersegment eliminations
1.1
(11.8
)
(9.5
)
N.M.
N.M.
Total OCF
$
4,859.5
$
5,151.5
$
4,825.1
(3.1
)
3.5
Property and equipment additions(ii):
U.K./Ireland
$
1,578.0
$
1,988.9
$
2,161.8
Belgium
537.2
790.8
691.0
Switzerland
277.9
249.6
244.4
Continuing CEE
107.0
152.8
158.2
Central and Corporate
380.4
523.5
448.1
Total property and equipment additions
$
2,880.5
$
3,705.6
$
3,703.5
OFCF(i) (ii):
U.K./Ireland
$
1,222.5
$
1,006.6
$
669.4
26.4
50.4
Belgium
848.9
689.2
609.3
27.8
5.7
Switzerland
350.0
462.4
555.9
(22.8
)
(17.0
)
Continuing CEE
108.0
80.8
61.9
42.7
22.0
Central and Corporate
(551.5
)
(781.3
)
(765.4
)
18.1
(0.1
)
Intersegment eliminations
1.1
(11.8
)
(9.5
)
N.M.
N.M.
Total OFCF
$
1,979.0
$
1,445.9
$
1,121.6
34.5
24.2
_______________
(i)
Includes the Centrally-held Operating Cost Allocations, as
defined and described below.
(ii)
Excludes the Centrally-held P&E Attributions, as defined and
described below.
Centrally-held Operating Cost
Allocations
During the fourth quarter of 2019, we changed the presentation
of certain operating costs related to our centrally-managed
technology and innovation function. These costs, which were
previously included in Central and Corporate, are now allocated to
our consolidated reportable segments. This change, which we refer
to as the “Centrally-held Operating Cost Allocations”, was made as
a result of internal changes with respect to the way in which our
chief operating decision maker evaluates the OCF of our operating
segments. Segment information for all periods presented has been
revised in our reported U.S. GAAP disclosures to reflect this
change. The following table provides a summary of the impact on the
OCF of our consolidated reportable segments and Central and
Corporate that resulted from the Centrally-held Operating Cost
Allocations.
Year ended December
31,
2019
2018
2017
in millions
Increase (decrease) to OCF:
U.K./Ireland
$
(66.6
)
$
(61.7
)
$
(52.8
)
Switzerland
(33.0
)
(36.7
)
(32.3
)
Continuing CEE
(14.7
)
(15.5
)
(13.4
)
Central and Corporate
114.3
113.9
98.5
Total Liberty Global
$
—
$
—
$
—
Centrally-held Property & Equipment
Attributions
Property and equipment additions presented for Central and
Corporate include certain capital costs incurred for the benefit of
our operating segments. Generally, for purposes of the consolidated
financial statements of our borrowing groups, the expense
associated with these capital costs is allocated and/or charged to
our operating segments as related-party fees and allocations in
their respective statements of operations over the period in which
the operating segment benefits from the use of the Central and
Corporate asset. Related-party fees and allocations are excluded
from the reported OCF metric of these borrowing groups. These
amounts are based on (i) our estimate of its share of underlying
costs, (ii) our estimate of its share of the underlying costs plus
a mark-up or (iii) commercially-negotiated rates. These charges and
allocations differ from the attributed OFCF approach, as further
described below.
For internal management reporting and capital allocation
purposes, we evaluate the OFCF of our operating segments on an
"attributed" basis, whereby we estimate and attribute certain
capital costs incurred by Central and Corporate to our operating
segments as if that operating segment directly incurred its
estimated share of the capital costs in the same period the costs
were incurred by Central and Corporate. These capital costs
represent assets that are jointly used by our operating segments.
In the context of evaluating our operating segments, we believe
this non-GAAP approach, which we refer to as the "Centrally-held
Property and Equipment Attributions", is a meaningful measure as it
represents a transparent view of what the estimated capital spend
for our operating segments might be if they were to operate as a
stand-alone business (excluding, among other considerations, any
impact from lost economies of scale) and allows us to more
accurately (i) review capital trends by operating segment, (ii)
perform benchmarking between operating segments and (iii) drive
alignment and accountability between Central and Corporate and our
operating segments with respect to our consolidated capital spend.
The amounts attributed to each operating segment are estimated
based on (a) actual costs incurred by Central and Corporate,
without any mark-up, and (b) each respective operating segment's
estimated use of the associated assets.
The below table summarizes the Centrally-held Property and
Equipment Attributions, consistent with our internal management
reporting approach. This presentation is for illustrative purposes
only and is intended as a supplement to, and not a substitute for,
our U.S. GAAP presentation of the property and equipment additions
of our reportable segments.
Year ended December
31,
2019
2018
2017
in millions
Increase (decrease) to property and
equipment additions:
U.K./Ireland
$
136.5
$
176.6
$
151.3
Belgium
11.3
—
—
Switzerland
52.1
56.1
49.3
Continuing CEE
26.9
37.8
31.3
Central and Corporate
(226.8
)
(270.5
)
(231.9
)
Total Liberty Global
$
—
$
—
$
—
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200213005868/en/
Investor Relations Matt Coates +44 20 8483 6333 John Rea
+1 303 220 4238 Stefan Halters +44 20 8483 6211
Corporate Communications Molly Bruce +1 303 220 4202 Matt
Beake +44 20 8483 6428
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