Liberty Global “in great shape”
February 18, 2022
Liberty Global has announced its Q4 2021 financial results, saying it achieved all 2021 guidance targets including increased Adjusted Free Cash Flow.
CEO, Mike Fries, stated: “Our fourth quarter and full year results demonstrated continued commercial momentum across our FMC champions. Operationally, we delivered 306,000 aggregate broadband and postpaid mobile subscribers during Q4 and over 1 million for FY21 with our converged bundles leveraging our market-leading broadband speeds and increasing 5G coverage. As we look at the overall market in Europe, we see more tailwinds than headwinds, including huge demand for connectivity, improved pricing power, competition rationalising and an improved regulatory environment.”
“Executing on our synergy plans in Switzerland and the UK remains a top priority and we are on track with the integrations in both markets. Our focus on network development strategies across our core operations continued throughout the quarter. In the UK, Virgin Media O2 increased its 1Gbps footprint to reach all of its 15.6 million homes passed, while progressing its FTTP upgrade plans to deploy a full fibre overlay across the entire HFC network by 2028. Meanwhile in Belgium, Telenet recently launched a strategic tower review with strong interest.”
“To extend Virgin Media O2’s broadband leadership, Liberty Global and Telefónica have initiated discussions with a number of potential financial partners regarding an opportunity to participate in a new network build joint venture. The focus of the entity will be on building a full fibre network of up to 7 million premises in new greenfield areas by the end of 2027. Virgin Media O2 will commit to being an anchor tenant of this new network, with its proven track record of achieving 30 per cent penetration in new build areas with project Lightning. The network will also be available to other ISPs on a wholesale basis. As this will extend the company’s gigabit reach to ~23 million premises once completed, it provides Virgin Media O2 with incremental growth opportunities by offering services to a wider pool of customers and higher cross and upsell due to the increased overlap of fixed and mobile services.”
“Our ventures portfolio is becoming an increasingly important piece of our value creation strategy as we continue to invest in technology, content and infrastructure businesses offering products and services directly adjacent to our core operations. The portfolio is now valued at $3.5 billion which represents a year-on-year increase of $1.1 billion. Key drivers include Lacework, which closed one of the largest venture capital funding rounds of the year in the US last November, raising $1.3 billion at a valuation of $8.3 billion, up substantially from its $1.1 billion valuation at the beginning of 2021, and Univision, which closed its merger with Televisa in January 2022. Looking ahead, we see a number of interesting infrastructure opportunities on the horizon and will look at strategic options for our content investments, while the technology portion of our Ventures portfolio is expected to be largely self-funding going forward.”
“At the consolidated level, we delivered on all 2021 guidance including Full Company Adjusted Free Cash Flow of $1.45 billion1, which represented 37 per cent YoY growth. We expect to continue growing Distributable Cash Flow to $1.7 billion in 2022, an increase of 22 per cent over 2021, supported by shareholder distributions from our joint ventures in the UK and the Netherlands, as well as an expected recapitalisation of Virgin Media O2 later in the year as management further executes on its synergy plan. This growth is expected despite our forecast for peak Costs to Capture spend in both the UK and Switzerland this year, as well as elevated capital expenditures in Belgium and the Netherlands related to network capacity.”
“Liberty Global’s balance sheet remains in great shape with $4.3 billion(i) of cash (pro forma for ~$600 million of net cash proceeds expected from the sale of UPC Poland) and $5.9 billion of total liquidity (pro forma for UPC Poland). We continue to believe our shares offer very strong value at current prices and in our robust share buyback program we repurchased $1.6 billion of our shares in 2021, exceeding market expectations and buying back 10 per cent of our shares by year end. We look forward to executing on the commitment to repurchase 10 per cent of our shares outstanding in both 2022 and 2023,” he concluded.
Q4 Operating Company Highlights
Sunrise UPC (Consolidated)
Sunrise UPC delivers record-high sales, achieving 2021 guidance; synergies realisation ahead of plan
Operating highlights: Strategic integration plan towards becoming a national converged champion remains on track with synergy realisation ahead of plan. Despite the continuation of an aggressive competitive environment, record-high sales combined with stable low churn resulted in 8,000 broadband net additions in Q4, closing the year with great momentum. Sales uptake in mobile postpaid with 49,000 net adds across all brands. FMC share grew 3 per cent in 2021 and has now reached 56 per cent. Budget brand Yallo converged into a Full Telco operator. Sunrise UPC will carry on utilising a combination of its own network, Swisscom’s network and some new build in selected areas to always provide the best products in the market.
Financial highlights: Reported revenue was $824.5 million in Q4 2021, an increase of 1 per cent on a rebased basis YoY, primarily due to an increase in business wholesale revenue partially offset by decreases in (i) prepay business revenue and (ii) handset sales. Sunrise UPC’s reported Adjusted EBITDA was $297.8 million in Q4 2021. On a rebased basis, Adjusted EBITDA decreased 0.5 per cent, including $6 million of costs to capture. Adjusted EBITDA less P&E Additions was $101 million in Q4 on a reported basis. On a rebased basis, Adjusted EBITDA less P&E Additions decreased 23.3 per cent YoY, including the adverse impact of $42 million of costs to capture.
Solid operational results in Q4 2021 and full year in line with guidance
Operating highlights: Commercial momentum continued in Q4 2021, resulting in the ninth quarter of broadband growth with 6,000 net adds and 13,000 postpaid mobile adds driven by a strong uptake of net new FMC customers on Telenet’s ‘ONE(Up)’ bundles. Telenet continues to engage with Fluvius to reach a formal agreement to create “the data network of the future” through their joint fixed network infrastructure in Flanders. Telenet also launched an external auction for the potential sale of their mobile tower portfolio to enhance shareholder value.
Financial highlights: Reported and rebased revenue decreased 3.9 per cent and increased 0.3 per cent, respectively, to $763 million in Q4. Revenue increased as a result of higher mobile subscription revenue and an increase in broadband revenue due to customer growth, partially offset by lower revenue from business services. Reported and rebased Adjusted EBITDA decreased 2.5 per cent and increased 1.6 per cent, respectively, to $351.3 million in Q4. The rebased Adjusted EBITDA growth was primarily due to the net effect of (i) the aforementioned revenue impacts, (ii) a decrease in labor costs and (iii) lower costs related to sales and marketing. Reported and rebased Adjusted EBITDA less P&E Additions decreased 8.8 per cent and 5.1 per cent, respectively, to $202.3 million in Q4.
VMO2 JV (Non-consolidated Joint Venture)
VMO2 JV continues to grow its customer base, discussions to initiate a 7 million premises fibre network to be built with the backing of a financial partner
Operating highlights: Strong demand for premium connectivity and broadband speed continues, resulting in 129,000 mobile postpaid net adds and 60,000 broadband net adds in Q4, leading to the seventh consecutive quarter of growth in both Project Lightning areas and VMO2’s existing BAU. Implemented a 6.5 per cent average price increase in fixed starting in March. VOLT offer shows strong growth boosting FMC penetration. 15.6 million premises are now covered by 1Gbps speeds providing an average speed of 214Mbps, 4x the national average. Liberty Global and Telefonica have initiated discussions with potential financial partners to participate in a fibre network build joint venture of up to 7 million premises in new greenfield areas, to reach 80 per cent of the country by the end of 2027. The VMO2 JV will commit as an anchor tenant for the project.
Financial highlights (in US GAAP): Revenue decreased 0.6 per cent YoY on an FX neutral pro forma basis9 to $3,700.4 million, primarily driven by lower service revenue due to the continued impact of a change in the distribution channel mix, partially offset by an improvement in mobile revenue fueled by increased upgrade activity following flagship handset launches in late Q3. Adjusted EBITDA decreased 0.4 per cent YoY on an FX neutral pro forma basis to $1,125.3 million, including $41 million of opex costs to capture, due to (i) the aforementioned decrease in revenue, (ii) a normalisation of operating costs as Covid restrictions eased, (iii) increased investment in future growth drivers of digitalisation, product development and increased sales and marketing expenses through the peak Q4 trading period and (iv) higher programming costs. Adjusted EBITDA less P&E Additions decreased 38.9 per cent YoY on an FX neutral pro forma basis to $317.7 million, including $111 million of opex and capex costs to capture. P&E Additions increased 32.4 per cent YoY, as the company continued to invest in its fixed and mobile infrastructure.