Mike Fries - Chief Executive Officer Betzalel Kenigsztein - President and Chief Executive Officer of LiLAC John Reid - Chief Executive Officer of Cable & Wireless Chris Noyes - Chief Financial Officer of LiLAC.

Matthew Harrigan - Wunderlich Securities Soomit Datta - New Street Research David Joyce - Evercore ISI Kevin Roe - Roe Equity Research Jeff Wlodarczak - Pivotal Research Group Amy Yong - Macquarie Julio Arciniegas - RBC Capital Markets.

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Liberty Global's First Quarter 2017 Investor Call for its LiLAC Group operations.

This call and the associated webcast are the property of Liberty Global, and any redistribution, retransmission or rebroadcast of this 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 materials can be found under the Investor Relations section of Liberty Global's website at www.libertyglobal.com. [Operator Instructions] As a reminder, this call is being recorded on this date, May 8, 2017. Page 2 of the slides details the company's safe harbor statements regarding forward-looking statements.

Today's presentation materials 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 from time to time in Liberty Global's filings with the Securities and Exchange Commission, including its most recently 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 in the conditions on which any such statement is based. I would now like to turn the call over to Mr. Mike Fries..

Thank you, operator, and welcome everybody to Part 2 of our results call where we'll focus on LiLAC, our Latin America and Caribbean business unit. I'm joined again by senior leadership in Denver, Europe and Miami. In particular, Betzalel Kenigsztein, President and CEO of LiLAC; John Reid, CEO of Cable & Wireless; and Chris Noyes, CFO of LiLAC.

Each of them will present in just a moment. I'm going to give a quick overview of the quarter. Betzalel will talk about our operations in Chile and Puerto Rico. John will cover Cable & Wireless, and Chris will close with the financials, and then we'll get to your questions.

We are talking from slides, so we hope you can get those, will certainly help you follow along here. And I'm starting on Slide 4, which provides some group highlights.

I think it's firstly important to point out that we had another great quarter from our businesses in Chile and Puerto Rico, which together represent about 40% of LiLAC revenue, while Cable & Wireless is showing signs of stabilization as we make progress, changing up the team, investing in growth and executing on our synergy plans.

Q1 saw strong RGU growth across the group, with 81,000 positive net adds, including mobile, now compared to a loss of 75,000 a year ago. Broadband net adds were 39,000 compared to 34,000 last year, so that's a 15% uptick.

While mobile net adds of 39,000 compared to a loss of 106,000 last year, so a big turnaround in mobile, essentially all of it coming from Cable & Wireless. OCF results were mixed, and Chile and Puerto Rico delivered double-digit OCF growth, as I just alluded to.

While Cable & Wireless, as we foreshadowed, had a tough comparable period since calendar Q1 last year was we believe somewhat inflated now prior to closing the deal, and Chris will lay that out. And again, we're seeing signs of stabilization in Cable & Wireless, and are confident we can get the business to where it needs to be.

Part of that story is the synergy plan that's underway, which is on track and still forecasts $150 million of synergies by 2020 as we bring our scale and best practices to LiLAC. As I indicated, we are investing for growth across the business. We've got new build and upgrade programs underway across B2B, consumer fixed and the mobile business.

And I'm really encouraged by the talent we're attracting to LiLAC and Cable & Wireless, much of it from our European operations. And then lastly, we are preparing for a hard spin of LiLAC towards the end of this year. That's a right move for strategic and financial reasons, and we're on our way.

Slide 5 lays out some of the bigger picture just to continue to set the scene for new and current investors alike. The first point to make is that LiLAC represents a highly diversified set of operations across a region that we believe will experience tremendous growth over the next 5 to 10 years.

We're not the biggest operator there, but with 5 million fixed RGUs, 4 million mobile subs, 3.6 billion of annual revenue and market-leading positions across 20 countries, we're in a great position to grow, expand, and consolidate. The chart on the left-hand side of the slide lays out revenue by country and by product.

You'll see geographically at Chile and Panama, two investment-grade countries, are our largest markets and together represent over 40% of revenue. The balance spread across the Caribbean, about 17 markets, where we're typically Number 1 and Number 2 in the fixed broadband and mobile business.

And you can also see that no single product dominates this business, with video, broadband and mobile each contributing about 20% of revenue, and the balance coming from B2B and the subsea fiber business as well as fixed voice.

Also important to point out that we have limited currency risk versus our regional peers, with the majority of our revenue in dollar-based economies and nearly all of our debt hedged across the platform. With that strong foundation, we see a number of opportunities to drive value creation here.

First, we have a tremendous opportunity to grow our customer base, capturing both organic growth and market share with better, faster products in most of our markets. Second, we have a huge opportunity to leverage scale benefits throughout the organization.

In LiLAC, we now have a group with sufficient scale to drive synergies and cost benefits within the region, and that's part of what will be captured in the $150 million in synergies. And we continue to benefit both groups by sharing best practices in treasury, M&A, technology and products across Europe and LiLAC.

And lastly, we have a coherent strategic roadmap in place. We have put a lot of effort into the foundational work that's required in things like T&I and customer experience, and we're going to see the benefits of that as we move forward. Our buyback program continues to progress with $40 million of $300 million spent through the end of March.

And we're always looking for opportunities to grow the group inorganically through acquisitions in what remains, I'm sure you know, a highly fragmented region. I'll just point out that we are carefully evaluating a large pipeline of deal flow.

But I want to remind you, our approach is to be very deliberate and focused, squarely focused on relative values and only on accretive opportunities. So to conclude, we're hard at work building the foundations for a business that we expect to be a consistent grower in the medium term.

We're leveraging greater scale over time, and we're generating strong cash returns for shareholders. With that, I'll hand it over to Betzalel who will update you on our businesses in Chile and Puerto Rico, and then we'll get to your questions at the end.

Betzalel?.

Thank you, Mike. I will now update you on the progress we have made in Chile and Puerto Rico during the first quarter.

Before I dive into the markets, I'd like to provide an update on progress with operational initiatives that we have started across LiLAC, which should benefit us in the medium term and drive some of the synergies Mike mentioned in his introduction.

First, we are centralizing our procurement functions, enabling us to reduce our cost by leveraging our scale and reducing our vendor counts. With respect to scale, we are in the process of outsourcing areas such as network and technical activities on a regional basis, resulting in better quality of service, while managing the overall cost down.

The last point to mention is that we keep focusing on sharing best practices across LiLAC, and we are seeing benefit of this already reflected in cost reduction, while improving customer experience and commercial results. Moving to Slide 6 and VTR, our Chilean business, which represent approximately 25% of LiLAC revenue.

We had a strong start to the year, adding 24,000 new customers, 25,000 fixed-line RGUs and continue to build our mobile base where we have now added a total of 50,000 postpaid subscribers over the past 12 months. We pride ourselves in delivering the fastest broadband speeds and providing best service quality in the country.

This begins with the strength of our HFC network, which passes 2.8 million homes on a two-way basis at the end of Q1 and then culminating our leading customer proposition, including a rich HD video offering as part of our attractive bundles.

An example of how we deliver differentiated service in the home is our advanced WiFi connected box that are widely utilized by Liberty Global in Europe and by LiLAC in Puerto Rico, and soon to be at CWC. At the end of Q1, we had deployed about 200,000 of these boxes at VTR, representing good progress from just over 100,000 at the end of Q4.

To conclude on the fixed side of VTR business, we had a good track record of increasing prices, and you'll see part of this in the higher ARPU we have reported year-over-year, following a 1% price rise in January.

As you can see, our fixed business in Chile has been performing strongly for some time, and here we have an example of sharing best practices, which I mentioned earlier, where members of our Chilean commercial team have used their experience to support the creation and rollout of the go-to-market strategy for our Master fixed bundle in Cable & Wireless Panama, where we are starting to see some good traction.

Moving to mobile. As I mentioned, we have seen a continuation of good momentum adding new prepaid customers in the quarter. With only 7% year-to-date of our fixed customers taking a mobile product from us at the end of Q1, there's clearly much more potential here for growth.

Last, for our product suite in Chile, we have continued to push our B2B and, in particular, our SOHO product where we offer superior speed and dedicated 24/7 support. We now have a base of 37,000 subscribers built over the last 12 months from a standing start. In terms of our footprint, we added or upgraded nearly 50,000 homes in Q1.

So we have had a very good start to the year at VTR and we aim to keep this momentum going. On Slide 7, we will now look at Puerto Rico in more depth.

Liberty Cablevision saw another positive quarter with 7,000 RGUs additions, driven by broadband growth across our leading network, which offers speeds of up to 400 megabit per second and our main bundles featuring a speed of 60 megabit per second. Given the challenging macro backdrop in Puerto Rico, this was a particular good performance.

However, we will continue to monitor developments closely and remain nimble so we can react as needed to any changes in the operating environment. Moving back to our Q1 performance.

In our Video business subscribers were relatively stable as take-up of the U-Pick bundles that we launched in Q3 last year partly offset churn resulting from macro headwinds. As with our other LiLAC businesses, we manage our value proposition closely.

And on February 1, we increased prices by an average of 3% to 4%, driving improved customers ARPU without a significant increase in churn. Our cost base also continues to be a focus, and we reduced direct cost year-over-year through changes in our content mix as we removed some channels with low viewership levels.

On the fixed residential side of the business, as we have done in Chile, we are rolling out Connect Boxes in Puerto Rico and now have a total of 70,000 deployed, nearly double the number that we had at the end of Q4. I have talked about our focus on B2B previously and this continues to drive top line growth for Liberty Puerto Rico.

In Q1, we saw strong double-digit revenue growth in B2B and anticipate this will become relevant as we combine our product offering with Cable & Wireless expertise in this area, another example of sharing best practice across LiLAC.

Finishing with our network, we continue to provide the fastest speed in the island, passing 1.1 million homes with two-way HFC technology, and we are increasing this footprint in 2017. I'll now hand over to John who will run through CWC performance..

Thank you, Betzalel, and hello, everyone. Q1 was a challenging quarter, both in terms of our underlying performance and in particular, given the very difficult year-over-year OCF comparison, which Chris will address later in the presentation.

I am confident, however, that we have and continue to make the right moves to transform the business and position ourselves for sustainable growth. To expand on this, first, we're seeing some encouraging progress with our fixed service offerings across the region.

We are actually overhauling our entire operating model, given the heightened competitive landscape in a number of key markets. To this end, as Betzalel commented, we are leveraging LiLAC's and the broader Liberty Group's expertise in generating synergies.

We're also revamping our customer value propositions, driving service improvements and transforming our go-to-market approach, all with the aim of first stabilizing and then growing our customer base. Our broadband NPS overall rose 8 points, and our video NPS rose 2 points in the quarter as these initiatives gained traction.

As noted previously, fixed services are one of the largest areas of opportunity for C&W, given the company's historic lack of focus in this area. While it's early days, our quarter-on-quarter growth in fixed net adds is encouraging. And, in fact, in Q1, we saw our best quarter of broadband additions as a Liberty company.

Panama's success with its Master offering was promising, with an upward trend in customer additions, culminating in March where we added nearly 50% more customers than the previous 3-month average.

Jamaica was another market where while we're still seeing some challenges in video, we have generated good momentum in broadband and voice adds as we continue penetration on wireless, an unmatched footprint. It was also encouraging that we posted our best quarter for video RGU growth in the Bahamas.

In the mobile segment, we saw a decline in revenue during the quarter, driven by the Bahamas, where, as expected, we saw year-over-year revenue 24% lower due to a new mobile competitor, as well as a fall in contractor rolling rates.

However, in Jamaica, we once again delivered double-digit growth in Q1 with price higher year-over-year, and we expect the launch of LTE in Barbados to help our performance in that market.

We saw a good net add growth in Panama, our largest mobile market, driven by Carnival there, and we're also seeing strong migrations to our LTE network with excellent ARPU uplift. Obviously, ARPU management is critical in mobile.

And to this end, we continue to innovate our product set, looking to drive greater convergence of our fixed and mobile assets. We experienced strong uptake of our FlowToGo video app in the Bahamas during Q1, using this value-added services as a retention tool for our mobile customers.

Late in the quarter, we launched a unique Flow Kids app, offering cartoon and video content, and we're also seeing a strong take-up of our award-winning Flow Lend app.

This service has, to date, provided prepaid top-up microloans to nearly 150,000 different customers, resulting in a 7% ARPU lift and 25% lower churn relative to subscribers that did not use the app. We will launch this service in the Bahamas in the second quarter, providing us with another competitive advantage in that market.

In B2B and wholesale, which includes our subsea networks business, we saw a steady performance in the quarter. And in Q2, we plan to introduce new suite of products to attack the highly attractive hospitality segment, including an advanced video product, as well as a managed WiFi service.

Finally, we are building for the future through a series of upgrade and expansion efforts of our fixed line networks in various markets. We delivered just over 50,000 new homes in Q1. On Slide 9, I will now cover some of the areas that we've been working on to establish a platform for long-term growth.

High performance starts with having the right team in place.

And to that end, I am pleased to confirm that we now have all of our key management positions filled, completing the transformation of the executive team with new appointments of a CFO, a Chief Commercial Officer and a General Counsel, with all of these new joiners from the wider Liberty Global family.

In addition to these roles, we've also announced several important leadership positions across our regional operations with new executives in key commercial and finance roles in Jamaica, Panama, Trinidad and Barbados, as well as in some of our other Caribbean markets. This new team is absolutely focused on getting us back to growth.

Of course, one of the levers that we can use is pricing. In the first quarter, we increased prices in several markets, including mobile in Barbados and in our fixed products in Jamaica.

Additional price increases are planned in several countries in the second and third quarters of 2017, and we expect this to help drive improved performance through the year. Beyond this, growth of fixed services, as I mentioned, represents a big opportunity for C&W.

We have a great runway to drive penetration in market share in Panama, but also in Jamaica and in the Bahamas. We are seeing good uptake of our fiber-to-the-home service, as well as the number of our smaller markets where we're increasing speeds and service quality.

Mobile remains the largest part of our business, and here growth is all about driving data consumption and revenue through upgraded networks, devices, applications and content.

On this last point, we've recently introduced richer bundles through including content from our FlowSports app to higher value data plans in Jamaica, enabling our mobile customers there who watch Premier League football, CARIFTA Athletics and Indian Premier League Cricket.

And we're excited about how initiatives such as these and, for example, our FlowToGo app, can drive relevance, consumption and spend. Given our leadership in fixed services and content, this represents an important competitive advantage and a point of differentiation.

Ultimately, C&W is a complex organization, given our geographic spread and long history, and the key to our success is transforming the business, driving speed to market and greater efficiencies.

We've made great strides during the past quarter, including a new operating model, which collapsed our B2B and customer operations into a single structure, new leadership, headcount savings targeting approximately 150 positions across the company and the creation of a transformation office, which will drive both commercial and broad operational improvements over the coming quarters and ensure that we're on track to achieve the synergy targets, as Mike mentioned earlier.

There's also a tremendous amount of work being done on broad foundational initiatives that will enhance the customer experience, drive NPS and increase lifetime customer value.

Examples include a new preventative maintenance program reducing truck hauls and outages, initial work on the predictive churn model and focused product development of our broadband video and mobile customer segments.

On that latter point, we are now fully merged into Liberty Global's product roadmap, and we're deploying the Connect Box with game-changing WiFi capability across our larger operations beginning in the second quarter.

All of these initiatives will ultimately drive customer responsiveness and was promising that our overall NPS rose by 2 points in the quarter.

To sum up, our objective is to transform C&W by improving the efficiency of our cost base but also establishing operating structure that will enable us to drive improved financial performance through better management of our business, as well as a more comprehensive commercial approach to create top line momentum.

While there is clearly much to do and when we do acknowledge it will take time, we have made good progress in Q1, including raising prices, reducing headcount and improving our go-to-market approach, which we expect to drive better performance going forward.

With that, I'll pass you to Chris, who will discuss LiLAC's financial performance for the first quarter..

first, revenue performance, whether onetime or not, explains a reasonable portion of the decline.

Second, the positive impact of onetime non-recurring items benefiting Q1 2016 OCF, including the $8 million vendor credit; third, the impact of higher programming cost in Q1 2017 relating to the Premier League, which we began incurring starting in Q3 last year; fourth, the negative impact in Q1 2017 from Hurricane Matthew and overall higher bad debt expense; and finally, lower network and marketing expense in the prior year period.

These items were partially offset by lower bonus costs in Q1 2017. To put our current quarter in context, the OCF result of $213 million was consistent with the average OCF over the last 3 quarters.

Looking ahead to the rest of the year, we anticipate improved OCF performance at CWC on the back of the operational steps that we have taken, including implementation of our efficiency plans. Turning to Slide 13, as Betzalel discussed, we had a strong start in both Chile and Puerto Rico.

These operations, comprising 37% of LiLAC's total revenue, delivered a combined 6% rebased revenue growth, with VTR at 7% and LCPR at 3%. In Chile, our fixed line results were driven by both ARPU and volume as we increased price, improved tier mix and added over 85,000 RGUs in just the last year alone.

Additionally, our fixed line performance was complemented with continued momentum in mobile where we passed 175,000 subscriber mark during the quarter, having added 13,000 subscribers in Q1.

In Puerto Rico, our top line performance reflects our best quarterly rebased growth since Q1 2016, led by subscriber and B2B growth and supported by price increases across our fixed portfolios.

As evident from the macroeconomic news last week, Puerto Rico remains a challenging business climate, but our management team, through smart bundling and innovative video offers, has been able to maintain market shares. Turning to OCF, we generated 11% rebased OCF growth for these combined operations, with VTR at 12% and LCPR at 10%.

Operating leverage in both businesses is coming through as we delivered year-over-year OCF margin increases of 170 basis points of VTR to 40% and 300 basis points at LCPR to 48%. Moving to the bottom left of the slide. We're confirming all of our full year LiLAC financial guidance targets.

Specifically, we continue to target approximately $1.5 billion of OCF, which implies higher quarterly OCF over the next three quarters.

Additionally, we expect our capital intensity to ramp through the rest of the year as we continue to target total property and equipment additions in the range of 21% to 23% of revenue, reflecting further new build and upgrade activity as well as investments in LTE coverage and in our video and broadband products.

And finally, we still expect limited free cash flow for 2017 with phasing heavily weighted towards the back end of the year, Q4 in particular. With that said, we remain laser-focused on improving our cash flow generation with better capital allocation and working capital management, and we're in the early days of implementing optimization strategies.

To sum it up on Slide 14. First, we saw another quarter of robust performances in Chile and Puerto Rico. Second, as John touched upon, we've taken a number of actions to improve operational performance of CWC and expect to show continued progress as we move through 2017.

And third, the execution of our synergy plan's in full swing and together with our investment in new build and upgrades, we're well positioned to deliver our 2017 full-year financial guidance targets. With that, operator, we are ready to open up for questions..

[Operator Instructions] And we'll take our first question from Matthew Harrigan with Wunderlich Securities..

Thank you. I had a couple of questions, just kind of ultimate high-level question. There's talk that - obviously, you don't offer it in Mexico, but there's talk that Obrador might be the best next president and it could be indicative of some political changes throughout the region. I mean, you've always been very careful with markets like Argentina.

You sold back in the old Liberty International days, but is there anything that would give you pause, politically, including how there'd be ramifications for the M&A side? And then secondly, what are you learning from the Bahamas' fiber-to-the-home experience in terms of cost and in terms of prospectively even for new services over a period of time? Thank you..

Thanks Matt, I'll take the first one, and then John, you might pick up on the Bahamas' fiber-to-the-home experience. You correctly pointed out that we have studiously avoided markets that represent significant macro political risks based on history, based on just how we view investment climate.

And the markets we're in today we think are good ones for the most part, they're almost all good ones. As I mentioned, in my remarks, the vast majority of our markets are either dollarized or fully hedged in our balance sheet so we're not taking huge macroeconomic risk when it comes to the balance sheet or the business as a whole.

Not an expert in Mexican politics, I’m not sure what will go down there, but the markets we're in feel right to us. And as we look at the M&A pipeline, we're clearly bringing that same discipline, that same sort of market focus to the transactions and the geographies that we're evaluating. So, I think it's going to be a strategy of ours.

It wouldn't be surprising that to focus in geographies that provide synergies either because they're regionally contiguous or immediate opportunity, again, we know how to execute in those sort of opportunities but certainly, stability, if we can achieve that and that's the underlying goal.

John, you want to talk about fiber-to-the-home in the Bahamas? You might be on mute, John. All right, Betzalel? Well, there you go.

John?.

Mike, maybe John has a problem with connection. In Bahamas, we did around 30,000 homes, fiber-to-the-home. We get - we are seeing some good traction on sales and mainly selling a triple-play that is having a very high speed and a good video offering.

So it's too early to say but some good first signs of development of our fixed proposition in the Bahamas..

Thank you..

And we'll take our next question from Soomit Datta with New Street Research..

Question on wireless, please. Just trying to get a sense as to how that product category will play going forwards.

And Panama looked a lot better this quarter, but Jamaica, I see there was a reference in the press release to losing 10,000 subs, I think, and some elevated promotional activity in Jamaica, which has been your best wireless market for a while now.

And in the Bahamas, I was interested in getting a sense as to how much revenue share you think you may have lost so far to Cable Bahamas and how you think that plays over the coming quarters. And trying to pull it all together, is wireless ultimately going to get better sooner or is it going to take a little bit longer to play out? Thank you..

Okay. John, are you back on? Apparently not.

Betzalel, you want to take that?.

Yes. We can start with Panama. I think, in Panama, there is several actions that we are taking in order to stabilize. We had a difficult Q last year, especially on the prepaid mobile, and a lot of focus is now in Panama in order to reduce churn and manage the prepaid customer base better.

Also, we are seeing some traction on the fixed with a new bundle that was launched in Panama. And both combined, I think that they are delivering beginning of showing the right stabilization and growth that we expected. In Bahamas, I think that it's as expected. It's not an easy situation where we were the only player.

Now we have Cable Bahamas offering mobile. But with quite aggressive marketing effort and the right propositions in the market, we are still holding the fort. Of course, there is an ARPU effect on managing that RGU count. It's early to say. So far, the development is as we expected.

We knew that there's going to be a drop, but it's tracking closely to our expectations.

In Jamaica, it's a market that we are now struggling on maintaining our growth in mobile and at the same time to manage our fixed base, but we believe that we have the right price increase and new propositions in the market that will stabilize the Jamaican situation..

Thank you. Just a quick follow-up on the Bahamas.

Is most of the downside, of the 24% down we saw, is that roaming mainly or are we beginning to see the competitive threat as part of that? You mentioned ARPU was down a bit, but is it possible to split the two components?.

I think part of that is as John said on the hurricane. The Bahamas is still struggling, has been several quarters with costs related to the hurricane.

John, are you back on?.

Yes. I'm sorry, I lost connection here. Good to know I'm not in one of the countries in which we provide service though. That's a mix of roaming, contracted rates, of course, that we entered into new contracts, long-term contracts a couple of years ago to secure that relationship.

And with the Live now getting up to in between 15% and 20%, we think of market share, so pretty much on track to what we thought they would - what they would achieve after the first 5 or 6 months.

And as Mike indicated, we still have some hurricane overhang on, unfortunately, these developed markets have certainly taken a little time to get back on stream. So it's a mixture of all three, but certainly not as much on the roaming..

Okay, that’s great. Thank you..

And we'll take our next question from David Joyce with Evercore ISI..

Thank you. You heard some strong OCF results in VTR and Puerto Rico. I was wondering if there are any synergies that are showing there as a result of the broader CWC deal.

And just when should we then think of further synergies coming through? And if you could also talk about the B2B seasonality, I know it can be kind of lumpy, but was there any - I know you did mention the proportion of the B2B revenue in the quarter, but is there anything we should think about as the year goes through? Thank you..

Yes. Betzalel, you want to hit the synergy point? I'll tell you, just - from experience these things will take time to be implemented. I think that number of 150 was half CapEx, half OpEx. So certainly going to take some time, but Betzalel wants to provide you some color..

Yes. Definitely, as we expected, the synergy plan is taking off. It takes time. The first quarter is the beginning.

So not a massive number reflected in the Q1 results, especially in Chile and Puerto Rico, but we see some of the initiatives that we start rolling now that will have impact that will be visible in Q2 and Q3 and Q4, especially as we - as I mentioned before, we are visualizing some outsourcing of network activities.

We have some good traction on improving our content negotiations. Procurement is bringing results all over, mainly in Cable & Wireless, but some of it also in Chile and Puerto Rico..

John, do you want to hit the second question?.

Sorry, Mike, that broke up on my end. Well, I heard of the VTR question. Apologies, folks I have had a bad connection..

Yes.

The B2B analysis?.

Could you repeat the question David?.

Yes, so you can provide some more color on that. How that should phase through the year, granted it's - it can be fairly lumpy..

Yes.

It's largely a CWC question on B2B, John?.

Well, yes. It is lumpy and it comes in certainly - it definitely comes in various quarters at various contract term likes.

What we, of course - the objective for us is to standardize and sort of regularize the recurring revenue so as not to see that lumpiness impact the performance, some of which kind of tends to go longer cycles and, obviously, you have quarters sometimes.

So it will continue to sort of - I mean, we've got great opportunities in the year to achieve our managed services, certainly targets for 2017. And as a matter of fact, we think we'll actually have a great year-over-year result.

That being said, some of it does kind of slip from quarter-to-quarter, so our focused it is much on the recurring side of our business, as it is on the sort of one-time or lumpy B2B or complicated IT solutions or government revenue for that matter..

Mike, maybe, one word to add. When you look at the different type of B2B services that we're offering in Chile and Puerto Rico, is mainly SOHO and the SME, so it's much, much more stable. Given why there's a lot of big deals with the government, that seasonality - there is a significant effect of seasonality there.

There is more on volatility on the timing and the phasing, but those - at the end of those did come through, but sometimes they are a bit delayed versus the previous quarter..

Yes, I think, it's also fair to say that in Chile and Puerto Rico, the focus is squarely on SOHO, and I think revenue growth in those two markets is 20%, 30%, 40%. So we have had good revenue growth. Similar to the European model of those two markets, Cable & Wireless has got a bigger managed services, wholesale, core subsea business.

And I think if you take Panama out of the results, growth was closer to 4%, I believe..

Absolutely right Mike..

Great. Thank you..

And we'll take our next question from Kevin Roe with Roe Equity Research..

Thank you. John, you highlighted many CWC initiatives and trends to help drive it to growth. And Chris, in your prepared remarks, you mentioned OCF at CWC will improve for the remainder of the year.

I'd like you to bridge those two comments and maybe touch on the primary drivers of that OCF improvement for the remainder of the year? I know we've got the Bahamas drag easing, there is some seasonality, the project-related lumpiness. Maybe if you could prioritize that that would be helpful. And my follow-up question is on Puerto Rico, if I may.

ARPU was up 2% in the quarter, which was a pretty material reversal of some recent declines.

Is this positive inflection point a new trend? Is it going to look more like Chile's ARPU progression going forward? How should we think about that?.

Okay. I'll kick it off on Cable & Wireless. And Kevin, you're certainly familiar with the company and the transformation project or, I guess the initiatives that we've undertaken.

So where we see the - I guess, some of the start this, get some traction is, one is on, obviously, on the urban network activity, and that starts with the new build in Panama or upgrade in Panama, a new build, Greenfield opportunities in Jamaica, smaller extensions through the region and launching new services over those new platforms.

So Panama, obviously, is a big focus for us, they're our biggest asset. So converting those one-way HFC customers to two-way on that plant, extending out the network to a Greenfield part of the country, which we think we'll, obviously, have some great success at.

And Jamaica, Jamaica's footprint is very wide compared to our competitors, so we have an HFC plant, and we also have a pretty robust upgraded DSL plant that we've been focusing on. So we're with our plan to launch video and high-speed Internet over that network as well. So I think, certainly, from a new build expansion perspective, you get that.

Obviously, all the other network upgrade work that's been done throughout the region is sort of stabilizing the network either wireless or wire line. And obviously, as well as we upgrade these networks, we launched new products, we've got pricing as a big part of our plan for the rest of the year as well.

We have - using some pricing in some markets in the first quarter. We've actually kicked off the second quarter with some new pricing in some markets, and the plan there, obviously, is to continue that.

But to do that as the networks are upgraded or new products come to market such as the new WiFi Connect Box that we're introducing in some larger markets throughout the course of the year.

So, it really is a plan of stabilizing the network, upgrading the network, expanding the network using pricing and also bringing new products to bear in the region.

And of course, that's really the consumer business, the B2B business benefits from that by just upgrading and expanding the network and expanding our footprint, as well for that part of our business.

And network seems to be - it's steady as - I guess, it's a steady ship, pardon the pun, and we expect to see it hit its objectives throughout the course of the year and continue the successes we've had for the past 10 years or 12 years. So, I think, really, the focus for us, as we all know in the pressure force, is on the consumer business.

And [indiscernible] I think the strategy is going to take hold in the second, third and fourth quarters..

John, I think, you've also got, of course, headcount reductions and the benefits from the broader synergy plan taking effect there as well for OCF..

Absolutely..

Yes. In Puerto Rico, we did - in the beginning of the year, we did a 3% to 4% price increase that was well-accepted in the market with a limited churn, lower than what we usually have -- we get from a 3%, 4%.

And that was mainly through a value-added that we had in the markets, which still increases leveraging the superiority that we have on the network. So when we combined the price increase with adding value, we have a combination of the direct price increase and upgrades of the packages to higher fee. So it's working well in Puerto Rico.

The other element that was helping a lot is the U.K. video product that we offered, where eventually what happened people are taking the bundle with, maybe, lower ARPU related to video, but they're transferring it into higher ARPU in broadband. So, the overall combination is higher ARPU per customer..

That’s helpful. Thank you..

And we'll take our next question from Jeff Wlodarczak with Pivotal Research Group..

Hello again. There have been a number of reports, your primary competitor in the Caribbean, Digicel, is financially distressed having issues but relatively high leverage levels. As I understand, they're firing 25% of their employees.

Have you seen any signs of - in their markets that you compete with them - of lessening competitive pressure, slowing build outs and/or focus on price hikes? Then I've got a follow-up..

It’s Mike here Jeff, we've got to be thoughtful about how we speak about competitors, of course. I think Dennis O'Briant and his team are quite effective and quite aggressive. So while we are Number 1 and/or Number 2 in pretty much every market we operate in, we try to take a cooperative approach to regulatory and other matters.

We just brought some Champions League sports rights together with them. Having said that, of course, they have a different debt profile than we do. That's for sure. And while we are fully hedged, and we think, in many respects, protected on the currency front that they have not yet or not built a capital structure, that's sensitive to those matters.

What they might be doing on synergies, we're not going to speak to. But John, you're welcome to talk about any local impacts that might be having in terms of their competitive posture, which I can guarantee, remains aggressive..

Yes, in terms of their actual build-out, I think they've pretty much done what they planned to do, certainly in the large markets of Barbados, Jamaica and Trinidad. I think they've - publicly, they've indicated that they've pretty much done their build-out, which, obviously, their network is not as large as ours.

But certainly, where they overlap with us, whether it's FTTH or HFC and in Trinidad and Jamaica. Now they are very competitive. They are rational, however. And so for the most part, their go-to-market strategy has been around sort of a discounted kind of first year or first - actually first quarter of service. The product is pretty much the same.

I think when you look at the product set whether it's the video product or the broadband product, there's always certain networks that you will have and the other guy doesn't have. It's normally out of choice, to be quite frank. And when it comes to the broadband speeds, we're kind of neck-and-neck.

So in terms of competitive, it was the new guy on the block and we were the incumbent for many years. We knew we were going to lose some share. The good news, of course, is that they had foresight to be rational. And at the same time, as I indicated, we're not seeing any additional build-out from what they did at the end of last year..

Fair enough. Thank you.

And then broadly speaking, do you anticipate generating material free cash flow over the next 5 years? Or you are more likely to drive that free cash flow in upgrading your network, expanding your builds, RGUs?.

Well it's a good question, Jeff. I think, today, our free cash flow profile is, as you know, relatively light, and that's partially because we are putting a lot of capital into new build and positioning ourselves for longer-term growth. But we certainly do expect, over time, as the capital intensity declines to generate more free cash.

We're not providing any free cash flow guidance, Chris, correct me if I'm wrong. But obviously, our internal profile shows improving free cash flow over time..

Yes. 2017, we did indicate limited free cash flow. And as we look out, clearly, as Mike was mentioning, 2017 is a big investment year for us across the overall group with Chile, Puerto Rico and CWC on the new build and upgrade front.

Certainly moving out, I think after 2017, we'll certainly be through a good chunk of some of our key builds in markets like Jamaica and Panama, and we'll be focused on free cash flow generation as we move out, but we're not going to give any guidance at this point in terms of development beyond 2017..

Thanks guys..

And we'll take our next question from Amy Yong with Macquarie..

Thanks. Two questions. So first on VTR, mobile penetration has been growing nicely, but still kind of slow.

What do you think needs to get done to push that penetration rate higher? And ultimately, where do you think it could land? And then I guess, my second question is on a hard spin? What are the next steps needed to accomplish a hard spin? And what are some of the options you think above M&A, I guess including M&A, that can open up once that's done?.

I'll take the spin question, and Betzalel, you can prepare the VTR question. I think the spin - there's a couple of questions here. First of all, it's a process and I think I've talked about it before. It's a pretty regular process.

It doesn't look different than most spins, meaning that we're getting all of our pro forma financials, historical financials sorted through, drafting a registration statement, clarifying, importantly, the legal and operating relationship between Liberty and LiLAC post-spin, getting all the tax and jurisdiction issues sorted.

And I think the punch line is we're making good, really good progress on all of those matters. But we still expect to be filing something with the SEC, mid or late this summer. And hopefully, by year end, we are - it's really a split off, technically not a spin-off, but splitting off the LiLAC business. And the benefits, I think, are substantial.

One, it will be, in our view, a healthy and valuable currency that we can use to go out and look at strategic expansion where it makes sense. It should trade better, we think, with greater focus, and investor focus and management focus.

And it's important, I think, for both sets of shareholders to know that we've created, as we said we would, two different capital structures, two different currencies, two different investment opportunities with different risk and return profiles.

There will be - and I think this is an important point to make, we will retain some influence and co-ordination and collaboration between Europe and Latin America. That makes total sense to us.

It doesn't make sense to completely cast away the one business or the other and not continue to take advantage of procurement benefits, programming acquisition benefits, technology and product innovation benefits, things of that nature.

So, I think we hope that the structure when finalized will still keep LiLAC in the broader family, if you will, so that it's getting all the benefits that become being part of a global MSO brings, but having, importantly, the independence, the capital structure, the strategic focus and the M&A focus to be independent.

On the M&A side, I can't speak specifically about anything, but they fall under three buckets in the markets in which we operate today.

Whether it's Cable & Wireless or others, there are opportunities to strengthen, solidify, build-out and increase scale in those markets or contiguous markets that we already operate in today, and those you can imagine are on the way.

If you look at the smaller businesses, smaller opportunities in Central America or South America that we think easily bolt-on to a business like LiLAC, those are also under review.

And then lastly, there are, and it wouldn't be surprising to anybody on the call, there are obviously some larger scale M&A opportunities, which, of course, we're also reviewing on a very preliminary basis, none of which are in any advanced stages whatsoever, primarily because we're not particularly interested in paying a premium when our stock trades where it does.

So we've got some work to do. And I think you're going to - as I said in my remarks, see us be very thoughtful, deliberate and focused on doing accretive deals. And so as those - as our business evolves, as the stock trades, as opportunities come up, you'll see us take advantage of those where they make sense and where they make sense financially.

Betzalel?.

Yes. On VTR and mobile, if you track back, WOM is a new player that is not new, entered the market 1.5 years ago with very aggressive offering. So if you look at the overall market, mobile market in Chile, it's not an easy one when we have Entel, a very strong player, Claro, Movistar and WOM that entered the market last year.

When WOM entered the market, there was a slowdown in our results. And our growth, we almost went to 0. Some operational and commercial activities on reshaping and focusing on our commercial operation, we are back on track on growth on our mobile customer base. Most of them is postpaid. In the last two quarters, most of them are SIM-only.

Yes, at the end of the day, only 7% of our customer base, it's about 180,000 subs that takes the service from us. It's small on the bigger picture, it's still a good contributor to our revenue growth month-to-month. I cannot share now any strategic changes in our approach in the coming quarters, but if there will be, we will definitely update you..

That’s very helpful. Thank you..

And we'll take our last question from Julio Arciniegas with RBC Capital Markets..

Yes, hello. Thanks for taking my question. My question is regarding the cable fiber deployment in the quarter. We have heard that basically deploying is a key angle in order to see subscriber growth. On Panama, of course, it's a market that is very relevant. However, I see that for example, in Panama, the new build this quarter has been 0.

Can you give me an update of how should I think about the deployment in Panama? Are you currently more focusing upgrading your current homes or you are - in the next quarter, we should see more new build in Panama? I mean, overall in cable and wireless footprint, what is the target of home passed of new build? Thank you..

John, you like to handle that?.

Yes, I'll take that one, Mike. Yes, you're absolutely right, Julio. In the first quarter, the priority is to, I guess, what I would say is to do the easy work, and that's to upgrade the one-way HFC network to two-way capabilities, and then the expansion work will continue. We actually started that upgrade work. It's about 285,000 homes.

We started that last year, and we're at the tail end of that. So as we complete that, we will also - actually, there will be a little bit of an overlap. We'll roll out the - sort of start expanding our network out as the middle of the year kind of gets a little bit closer.

But the priority was to focus on that one-way HFC plant because as well we have customers there who are underserved in terms of what products we're able to provide them. In terms of the homes passed, we had a target in terms of the total number of upgraded and rebuilded or expansion homes for the region.

And that's about 250,000 we've been using for our annual operating plan focus this year. So there is a component of that, that's Greenfield, and it is in couple of other countries, as well as in Panama and Jamaica as I indicated and also I think just a little bit in Trinidad and some smaller Caribbean countries.

Most of the work is upgrade, as you can imagine, with a company, with the history that we have and the amount of copper that we have in the ground, but the total upgrade and expansion plan for this year is we'll see 250,000 new homes get positioned for high-speed broadband and the advanced video services by the end of the year..

Maybe one point to add on the upgrade plan in Cable & Wireless is also moving the legacy copper ADSL to VDSL. That's also a significant part of the overall upgrade plan on top of the HFC one-way to two-way and on top of the new build that will be part of the plan..

Okay.

If I may follow-up, just in that beat, from the 250,000, can you give us some indication of how much is going to be [VDSL]?.

At the top of my head, probably not. I mean I think if I try to reflect on how many homes we have outside of Panama, most of the upgrade work will be VDSL upgrade from DSL. In Jamaica, it's all VDSL, and that's about 75,000 homes. In Trinidad, it's HFC. As Betzalel indicated, actually in Barbados, migrating customers from DSL to FTTH.

So it's a hodgepodge as you can imagine, with the number of countries that we have, but primarily outside of Panama, it's a DSL upgrade or migrate to an HFC or fiber-to-the home plan..

Okay. Thank you..

All right. Well, listen, thanks for joining us on our second LiLAC call. We'll continue these, of course. I think they're helpful, especially for those who are - who's been taking the time, which we appreciate, to understand the business opportunity. I would say, as I have in the past, it's early days still, but these are exciting times for LiLAC.

We're getting the management team formed, we're in the process of integrating and getting the synergies we have talked about. We're eyeballing and evaluating expansion opportunities very carefully.

And of course, we're preparing for the spin, all of that happening within the backdrop of a region that we know has fundamental organic growth and which we, in all of our markets, especially a handful of them that represents the vast majority of revenue, are starting to see the benefits of revenue and operating cash flow pickup.

So, we're excited about it. Hope you are, too, and we'll speak to you next quarter with results. Thanks very much, everybody..

Ladies and gentlemen, this concludes Liberty Global's First Quarter 2017 Investor Call. As a reminder, a replay of the call will be available in the Investor Relations section of Liberty Global's website at www.libertyglobal.com. There you can also find a copy of today's presentation materials..