Rebased Revenue Growth of 4% in Q4, and 3% for the Full
Year
Rebased OCF Growth of 6% in Q4, and 4% for the Full
Year
Free Cash Flow1 of $2.5 billion in 2015,
exceeding guidance
Repurchased $2.3 Billion of Equity, including ~$900 million
in Q4
Vodafone JV in the Netherlands to Create National
Powerhouse
Liberty Global plc ("Liberty Global") (NASDAQ: LBTYA, LBTYB,
LBTYK, LILA and LILAK), today announces financial and operating
results2 for the three months ("Q4") and year ended December 31,
2015 for the Liberty Global Group3 and the LiLAC Group3.
Key highlights for the consolidated operations of Liberty
Global plc for full-year 2015
- Organic RGU4 additions of 870,000,
including 344,000 in Q4, the best quarter of the year
- Broadband net adds of 734,000, fueled
by speed leadership
- Video attrition improved materially in
H2, as compared to the first half of 2015
- Revenue of $18.3 billion, representing
3% rebased5 growth, including 4% rebased growth in Q4
- Full-year rebased revenue growth
improvements in the U.K. and Belgium
- Rebased OCF6 growth of 4% in 2015,
reaching $8.7 billion
- Full-year result driven by 6% rebased
OCF growth in Q4 2015
- Excluding our Dutch business, rebased
OCF growth would have been 5% in 2015
- Operating income of $2.3 billion, up 5%
year-over-year
- Adjusted Free Cash Flow ("FCF")1,7
growth of over 20% in '15, exceeding our financial guidance
- Repurchased $2.3 billion of equity in
2015, including approximately $900 million in Q4
Operating and financial highlights for the Liberty Global
Group, our European business
- Q4 2015 organic RGU additions of
336,000, including 208,000 broadband additions
- Led by 126,000 RGU additions in the
U.K. and 94,000 in Germany
- U.K. new build on track, added over
250,000 Project Lightning premises in 2015
- Investment supported record customer
growth in the U.K. of 55,000 in Q4
- New build programs to target over 1.5
million homes in 2016
- Continued investment in cutting-edge
technologies and product innovation
- Added record 1.5 million
next-generation8 video subscribers in 2015
- Q4 '15 rebased OCF growth increased to
6%, led by Switzerland/Austria, Germany & U.K./Ireland
- Q4 rebased revenue growth of 3.5%,
including 6% in both the U.K. and Germany
- Full-year 2015 revenue growth of 3% and
rebased OCF growth of 3.5%
- Completed Ziggo reorganization in
December; synergies backed 2% rebased OCF growth in Q4
- Enhanced customer experience with
Replay TV, 4G mobile and Ziggo Sport in H2 2015
- Quality program setting the stage for
stabilized revenue performance in 2016
- Balance sheet remains strong
- Average debt tenor over seven years
with net leverage9 of 4.9x at year end
- Nearly $4.4 billion in total
liquidity10 and only 11% of our debt due before 2021
2015 Operating and financial highlights for the LiLAC
Group
- Organic RGU additions of 110,000, a
fifth straight year of over 100,000 new subscribers
- Strongest annual broadband subscriber
gain in Chile in eight years
- Delivered customer growth in every
quarter, totaling 40,000 additions in 2015
- Recently raised top speeds to 200 Mbps
in Puerto Rico and 160 Mbps in Chile
- Full-year rebased revenue growth of 7%
powered robust financial results across the board
- 2015 OCF of $491 million, representing
8% rebased growth
- Delivered $87 million in FCF, up 25%
year-over-year
- Finished 2015 with net leverage of 3.9x
and minimal debt maturities prior to 2022
- Decreased fully-swapped borrowing
cost11 by 320 bps in 2015 to 6.0% following a series of
transactions in H2 2015 relating to a re-strike of our CLP
derivative position
CEO Mike Fries stated, "The core drivers of value creation and
opportunity in our business have never been better than today.
Financial and operating growth in the second half of 2015 was
stronger than our first six months of the year across the board,
and we are guiding towards even higher growth for 2016 and beyond.
These trends are supported by our Liberty 3.012 blueprint, which
will enhance revenue and operating cash flow by focusing on B2B13,
mobile, network expansion and cost controls over the next three
years."
"Europe is a rapidly converging market for fixed and mobile
services, and in addition to the completion of our BASE mobile
acquisition in Belgium, we are excited to announce today a new
50-50 joint venture with Vodafone in the Netherlands. By combining
our best-in-class broadband and video network in the Netherlands
with Vodafone's market-leading 4G wireless platform, we are
creating a new national champion for Dutch consumers that has the
opportunity to realize synergies valued at €3.5 billion14. This is
a terrific transaction for Liberty Global shareholders. We valued
Ziggo at €14 billion or approximately 11 times 2015 OCF15 and will
continue to benefit from 50% of the synergies and free cash flow of
the combined businesses. Together with expected proceeds from
additional leverage and the pre-closing cash generated by Ziggo, we
also expect to generate between €2.5 and €3 billion16 of cash at
closing."
"On the operating front in Europe, we reported 3% rebased
revenue growth and 4% rebased OCF growth for 2015. Our revenue
ramped in the second half of the year, in large part driven by
Virgin Media in the U.K. and Unitymedia in Germany, with both
markets delivering 6% rebased top-line growth in Q4. Underpinned by
the continued success of our pricing strategy, footprint expansion
and the strong demand for our increasingly converged products, we
expect to deliver 5% to 7% rebased OCF growth in Europe in 2016,
excluding our Dutch business Ziggo and the recently acquired BASE,
and we also plan to deliver over $2 billion of FCF17. Over the next
three years, we are targeting rebased OCF growth of between 7% and
9%18, as we execute our ambitious Liberty 3.0 plans."
"Our Latin American and Caribbean platform also had an eventful
year, as we launched our LiLAC tracking stock in July and announced
the Cable & Wireless transaction in November. Cable &
Wireless will add substantial scale and unlock significant
synergies over the next several years and will enhance the already
strong growth prospects for a region that is characterized by low
broadband and pay-TV penetration. In 2015, LiLAC achieved strong
subscriber growth and delivered robust rebased OCF growth of 8%,
above our mid-single-digit OCF guidance for the year. Looking
ahead, we expect to deliver 5% to 7% rebased OCF growth and limited
FCF at LiLAC in 2016, excluding Cable & Wireless."
"Our balance sheet remains in great shape, with $4.9 billion of
total liquidity, an average tenor of over seven years, and a record
low cost of debt of 4.9%. We generated $2.5 billion of FCF in 2015,
an adjusted year-over-year improvement of over 20%1, which exceeded
our guidance of mid-teens growth. This strong FCF generation
underpinned a record $2.3 billion of stock repurchases last year,
and we are pleased to announce an increase to our buyback target of
$2.4 billion, upping our remaining amount authorized for
repurchases to $4.0 billion by year-end 2017.”
Strategic combination of Ziggo and Vodafone
Netherlands
Powerful combination of the best fixed and mobile networks in
the Netherlands
Liberty Global and Vodafone Group Plc today announced an
agreement to merge their operating businesses in the Netherlands to
form a 50:50 joint venture (the “JV”), creating a nationwide
integrated communications provider with over 15 million
subscribers19. By combining Ziggo’s market-leading Horizon TV
product suite, 200 Mbps nationwide broadband internet and extensive
Wi-Fi network, together with Vodafone’s market-leading, data-rich
4G mobile propositions, Dutch consumers will enjoy an amazing
customer experience with superior connectivity and entertainment
both in and outside the home. In addition, the JV will become a
leading national enterprise business that will ensure sustainable
competition in the small, medium and large business segments across
the Netherlands, which will benefit the overall Dutch economy. The
transaction is expected to close around the end of 2016 and is
subject to regulatory approvals and consultations with the Works
Councils.
We expect this highly complementary combination to enhance the
long-term equity value for Liberty Global Group for the following
reasons:
- Total cost, capex and revenue synergies
with an NPV of ~€3.5 billion14 after integration costs
- We valued our Ziggo operations at an
enterprise value of €14 billion or a premium multiple of ~11x 2015
OCF15
- Vodafone will make a cash payment to
Liberty Global of €1 billion to equalize ownership in JV
- New joint venture will target leverage
of 4.5-5.0x covenant EBITDA20
- Continue to benefit from 50% of growth,
synergies, free cash flow21 and recapitalizing proceeds
Subscriber Statistics - Liberty Global Group (Europe)
At the end of Q4 2015, we provided our 25.8 million unique
customers with 53.6 million subscription services ("RGUs") across
our footprint of 49.2 million homes passed in Europe. On a product
level, our RGU base for the Liberty Global Group consisted of 22.8
million video, 16.8 million broadband internet and 14.0 million
telephony subscriptions. As compared to December 31, 2014, we
increased our total RGU base by 2%, or 840,000 RGUs, primarily
driven by our 760,000 organic RGU additions and, to a lesser
extent, various small in-market acquisitions. We ended the year
with a bundling ratio of 2.08 RGUs per customer, as 45% of our
customers subscribed to a triple-play product, 17% subscribed to a
double-play product and 38% subscribed to a single-play product,
offering continued up-sell opportunity within our existing customer
base.
Geographically, our 2015 organic additions consisted of 412,000
RGUs in Western Europe and 349,000 in Central and Eastern Europe
("CEE"). From a country perspective, our results were again led by
our German operations, where we added 316,000 RGUs in 2015, as we
successfully balanced subscriber volumes and price increases.
Meanwhile, Virgin Media in the U.K. delivered a solid 2015
performance with a total of 219,000 RGU additions, including
126,000 RGUs added in Q4, a quarterly record since we assumed
ownership in June 2013. This result was powered by continued strong
demand for high broadband speeds and the early benefits from
Project Lightning. Moving to Belgium, Telenet added 80,000 RGUs in
2015, driven by the continued traction of its leading "Whop" and
"Whoppa" bundles.
Turning to the Netherlands, Ziggo experienced RGU attrition of
203,000 during 2015, including 52,000 in Q4, which was mainly the
result of lower sales and higher churn. This decline is due in part
to aggressive competition, operational challenges associated with
our network and product harmonization and integration work, as well
as price increases we initiated across our existing customer base
during the year. We believe that our continued focus on video
quality and the customer experience, together with the launch of
the Ziggo Sport channel in Q4, will put us in a better competitive
position in 2016. Rounding out our top five markets, we lost 12,000
RGUs in Switzerland during the year, partly driven by lower sales
and elevated churn following our announced average price increase
of 3.5% per customer that became effective January 1, 2016. This
price increase was supported by continued network investments and
product enhancements, such as more HD channels in our basic digital
offer, the doubling of broadband speeds for existing subscribers
and the expansion of our Replay TV functionality.
From a product perspective, our organic subscriber growth was
fueled by 646,000 broadband RGU additions in 2015. During the year,
we expanded our speed leadership strategy and launched new top
speeds, including up to 500 Mbps in several markets. In the U.K.,
Virgin Media posted a particularly robust result, delivering
158,000 broadband additions during the year, a 12% year-over-year
improvement, due primarily to fall and winter marketing campaigns,
the recent launch of its 200 Mbps service and the start of the
Project Lightning new build program. Our German operation added
210,000 broadband subscribers, representing lower RGU volume growth
as compared to 2014, due largely to the impacts of broadband price
increases and higher priced portfolios that were implemented during
2015. Our CEE businesses added 136,000 broadband RGUs during 2015,
partially related to a network expansion completed in the second
half of 2015. Turning to fixed-line telephony, we added 515,000
subscribers in 2015 organically, slightly below the 566,000 total
posted in 2014, as improvements in Romania, the U.K. and
Switzerland were more than offset by lower additions in Germany,
the Netherlands and Ireland.
On the video front, we lost 400,000 subscribers in 2015. In the
CEE region, we saw improved video performance, with a gain of
51,000 RGUs, but this result was more than offset by weaker trends
in our Western European markets, in particular the Netherlands
where we lost over 200,000 video RGUs. At the same time, we
successfully migrated 1.5 million of our legacy video subscribers
to one of our next-generation TV platforms in 2015. More
specifically, we increased our Horizon TV subscriber base by over
800,000, added over 350,000 TiVo subscribers in the U.K. and nearly
140,000 Digital TV subscribers in Belgium with a Horizon-like user
interface, and upgraded over 170,000 legacy boxes to our
"Horizon-light" platform in the Czech Republic. There were a number
of video innovation milestones that we achieved in 2015, including
the successful launch of Replay TV in the Netherlands, Switzerland
and Ireland, the expansion of our multi-screen TV viewing services
across all 12 of our European markets and the enhancement of
out-of-home video capabilities. As of the end of 2015, 29% of our
total video base subscribed to one of our next-generation
platforms, an increase from 22% at the end of 2014. At December 31,
2015, we had 14.2 million enhanced video subscribers22,
representing enhanced video penetration23 of 65%, and 7.7 million
basic video subscribers.
With respect to our wireless business in Europe, we finished
2015 with 4.7 million mobile subscribers24. During 2015, we added
425,000 total postpaid subscribers, partially offset by a loss of
188,000 low-ARPU25 prepaid subscribers. This net growth of 237,000
mobile subscribers was led by our Western European operations,
which added 218,000 subscribers. At Telenet, we added 107,000
mobile subscribers during the year, eclipsing the one million mark
during Q4, primarily as a result of our "Family Deal" proposition
launched in April 2015 and the initiation of split-contracts26 in
Q3. In the Netherlands, Germany and Switzerland we added 57,000,
46,000 and 24,000 total mobile subscribers, respectively. In the
U.K., we lost 37,000 mobile subscribers during the year, as our
postpaid gains of 151,000 were less than the aforementioned prepaid
subscriber losses. Our postpaid result in this market was driven by
the popularity of our SIM-only contracts and Freestyle mobile
proposition in the U.K. From an innovation standpoint, we
successfully launched our 4G services in Switzerland and the
Netherlands in September and October, respectively, along with a
full-MVNO launch in Ireland in October. During 2016, we expect to
deploy 4G services in additional markets and, in combination with a
targeted fixed-mobile convergence strategy, we see ample
opportunity for mobile growth ahead of us.
Revenue - Liberty Global Group (Europe)
Revenue attributed to the Liberty Global Group for the three
months and year ended December 31, 2015 remained relatively flat at
$4.3 billion and $17.1 billion, respectively, as compared to the
corresponding prior year periods. For both periods, our reported
results were primarily driven by the contribution from Ziggo and,
to a lesser extent, our organic revenue growth. These positive
factors were nearly offset by negative foreign currency ("FX")
movements related to the strengthening of the U.S. dollar against
all of our functional currencies. 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 3.5% and 3% during the Q4 and full-year
2015 periods, respectively.
Our Q4 and full-year 2015 rebased growth rates both included the
net effects of certain non-recurring and non-operational items, the
most significant of which were: (i) the net positive impacts of $32
million and $116 million, respectively, from the upfront
recognition of mobile handset revenue in connection with our
split-contract26 programs in the U.K. and Belgium, (ii) the
negative impacts of $19 million and $101 million, respectively, of
increased VAT obligations, composed of $15 million and $85 million,
respectively, in the U.K. and $4 million and $16 million,
respectively, at our direct-to-home ("DTH") business, (iii) the
favorable impacts of $5 million and $23 million, respectively, of
higher amortization of deferred upfront fees on B2B contracts in
the U.K., (iv) increases in revenue due to an $18 million benefit
recorded in the U.K. during the fourth quarter of 2015 related to
the settlement of disputes with mobile operators over amounts
charged for voice traffic, including $16 million related to years
prior to 2015 and (v) the $12 million negative impact of a Q1 2014
favorable revenue settlement in Germany impacting the full-year
comparison.
In terms of our products, the success of broadband internet
continued to fuel our overall rebased revenue results throughout
2015. Other key areas of growth came from B2B (including SOHO) and
mobile (including interconnect and handset sales), delivering
improved 2015 rebased revenue growth rates of 9% and 15%27,
respectively, as compared to 2014. These growing business lines
represented 11% and 8% of our total 2015 revenue, respectively.
Geographically, we generated 3% rebased revenue growth in
Western Europe in 2015, while our CEE operations delivered 1%
rebased revenue growth in each of the Q4 and full-year 2015
periods. The rebased results of CEE for both periods were similar
to last year's results, led by Romania, Hungary and Poland, and
were mainly driven by volume gains across the region, partially
offset by declines in ARPU.
Turning back to Western Europe, which represents over 90% of
Liberty Global Group's revenue, our 2015 top-line rebased growth of
3% was led by Belgium and Germany, each delivering 6% rebased
revenue growth. As compared to 2014, Belgian rebased revenue growth
improved by two percentage points, primarily due to an increase in
subscribers, higher ARPU per RGU and growth in our mobile and B2B
businesses. Germany repeated its 2014 performance with 6% rebased
revenue growth, although in 2015 our growth was more balanced
between price and volume. Moving to our largest operation, Virgin
Media in the U.K. and Ireland produced 4% revenue growth on a
rebased basis for the year ended December 31, 2015. Of particular
note, the U.K. delivered 6% rebased revenue growth in Q4 2015, its
third consecutive quarter of improved growth and our best quarterly
rebased result since we acquired the business in 2013. The growth
in the U.K. for Q4 and the full-year was fueled by higher cable
subscription revenue from subscriber growth and ARPU per RGU
improvements, the net benefit from higher mobile handset sales and
higher B2B revenues.
Our Swiss/Austrian operation delivered 3% rebased revenue growth
during 2015, driven by an increase in cable subscription revenue
and increasing momentum in our B2B and mobile businesses. Finally,
our rebased revenue growth in Europe was negatively impacted by our
operations in the Netherlands, especially in the second half of
2015. For full-year 2015, Ziggo experienced a 2% rebased revenue
decline, primarily due to the previously-mentioned challenges in
the Dutch market. While Ziggo reported a year-over-year Q4 rebased
revenue contraction of 3%, Q4 local currency revenue stabilized
relative to Q3 2015. Looking forward to 2016, we expect that our
continued investment in our product suite, enhanced customer
service and positive momentum in our mobile and B2B operations will
stabilize our top-line in the Netherlands.
Operating Cash Flow - Liberty Global Group (Europe)
For the three months and year ended December 31, 2015, our
reported OCF increased 3% to $2.1 billion and 2% to $8.2 billion,
respectively, as compared to the corresponding prior-year periods.
Our reported Q4 increase was primarily driven by the net effect of
organic OCF growth, the inclusion of Ziggo and the negative effects
of FX movements. With respect to the full-year 2015 period, the
principal OCF contributors were acquisitions, mainly Ziggo, and
organic OCF growth. This result was partially offset by negative FX
headwinds during the period. From a rebased perspective, the
operations attributed to the Liberty Global Group reported 6% and
3.5% OCF growth, respectively, for the three months and full year
ended December 31, 2015.
Our full-year rebased OCF growth included the net positive
impact of the aforementioned revenue items and the net negative
impact of certain items that impacted our expenses, the most
significant of which were: (i) $28 million of additional
integration-related expenses, primarily in the Netherlands and
Belgium and (ii) $20 million of Liberty 3.0 program costs within
our corporate category. In terms of our Q4 rebased OCF performance,
our growth rate included the aforementioned net favorable revenue
items, the positive impact of synergies related to our Ziggo
integration and the adverse impacts of $5 million in integration
costs related to the acquisition of BASE Company ("BASE") and $3
million in incremental costs related to our Liberty 3.0
program.
From a geographic perspective, our Western European operations
reported 5% rebased OCF growth for full-year 2015, including
rebased OCF growth of 7% in Q4. Our full-year growth in Western
Europe was partially offset by a 3% rebased OCF contraction in the
CEE region and higher year-over-year central and other costs. Our
CEE performance was negatively affected by the recurring $16
million increase in annual VAT payments related to our
Luxembourg-based DTH operation that took effect on January 1,
2015.
In Western Europe, our 2015 performance was led by our operation
in Germany, which generated 7% rebased OCF growth in 2015,
including 11% in Q4 2015. This performance was primarily driven by
the aforementioned revenue growth, while Q4 also benefited from a
decrease in sales and marketing costs. In the U.K./Ireland, we
delivered 6% rebased OCF growth in 2015, including 7% in Q4 2015.
These results were primarily driven by U.K. top-line growth, cost
savings and efficiencies. These positive factors were partially
offset by increases in certain operating costs, including
programming and mobile handset costs. With respect to our
operations in Switzerland/Austria and Belgium, our full-year 2015
rebased OCF growth of 6% for both segments was delivered largely
through the aforementioned revenue drivers. Of note, our
Switzerland/Austria operation delivered 13% rebased OCF growth in
Q4 2015. This growth was driven by revenue increases, lower
staff-related costs, lower network-related costs, lower marketing
spend related to the impact of higher spend in Q4 2014 associated
with our MyPrime and mobile campaigns and lower rent expense due to
the impact of costs incurred in Q4 2014 associated with the
relocation of our Swiss office.
Rounding out Western Europe, Ziggo reported an increase in
rebased OCF of 2% in Q4 and a decline of 2% during 2015. The
full-year 2015 decline is primarily due to the aforementioned
revenue contraction. Our Segment OCF in the Netherlands during Q4
was $10 million higher than the third quarter of 2015 and the
highest of any quarter during 2015, mainly as a result of cost
controls and delivery on the synergy plan. For the year ended
December 31, 2015, we incurred $29 million of integration related
costs, but these expenses were more than offset by synergy
benefits, which were primarily driven by FTE savings.
The Liberty Global Group reported OCF margins28 of 48.2% and
47.9%, respectively, for the three months and year ended December
31, 2015. These represent margin improvements of 160 and 70 basis
points, respectively, compared to the 46.6% and 47.2% margins we
reported for the corresponding prior year periods.
Property and Equipment Additions - Liberty Global Group
(Europe)
The Liberty Global Group reported property and equipment
("P&E") additions29 of $3,910 million or 22.9% of revenue in
2015, as compared to $3,653 million or 21.4% of revenue in 2014.
The increase in absolute P&E additions was due principally to
an increase associated with the acquisition of Ziggo as well as
higher spend for line extensions, new builds and upgrade projects.
These increases were partially offset by the impact of the
strengthening of the U.S. dollar against all of our European
currencies. In terms of our 2015 P&E additions by category, 47%
pertained to line extensions, upgrade and rebuild and scalable
infrastructure, 27% was related to customer premises equipment
("CPE") and 26% was related to support capital.
For 2016, we expect our property and equipment additions as a
percentage of our revenue will range from 25% to 27%. As part of
our Liberty 3.0 program, we are planning to build over 1.5 million
homes in 2016, including the U.K. (over 500,000), Germany (over
200,000), and the CEE region (over 600,000).
Free Cash Flow - Liberty Global Group (Europe)
We reported Free Cash Flow attributable to the Liberty Global
Group of $2.4 billion, a 16% year-over-year increase, as compared
to the $2.1 billion we reported in 2014. This improvement is
attributable to the effect of lower interest rates, our organic OCF
growth, the inclusion of Ziggo and benefits from our vendor
financing program. The impact of these increases was partially
offset by trade working capital outflows, the adverse impact of FX
and higher tax payments.
Leverage, Liquidity & Shares Outstanding - Liberty Global
Group (Europe)
We ended 2015 with attributed total third-party debt30 of $44.7
billion and cash and cash equivalents of $708 million for the
Liberty Global Group. As compared to the previous quarter, our
reported long-term debt balance remained flat.
Excluding $2.4 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
ratios were 5.0x and 4.9x, respectively, at December 31, 2015. The
Liberty Global Group's average tenor of third-party debt was over
seven years at the end of 2015, only 11% of which is due before
2021. At December 31, 2015, our blended fully-swapped borrowing
cost of such debt was 4.8%, a 110 basis point improvement as
compared to 5.9% at year end 2014. This reduction is mainly
attributable to over $9 billion of debt refinancings that we
undertook in 2015.
Our consolidated liquidity position at the end of 2015 was $4.4
billion, including $708 million of cash, and the aggregate maximum
undrawn commitments under our credit facilities31 of $3.7
billion.
At February 4, 2016, we had 844 million Liberty Global Group
shares outstanding, including 253 million Class A ordinary shares,
10 million Class B ordinary shares and 581 million Class C ordinary
shares.
Subscriber Statistics - LiLAC Group
At the end of Q4 2015, we provided our 1.7 million unique
customers with 3.5 million subscription services across our cable
footprint of 4.1 million homes passed within Chile and Puerto Rico.
In 2015, we continued our strong track record of customer growth,
as we added over 40,000 customers organically, a 24% increase over
2014 organic growth. In terms of RGUs, we increased our subscriber
base by 266,000 RGUs, powered by a 37% year-over-year increase in
broadband additions. This result included 156,000 RGUs from the
acquisition of Choice in Puerto Rico and 110,000 organic RGU
additions (88,000 broadband, 14,000 telephony and 8,000 video). As
a result, we finished 2015 with an RGU base consisting of 1.3
million video, 1.3 million broadband internet and 0.9 million
telephony subscriptions.
Geographically, our Chilean operation contributed 80,000 RGUs,
an increase of 7% year-over-year, fueled by strong broadband
additions. We added 71,000 broadband RGUs in 2015, our strongest in
eight years, due in part to the introduction of our popular “Vive
Más” bundles, featuring rich HD channel line-ups and market-leading
broadband speeds. Further extending our competitive advantage, we
recently boosted our Vive Más speeds to 80 Mbps (December 2015) and
top broadband speed to 160 Mbps (February 2016). Rounding out our
triple-play products in Chile, we added 13,000 video RGUs and lost
4,000 telephony RGUs in 2015. On the video front, we added video
subscribers for the eleventh year in a row. We expanded our HD
line-up early in 2015 and in the fourth quarter we selectively
introduced our next-generation video-on-demand user interface,
which we are targeting to be fully rolled-out by the middle of
2016. Additionally, we will begin deploying Horizon TV during 2016
and we expect to continue to invest in product innovation to
enhance the customer experience.
Turning to Puerto Rico, we added 30,000 RGUs in 2015, including
8,000 in Q4. From a product perspective, we added 17,000 RGUs in
each of broadband and telephony, while losing 5,000 video
subscribers during 2015. Our RGU growth was driven in part by our
strategy to drive bundled services to our customer base, including
our newly acquired Choice customers, which have been historically
more focused on single-play broadband services. Similar to our
Chilean operation, we are excited about our product portfolio and
the competitive advantage that we expect to have in the
marketplace. During 2016, we plan to significantly increase
customer broadband speeds, with a new top speed of 200 Mbps, as
well as expand the HD line-up and implement harmonized product
portfolios across our entire footprint.
In addition to our residential triple-play business, we
continued to grow our mobile subscriber base in 2015, adding 22,000
mobile subscribers during the year in Chile. This year-over-year
increase consisted of a 30,000 postpaid subscriber gain and a loss
of 9,000 prepaid subscribers. During Q4, we lost 2,000 mobile
subscribers, bringing our total mobile subscribers at year end to
132,000. The competitive landscape in the second half of 2015
intensified with the emergence of an aggressive, low-priced
competitor. We expect that the Chilean mobile market will remain
highly competitive in 2016.
Revenue - LiLAC Group
The LiLAC Group reported revenue of $309 million and $1.2
billion for the three months and year ended December 31, 2015,
respectively. This represents increases of 4% in Q4 and 1% for the
twelve-month period, as compared to the corresponding prior-year
periods. Our reported increases for both the Q4 and full-year 2015
periods include the positive impacts of organic revenue growth and
the inclusion of Choice in Puerto Rico. These increases were offset
by the negative impact of FX movements related to declines of the
Chilean peso against the U.S. dollar of 17% and 15%, respectively.
When adjusting to neutralize for the impact of the Choice
acquisition and FX, the businesses attributed to the LiLAC Group
delivered year-over-year rebased revenue growth of 7% in both the
Q4 and full-year 2015 periods.
Our Chilean operation reported rebased revenue growth of 7% for
full-year 2015, including 8% in Q4, our strongest quarterly result
in over two years. Our rebased performance in both periods was
driven by cable subscription and mobile revenue growth, resulting
from a combination of volume growth and improved ARPU per RGU. Of
note, the revenue increase during the 2015 period is net of
adjustments to reflect the retroactive application of proposed
tariff reductions on ancillary services and fixed-line termination
rates. These adjustments reduced our full-year 2015 revenue at VTR
by approximately $6 million.
In Puerto Rico, we ended the year with revenue growth of 6% on a
rebased basis, including 5% growth in Q4. The principal growth
drivers for both periods include the net impact of our subscriber
gains, ARPU declines and the robust growth in our B2B business
(including SOHO), which generated rebased revenue growth in excess
of 20% in 2015.
Operating Cash Flow - LiLAC Group
For the three months and year ended December 31, 2015, the
operations attributed to the LiLAC Group reported OCF decreases of
1% to $127 million and an OCF increase of 3% to $491 million,
respectively, as compared to the corresponding prior year periods.
The LiLAC Group's reported Q4 and full-year OCF growth was
primarily driven by organic growth and the Choice acquisition.
These results were partially offset by the aforementioned negative
impact of FX and the adjustments related to the tariff reductions
noted above. On a rebased basis, we delivered 2% year-over-year OCF
growth in Q4 and 8% year-over-year OCF growth for full-year
2015.
From a country perspective, Chile reported 7% rebased OCF growth
for the year ended December 31, 2015, including flat performance in
Q4. Our rebased results for both Q4 and the full-year were
adversely impacted by the $5.7 million (CLP 3.4 billion)
unfavorable impact of a nonrecurring adjustment recorded in Q4 2014
related to the reassessment of certain accrued liabilities, as well
as the negative impacts of costs denominated in U.S. dollars. We
estimate that the impact of this non-functional currency spend
reduced our OCF on a year-over-year basis by approximately $3
million and $8 million for the three months and year ended December
31, 2015.
Rounding out our LiLAC Group operations, Puerto Rico generated
rebased OCF growth of 10% in 2015, including 7% in Q4, driven in
part by the aforementioned revenue growth and disciplined cost
controls.
On a year-over-year basis, the LiLAC Group's reported OCF margin
decreased by 200 basis points to 41.2% in Q4 and increased 70 basis
points to 40.3% for full-year 2015. The full-year improvement is
supported by revenue growth and improved operational leverage,
while the Q4 decrease is largely attributable to the aforementioned
Q4 2014 nonrecurring adjustment.
Property and Equipment Additions - LiLAC Group
For fiscal 2015, operations attributed to the LiLAC Group
reported P&E additions of $227 million or 19% of revenue, as
compared to $256 million or 21% of revenue in 2014. The decrease in
absolute P&E additions was primarily related to the
depreciation of the Chilean peso against the U.S. dollar and lower
spend on support capital, scalable infrastructure and CPE. The
inclusion of our Choice acquisition in Puerto Rico for seven months
in 2015 partially offset this decline. In terms of our 2015 capital
allocation, 49% of our full-year spend was related to CPE, 33% to
scalable infrastructure, line extensions and upgrade/rebuild
activity and 18% to support capital, including IT upgrades and
general support systems.
Looking ahead to 2016, we expect our property and equipment
additions as a percentage of revenue to range from 21% to 23%, an
increase over the prior year that is mainly due to our plans to
substantially increase our new build and upgrade program. In this
regard, we are currently targeting over 150,000 homes to be
connected to our networks or to be upgraded to two-way service in
2016, a near doubling from 2015. We believe this higher level of
investment will drive future growth and generate attractive returns
to our shareholders.
Free Cash Flow - LiLAC Group
On a reported basis, we generated $87 million of FCF in 2015 for
the operations attributed to the LiLAC Group, as compared to $70
million in 2014, representing a 25% year-over-year improvement. The
positive variance was mainly attributable to organic OCF growth and
trade working capital improvement. This result was partially offset
by higher interest and related derivative payments. The higher
payments were directly attributable to interest and related
derivative payments of approximately $67 million in January 2015 on
the $1.4 billion in bonds at VTR Finance B.V., as similar payments
were not required to be made in the corresponding Q1 2014
period.
Leverage, Liquidity & Shares Outstanding - LiLAC
Group
At December 31, 2015, we had total third-party debt attributed
to the LiLAC Group of $2.3 billion and cash and cash equivalents of
$275 million. As compared to September 30, 2015, the carrying value
of our debt attributed to the LiLAC Group was largely unchanged,
while the cash balance attributed to the LiLAC Group improved by
$36 million.
The average tenor of our third-party debt attributed to the
LiLAC Group at the end of Q4 2015 was over seven years, with
minimal maturities prior to 2022, and our blended fully-swapped
borrowing cost of such debt was 6.0%, as compared to 9.2% at the
end of 2014. This substantial decrease was directly attributable to
a re-striking of all of the derivatives associated with VTR's $1.4
billion principal amount of senior secured notes during the second
half of 2015. The net impact of these transactions resulted in a
reduction in the annual swapped coupon that we pay going forward,
with the notional amount of our leverage on a swapped basis at the
Chilean credit pool increasing from CLP 760 billion to CLP 951
billion. The gross and net leverage ratios associated with the debt
attributed to the LiLAC Group were 4.5x and 3.9x, respectively, at
the end of 2015.
At February 4, 2016, we had 44 million LiLAC shares outstanding,
including 13 million Class A ordinary shares, 0.5 million Class B
ordinary shares and 31 million Class C ordinary shares.
Profit Forecast for Liberty Global for the Year ending
December 31, 2016
Liberty Global is currently in an offer period (as defined in
the City Code on Takeovers and Mergers (the “Code”)) with respect
to Cable & Wireless Communications Plc ("Cable &
Wireless"). Accordingly, pursuant to the requirements of Rule 28 of
the Code, by publishing an ordinary course "profit forecast" in
this release Liberty Global is required to include a statement by
the Directors that such profit forecast is valid. In addition, we
must include in this release a confirmation by our Directors that
the profit forecast has been properly compiled on the basis of the
assumptions stated and that the basis of accounting used is
consistent with Liberty Global’s accounting policies.
As noted in the release, Liberty Global today is providing
full-year 2016 financial guidance targets, which includes the
following statements:
- Full-year guidance of 5% to 7% rebased
OCF growth, for Liberty Global Group, excluding the Netherlands and
BASE
- Full-year guidance of 5% to 7% rebased
OCF growth for LiLAC Group, excluding Cable & Wireless
While our OCF measure should not be considered a measurement of
profit, the above statements for the year ending December 31, 2016,
constitute "profit forecasts" for the purposes of the Code (the
“Liberty Global Profit Forecast”). Please see pages 17 and 20 for
our Operating Cash Flow (“OCF”) definition and the required
reconciliation and how we calculate rebased growth rates.
The Liberty Global Profit Forecast has been prepared on a basis
consistent with the accounting policies for Liberty Global, which
are in accordance with generally accepted accounting standards in
the U.S. and those which Liberty Global anticipates will be
applicable for the full year ending December 31, 2016. Liberty
Global has prepared the Liberty Global Profit Forecast based on
audited financial results for the year ended December 31, 2015, and
an internal management forecast to December 31, 2016.
In accordance with Rule 28.4(a) of the Code, the principal
assumptions upon which the profit forecast is based are included
below. Our 2016 guidance for Liberty Global Group mentioned above
excludes our Dutch business Ziggo and the recently acquired BASE in
Belgium, whereas the 2016 guidance for LiLAC Group excludes Cable
& Wireless. In accordance with Rule 28.4(c) of the Code, there
is a clear distinction made between assumptions which the Directors
of Liberty Global (or other members of Liberty Global’s management)
can influence and those which they cannot influence.
Factors outside the influence or control of Liberty Global and
its Directors:
- economic and business conditions and
industry trends in the countries in which we operate;
- the competitive environment in the
industries in the countries in which we operate, including
competitor responses to our products and services;
- fluctuations in currency exchange rates
and interest rates;
- instability in global financial
markets, including sovereign debt issues and related fiscal
reforms;
- consumer disposable income and spending
levels, including the availability and amount of individual
consumer debt;
- changes in consumer television viewing
preferences and habits;
- consumer acceptance of our existing
service offerings, including our digital video, broadband internet,
fixed-line telephony, mobile and business service offerings, and of
new technology, programming alternatives and other products and
services that we may offer in the future;
- changes in laws or treaties relating to
taxation, or the interpretation thereof, in the U.K., U.S. or in
other countries in which we operate;
- changes in laws and government
regulations that may impact the availability and cost of capital
and the derivative instruments that hedge certain of our financial
risks;
- 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; and
- events that are outside of our control,
such as political unrest in international markets, terrorist
attacks, malicious human acts, natural disasters, pandemics and
other similar events.
Factors within the influence or control of Liberty Global and
its Directors:
- our ability to maintain or increase the
number of subscriptions to our digital video, broadband internet,
fixed-line telephony and mobile service offerings and our average
revenue per household;
- our ability to maintain or increase
rates to our subscribers or to pass through increased costs to our
subscribers;
- there will be no material change in the
present management or control of Liberty Global or its existing
operational strategy; and
- Liberty Global’s accounting policies
will be consistently applied in the financial year to December 31,
2016.
The Directors of Liberty Global have considered the Liberty
Global Profit Forecast and confirm that it is valid as at the date
of this document and has been properly compiled on the basis of the
assumptions set out above and that the basis of the accounting used
is consistent with Liberty Global’s accounting policies.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995, including statements regarding our operations, strategies,
future growth prospects and opportunities (in particular with
respect to upselling and bundling of products); our expected OCF
growth and FCF in the future; property and equipment additions as a
percentage of revenue, including the expected increase in such
percentages as a result of new build opportunities; Liberty 3.0,
including plans and expectations with respect to new build and
network extensions; the pending acquisition of Cable & Wireless
and joint venture in the Netherlands and the anticipated benefits,
costs and synergies in connection therewith; the timing of proposed
transactions; the development, enhancement and expansion of our
superior networks and innovative and advanced products and
services, including higher broadband speed rollouts, expansion and
launches of next-generation video services and new channels; our
mobile and B2B strategies; our expectations with respect to
improved performance in the Netherlands and the anticipated drivers
thereof; the strength of our balance sheet and tenor of our
third-party debt; expectations with respect to our share buyback
program; 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; 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 digital 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; our ability to
access cash of our subsidiaries and the impact of our 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 extension; 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 largest international cable company with
operations in 14 countries. We connect people to the digital world
and enable them to discover and experience its endless
possibilities. Our market-leading products are provided through
next-generation networks and innovative technology platforms that
connected 27 million customers subscribing to 57 million
television, broadband internet and telephony services at December
31, 2015. In addition, we served five million mobile subscribers
and offered WiFi service across six million access points.
Liberty Global’s businesses are currently attributed to two
tracking stock groups: the Liberty Global Group (NASDAQ: LBTYA,
LBTYB and LBTYK), which primarily comprises our European
operations, and the LiLAC Group (NASDAQ: LILA and LILAK, OTC Link:
LILAB), which comprises our operations in Latin America and the
Caribbean.
Liberty Global's consumer brands are Virgin Media, Ziggo,
Unitymedia, Telenet, UPC, VTR and Liberty. Our operations also
include Liberty Global Business Services and Liberty Global
Ventures. For more information, please visit
www.libertyglobal.com.
_______________________________________
1 The adjusted growth rate for our FCF is based on (i) our
reported 2014 FCF plus the pre-acquisition FCF of Ziggo, with the
combined amount further adjusted to reflect the new Ziggo capital
structure and the change in our FCF definition, and (ii) our
reported 2015 FCF, adjusted to reflect the FX rates that were in
effect when we provided our 2015 FCF guidance. 2 We sold
substantially all of our legacy content business on January 31,
2014 (the "Chellomedia Sale"). Accordingly, we have presented the
disposed business as a discontinued operation for the year ended
December 31, 2014. 3 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 consolidated financial statements included in our
annual report on Form 10-K filed on February 12, 2016 (the "10-K").
“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 VTR and Liberty
Puerto Rico. 4 Please see page 29 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. 5 Please see page
17 for information on rebased growth. 6 Please see page 20 for our
Operating Cash Flow ("OCF") definition and the required
reconciliation. 7 Please see page 23 for information on Free Cash
Flow (“FCF”) and the required reconciliations. 8 Our
next-generation video base consists of Horizon TV, TiVo (in the
U.K.), Digital TV with Horizon-like user interface (in Belgium) as
well as Horizon Light set-top boxes. 9 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 by the shares we hold in Sumitomo Corp., ITV plc
and Lions Gate Entertainment Corp. 10 Liquidity refers to cash and
cash equivalents plus the maximum undrawn commitments under
subsidiary borrowing facilities, without regard to covenant
compliance calculations. 11 Our blended fully-swapped debt
borrowing cost represents the weighted average interest rate on our
aggregate variable- and fixed-rate indebtedness (excluding capital
lease obligations), including the effects of derivative
instruments, original issue premiums or discounts and commitment
fees, but excluding the impact of financing costs. 12 During 2015,
we initiated our “Liberty 3.0” program, which is a comprehensive
plan to drive top-line growth while maintaining tight cost
controls. The Liberty 3.0 program seeks to capitalize on revenue
opportunities associated with extensions of our network, mobile and
B2B, together with the realization of greater efficiencies by
leveraging our scale more effectively. Underpinning this program is
a commitment to customer centricity, which we believe is key to
succeeding in an ever more demanding consumer market. We expect
this transformation to occur over the next several years and, as
with any program of this magnitude, the benefits are expected to
materialize over time. We believe that the successful
implementation of Liberty 3.0 will, beginning in 2017, lead to
consolidated organic growth rates for revenue and OCF that are
meaningfully higher than our recent consolidated organic growth
rates. 13 Total B2B includes subscription (SOHO) and
non-subscription revenue. Non-subscription revenue includes the
amortization of deferred upfront installation fees and deferred
non-recurring 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 deferred revenue is
accounting for $5 million and $23 million of the increases in
Liberty Global Group's total B2B revenue for the three months and
year ended December 31, 2015, respectively. 14
The total NPV of synergies of €3.5 billion
is calculated after considering integration costs and includes
revenue synergies with an estimated net present value (“NPV") of
€1.0 billion and operating and capital cost synergies with an
estimated NPV of €2.5 billion. The full annual run-rate amount for
the operating and capital cost synergies of €280 million (including
at least €240 million of operating cost synergies) is expected to
be achieved during the fifth full year after closing. To achieve
these synergies, the JV expects to incur approximately €350 million
of integration costs, most of which will be incurred in the first
three years post completion.
15
The multiple is calculated by dividing a
pre-synergy enterprise value for Ziggo of €14 billion by the
adjusted segment OCF of Ziggo and Sport1 for the year ended
December 31, 2015 of €1,272 million. The adjusted Segment OCF of
Ziggo and Sport1 was calculated by deducting (i) estimated
recharges from Liberty Global to the Joint Venture of €81 million
from (ii) the actual combined segment OCF of Ziggo and Sport1 of
€1,352 million for the year ended December 31, 2015.
16
The range of cash to be received at
closing of €2.5 billion to €3.0 billion includes the €1.0 billion
estimated equalization payment from Vodafone and the assumed
combined proceeds of €1.5 billion to €2.0 billion from pre-closing
cash generated by Ziggo and our share of the proceeds from
additional joint venture leverage. The actual proceeds from
additional leverage will depend on the actual pre-closing
performance of the businesses to be contributed to the joint
venture and capital market conditions at closing. The assumed
proceeds from the pre-closing cash to be generated by Ziggo is
based on budgeted cash flows for Ziggo and assumes that the
transaction will close at or around December 31, 2016.
17
Our FCF guidance for 2016, which includes
the Netherlands, but excludes BASE and Cable & Wireless, is
based on FX rates at the date of this release.
18
Our three-year OCF guidance of 7% to 9%
growth excludes Ziggo, Cable & Wireless and BASE and is
intended to be calculated as a compound annual growth rate in 2018
with 2015 as the base year, after adjusting for acquisitions,
dispositions, FX and other factors that may affect the
comparability of 2018 and 2015 results.
19 Represents combined revenue generating units of Liberty Global
and Vodafone (as defined by each) as at December 31, 2015. 20
Covenant EBITDA is calculated in accordance with Ziggo’s
third-party debt agreements. 21
The JV agreement provides for the equal
distribution of all available cash, subject to minimum cash
balance, between Vodafone and Liberty Global
22 Enhanced Video Subscriber - please see page 29 for our Enhanced
Video Subscriber definition. 23 Enhanced video penetration is
calculated by dividing the number of enhanced video RGUs by the
total number of basic and enhanced video RGUs. 24 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. 25 Average Revenue Per Unit (“ARPU”) refers to
the average monthly subscription revenue per average customer
relationship and is calculated by dividing the average monthly
subscription revenue (excluding mobile services, B2B services,
interconnect, channel carriage fees, mobile handset sales and
installation fees) for the indicated period, by the average of the
opening and closing balances for customer relationships for the
period. Customer relationships of entities acquired during the
period are normalized. Unless otherwise indicated, ARPU per
customer relationship 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 subscription revenue
(excluding mobile services, B2B services, interconnect, channel
carriage fees, mobile handset sales and installation fees) 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. 26 In the U.K. and Belgium, 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. 27 Liberty Global Group's 11.5% and
15% rebased mobile revenue growth for Q4 and the full-year 2015,
respectively includes the positive impact of our split-contract
programs in the U.K. and Belgium, as further described in footnote
26. Our split-contract programs in the U.K. and Belgium had a net
positive effect on our mobile subscription and handset revenue of
$31.6 million in Q4 2015 and $115.5 million in full-year 2015. The
net positive effect of the split-contract programs is comprised of
(i) increases to handset revenue of $42.5 million and $157.1
million and (ii) decreases to mobile subscription revenue of $10.9
million and $41.6 million during Q4 2015 and the full-year 2015,
respectively. 28 OCF margin is calculated by dividing OCF by total
revenue for the applicable period. 29 Our property and equipment
additions include our capital expenditures on an accrual basis and
amounts financed under vendor financing or capital lease
arrangements. 30 Total debt includes capital lease obligations. 31
Our aggregate unused borrowing capacity of $3.9 billion represents
the maximum undrawn commitments under our subsidiaries' applicable
facilities without regard to covenant compliance calculations. This
consists of $3.7 billion attributed to the Liberty Global Group and
$231 million attributed to LiLAC Group. Upon completion of the
relevant December 31, 2015 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 $3.5 billion. This consists of $3.3
billion attributed to the Liberty Global Group and $231 million
attributed to the LiLAC Group.
Balance Sheets, Statements of Operations and Statements of
Cash Flows
The consolidated balance sheets, statements of operations and
statements of cash flows of Liberty Global are included in our
10-K. For attributed financial information of the Liberty Global
Group and the LiLAC Group, see Exhibit 99.1 to our 10-K.
Revenue and Operating Cash Flow
In the following tables, we present revenue and operating cash
flow by reportable segment of our continuing operations for the
three months and year ended December 31, 2015, as compared to the
corresponding prior-year periods. All of our reportable segments
derive their revenue primarily from broadband communications
services, including video, broadband internet and fixed-line
telephony services. Most of our reportable segments also provide
B2B and mobile services. For detailed information regarding the
composition of our reportable segments, including information
regarding a change to our reportable segments that we made during
the second quarter of 2015, see note 18 to our consolidated
financial statements included in our 10-K.
For purposes of calculating rebased growth rates on a comparable
basis for all businesses that we owned during 2015, we have
adjusted our historical revenue and OCF for the three months and
year ended December 31, 2014 to (i) include the pre-acquisition
revenue and OCF of certain entities acquired during 2014 and 2015
in our rebased amounts for the three months and year ended December
31, 2014 to the same extent that the revenue and OCF of such
entities are included in our results for the three months and year
ended December 31, 2015, (ii) remove intercompany eliminations for
the applicable periods in 2014 to conform to the presentation
during the 2015 periods following the disposal of the Chellomedia
operations, which resulted in previously eliminated intercompany
costs becoming third-party costs, (iii) 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 months and year ended
December 31, 2014 to the same extent that the revenue and OCF of
these disposed subscribers is excluded from our results for the
three months and year ended December 31, 2015, (iv) 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 three months and year ended December 31, 2014 to
the same extent that the revenue and OCF from this partner network
is excluded from our results for the three months and year ended
December 31, 2015, (v) 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 months and year ended December 31, 2014 to the same extent
that the revenue, OCF and associated intercompany eliminations are
excluded from our results for the three months and year ended
December 31, 2015 and (vi) reflect the translation of our rebased
amounts for the three months and year ended December 31, 2014 at
the applicable average foreign currency exchange rates that were
used to translate our results for the three months and year ended
December 31, 2015. We have included Ziggo, Choice and two small
entities in whole or in part in the determination of our rebased
revenue and OCF for the three months ended December 31, 2014. We
have included Ziggo, Choice and four small entities in whole or in
part in the determination of our rebased revenue and OCF for the
year ended December 31, 2014. We have reflected the revenue and OCF
of the acquired entities in our 2014 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 (“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 non-recurring 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 data
is not a non-GAAP financial measure as contemplated by Regulation G
or Item 10 of Regulation S-K.
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 December 31, (decrease)
(decrease) Revenue 2015 2014
$ % Rebased % in millions, except %
amounts Liberty Global Group: European Operations
Division: U.K./Ireland $ 1,804.4 $ 1,802.3 $ 2.1 0.1 5.3 The
Netherlands 672.6 562.5 110.1 19.6 (3.0 ) Germany 607.1 655.1 (48.0
) (7.3 ) 5.7 Belgium 505.5 547.1 (41.6 ) (7.6 ) 5.4
Switzerland/Austria 432.2 445.0 (12.8 ) (2.9 ) 2.1
Total Western Europe 4,021.8 4,012.0 9.8 0.2 3.5 Central and
Eastern Europe 265.0 299.1 (34.1 ) (11.4 ) 1.4 Central and other
(1.7 ) (7.6 ) 5.9 N.M. * Total European
Operations Division 4,285.1 4,303.5 (18.4 ) (0.4 ) 3.5 Corporate
and other 8.4 15.8 (7.4 ) (46.8 ) * Intersegment eliminations (3.6
) (2.4 ) (1.2 ) N.M. *
Total Liberty Global Group
4,289.9 4,316.9 (27.0 ) (0.6 ) 3.5 LiLAC
Group: Chile 204.2 219.7 (15.5 ) (7.1 ) 8.4 Puerto Rico 105.1
78.5 26.6 33.9 4.6 Total LiLAC
Group 309.3 298.2 11.1 3.7 7.1
Inter-group eliminations — 0.1 (0.1 ) N.M.
*
Total $ 4,599.2 $ 4,615.2 $ (16.0 ) (0.3 ) 3.8
* - Omitted; N.M. - Not Meaningful
Year ended Increase
Increase December 31, (decrease)
(decrease) Revenue 2015 2014
$ % Rebased % in millions, except %
amounts Liberty Global Group: European Operations
Division: U.K./Ireland $ 7,058.7 $ 7,409.9 $ (351.2 ) (4.7 ) 3.9
The Netherlands 2,745.3 1,498.5 1,246.8 83.2 (1.7 ) Germany 2,399.5
2,711.5 (312.0 ) (11.5 ) 5.9 Belgium 2,021.0 2,279.4 (258.4 ) (11.3
) 6.1 Switzerland/Austria 1,758.2 1,846.1 (87.9 )
(4.8 ) 2.9 Total Western Europe 15,982.7 15,745.4 237.3 1.5
3.4 Central and Eastern Europe 1,066.6 1,259.5 (192.9 ) (15.3 ) 1.3
Central and other (5.4 ) (7.1 ) 1.7 N.M. *
Total European Operations Division 17,043.9 16,997.8 46.1 0.3 3.2
Corporate and other 42.3 70.8 (28.5 ) (40.3 ) * Intersegment
eliminations (23.5 ) (24.9 ) 1.4 N.M. * Total
Liberty Global Group 17,062.7 17,043.7 19.0
0.1 3.2 LiLAC Group: Chile 838.1 898.5 (60.4 ) (6.7 )
6.9 Puerto Rico 379.2 306.1 73.1 23.9
6.1 Total LiLAC Group 1,217.3 1,204.6 12.7
1.1 6.6 Total $ 18,280.0 $ 18,248.3
$ 31.7 0.2 3.4
* - Omitted; N.M. - Not Meaningful
Three months ended
Increase Increase December 31,
(decrease) (decrease) OCF 2015
2014 $ % Rebased % in
millions, except % amounts Liberty Global Group:
European Operations Division: U.K./Ireland $ 816.2 $ 802.4 $ 13.8
1.7 7.1 The Netherlands 392.0 314.4 77.6 24.7 1.7 Germany 390.3
400.7 (10.4 ) (2.6 ) 11.0 Belgium 224.2 247.1 (22.9 ) (9.3 ) 3.5
Switzerland/Austria 262.0 242.2 19.8 8.2
13.3 Total Western Europe 2,084.7 2,006.8 77.9 3.9 7.1
Central and Eastern Europe 118.5 133.9 (15.4 ) (11.5 ) 0.9 Central
and other (74.6 ) (68.2 ) (6.4 ) N.M. * Total European Operations
Division 2,128.6 2,072.5 56.1 2.7 6.2 Corporate and other (62.9 )
(61.9 ) (1.0 ) (1.6 ) * Total Liberty Global Group 2,065.7
2,010.6 55.1 2.7 6.3 LiLAC Group: LiLAC
Division: Chile 82.0 95.9 (13.9 ) (14.5 ) — Puerto Rico 46.5
33.5 13.0 38.8 6.7 Total LiLAC Division 128.5
129.4 (0.9 ) (0.7 ) 2.3 Corporate and other (1.1 ) (0.7 ) (0.4 )
N.M. * Total LiLAC Group 127.4 128.7 (1.3 ) (1.0 )
2.0 Total $ 2,193.1 $ 2,139.3 $ 53.8 2.5
6.1
* - Omitted; N.M. - Not Meaningful
Year ended Increase
Increase December 31, (decrease)
(decrease) OCF 2015 2014
$ % Rebased % in millions, except %
amounts Liberty Global Group: European Operations
Division: U.K./Ireland $ 3,162.1 $ 3,235.7 $ (73.6 ) (2.3 ) 6.3 The
Netherlands 1,519.5 857.9 661.6 77.1 (2.0 ) Germany 1,502.1 1,678.2
(176.1 ) (10.5 ) 7.1 Belgium 990.3 1,125.0 (134.7 ) (12.0 ) 5.6
Switzerland/Austria 1,040.1 1,056.4 (16.3 ) (1.5 )
6.0 Total Western Europe 8,214.1 7,953.2 260.9 3.3 4.7
Central and Eastern Europe 474.0 583.0 (109.0 ) (18.7 ) (2.7 )
Central and other (289.2 ) (282.7 ) (6.5 ) N.M. *
Total European Operations Division
8,398.9 8,253.5 145.4 1.8 3.7 Corporate and other (222.6 ) (212.0 )
(10.6 ) (5.0 ) * Intersegment eliminations — 4.0 (4.0
) N.M. * Total Liberty Global Group 8,176.3
8,045.5 130.8 1.6 3.5 LiLAC Group:
LiLAC Division: Chile 328.1 351.0 (22.9 ) (6.5 ) 6.9 Puerto Rico
167.2 128.9 38.3 29.7 9.9 Total
LiLAC Division 495.3 479.9 15.4 3.2 7.9 Corporate and other (4.3 )
(3.1 ) (1.2 ) N.M. * Total LiLAC Group 491.0
476.8 14.2 3.0 7.7 Total $ 8,667.3
$ 8,522.3 $ 145.0 1.7 3.7
* - Omitted; N.M. - Not Meaningful
Operating Cash Flow Definition and Reconciliation
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 and is superior
to available GAAP measures 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 GAAP measures
of income or cash flows. A reconciliation of total segment
operating cash flow to our operating income is presented below.
Three months ended Year ended
December 31, December 31, 2015
2014 2015 2014 in millions Total
segment operating cash flow $ 2,193.1 $ 2,139.3 $ 8,667.3 $ 8,522.3
Share-based compensation expense (65.2 ) (74.6 ) (318.2 ) (257.2 )
Depreciation and amortization (1,438.2 ) (1,416.1 ) (5,825.8 )
(5,500.1 ) Impairment, restructuring and other operating items, net
(68.4 ) (375.3 ) (174.1 ) (536.8 ) Operating income $ 621.3
$ 273.3 $ 2,349.2 $ 2,228.2
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 December 31, 2015:
Capital Debt & Capital
Cash Lease Lease and Cash
Debt2 Obligations Obligations
Equivalents in millions
Liberty Global and Liberty Global
Group unrestricted subsidiaries
$ 2,537.5 $ 63.3 $ 2,600.8 $ 209.6 Virgin Media3 14,794.1 159.5
14,953.6 29.5 UPC Holding 6,523.2 24.6 6,547.8 151.1 Unitymedia
7,824.2 703.1 8,527.3 2.2 Ziggo Group Holding 8,012.6 0.3 8,012.9
13.9 Telenet 3,709.0 371.1 4,080.1 301.3 Total
Liberty Global Group 43,400.6 1,321.9 44,722.5
707.6 LiLAC Group unrestricted subsidiaries — — — 82.1 VTR Finance
1,400.0 0.3 1,400.3 126.7 Liberty Puerto Rico 933.9 0.6
934.5 65.7 Total LiLAC Group 2,333.9 0.9
2,334.8 274.5 Total $ 45,734.5 $ 1,322.8
$ 47,057.3 $ 982.1
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 statements of cash flows included in Exhibit 99.1 to our
10-K:
Liberty Global Group
Three months ended Year ended
December 31, December 31, 2015
2014 2015 2014 in millions, except %
amounts Customer premises equipment $ 233.7 $ 271.6 $ 1,057.1 $
1,159.3 Scalable infrastructure 223.4 215.8 807.2 711.4 Line
extensions 167.4 122.8 493.3 393.0 Upgrade/rebuild 131.0 136.7
519.4 522.1 Support capital & other 333.9 315.1
1,033.2 867.2 Property and equipment additions
1,089.4 1,062.0 3,910.2 3,653.0 Assets acquired under
capital-related vendor financing arrangements4 (390.9 ) (297.4 )
(1,481.5 ) (975.3 ) Assets acquired under capital leases (16.8 )
(20.6 ) (106.1 ) (127.2 ) Changes in current liabilities related to
capital expenditures (91.1 ) (153.4 ) (50.3 ) (89.2 ) Capital
expenditures5 $ 590.6 $ 590.6 $ 2,272.3 $
2,461.3 Property and equipment additions as % of
revenue 25.4 % 24.6 % 22.9 % 21.4 %
LiLAC Group
Three months ended Year ended
December 31, December 31, 2015
2014 2015 2014 in millions, except %
amounts Customer premises equipment $ 16.0 $ 24.5 $ 111.5 $
123.6 Scalable infrastructure 9.1 10.2 36.9 44.2 Line extensions
5.5 4.3 21.0 15.8 Upgrade/rebuild 2.0 2.5 18.0 21.7 Support capital
& other 9.7 16.4 39.7 50.9 Property
and equipment additions 42.3 57.9 227.1 256.2 Changes in current
liabilities related to capital expenditures 15.1 (10.4 ) 0.1
(33.1 ) Capital expenditures $ 57.4 $ 47.5 $
227.2 $ 223.1 Property and equipment additions
as % of revenue 13.7 % 19.4 % 18.7 % 21.3 %
______________________________
1 Except as otherwise indicated, the amounts reported in the
table include the named entity and its subsidiaries. 2 Debt amounts
for UPC Holding, Ziggo Group Holding and Telenet include notes
issued by special purpose entities that are consolidated by each. 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 $56 million carrying
value 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 $50 million, $39
million, $189 million and $115 million, respectively, that were
also financed by our vendors under these arrangements. 5 The
capital expenditures that we report in our 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.
Free Cash Flow Definition and Reconciliation
We define 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
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 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. 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 free cash flow as a supplement to, and not a substitute for,
GAAP measures of liquidity included in our consolidated statements
of cash flows. The following table provides the reconciliation of
our continuing operations' net cash provided by operating
activities to FCF for the indicated periods:
Three months ended Year ended
December 31, December 31, 2015
2014 2015 2014 in millions
Consolidated Liberty Global
Net cash provided by operating activities of our continuing
operations $ 1,546.5 $ 1,542.7 $ 5,705.8 $ 5,612.8 Excess tax
benefits from share-based compensation6 (0.3 ) 7.0 26.7 7.0 Cash
payments for direct acquisition and disposition costs7 14.7 54.4
264.2 79.7 Expenses financed by an intermediary8 161.4 6.3 294.2
27.5 Capital expenditures (648.0 ) (638.1 ) (2,499.5 ) (2,684.4 )
Principal payments on amounts financed by vendors and
intermediaries (215.7 ) (120.0 ) (1,125.4 ) (686.9 ) Principal
payments on certain capital leases (32.0 ) (42.5 ) (146.8 ) (183.3
) FCF $ 826.6 $ 809.8 $ 2,519.2 $ 2,172.4
Liberty Global Group
Net cash provided by operating activities of our continuing
operations $ 1,441.6 $ 1,456.6 $ 5,399.3 $ 5,323.8 Excess tax
benefits from share-based compensation (0.3 ) 6.9 23.0 6.9 Cash
payments for direct acquisition and disposition costs 14.4 52.0
259.3 75.3 Expenses financed by an intermediary 161.4 6.3 294.2
27.5 Capital expenditures (590.6 ) (590.6 ) (2,272.3 ) (2,461.3 )
Principal payments on amounts financed by vendors and
intermediaries (215.7 ) (120.0 ) (1,125.4 ) (686.9 ) Principal
payments on certain capital leases (31.8 ) (42.3 ) (146.0 ) (182.5
) FCF $ 779.0 $ 768.9 $ 2,432.1 $ 2,102.8
LiLAC Group
Net cash provided by operating activities of our continuing
operations $ 104.9 $ 86.1 $ 306.5 $ 289.0 Excess tax benefits from
share-based compensation — 0.1 3.7 0.1 Cash payments for direct
acquisition and disposition costs 0.3 2.4 4.9 4.4 Capital
expenditures (57.4 ) (47.5 ) (227.2 ) (223.1 ) Principal payments
on certain capital leases (0.2 ) (0.2 ) (0.8 ) (0.8 ) FCF $ 47.6
$ 40.9 $ 87.1 $ 69.6
______________________________
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 consolidated statements of cash flows. 7 Represents costs paid
during the period to third parties directly related to acquisitions
and dispositions. 8 For purposes of our consolidated statements of
cash flows, expenses financed by an intermediary, including VAT,
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 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. The inclusion of this adjustment represents a change
in our definition of free cash flow that we implemented effective
January 1, 2015. The free cash flow reported for the 2014 period
has been revised to calculate free cash flow on a basis that is
consistent with the new definition.
ARPU per Customer Relationship9
The following table provides ARPU per customer relationship for
the indicated periods:
Three months ended Dec. 31, %
FX-Neutral10 2015 2014
Change % Change Liberty Global Consolidated $
44.14 $ 46.75
(5.6)
%
3.6 % Liberty Global Group € 39.68 € 36.82 7.8 % 3.5 % U.K. &
Ireland (Virgin Media) £ 48.80 £ 48.29 1.1 % 1.8 % Germany
(Unitymedia) € 23.51 € 22.04 6.7 % 6.7 % Belgium (Telenet) € 51.23
€ 48.49 5.7 % 5.7 % The Netherlands (Ziggo) € 44.97 € 44.33 1.4 %
1.4 % Other Europe (UPC Holding) € 26.72 € 25.33 5.5 % 0.7 % LiLAC
Group $ 55.12 $ 59.60
(7.5)
%
3.4 % Chile (VTR) CLP 33,382 CLP 32,284 3.4 % 3.4 % Puerto Rico $
78.13 $ 84.33
(7.4)
%
(7.4)
%
Mobile Statistics11
The following tables provide ARPU per mobile subscriber12 and
mobile subscribers13 for the indicated periods:
ARPU per Mobile Subscriber Three months ended Dec.
31, % FX-Neutral 2015
2014 Change % Change Liberty Global Group:
Including interconnect revenue $ 21.38 $ 25.06 (14.7 )% (8.7 )%
Excluding interconnect revenue $ 17.66 $ 20.45 (13.6 )% (7.9 )%
LiLAC Group: Including interconnect revenue $ 24.91 $ 25.52
(2.4 )% 13.9 % Excluding interconnect revenue $ 22.84 $ 23.18 (1.5
)% 15.0 %
Mobile Subscribers Dec.
31, 2015 Sept. 30, 2015
Change Liberty Global Group: U.K. 3,016,400 3,027,300
(10,900 ) Belgium 1,001,200 977,200 24,000 Germany 355,500 349,700
5,800 The Netherlands 186,800 180,900 5,900 Switzerland 32,900
24,800 8,100 Austria 13,000 8,000 5,000 Ireland 7,600 1,100
6,500 Total Western Europe 4,613,400 4,569,000
44,400 Hungary 34,400 24,700 9,700 Poland 7,200
7,900 (700 ) Total CEE 41,600 32,600
9,000 Liberty Global Group 4,655,000 4,601,600 53,400 LiLAC
Group - Chile 132,000 134,000 (2,000 ) Grand Total
4,787,000 4,735,600 51,400
__________________________________________
9 Please see page 16 for the definition of ARPU per
customer. The amounts for the three months ended December 31, 2014
do not include the impact of the Ziggo acquisition (prior to our
ownership) and the Choice acquisition. 10 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. 11 Please see page 16 for
the definition of mobile subscriber. 12 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. 13 With the
exception of the U.K. and Chile, all of our mobile subscribers
receive mobile services pursuant to postpaid contracts. As of
December 31, 2015 and September 30, 2015, the mobile subscriber
count in the U.K. included 755,800 and 808,400 prepaid mobile
subscribers, respectively, and the mobile subscriber count in Chile
included 10,900 and 12,000 prepaid mobile subscribers,
respectively.
RGUs, Customers and Bundling
The following table provides information on the breakdown of our
RGUs and customer base and highlights our customer bundling metrics
at December 31, 2015, September 30, 2015 and December 31, 2014:
14
December31, 2015
September30, 2015
December31, 2014
Q4’15 / Q3’15(% Change)
Q4’15 / Q4’14(% Change)
Liberty Global
Group
Total RGUs Video RGUs 22,756,100 22,789,100 23,102,300 (0.1
%) (1.5 %) Broadband Internet RGUs 16,798,400 16,572,700 16,133,000
1.4 % 4.1 % Telephony RGUs 13,997,600 13,809,400
13,476,400 1.4 % 3.9 % Total Liberty Global Group 53,552,100
53,171,200 52,711,700 0.7 % 1.6 %
Customers
Single-Play Customers 9,777,100 9,937,500 10,248,100 (1.6 %) (4.6
%) Dual-Play Customers 4,316,500 4,216,300 4,200,000 2.4 % 2.8 %
Triple-Play Customers 11,714,000 11,600,400
11,354,500 1.0 % 3.2 % Total Liberty Global Group 25,807,600
25,754,200 25,802,600 0.2 % — % % of Single-Play Customers
37.9 % 38.6 % 39.7 % (1.8 %) (4.5 %) % of Dual-Play Customers 16.7
% 16.4 % 16.3 % 1.8 % 2.5 % % of Triple-Play Customers 45.4 % 45.0
% 44.0 % 0.9 % 3.2 % RGUs per customer relationship 2.08
2.06 2.04 1.0 % 2.0 %
LiLAC
Group
Total RGUs Video RGUs 1,289,900 1,291,200 1,233,400 (0.1 %)
4.6 % Broadband Internet RGUs 1,322,100 1,307,100 1,142,300 1.1 %
15.7 % Telephony RGUs 883,900 889,800 854,500
(0.7 %) 3.4 % Total LiLAC Group 3,495,900 3,488,100 3,230,200 0.2 %
8.2 %
Customers Single-Play Customers 562,300 561,200
482,800 0.2 % 16.5 % Dual-Play Customers 372,400 367,400 324,900
1.4 % 14.6 % Triple-Play Customers 729,600 730,700
699,200 (0.2 %) 4.3 % Total LiLAC Group 1,664,300 1,659,300
1,506,900 0.3 % 10.4 % % of Single-Play Customers 33.8 %
33.9 % 32.0 % (0.3 %) 5.6 % % of Dual-Play Customers 22.4 % 22.1 %
21.6 % 1.4 % 3.7 % % of Triple-play Customers 43.8 % 44.0 % 46.4 %
(0.5 %) (5.6 %) RGUs per customer relationship 2.10 2.10
2.14 — % (1.9 %)
_____________________________________________
14 The December 31, 2014 amounts do not include the impact
of the Choice acquisition.
Consolidated Operating Data — December
31, 2015
Video
HomesPassed(1)
Two-wayHomesPassed(2)
CustomerRelationships(3)
TotalRGUs(4)
Basic
VideoSubscribers(5)
EnhancedVideoSubscribers(6)
DTHSubscribers(7)
MMDSSubscribers(8)
TotalVideo
InternetSubscribers(9)
TelephonySubscribers(10)
U.K. 12,908,500 12,891,300 5,115,200 12,732,400 — 3,727,000
— — 3,727,000 4,694,900 4,310,500 Germany 12,763,800 12,556,500
7,144,700 12,518,700 5,003,800 1,497,100 — — 6,500,900 3,106,200
2,911,600 The Netherlands(11) 7,023,200 7,009,100 4,090,400
9,728,200 768,000 3,320,500 — — 4,088,500 3,101,400 2,538,300
Belgium 2,935,700 2,935,700 2,177,500 4,846,300 340,600 1,714,200 —
— 2,054,800 1,570,500 1,221,000 Switzerland(11) 2,195,100 2,194,600
1,351,400 2,567,200 619,600 682,700 — — 1,302,300 759,900 505,000
Austria 1,372,300 1,372,300 654,600 1,378,600 139,200 363,300 — —
502,500 484,800 391,300 Ireland 856,500 772,000
497,400 1,094,800 32,100 311,200 —
22,200 365,500 371,200 358,100 Total
Western Europe 40,055,100 39,731,500 21,031,200
44,866,200 6,903,300 11,616,000 —
22,200 18,541,500 14,088,900 12,235,800
Poland 2,971,300 2,903,000 1,441,600 2,847,700 240,700 962,200 — —
1,202,900 1,052,400 592,400 Hungary 1,624,100 1,606,800 1,094,500
2,061,100 170,100 478,600 289,400 — 938,100 588,200 534,800 Romania
2,647,600 2,579,800 1,243,300 2,127,500 290,600 593,200 350,600 —
1,234,400 488,800 404,300 Czech Republic 1,421,800 1,388,500
720,300 1,206,600 107,300 361,400 120,100 — 588,800 456,500 161,300
Slovakia 540,000 517,500 276,700 442,900
36,500 144,100 69,300 500
250,400 123,500 69,000 Total CEE 9,204,800
8,995,600 4,776,400 8,685,800 845,200
2,539,500 829,400 500 4,214,600
2,709,400 1,761,800
Total Liberty Global Group
49,259,900 48,727,100 25,807,600
53,552,000 7,748,500
14,155,500 829,400 22,700
22,756,100 16,798,300 13,997,600
Chile 3,061,500 2,545,100 1,263,400 2,719,000 93,800 932,200
— — 1,026,000 1,003,100 689,900 Puerto Rico 1,070,700
1,070,700 400,900 776,900 — 263,900
— — 263,900 319,000 194,000
Total LiLAC Group 4,132,200 3,615,800
1,664,300 3,495,900
93,800 1,196,100 —
— 1,289,900 1,322,100
883,900 Grand Total 53,392,100
52,342,900 27,471,900 57,047,900 7,842,300
15,351,600 829,400 22,700 24,046,000
18,120,400 14,881,500
Subscriber Variance Table - December
31, 2015 vs. September 30, 2015
Video
HomesPassed(1)
Two-wayHomesPassed(2)
CustomerRelationships(3)
TotalRGUs(4)
Basic
VideoSubscribers(5)
EnhancedVideoSubscribers(6)
DTHSubscribers(7)
MMDSSubscribers(8)
TotalVideo
InternetSubscribers(9)
TelephonySubscribers(10)
U.K. 162,700 166,500 54,800 126,400 — 900 — — 900 69,100
56,400 Germany 14,100 18,300 10,400 93,800 (48,600 ) 34,700 — —
(13,900 ) 61,600 46,100 The Netherlands(11) 8,500 8,600 (51,300 )
(51,900 ) (35,400 ) (15,900 ) — — (51,300 ) 6,500 (7,100 ) Belgium
4,900 4,900 (2,500 ) 25,800 (15,600 ) 10,700 — — (4,900 ) 13,700
17,000 Switzerland(11) 600 600 (29,400 ) (26,500 ) (27,300 ) (1,900
) — — (29,200 ) 200 2,500 Austria 6,600 6,600 4,400 13,400 (2,100 )
600 — — (1,500 ) 5,600 9,300 Ireland 2,800 7,700
(6,200 ) (10,000 ) (1,200 ) (7,200 ) — (1,700 ) (10,100 )
(100 ) 200 Total Western Europe 200,200 213,200
(19,800 ) 171,000 (130,200 ) 21,900 —
(1,700 ) (110,000 ) 156,600 124,400 Poland 103,000
105,600 26,100 63,700 (9,000 ) 25,800 — — 16,800 32,900 14,000
Hungary 22,100 21,300 7,800 37,200 (12,400 ) 17,200 3,700 — 8,500
11,700 17,000 Romania 76,400 88,400 36,500 88,700 100 12,800 24,300
— 37,200 17,800 33,700 Czech Republic 10,200 33,900 2,200 12,900
8,500 (100 ) 1,400 — 9,800 4,800 (1,700 ) Slovakia 20,500
21,100 600 7,300 2,700 600 1,400
— 4,700 1,800 800 Total CEE
232,200 270,300 73,200 209,800 (10,100
) 56,300 30,800 — 77,000 69,000
63,800 Total Liberty Global Group 432,400 483,500
53,400 380,800 (140,300 ) 78,200 30,800
(1,700 ) (33,000 ) 225,600 188,200
Chile 26,600 27,100 3,600 200 (3,700 ) 3,500 — — (200 ) 9,500
(9,100 ) Puerto Rico 2,500 2,500 1,400 7,600
— (1,100 ) — — (1,100 ) 5,500
3,200 Total LiLAC Group 29,100 29,600 5,000
7,800 (3,700 ) 2,400 — — (1,300
) 15,000 (5,900 )
Grand Total 461,500
513,100 58,400 388,600
(144,000 ) 80,600 30,800
(1,700 ) (34,300 )
240,600 182,300
Organic Change
Summary:
U.K. 125,800 129,600 54,800 126,400 — 900 — — 900 69,100 56,400
Germany 14,100 18,300 10,400 93,800 (48,600 ) 34,700 — — (13,900 )
61,600 46,100 The Netherlands 8,500 8,600 (51,300 ) (51,900 )
(35,400 ) (15,900 ) — — (51,300 ) 6,500 (7,100 ) Belgium 4,900
4,900 (2,500 ) 25,800 (15,600 ) 10,700 — — (4,900 ) 13,700 17,000
Other Europe 189,600 234,800 8,800 141,700
(53,600 ) 34,600 30,800 (1,700 ) 10,100
56,700 74,900
Total Liberty Global Group
342,900 396,200 20,200
335,800 (153,200 ) 65,000
30,800 (1,700 ) (59,100 )
207,600 187,300 Chile 26,600 27,100
3,600 200 (3,700 ) 3,500 — — (200 ) 9,500 (9,100 ) Puerto Rico
2,500 2,500 1,400 7,600 — (1,100
) — — (1,100 ) 5,500 3,200
Total
LiLAC Group 29,100 29,600
5,000 7,800 (3,700 )
2,400 — — (1,300
) 15,000 (5,900 ) Total Organic
Change 372,000 425,800 25,200 343,600
(156,900 ) 67,400 30,800 (1,700 ) (60,400 ) 222,600
181,400
Q4 2015
Adjustments:
Q4 2015 U.K. adjustments 36,900 36,900 — — — — — — — — — Q4 2015
Acquisitions - Poland 16,400 15,000 19,200 27,200 1,500 12,400 — —
13,900 12,400 900
Q4 2015 Acquisitions
- Romania
30,900 30,900 14,000 17,800 11,400 800 — — 12,200 5,600 — Q4 2015
Hungary adjustments 5,300 4,500 — — —
— — — — — — Net
Adjustments 89,500 87,300 33,200 45,000
12,900 13,200 — — 26,100 18,000
900 Net Adds (Reductions) 461,500 513,100
58,400 388,600 (144,000 ) 80,600 30,800
(1,700 ) (34,300 ) 240,600 182,300
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 and Multi-channel Multipoint (“microwave”)
Distribution System (“MMDS”) 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. With respect to MMDS, one MMDS customer is equal to one
Home Passed. Due to the fact that we do not own the partner
networks (defined below) used in Switzerland and the Netherlands
(see note 11) 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) Revenue Generating Unit or "RGU" is separately a
Basic Video Subscriber, Enhanced Video Subscriber, DTH Subscriber,
MMDS 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 Austrian market subscribed to our enhanced video service,
telephony service and broadband internet service, the customer
would constitute three RGUs. Total RGUs is the sum of Basic Video,
Enhanced Video, DTH, MMDS, 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 December 31, 2015 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 133,800
“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)
MMDS Subscriber is a home, residential multiple dwelling unit or
commercial unit that receives our video programming via a MMDS. (9)
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 53,000 digital subscriber line (“DSL”)
subscribers within Austria that 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 100,000 subscribers who have requested and
received this service. (10) 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 41,300 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 57,200 subscribers
who have requested and received this service. (11) 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
December 31, 2015, Switzerland’s partner networks account for
139,500 Customer Relationships, 284,400 RGUs, 104,400 Enhanced
Video Subscribers, 106,600 Internet Subscribers, and 73,400
Telephony Subscribers.
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 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.” 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 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.
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version on businesswire.com: http://www.businesswire.com/news/home/20160215005707/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 6428Tim Burt, +44 20 7240 2486
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