Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Liberty Global’s First Quarter 2020 Investor Call.

This call and the associated webcast are the property of Liberty Global, and any redistribution, retransmission or rebroadcast of the call or webcast in any form without the expressed written consent of Liberty Global is strictly prohibited. At this time, all participants are in a listen-only mode.

Today’s formal presentation material can be found under the Investor Relations section of Liberty Global’s website at libertyglobal.com. After today’s formal presentation, instructions will be given for a question-and-answer session. Page 2 of the slides details the company’s Safe Harbor statement regarding forward-looking statements.

Today’s presentation may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including the company’s expectations with respect to its outlook and future growth prospects and other information and statements that are not historical fact.

These forward-looking statements involve certain risks that could cause actual results to differ materially from those expressed or implied by these statements. These risks include those detailed in Liberty Global’s filings with the Securities and Exchange Commission, including its most recent filed Forms 10-Q and 10-K, as amended.

Liberty Global disclaims any obligation to update any of these forward-looking statements to reflect any change in its expectations or any condition on which any such statement is based. I would now like to turn the call over to Mr. Mike Fries..

number 1 is the expected net proceeds of $1.75 billion, which equates to roughly $3 per share; then you have our 50% of the estimated synergies, which adds up to about $6 per share; and finally, there is an implied transaction value for the underlying Virgin Media business when we combine.

And we had to agree, as I just mentioned, £18.7 billion, which after debt represents an implied value for the equity today of around $14 per share of Liberty Global. If you add all that up, you get to about $23 per share. That’s just on the UK business. And we understand that everyone will have a different view, a different valuation approach.

And in particular, some might argue that the implied value of Virgin in the deal and then the combination is a challenging one or not acceptable. We don’t agree with that, of course. But if you want to haircut the deal multiple by 20%, and put it us in the mid-7s. You still get the $16 per share with the entire transaction.

It’s hard to argue that we don’t have a considerable value gap here. And I think, you’re all capable of doing the math on your own. And we just wanted to give you those components and hopefully clarify what we’ve been talking about for some time.

And one more slide here in Virgin Media to help round out the operating update, and then pass it to Charlie. And as you’ll say, there are more operating update slides like this in the back or other assets.

But you see that we’ve tried to focus here on the data that we believe is most important for tracking progress in our core market, namely, winning and retaining customers across our fixed mobile B2B business; secondly, growing ARPU, the up-sell and cross-sell; and third, driving fixed mobile convergence.

We’re also focused, of course, on extending our network reach and speed leadership, and driving cost efficiencies. In fact, on the cost efficiency side, we’ve been forced to accelerate some of the transformation in our care and sales capabilities, to be more digital to operate more efficiently and that’s going to pay dividends on the other side.

There are a few good visuals in the middle 2 columns here. You’ll see firstly, that Virgin Media’s customer base has been largely stable just under 6 million. In fact, the number is only moved about 20,000 customers in 5 quarters.

Yes, as we show the customer gains we pick up in lightning or often offset by the customer losses in the BAU footprint, but the numbers are not significant in either direction. You can also see a strong customer ARPU trend in the last 5 quarters, with 1.2% growth year-over-year in the first quarter.

This is driven larger than price increases and against cross-sell and up-sell, but also underpinned by product innovation, and improved base management. We are continually seeking to enhance the value for money proposition for customers in this market things like our next gen V6 set-top box and broadband speed.

In fact, in the past quarter we boosted over 1 million customers to 100 megabit broadband speeds bringing our average speed across our base, average speed to 140 megabit. Just by reference for reference purposes. The rest of the UK market is averaging consumer speeds of 30 megabits a second.

So we are – our average Virgin customer is getting broadband speeds 4 to 5 times faster than the rest of the market. As we pointed out, often 95% of that UK network is already will get ready. And we’ve launched those speeds across major towns and 30% of the footprint.

I put us on track for network-wide coverage of 1 gig in 2021 delivering 50% of the government’s national gigabit ambition 4 years early. I think there’s enough said there. Now Lutz and the team have also been already focusing on cross selling to mobile – mobile into the fixed base following the launch of convergence bundles about a year ago.

And the Q1 postpaid net ads were good at 72,000. So fixed mobile convergence is already working at Virgin, we’re at 22%. Fixed mobile convergence ratio with plenty of runway. Remember, Telenet, VodafoneZiggo are in the mid-40.

So, as we all know, fixed mobile convergence drives higher NPS and lower churn as the fundamental rationale for the deal we announced today. So it all knows and good start to the year for Virgin Media even in light of the pandemic. OFCF margins are strong, and 23% before lightning and 17% after, SOHO our customer base grow 7%.

And the team is managing through the headwinds we identified at the beginning of the year, the increase in network taxes and the contract notification programming costs, we’ve been managing through those very, very well. In fact, NPS is up, there’s no return is down.

I think the group is really well positioned to come out of this COVID period very, very strong. So that’s it for me. I’ll pass it over to Charlie, and then we look forward to getting your questions.

Charlie?.

Thanks, Mike. And now I’m on Page 12, divisional overview, Mike has given you the key operational highlights of Virgin Media. And in the appendix, we’ve included similar pages, showing the key operational drivers for other major fixed mobile convergence businesses.

In the interest of time, we’re not going to review these pages in our remarks today, but please do contact the IR team if you want to discuss them further. On this page, we set out the key financial metrics, which we’re using to assess the performance of these national FMC champions.

Our focus continues to be to drive OFCF or OCF minus accrued CapEx, and free cash flow as these markets mature in terms of broadband penetration.

Now for reference, we’ve also included a page in the appendix setting out our view of 2019 free cash flow for each of our divisions after the allocation of interest and the central technology and innovation CapEx.

But for the quarter on this slide, I will focus on the underlying OFCF trends year-on-year, revenue in the UK anonymous slightly down 0.6%, but OCF declined 3.5%, OFCF before Lightning Construction CapEx increased $18 million to $372 million for the quarter.

We increased our investment in Lightning compared to 2019 Q1 and spent $99 million, with 93,000 homes released during the quarter. Revenue growth in Belgium was slightly down at 9.4%, with OCF up 0.6% and year-on-year OFCF down $10 million to $187 million.

And as John already explained in the Telenet earnings call, there was an acceleration of prepaid sports rights costs, and some front loading CapEx in Q1, which contributed to this year-on-year OFCF decline.

But for the full year, confirmed that, excluding the effects of any lockdowns in the second half of the year, they expect to deliver full year rebased OFCF growth of 1% to 2% on an IFRS basis and adjusted free cash flow the lower end of the previous €415 million to €430 million guidance range.

This assumes that they will gradually exit the lockdown starting in May, with a gradual economic recovery thereafter. In Switzerland, UPC was caught up in the continuing price competition in that market, which resulted in an accelerated decline in consumer and SOHO customer ARPU. This contributed to 2.7% decline in revenue.

They also had an acceleration in prepaid sports rights cost in the quarter, as well as accelerated spending CapEx contributing to a lower OFCF of $55 million. However, based on current expectations around the impact of COVID.

We expect cash generation to improve and the company remains on track to produce around $170 million of free cash flow for the full year, which includes central OpEx and CapEx allocations.

In Holland, VodafoneZiggo had a very strong quarter with revenue growth of 3.3%, OCF growth of 4.9% and OFCF of $258 million, as they outperformed our expectations in virtually every operating metric, showing the strength of these converged national FMC champions. They’re now expecting stable to modest rebased OCF growth for full year.

And they maintain their original free cash flow guidance of €400 million to 500 million and potential cash for shareholders distributions. Now, again, this assumes no further deteriorations as a result of COVID. On the entitled Group Overview, we set out the key financial metrics for the group as a whole.

Revenue declined 0.3% for the quarter, an improvement over the declines from the previous four quarters, despite the impact of COVID-19. OCF growth also improved compared to the last 3 quarters of 2019, a minus 3.6% in line with our pre-covered expectations.

OFCF continue to improve and excluding Lightning Construction CapEx was $593 million for the quarter, up from $569 million a year ago. The continuing reduction in CapEx intensity contributed this. And CapEx as a percentage of sales prior to Lightning Construction CapEx at 19.4%, lower than the previous four quarters. Liquidity remains extremely strong.

Cash, including our $2 billion investment in separately managed accounts was $7.4 billion. Now, as many of you know, our SMAs are invested in low-risk liquid investments.

Both our SMAs and money market accounts are now largely invested in government securities, as opposed to AAA funds, which will lead to a reduction in interest income going forward, but ensure maximum security for the cash.

For the available revolving credit facilities and in our operating companies, the group as a whole has $10.3 billion of liquidity. Our leverage at the end of the quarter was 5.2 times growth and 3.7 times net EBITDA.

The cost of debt continues to decline as we continued our refinancing program during Q1 and now stands at 4.1% with an average life in excess of seven years. On the page titled adjusted free cash flow, we lay out the key components of free cash flow.

Q1 OFCF before Lightning Construction CapEx was $595 million, and our net interest for the quarter was $579 million. We make virtually all our interest payments in Q1 and Q3. So this phasing is in line with our expectations. Cash tax was positive for the quarter of $5 million.

And we expect the full year 2020 figure to be lower than the full year 2019 figure of $358 million, partly due to reduced U.S. tax payments. The distributions in the JV in Holland were $11 million for the quarter, but we continue to expect full-year distributions of €200 million to €250 million, in line with VodafoneZiggo’s recent guidance.

And as is typically the case in Q1, working capital was negative at $250 million, largely due to the phasing of vendor financing program. And as in 2019, we continue to target broadly flat net working capital flows to the year.

Adjusted free cash flow before Lightning Construction CapEx was negative $218 million for the quarter and negative $317 million after construction CapEx, which again was in line with our expectations. Turning to the outlook for the full year, we’re still assessing the medium-term impact from COVID-19. And we’ll give investors a further update in Q2.

Despite the impact of COVID, we continue to be encouraged by our operating prospects. And unless there’s another step change in the macroeconomic environment, we don’t see a need to change or suspend our original full-year guidance as detailed on the slide.

And note that our current assumption is that lockdowns are lifted from Q2 followed by a gradual economic recovery. And also that our original $1 billion free cash flow guidance was based on exchange rates of €1.13 to $1, and $1.33 £1.

Although we don’t guide on rebased revenue growth, we do expect negative impacts to revenue from reduced handset sales, and premium video, particularly sports. But both of these are relatively low-margin and have a limited impact on cash flow. We will continue to monitor the impact of the crisis on these forecasts and update you further in Q2.

And so with that, I’ll turn it back to the operator. And in order to address everyone’s questions, we would kindly ask that you keep to one question each..

The question-and-answer session will be conducted electronically. [Operator Instructions] And we’ll go to our first caller..

Yeah, hi..

Who it is?.

Robert Grindle, it’s Robert from Deutsche Bank. Hi, there..

Hey, Robert..

Yeah. So one question, so I’d like to ask about the JV structure and why you chose that rather than, say, a majority stake.

Is this the only game in town? Or was it as you mentioned about confirming a positive equity value for VMED? Was the JV structure also interesting, given your thinking about an extended fiber builds program? Obviously, [Test] [ph] got a lot of fiber experience. Is that something you are aligned on? Thank you..

Okay, that’s 3 questions. Let me see if I can jump into those. There’s always multiple ways to approach a transaction like this or a strategic move like this. But this felt to us like the best outcome and the best partner for all kinds of reasons. And I’ve talked about those in the remarks I just made, so you’ve heard that.

And we’re comfortable, as I mentioned, with these structures. We have experience with them. It’s worked exceedingly well in Holland with Vodafone, who’s been a great partner. And so, this was the transaction that was presented to us or that we also went out and sought, and the one we think will be most accretive and most advantageous.

So, sure, there’s all the different ways to do it. It had nothing to do with what you’re describing. And then the value, the value once you decide how you’re going to approach a partnership, then you agree on values, not the other way around. I don’t think it was driven by value. It wasn’t driven by anything other than that.

It wasn’t obviously the only game in town. There are multiple mobile operators in this market without fixed infrastructure. So clearly, there were other options. But again, as I said, we felt this was the best option. And credit to Telefónica for also being quite interested and focused on this. And I think it is the best fit.

It doesn’t change anything with respect to our – the level of excitement we have around Project Lightning or network extension in the market. It takes nothing off the table. In fact, I would argue and I think Telefónica would agree, this increases our confidence level, in looking at a national scope, or extending convergence, best-in-class network.

How you achieve that? How we finance that? And how aggressive we are, that is all to be determined. But I think the main takeaway is it doesn’t change our level of excitement. It takes nothing off the table.

I would say it only enhances our ability to be strategic and financially aggressive, and it makes sense, in terms of looking at our network and the opportunities that we’ve discussed historically.

Good and thanks..

Uh-huh..

We’ll go next to Jeff Wlodarczak with Pivotal Research..

Good morning. How are we – hi, how reasonable comp is your operating strategy, synergy upside, I mean, I think obviously leverage levels at VodafoneZiggo, that JV, so what you sort of expect from this deal? And then, if I could sneak one in about the back-book re-pricing in UK, how that’s going relative to your expectations? Thanks..

Okay. Lutz, you can prepare for the back-book re-pricing issue. The Punch-line is, are in line. But there are lots of things that are similar in this transaction to the VodafoneZiggo transaction.

Obviously, the structure itself, there are often many – big differences too, of course, in terms of the size of the market and the competitive landscape that we find ourselves in. On the other hand, it is a similar playbook for us. And it’s one we’re quite familiar with.

So our approach to synergies, our approach to integration, our approach to strategy to drive revenue and convergence are quite similar. And it wouldn’t surprise us if down the road these 2 companies together are achieving similar outcomes. It’s possible here we might even exceed the convergence levels that we see today. In Holland, which are mid-40s.

It could be even higher in this market. A lot of it has to do with what – how the market evolves generally and how competitors react over time. I don’t believe there’ll be any reaction that’s worthy of discussion in the short term or even in immediate term perhaps. But how the market evolves over the longer term is what’s critical.

I’d simply say, when we put the business plan together, at least from our perspective, we were very conservative about the standalone mobile business and the challenges that it might face. And we think we were very appropriately conservative about our own business, just to be, you know, thoughtful and not too ambitious.

And I think when you put those two businesses together you drive synergies through that that business plan. It is very accretive and quite attractive, and that obviously drove the transaction. So I think with very conservative assumptions on either business, with the synergies, which I think, as you point out, are probably conservative.

Certainly, it’s one of the lowest, if not, the lowest percentage we’ve seen in the countries or 7 countries we’ve been involved in FMC transactions now. But there’s good reason for that. This transaction came together relatively quickly. We wanted to be thoughtful and not over promise. We’ve never missed a synergy budget.

You would know that, Jeff, or synergy target, in fact I think almost in every case. We’ve exceeded our synergy budget and targets. So this should be the same..

On end of contract verification, so we have it out in the market since February 10. The churn level is exactly what we have planned for. So how many customers are calling in and how many customers decide to leave us. And then, the second lever is how much discount do you offer to keep the customer connected.

And the discount we have offered so far, it’s only one-third of what we have planned for. So therefore, it is altogether slightly better than we have expected. But the caveat to that is that we are only six weeks into it in that quarter, and also that was precluded. And that might change, so therefore we stay cautious.

But I have to say, although the market was pretty competitive in March and in February, we are doing slightly better than expected..

Thank you.

We’ll go next to David Wright with Bank of America..

Thank you, gents, for taking the call. And, Mike, if I could maybe express some gratitude, I guess, more generally for the salary sacrifices et cetera in light of COVID. My question is just on the UK joint venture and spectrum costs. There is a UK spectrum auction forecast, which probably should be this year, could be next year.

Should we expect in the event of any delays that that is cost that Telefónica will bear, or is there a risk that that could drop into the JV? Thank you..

Thanks very much, David. I believe the press release referenced this, but you might not have a chance to review, get through it or seen it. But the basic deal is that Telefónica will bring to the JV the spectrum that we both believe is necessary to achieve the plan at their cost. So that was the arrangement that we reached early on.

And that so they’ll deliver to the JV at their cost the spectrum when that auction occurs. Obviously, we have not been able to discuss spectrum with them in any detail. It’s a very complicated and has to be quite careful. So we don’t know what they’re doing. We don’t have any real understanding of what they may do.

But whatever they end up with it’ll be at their cost..

Mike, just maybe extending on your comment on Lightning, you’ve been very vocal with perceived on the valuation of Lightning, you stripped it out, et cetera. It’s kind of dropping in at 10 times EBITDA into this deal.

How did you kind of think about valuing Lightning independently as the kind of steady-state VMED cable infrastructure?.

Yeah, good question. Look, I think we each had some assets on the – on each side of the deal that we could have argued for different values. But they have their tower interests in the UK, which they thought at one point maybe it would be better outside of JV we had the Lightning transaction.

But we both agreed that this is going to be a long-term partnership, that we should be doing things inside the partnership that makes perfect strategic sense and operational sense and financial sense.

So let’s just say that, the valuation was considered, but we didn’t get into that kind of granularity, when it came to – this is always negotiation, in terms of identifying exactly what Lightning reference includes or doesn’t include. Then we didn’t do this, we did – probably approached it similarly on their tower footprint..

Very useful. Thank you..

Uh-huh..

We’ll go next to Michael Bishop with Goldman Sachs..

Yes. Thanks. Just both 2 very quick questions. Firstly, you’re now effectively sitting on a large cash balance, given this deal, I guess isn’t consuming any of your cash.

I’d just love to hear your latest thoughts on how you think about managing that cash balance effectively with this transaction, not consuming cash? And then super quickly, could I just follow-up on the last question? Clearly, you’ve been clear that Lightning is going into the JV.

But I’m just going to ask as a follow-up on the other fiber company that you’ve set up, just I noticed that the $10 billion of CapEx over the next 5 years commitment doesn’t really implicitly assume at least on my numbers that necessarily announcing anything with regards to the 7 million extra homes you’ve identified and also the fiber joint venture and those discussions.

So any update there would be great. Thanks..

Sure. On the second point, yes, anything we pursue or anything they pursue that would normally be considered a JV activity, is likely going to be a JV activity. So Liberty fibers, as you described, it is certainly something we would pursue through the joint venture.

And I think, as Jose Maria said on his call, these are the issues that we’ll address together in terms of pace, and speed, and financing structure and opportunity. In the meantime, we’ll continue with Lightning. In fact, we think we might exceed our budget on Lightning. We can, of course, choose to spend more or less between now and closing.

It just works out in working capital. But I think for the most part, you should assume that the JV will jointly address these strategic opportunities. And capital will come from both parties as a result of that. On the cash balance, I think we’ll remain disciplined as we have remained discipline. As I said, nobody anticipated this environment.

We always said you never know what the future is going to bring. And this was not something any of us hoped for. And on the other hand, we’re thankful to be liquid and we’re thankful to have cash. And we’ll remain disciplined on how we deploy the cash.

As I said, and have said, the first order of business is our core markets, and where we know and we already operate, that will remain the case. Secondly, we’ll look within the region we operate in, would be look for opportunities for consolidation or other similar convergence strategies, I would say.

We have as we’ve talked many times, it’s Ventures portfolio, not big, maybe $1 billion of interest in existing assets that we own in tech and content. And, so we’ll be careful and thoughtful about opportunities to build new revenue streams, new investment portfolios and new business opportunities.

But I think we’ll do that carefully and with great transparency, and probably wouldn’t require the kind of capital that we have. So this is a good problem to have. It’s a good question to be focused on for us. But it’s not something we can give you any more clarity on that as we sit here today, Michael, but stay tuned..

Thanks a lot..

Now, of course, I didn’t mention in that what we have used historically our excess capital for and that is these buybacks. I did mention in my remarks is that – it’s always on the list for our levered equity growth strategy. As we start to drive free cash flow and free cash flow per share, clearly, that’s an accelerator of free cash flow per share.

But, again, we’re not being – on this call, we’re not going to be – I couldn’t give you any details about that. Obviously, we’ll let you know. By the way, I know we’ve probably got a lot of questions. So just for everybody’s benefit, our remarks went a bit longer, we’re going to keep the line open. I’m sure you’ve got plenty of calls to get on to.

And but I think we’ll probably try to keep the line open for 10 to 15 minutes to be sure we get to a few more questions since we were a bit longer in our remark today. So go ahead, operator..

Yes, we’ll go next to Benjamin Swinburne with Morgan Stanley..

Thanks. Thanks. Good morning, everybody. Morning, Mike..

Hi, Ben..

I wanted to – assuming you are somewhere where it’s morning, okay, it may not be the case, but wanted to ask about tax implications of all this. I think you guys announced you’re moving effectively all the UK tax allowances et cetera into the JV.

You guys, I think originally reincorporated over in the UK at least partly for the tax benefits, and just wondering how that – what the tax structure and tax leakage if anything of the JV will look like? I’m assuming there’ll be not much anytime soon and then implications if any for the consolidated operations, Switzerland, Benelux, et cetera, in terms of cash taxes as a result of this deal..

Okay. There’s no implications to other assets. The UK tax losses have always been largely ring fenced within the UK and only usable on a UK entity. So it’s no implications at all for the other operations. I’ll simply say on a tax structure won’t be surprising to you, I think, it’s quite efficient.

We don’t – without getting into great detail, there shouldn’t be any tax implications on formation of the joint venture. The losses that exist will be transferred and, to the best of our ability used by the JV. There are some – as ever some nuances there.

But for the most part, it’s a very tax efficient transaction really for both parties and certainly for us, and we’re not – we don’t see any leakage of the kind you described..

Okay. And then just a quick follow-up on Virgin,,maybe for Lutz, if he’s on. What’s the pricing environment look like at this point, obviously, you’ve got a lot of stress in the economy.

Just wondering from a competition point of view of things has continued to be as tough as they’ve been, or if we’ve seen – if you’ve seen any of your – of the operators you compete with get a little more rational, so to speak, given just the focus on the macro and pressures on things like liquidity, et cetera..

Lutz, go ahead..

So – yeah, so I think in February and March and maybe because of the start of end-of-contract notification. I would say that the market was even a bit more competitive. So when you compare the deepness of discount to a year ago, discounts were 5% to 10% deeper. And then now after COVID, obviously, right sales are down, and in fact, not so much.

So we are still operating on 80% sales level, and churn went down dramatically. But in this environment, obviously, you’re less aggressive in terms of promotion. And so I would say it was a bit more aggressive and we kept our strategy right.

So you see that we kept our customers flat, we are looking to create really customer relationship with high value customers. We were not looking for the low end in the broadband. We were not looking for the low end in the video. And so therefore the service revenue out of that was 0.8% [ph] and the ARPU grew to 1.2%.

And this is exactly on our strategy..

Thank you..

We’ll go next to Vijay Jayant with Evercore..

Hi, Mike. I just wanted to understand, obviously, the structure now that most of your values are in JVs in the UK and Holland pro forma for this transaction. And about $1 billion of EBITDA on the remaining consolidated assets. How – in terms of transparency and value recognition, obviously, you make a case for that in today’s presentation.

How are we going to sort of track the performance of the JVs? And are you – regarding the risk of getting sort of a discount, because most values are an equity stakes.

And have you thought about, tracking stock or any structures that can show the value of those assets that you don’t sort of see on a consolidated basis?.

Yeah, good question. We did try to address it a bit in the remarks, but it’s worth repeating, that this does change, it takes our largest consolidated business and puts it into a JV. And so that does obviously have accounting and consolidation implications. However, because it’s our largest business, we will report quite extensively on the business.

And so I don’t see any reduction in transparency around the core operating companies. So firstly, I would say you get, you should be able to see through the structures and we will endeavor to report on the businesses in much the same way with arguably as much in more detail.

So I think, we’ll be focused on transparency for investors on the actual operating businesses, how they’re performing, and we’re quite engaged, of course, in all of these, and how they do so. That’s point 1. Point 2, Virgin wasn’t a public company when it was 100% owned.

Virgin, O2, whatever name it maybe, is – won’t be a public company when we started JV. But down the road, there could be opportunities in that said to create public listings are or structures that, that identify and isolate value and I think show value more, more creatively and more effectively.

Nothing’s off the table, I mean, and we retained – as we would expect, we did retain the ability to perhaps create trackers or things of that nature. So in the Liberty tradition, all options are available to us to ensure we’re getting transparent value. But we’ll be thoughtful about that over time.

It is the right point, which is why we spend a few more minutes than we normally would on structure and value creation. And holding company discounts, that’s your expertise. I don’t think so, I would argue for it, obviously. But we certainly can’t – at this point in time, we would take a holding company discount if somebody valued the stock correctly.

So I think it’s all relative, and we’ll have to see how we go..

Thank you..

You bet..

We’ll go next to Polo Tang with UBS..

Yeah, hi. I just have one question, and that is does the deal with O2 preclude doing a cable wholesale deal, or a fiber JV with Sky? Or is this just not a priority at the moment? Thank you..

Well, thanks, Polo. As I said at the beginning of the Q&A, nothing’s off the table. So I think the direct answer is, no. We don’t believe that this transaction either as it’s pending or when closed, creates any obstacles to smart opportunity.

I’m not going to comment on that one specifically, I’ll simply say that it doesn’t take anything off the table legally, structurally, we don’t believe from a regulatory point of view. So there will be – all the conversations that we were having and all the ideas that we were discussing, I think remain and can be executed on if they make sense.

So that goes for the Lightning build out. That goes for strategic partnerships with other operators if they make sense that goes for all the kind of things that we know can be accretive and strategically valuable for the group. We still believe can be evaluated and considered..

And I’ll just clarify that on the timing for the deal – can I just clarify the timing of the deal more now than given COVID-19 situation, something changed on your part, in terms of what spurred the move now to that deal? Or was there a change on this point? Can you maybe give some color?.

Yeah, as you would imagine, this didn’t come – I mean, the crisis that we’re all facing now and with the pandemic, obviously, is somewhat recent. This is – these are conversations that go back some time. So, as discussions and negotiations have momentum, you keep the momentum.

I would say definitely, that we didn’t see anything in the current environment that suggested we shouldn’t continue with this opportunity, as opposed to the environment, stimulating the opportunity, it’s the other way around. It’s an opportunity. There was always there. And we didn’t do anything that created an obstacle or that should slow it down.

So it’s really nothing to do with the current environment. It’s just the timing is coincidental..

Thanks..

Yeah..

We’ll go next to Nick Lyall with SocGen..

Good afternoon, Mike, Charlie. And it’s just a very quick # maybe on Swiss prices, please. They seem pretty – the ARPU seem pretty weak this quarter.

Is that just a COVID impact, maybe with some sports and PayTV items there? Is that something we should expect sort of for the rest of the year, it’s in pretty structural pricing pressure points?.

I don’t know, if Baptiest is on the call..

Yes, I’m in..

Yeah. You want to address that quickly. Baptiest Coopmans is the current CEO of Swiss business.

Do you want to address that?.

Yeah. I am in Switzerland since February 1. So the market stays competitive, and we try to find the right balance between volume and value there. And that’s the answer, and I think Charlie was very clear. We think we will have a $170 million cash flow out of this business this year. And the underlying trends are all improving.

All-time high customer satisfaction now, company is doing very well with COVID. So in that sense, the next quarter you will see that. And on top of that we had a major simplification program launch that will kick in the coming quarters..

Thanks very much..

We’ll go next to Christian Fangmann with HSBC..

Yeah. Hi, guys. Quick one.

I was not reading anything in the press release? Is there actually a break fee agreed, and then how about the brands? What are you planning to use in terms of – are we seeing something similar like at VodafoneZiggo?.

No, no disclosure on the brands. This is – it’s too early to have any discussions about that or even any agreements about that. So the brands will be determined down the road, when companies actually do come together and there’s a management team and we can have a thoughtful conversation about it, so business as usual for now and no update on brand.

I’ll simply say, we think both brands are really strong and complimentary. And that’s a good thing going into it. No break fee disclosed, and no break fee agreed..

Okay. That’s very clear. Thanks..

Yeah..

We’ll go next to Steve Malcolm with Redburn..

Thanks, guys. Good afternoon and Good morning. I’ll go – give me answer one-to-one, that’s fine. Just going back to the contractual situation. Can you just sort of shed me light on any MAC clauses in there? I mean, obviously, you’re talking about backward looking leverage and tends to expect UK, yes, down this year.

If combined EBITDA were 10%, 20% lower and leverage is in the mid-5.5%. Do you have like surface to go back and look at the overall debt in the JV, when it closes. And maybe just a quick one on the contractual position of your major content providers in the UK, BT and Sky.

I take the point that your sports revenues are zero margin, but that doesn’t mean that couldn’t be negative margin, if you’re not collecting revenues, you have to pay for them. So are you able to get relief on those sports right? While you’re not filling your customers? Maybe any help on that, that would be helpful, would be great. Thank you..

Okay. Yeah, these can go to the sports issues, your answer is yes. I think that the agreement or the release, I think, it was clear. The expectation is that we’ll have leverage in 4 to 5 times range, which will be closer to the high end of that range.

When we close and we expect that to be the case the market, today, it’s not necessarily the ideal moment to get all of the financing lined up. Normally, we would announce and conclude all the financing before even signing a transaction.

But we felt like to be – to optimize cost capital in the optimized structure, there’s no reason to do it all right now. But the gap of what remains is quite small. I think, Charlie, it’s only a couple billion pounds really that isn’t yet raised or ready to be transferred over, I think that’s the more or less. So at best, the number more or less.

So there’s not – the financing condition is not a particularly important on mobile, at this stage.

Lutz, you want to address the sports issue?.

Yes. On the spot issue, so we have been following exactly what client and BT has offered their customer. So simply pause the sport contract packages if the customer wants you to, and therefore we are also in a position with those not to pay for those customers just decided to pause their packages with us.

And therefore, that is not margin neutral to us..

Okay. So you are able to – yeah, BT and Sky have agree for you not to pay the wholesale cost for that period of time..

Exactly. I mean, we – obviously, you have to come to an agreement and we are in the middle of that, but that as we understand. We got this 4%. And also when you read our contract, it’s pretty much like that..

Okay. I’m sorry.

If I just come back to the first question, and if EBITDA were significantly lower, is that $18 billion of debt? Or would you review it at that point?.

Well, I think the partners can always agreed to review it. Obviously, we reserve that option. But I think I don’t believe in Charlie jump in here, right. We don’t see any impediments to achieving that level of debt between now and closing, which is one that would likely occur. It’s probably on the shorter end of that.

Charlie, do you want to go with that?.

And Steve, we’ve gone through what’s called [Technical Difficulty] his team and Telefonica. So we’re pretty comfortable that we have built into the full cost very significant. We pursue very kind of resilient businesses, a bit [Technical Difficulty] have done, it. It’s still trading on pretty well. So I’m very, very confident.

And this get the remaining couple of billion done, remember, the debt we have today are on created assets, we come across [indiscernible]..

I’m not questioning that you can get the debt.

I’m just questioning whether it’s the right level of debt as EBITDA was a lot lower?.

Steve, one thing I would say that expenses are very, very [Technical Difficulty] which is I think as Mike indicated, there might be a little conservative. Like gives a lot more creditworthiness to work as combined than just 2 stand like companies.

So we’ll see but I think [Technical Difficulty] and we have to find out based on what we know today, I think..

Okay. Thanks a lot, guys..

We’ll go next to James Ratzer with New Street Research..

Yes. Thank you very much, everybody. And my continued congrats on the deal. I think the question I had today probably more for Lutz, actually, just on the UK performance, which looked pretty encouraging this quarter. I was just interested in kind of 2 specific areas.

I mean, one, with all the extra home working going on, are you seeing signs that customers are actually upgrading their broadband packages as a result, and how supportive is that to your ARPU trend? And secondly, I mean, to what extent have you been benefiting, we simply from being able to do extra customer installs, as I understand open reach has been more limited in being able to do that.

How much of a boost is that providing to the current numbers? Thank you..

Yeah. So on the home working, I mean, in general 95% of our customers have 100 MB speed or more, right. As Mike said earlier on our average speed is 140 meg. So therefore, our customers do operate already on a very – our consumer customers to operate on an already on its very high speed.

And so therefore, we don’t see additional demand on top of that currency and the consumer space. On the B2B space, we see that we have further demand, higher speed packages, working from home packages for some of our customers. So that is encouraging. And in terms of net ads, you’re right, I would say, currently we are net benefiter.

So what do I mean that our sales are still at 80%. And it’s only online, but it’s remarkable. It’s obviously a more connectivity focus. So less demand on video, more on broadband, fixed broadband. And also our churn is restored now. And I think this is because of 2 things. One, simply you don’t want to change the system, while you’re so reliant on it.

And second, obviously, in the market, you cannot be assured if it’s a manual install, with competition that you get actually installed, why we keep on doing the manual install as well. So therefore, you’re right, currently, we are growing a bit our customer base because of that. But as you said also Q1, we kept the customer base platform.

So we cannot count our strategy just on the weakness of a competitor. So we can expect from us further initiatives to keep or grow our customer base..

Great. Thank you..

We’ll go next to Matthew Harrigan with Benchmark..

Thank you. I realized that over the top this question is, I think you did the right thing from a derisking and liquidity enhancement advantage point in this environment. But as an extension of the Robert Grindle question. I mean, you and John alone really have the opportunity to kind of be the ultimate, I guess, Angle, Cable Cowboys.

If you had turned around and bought all of O2, and equally have the financial wherewithal to do that £12.7 billion enterprise value and now get seen £6.7 billion in synergies over a 5-year time.

And so really wanted to get Machiavelli as this develops over time, he really would have had some opportunities for some very accretive stock buybacks, for obvious reasons.

Is that something you ever would have looked at? I mean, you wouldn’t have less complexity, I guess, in terms of financial engineering, but probably an inordinate amount of risk in this COVID-19 environment. And I realized that sort of really over the top question, but I thought I’d run it by you, nonetheless..

Well, Matt, I mean, you would know, we’re looking at all options and all alternatives. And generally we land on the one we think is the most accretive and create the most value, and this we believe is the one. So every market is different, every set of opportunities is different. And generally speaking, we’re – we never take anything off the table.

We’re always looking at what’s in front of us. But in this case, we believe this is the right outcome. That’s what I’ll say..

Right, I think that’s right and congratulations..

Okay, thanks. Now, we’re 10 after here. So, I guess, Rick – operator, we’ll take one or two more and then let people get back to their day, if there are one at the moment..

Okay. We’ll go next to Ulrich Rathe with Jefferies..

Yeah. Thanks very much. Mike, highlighted on footprint expansion, your and Telefónica share excitement about expanding that.

Could you comment on the capacity to pull that off during a period of probably quite large scale merger integration, at the same time embarking on accelerated footprint expansion potentially? I realize even after unplanned, but how do you look at the title capacity to pull all these things together at the same time? Thank you..

Yeah. It’s a good question. And it will be something that we factor in. We wouldn’t ever make strategic decisions that impact our ability to execute synergies or integrate the businesses. On the other hand, we’re already out there today, every day, building, extending plan in the Street.

So if we were able to do it or see our way clear to doing it, as a standalone company, there’s nothing about being a larger, more integrated company that should change that materially. But it’s the right question.

It’s a process of making sure you’re prioritizing where you spend your time and where you have your resources focused, but as we lay that out on the page, we’ll make that determination.

But I don’t see anything off the top in which you can comment that would somehow preclude us from having the wherewithal or the resources or the will to go ahead and continue looking at a broader network expansion if it makes. And you can always – there’s lots of ways of structuring it and financing it as well.

So I think it’s the right thing to think about. But on the other hand, there’s nothing in my mind, that says, it’s not it’s not doable. We’ll get there when we get there..

All right, that’s helpful..

I think that to add to that..

How about timing though, is – oh, sorry. Go ahead..

Well, I can get some of flavor to that. I think what we have done now is we have put really all network extension, so from consumer from B2B from wholesale into the Lightning unit. And they are accelerating the network extension. I mean, we have just announced the beginning of the week that we will mobile backhaul 3,000 5G sites from 3.

So therefore, we have secured vendors, for an acceleration in rollout, like we’ve also close a couple of [LFSN deal] [ph]. So therefore, the machine is growing. And the machine will run also quite independently. So therefore, it’s not so much impacted by the complexity of an integration..

Got it. Thank you, guys. Thank you..

And we will take our last question from Sam McHugh from Exane..

Morning, guys. Morning, guys. Just sticking to fiber in the UK, following BT’s announcement today, do you see any kind of strategic need to move a bit faster on your own network expansion be in Project Lightning? I mean, just linked to that, I think by the end of this year, we need to implement gainer-led switching in the UK.

I’m not sure if that has any kind of positive implications or negative implications here. If you have any interesting thoughts, that would be great. Thanks very much..

Well, look, I think, BT will make the decisions that it needs to make in the context of its own financial picture. And I think they will build and we anticipate they will continue to roll out fiber and they should. So I don’t know that their announcements or commentary today changes anything really, more or less confirming what they anticipated.

And they should be leaning into this element of their business. And I think they’ll probably do that. So I don’t believe it changes it materially. And, Lutz, do you want to tackle the second question? I’m not sure I fully understood it or got all the details of it, but maybe you did..

I mean, what we are accelerating is fixed-mobile convergence, right, the more customers we have locked in is fixed or mobile, in the better position, we are to protect them from competition, right. So we are doing more speed for our customers now. More fixed-mobile convergence and network extension at the moment, the pace you know.

And we are looking for ways to accelerate that. And with all of that, I think we are operating on our plan. And I agree with Mike, I think we haven’t seen anything surprising or any acceleration from BT to a previous announcement..

Okay. And with that, we will let you get back to your day. Always appreciate you participating in these calls and your support. We’re excited about this deal that goes without saying, we are creating an FMC champions – a champion with incredible synergies, and needs great vote of confidence for us and for Telefónica in the UK.

So we’re excited to get it going. And I would just lastly say, stay well, stay healthy, stay safe, and we’ll speak to you soon..

Ladies and gentlemen, this concludes Liberty Global’s first quarter 2020 investor call. As a reminder, a replay of the call will be available in the Investor Relations section of Liberty Global’s website. There you can also find a copy of today’s presentation materials..