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liberty global 98D59FD4-AEFE-4E07-94BE-1D6D7EDB882C_Q4_2008_Presentation_FINAL


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  • 1. Fiscal 2008 Investor Call February 24, 2009
  • 2. “Safe Harbor” Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: Forward-Looking Statements: The following slides contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including our expectations with respect to our 2009 outlook, our future growth pp prospects, including our continued ability to grow our operating cash flow and free cash flow, improve our operating cash flow , g y g p g ,p p g margins, expand our advanced services RGUs and increase our ARPU per customer, and our liquidity, including our ability to repay near-term debt amortizations, the performance of our currency hedges and our borrowing availability; our expectations with respect to the timing and impact of our roll-out of digital and broadband products and services; our insight and expectations regarding competitive and economic factors and regulatory initiatives in our markets; the impact of our M&A activity on our operations and financial performance; our expectations concerning future repurchases of our stock; and other information and statements that are not historical fact These forward-looking statements involve certain risks and fact. forward looking uncertainties that could cause actual results to differ materially from those expressed or implied by these statements. These risks and uncertainties include the continued use by subscribers and potential subscribers of the Company's services and willingness to upgrade to our more advanced offerings, our ability to meet challenges from competition and economic factors, the continued growth in services for digital television at a reasonable cost, the effects of changes in technology and regulation, our ability to achieve expected operational efficiencies and economies of scale, our ability to generate expected revenue and operating cash flow control capital expenditures as measured by percentage of revenue and achieve assumed flow, margins, our ability to access cash of our subsidiaries and the impact of our future financial performance, or market conditions generally, on the availability, terms and deployment of capital, as well as other factors detailed from time to time in the Company's filings with the Securities and Exchange Commission (“SEC”) including our most recently filed Form 10-K. These forward-looking statements speak only as of the date of this presentation. The Company expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in the Company's expectations with regard thereto or any change in events conditions or circumstances on which any such events, statement is based. Additional Information Relating to Defined Terms: Please refer to the Appendix at the end of this presentation, as well as the Company’s Press Release dated February 23, 2009 and SEC filings, for definitions of the following terms which may be used herein including: Rebased Growth, Operating Cash Flow (“OCF”), Free Cash Flow (“FCF”), FCF Conversion, Revenue Generating Units (“RGUs”), Average Revenue per Unit (“ARPU”), and OCF Margin, as well as GAAP reconciliations, where applicable. 2
  • 3. Agenda  2008 Highlights Hi hli ht  Financial Results Q&A 3
  • 4. 2008 Highlights Strong Organic Growth (1) Opportunistic M&A Activity  1.0 mm organic RGU net adds  Strategic consolidation in core markets  14% rebased OCF growth  1.4 mm RGUs acquired  330 bps increase in OCF margin  Tactical disposals completed or underway  82% Free Cash Flow growth Stable Balance Sheet & Liquidity Organic Growth  Appropriately leveraged  Hedged with long-term maturities (2)  ~$2 bn of liquidity available Capital M&A Structure  Over $2 bn in stock buybacks in 2008 (1) Please see Appendix for the definition and reconciliation of OCF and FCF, as well as information on organic additions. (2) Consists of our consolidated cash balance plus our aggregate unused borrowing capacity. 4
  • 5. Steady Subscriber Growth (1) Total Net Adds (RGUs) Video Net Loss 2008 = 1,048k 2008 = (235k) 302 284 Average 262k 249 214 (53) (54) Average (71) (57) (59k) Q1 '08 Q2 '08 Q3 '08 Q4 '08 Q1 '08 Q2 '08 Q3 '08 Q4 '08 Voice Net Adds Data Net Adds 2008 = 655k 2008 = 629k 182 177 170 0 168 166 Average Average 157k 164k 154 142 125 Q1 '08 Q2 '08 Q3 '08 Q4 '08 Q1 '08 Q2 '08 Q3 '08 Q4 '08 5 (1) Net adds refer to subscriber additions on an organic basis. Figures are shown in thousands.
  • 6. Digital is Moving the Needle DTV Highlights Digital Cable Subscribers 36% (1) RGUs (in millions) Penetration  5.1 mm subs  Record Q4 & FY ’08 5.1 25%  36% digital penetration 4.4 19% 4.0  DVRs driving growth gg 3.7 3.4 34 12% 3.1  Over 50% of base 2.8 2.6 takes DVR and/or HD 2.2 1.8  Meaningful digital 1.6 ARPU uplift 1.3 2006 2007 2008 (1) Digital Penetration is calculated by dividing digital cable RGUs by the total of digital and analog cable RGUs. 6
  • 7. Advanced Services Drive Growth Driving Key Operational Advanced Services(1) Performance(2) (Net Adds in 000s) 839 Average  6.4 mm bundled customers 678 700k 652 630 (up 18% YoY)  3 play customers up 27% YoY  ARPU per customer up 15% Q1 '08 Q2 '08 Q3 '08 Q4 '08 to $45.27  Regional ARPU’s strong:  Record year of 2.8 mm adds  UPC up 9%  Q4 up 28% vs. prior 3 qtr average  VTR up 8%  TNET up 7%  Record performances at UPC & TNET (1) Advanced Services include organic net additions in digital cable, DTH, broadband internet and telephony services. (2) Please refer to Appendix for ARPU per customer definition. For the consolidated ARPU per customer ($) and UPC’s ARPU per customer (Euros), no adjustment is made for FX. 7 Regional ARPUs refers to ARPU per customer.
  • 8. European Update Product Roadmap on Track Economic Impact Limited  Largely limited effects in 2008  Record digital adds in Q4 ‘08 08  Modest impact to date on sales,  DVR launched in all markets, VoD & churn & ARPU HD ramping  Watching CEE markets closely  3 0 broadband rollouts accelerating 3.0 b db d ll t l ti Regulatory Update Countries of Focus  Full-year rebased OCF growth of  EC decision re: OPTA in Netherlands 15% in NL & CH up 17% p  Access obligations technically effective  Romania poised for turnaround in mid-March  HU & AT continue to be WIP  But limited to no impact in 2009 ut ted o pact 009 8
  • 9. 2009 Operating Outlook Marketing the right products in diverse markets Economy Targeting 5 – 7% rebased OCF growth OCF Expect continued OCF margin expansion Efficiency Expect at least 25% free cash flow growth FCF Capital Maintaining liquidity for buybacks & acquisitions Allocation Another Solid Growth Year in 2009 9
  • 10. Agenda  2008 Highlights  Financial Results Q&A 10
  • 11. Three-Year Growth Trends Revenue OCF(1) ($mm) ($ ) ($mm) ($ ) $10,561 $4,533 $4 533 $9,003 $3,568 $6,484 $2,336 $2 336 2006 2007 2008 2006 2007 2008 11 (1) Please see Appendix for a definition and reconciliation of OCF.
  • 12. Revenue Breakdown ($mm) Q4 Rebased Full Year Rebased (1) () (1) () 2008 Growth 2008 Growth Western Europe $ 712 2% $ 3,092 3% C & E Europe 297 3% 1,356 4% Other(2) 2 -- 11 -- UPC Broadband 1,011 3% 4,458 3% Telenet (Belgium) 372 4% 1,509 1 509 6% J:COM (Japan) 798 6% 2,854 6% VTR (Chile) 153 12% 714 12% Corporate & Other p 237 -- 1,026 , -- Total LGI $ 2,571 6% $ 10,561 6% (1) Please see Appendix for information on rebased growth. 12 (2) Represents central and corporate operations of UPC Broadband.
  • 13. OCF Breakdown (1) ($mm) Q4 Rebased Full Year Rebased (2) (2) 2008 Growth 2008 Growth Western Europe $ 394 17% $ 1,639 14% C & E Europe 153 6% 702 7% (3) Other Oh (57) -- (235) -- UPC Broadband 489 16% 2,106 14% Telenet (Belgium) (g ) 175 12% 727 11% J:COM (Japan) 342 10% 1,191 11% VTR (Chile) 66 18% 296 18% Corporate & Other 38 -- 214 -- Total LGI $ 1,110 14% $ 4,533 14% (1) Please see Appendix for a definition and reconciliation of OCF. (2) Please see Appendix for information on rebased growth. 13 (3) Represents central and corporate operations of UPC Broadband.
  • 14. 2008 Financial Results by Market (1) 2008 Rebased Revenue Growth 18% 12% 12% 8% 6% 6% 6% Total LGI 6% 5% 1% 4% 4% 0% 3% PL AU CL IE JP BE SK CH CZ NL SI PR HU AT RO (5%) (9%) (1) 2008 Rebased OCF Growth 29% 28% 21% 18% 17% 15% Total LGI 14% 12% 12% 4% 11% 11% 11% 2% 8% IE PL AU CL CH NL PR CZ BE SK JP SI HU AT RO (25%) 14 (1) Please see Appendix for information on rebased growth.
  • 15. OCF Margin Analysis OCF Margin(1) Regional OCF Margins 2007 2008 Growth UPC 42.5% 47.2% 470 42.9% Telenet 46.2% 48.2% 200 39.6% J:COM 40.5% 41.7% 120 36.0% VTR 330 39.3% 39 3% 41.4% 41 4% 210 bps LGI 39.6% 42.9% 330 2006 2007 2008 Expect Continued OCF Margin Expansion in 2009 p g p 15 (1) Please see Appendix for the definition of OCF margin.
  • 16. 2008 CapEx Breakdown (1) CapEx Components Key Takeaways  FY ‘08 CapEx of 22% of revenue, down slightly to FY ‘07 Scalable Infrastructure 16%  > 55% related to CPE & SI CPE 41% Support  > 80% CPE, SI and Network 18%  > 90% of cable network 2-way Network 25%  Q4 CapEx impacted by brought forward spend Expect E pect 2009 CapE / Re en e Ratio to Decline CapEx Revenue (1) CapEx is categorized and defined as follows for this slide: (i) customer premise equipment (“CPE”); (ii) scalable infrastructure (“SI”); (iii) network which consists of line extensions and upgrade / rebuild; and (iv) support which consists of support capital and other including Chellomedia. 16
  • 17. Free Cash Flow (1) FCF FCF Conversion $763 17% 12% $419 82% 500 bps 2007 2008 2007 2008 Strong Improvement in Free Cash Flow & FCF Conversion 17 (1) Please see appendix for definitions of FCF and FCF Conversion and the reconciliation of FCF.
  • 18. Balance Sheet Snapshot (2) Gross Leverage  LGI balance sheet at Dec 31, 2008: 4.8x 4.6x  Total debt & capital leases of $20.5 bn  Total cash & cash equivalents(1) (including restricted cash) of $1.8 bn $1 8 2007 2008  Overall net debt of $18.7 bn (2) Net L N t Leverage  ~90% of debt amortizes 2012 & thereafter(3) 4.2x 4.1x  Gross leverage ratio comfortably in 4x – 5x target range 2007 2008 (1) Cash includes restricted cash related to our debt instruments of approximately $476 million at December 31, 2008. (2) Gross and Net Leverage equals total and net debt, respectively, divided by annualized OCF for the three months ended as of the date indicated. 18 (3) Includes principal amount of capital leases.
  • 19. Liquidity Overview Liquidity ~$2bn Shares Outstanding (In US$ Millions) (In Millions) 354 $817 $871 $ 276 $557 (2) (1) 12/31/2007 2/16/2009 Cash at LGI Cash at Subsidiaries Undrawn Lines Maintaining Ample Liquidity in Current Environment (1) Includes cash at LGI parent and its non-operating subsidiaries. Restricted cash is excluded. (2) The $871 million represents our aggregate unused borrowing capacity, as of December 31, 2008, without regard to covenant compliance calculations and excludes approximately $214 million related to unused borrowing capacity associated with the VTR Bank Facility. Pursuant to the deposit arrangements with the lender in relation to the VTR Bank Facility, 19 we are required to fund a cash collateral account in an amount equal to the outstanding principal and interest under the VTR Bank Facility.
  • 20. Conclusions Well positioned Well-positioned to weather economic downturn  Advanced digital services driving RGU growth  Strong balance sheet & ample liquidity  Expect 2009 to be a solid growth year on OCF & FCF  20
  • 21. Appendix pp
  • 22. Appendix Definitions and Additional Information f d dd lf Revenue Generating Unit (“RGU”) is separately an Analog Cable Subscriber, Digital Cable Subscriber, DTH Subscriber, MMDS Subscriber, Internet Subscriber or Telephony Subscriber. A home, residential multiple dwelling unit, or commercial unit may contain one or more RGUs. For example, if a residential customer in our Austrian system subscribed to our digital cable service, telephony service and broadband internet service, the customer would constitute three RGUs. Total RGUs is the sum of Analog Cable, Digital Cable, DTH, MMDS, Internet and Telephony Subscribers. RGUs generally are counted on a unique premise basis such that a given premise does not count as more than one RGU for any given service On the other hand if an individual service. hand, receives our service in two premises (e.g., a primary home and a vacation home), that individual will count as two RGUs. Non-paying subscribers are counted as subscribers during their free promotional service period. Some of these subscribers choose to disconnect after their free service period. Services offered without charge on a permanent basis (e.g. VIP subscribers, free service to employees) are not counted as RGUs. Average Revenue Per Unit (“ARPU”) refers to the average monthly subscription revenue per average RGU. ARPU per customer relationship refers to the average monthly subscription revenue per average customer relationship. In both cases, the amounts are calculated by dividing the average monthly subscription revenue (excluding installation, late fees and mobile telephony revenue) for the indicated period, by the average of the opening and closing p ( g , p y ) p ,y g p g g balances for RGUs or customer relationships, as the case may be, for the period. Customer relationships of entities acquired during the period are normalized. ARPU per customer relationship for UPC Broadband and Liberty Global Consolidated are not adjusted for currency impacts. OCF margin is calculated by dividing OCF by total revenue for the applicable period. Free Cash Flow Conversion is defined as FCF divided by OCF. Please see following pages for further information on OCF and FCF. Organic Addition figures exclude RGUs of acquired entities at the date of acquisition but include the impact of changes in RGUs from the date of acquisition. Organic figures represent additions on a net basis. 22
  • 23. Appendix Definitions and Additional Information f d dd lf Information on Rebased Growth: For purposes of calculating rebased growth rates on a comparable basis for all businesses that we owned during 2008, we have adjusted our historical revenue and OCF for the three months and year ended December 31, 2007 to (i) include the pre-acquisition revenue and OCF of certain entities acquired during 2007 and 2008 in our rebased amounts for the three months and year ended December 31, 2007 to the same extent that the revenue and OCF of such entities are included in our results for the three months and year ended December 31, 2008, (ii) exclude the pre- disposition revenue and OCF of certain entities that were disposed of during 2007 and 2008 from our rebased amounts for the three months and year ended December 31, 2007 to the same extent that such entities were excluded from our results for the three months and year ended December 31, 2008, and (iii) reflect the translation of our rebased amounts for the three months and year ended December 31, 2007 at the applicable average exchange rates that were used to translate our results for the three months and year ended December 31, 2008. The acquired entities that have been included in whole or in part in the determination of our rebased revenue and OCF for the three months ended December 31, 2007 include Interkabel, six small acquisitions in Europe and four small acquisitions in Japan. The acquired entities that have been included in whole or in part in the determination of our rebased revenue and OCF for the year ended December 31, 2007 include Interkabel, JTV Thematics, Telesystems Tirol, fourteen small acquisitions in Europe and five small acquisitions in Japan Additionally the disposed entities that were excluded in whole or in part from the determination of our rebased revenue and OCF for Japan. Additionally, the three months and year ended December 31, 2007 include our broadband communications operations in Brazil and Peru and our Liveshop operations in the Netherlands. In terms of acquired entities, we have reflected the revenue and OCF of these acquired entities in our 2007 rebased amounts based on what we believe to be the most reliable information that is currently available to us (generally pre-acquisition financial statements), as adjusted for the estimated effects of (i) any significant differences between generally accepted accounting principles in the U.S. (“GAAP”) and local generally accepted accounting principles, (ii) any significant effects of post-acquisition purchase accounting adjustments, (iii) any significant differences between our accounting policies and those of the acquired entities and (iv) other items we deem appropriate. As we did not own or operate the acquired businesses during the pre-acquisition periods, no assurance can be given that we have identified all adjustments necessary to present the revenue and OCF of these pre acquisition entities on a basis that is comparable to the corresponding post-acquisition amounts that are included in our historical 2008 results or that the pre- acquisition financial statements we have relied upon do not contain undetected errors. The adjustments reflected in our 2007 rebased amounts have not been prepared with a view towards complying with Article 11 of the SEC's Regulation S-X. In addition, the rebased growth percentages are not necessarily indicative of the revenue and OCF that would have occurred if these transactions had occurred on the dates assumed for purposes of calculating our rebased 2007 amounts or the revenue and OCF that will occur in the future. The rebased growth percentages have been presented as a basis for assessing 2008 growth rates on a comparable basis, and are not presented as a measure of our pro forma financial performance for 2007. Therefore, we believe our rebased data is not a non-GAAP measure as contemplated by Regulation G or Item 10 of Regulation S-K. p yg g 23
  • 24. Appendix Operating Cash Flow Definition and Reconciliation Operating cash flow is not a GAAP measure. Operating cash flow is the primary measure used by our chief operating decision maker to evaluate segment operating performance and to decide how to allocate resources to segments. As we use the term, operating cash flow is defined as revenue less operating and SG&A expenses (excluding stock-based compensation, depreciation and amortization, provisions for litigation, and impairment, restructuring and other operating charges or credits). We believe operating cash flow is meaningful because it provides investors a means to evaluate the operating performance of our segments and our company on an ongoing basis using criteria that is used by our internal decision makers. Our internal decision makers believe operating cash flow is a meaningful measure and is superior to other available GAAP measures because it represents a transparent view of our recurring operating performance and allows management to (i) readily view operating trends, (ii) perform analytical comparisons and benchmarking between segments and (iii) identify strategies to improve operating performance in the different countries in which we operate. For example, our internal decision makers believe that the inclusion of impairment and restructuring charges within operating cash flow would distort the ability to efficiently assess and view the core operating trends in our segments. In addition, our internal decision makers believe our measure of operating cash flow is important because analysts and investors use it to compare our performance to other companies in our industry. However, our definition of operating cash flow may differ from cash flow measurements provided by other public companies. A reconciliation of total segment operating cash fl ili i f l i h flow to our earnings (l ) b f i (loss) before i income taxes, minority i i i interests and di d discontinued operations i presented b l i d i is d below. Operating cash flow should be viewed as a measure of operating performance that is a supplement to, and not a substitute for, operating income, net earnings (loss), cash flow from operating activities and other GAAP measures of income or cash flows. Three months ended Year ended December 31, December 31, 2008 2007 2008 2007 2006 in millions $ 2,336.2 Total segment operating cash flow............................................... $ 1,109.5 $ 964.6 $ 4,533.1 $ 3,567.8 (70.0) Stock-based compensation expense ............................................. (28.2) (52.1) (153.5) (193.4) (1,884.7) Depreciation and amortization ..................................................... (697.7) (673.5) (2,857.7) (2,493.1) Provisions for litigation ................................................................ (25.0) (171.0) - - - (29.2) Impairment, restructuring and other operating charges, net ........... (155.3) (26.0) (158.5) (43.5) 352.3 Operating income .................................................................. 228.3 188.0 1,363.4 666.8 (673.4) Interest expense ........................................................................ (283.7) (275.7) (1,147.4) (982.1) 85.4 Interest and dividend income ...................................................... 16.4 30.7 91.8 115.3 13.0 13 0 Share of results of affiliates, net .................................................. Sh f lt f ffili t t 0.2 02 4.7 47 5.4 54 33.7 33 7 Realized and unrealized gains (losses) on derivative (264.8) instruments, net ....................................................................... (10.3) 143.6 78.9 72.4 299.5 Foreign currency transaction gains (losses), net ............................ (648.4) 67.8 (552.1) 109.4 Unrealized gains (losse)s due to changes in fair values of (146.2) certain investments and debt, net .............................................. 77.4 30.5 (7.0) (200.0) (13.8) Other-than-temporary declines in fair values of investments........... (206.6) (212.6) - - (40.8) Losses on extinguishment of debt, net ......................................... (90.4) (112.1) - - 206.4 Gains on disposition of assets, net ............................................... 1.8 4.5 557.6 - 12.2 12 2 Other income (expense) net ....................................................... (expense), (1.8) (1 8) (1.1) (1 1) 1.3 13 - Earnings (loss) before income taxes, minority interests and discontinued operations ...................................................... $ (620.1) $ (104.0) $ (167.0) $ 49.7 $ (170.2) 24
  • 25. Appendix Free Cash Flow Definition and Reconciliation FCF is defined as net cash provided by operating activities less capital expenditures, each as reported in our condensed consolidated statements of cash flows. Adjusted FCF represents FCF less non-cash capital lease additions. FCF and Adjusted FCF are not GAAP measures of liquidity. We believe that our presentation of FCF and Adjusted FCF provides useful information to our investors because these measures can be used to gauge our ability to service debt and fund new investment opportunities. FCF should not be understood to represent our ability to fund discretionary amounts, as we have various mandatory and pp p y y , y contractual obligations, including debt repayments, which are not deducted to arrive at this amount. Investors should view FCF as a supplement to, and not a substitute for, GAAP measures of liquidity included in our consolidated cash flow statements. The table below highlights the reconciliation of net cash provided by operating activities to FCF and FCF to Adjusted FCF for the indicated periods. Three months ended Year ended December 31, December 31, 2008 2007 2008 2007 in millions Net cash provided by operating activities .............. $ 913.9 $ 777.3 $ 3,138.0 $ 2,453.2 Capital expenditures ........................................... (695.9) (583.3) (2,375.0) (2,034.5) FCF .............................................................. $ 218.0 $ 194.0 $ 763.0 $ 418.7 $ 418.7 FCF ................................................................... $ 218.0 $ 194.0 $ 763.0 (185.2) Capital lease additions......................................... (57.5) (46.0) (166.5) Adjusted FCF ................................................. $ 160.5 $ 148.0 $ 596.5 $ 233.5 (1) Our cash provided by operations for the three months and year ended December 31, 2007 differs from the previously reported amounts due primarily to the reclassification of 25 cash flows related to derivative instruments to align with the classification of the applicable underlying cash flows.