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liberty global Q3_2008__Presentation

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  • 1. 3rd Quarter 2008 Investor Call Q November 6, 2008
  • 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 2008 guidance targets, our future g growth prospects, including our continued ability to generate free cash flow, expand our RGUs and increase our ARPU per pp , g y g ,p p 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 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 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 margins our ability to access cash of our subsidiaries and the impact of our future financial performance or margins, performance, 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 including our most recently filed Forms 10-K and 10-Q. 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 statement is based 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 November 5, 2008 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”), Revenue Generating Units (“RGUs”), Average Revenue per Unit (“ARPU”), and OCF Margin, as well as GAAP reconciliations, where applicable. 2
  • 3. Agenda O Operating Update ti U d t  Financial Results Q&A 3
  • 4. Where Are We Today? Stable Growth Diverse Markets  Advanced services(1)  15 countries & 4 continents  Customer ARPUs  Basket of currencies  OCF growth & margins  Blend of mature & growth Strategy Intact Strong Balance Sheet  New product launches  $3.2 billion total liquidity(2)  M&A in Belgium & Japan  Minimal near term maturities near-term  Continued stock buybacks  Rates & currencies hedged (1) Advanced Services refers to the value-added services of digital video, including digital cable and DTH, broadband internet and telephony. (2) The $3.2 billion consists of (i) $1.6 billion of unrestricted cash, of which $780 million is held by our parent and its non-operating subsidiaries, and the remaining $802 million is held by our operating subsidiaries, principally J:COM and Telenet and (ii) $1.6 billion of aggregate undrawn capacity (excluding VTR), as represented by the maximum undrawn commitments under each of our applicable facilities without regard to covenant compliance calculations, all of which is held by our operating subsidiaries, principally J:COM, Telenet and UPC. 4
  • 5. We Are Growing Advanced Services Rebased Growth(1) Digital Data Voice (000s) Q3 YTD 13.6% 812 13.4% 678 652 649 630 214 6.0% 154 125 5.6% 182 190 Revenue OCF Q3 '07 Q4 '07 Q1 '08 Q2 '08 Q3 '08 Free Cash Flow(1) ARPU per Customer Q3 ’08 Q3 ’07 $545 27,820 ($mm) 7,455 35.91 7,383 33.12 33 12 25,818 23.68 21.46 $225 143% YTD '07 YTD '08 VTR (CLP) UPC (€) Telenet (€) J:COM (¥) 5 (1) Please see Appendix for the definitions and reconciliations of OCF and FCF, and for information on rebased growth.
  • 6. UPC Broadband Update Operational Themes & Results  Launching 100+ Mbps data products  Record digital growth for 2nd straight quarter  Actively targeting situations in AT, HU & RO OCF Growth(1) ($mm) $557  Competitive situation remains challenging, $425 while economic conditions have deteriorated 31%  Rebased OCF growth improved 230 bps Q3 '07 Q3 '08 sequentially 15% Rebased Growth 6 (1) Please see Appendix for the OCF definition and reconciliation, and for information on rebased growth.
  • 7. J:COM Update Operational Themes & Results Digital Penetration(1) 75%  Continued success driving digital take-up 63% 19%  Broadband data driving ARPU & net adds Q3 '07 Q3 '08 OCF Growth(2) ($mm)  Completed FCN acquisition (190,000 RGUs) p q ( , ) $290 $229  Economy stable, strengthening currency 27%  Consistent financial performance Q3 '07 Q3 '08 12% Rebased Growth (1) Digital penetration is calculated by dividing digital cable RGUs by the total of digital and analog cable RGUs. (2) Please see Appendix for the OCF definition and reconciliation, and for information on rebased growth. 7
  • 8. VTR Update Operational Themes & Results Organic Digital Adds 39  Consistent advanced services RGU growth 13 203%  Digital penetration doubles YoY to 35% Q3 '07 Q3 '08  Broadband leadership reinvigorated with OCF Growth(1) ($mm) speed increases p $72 $64  12% rebased revenue & OCF growth for Q3 13%  Results impacted by competition & economy Q3 '07 Q3 '08 12% Rebased Growth (1) Please see Appendix for the OCF definition and reconciliation, and for information on rebased growth. 8
  • 9. Agenda  Operating Update  Financial Results Q&A 9
  • 10. YTD Financial Highlights Revenue OCF(1) ($mm) ($mm) $3,424 $, $7,991 $6,542 $2,603 32% 22% YTD '07 YTD '08 YTD '07 YTD '08 OCF Margin(1) CapEx (% of R f Revenue) ) 42.8% 22.2% 21.0% 39.8% 120 300 bps bps YTD '07 07 YTD '08 08 YTD '07 07 YTD '08 08 10 (1) Please see Appendix for the definition and reconciliation of OCF and definition of OCF margin.
  • 11. Revenue Breakdown ($mm) Q3 Rebased YTD Rebased (1) (1) 2008 Growth 2008 Growth Western Europe $ 780 3% $ 2,380 3% C & E Europe 362 3% 1,059 4% (2) Other 3 -- 8 -- UPC Broadband 1,145 3% 3,448 3% Telenet (Belgium) 375 5% 1,137 1 137 7% J:COM (Japan) 686 7% 2,056 7% VTR (Chile) 180 12% 561 11% Other 265 -- 789 -- Total LGI $ 2,650 6% $ 7,991 6% (1) Please see Appendix for information on rebased growth. 11 (2) Represents central and corporate operations of UPC Broadband.
  • 12. OCF Breakdown(1) ($mm) Q3 Rebased YTD Rebased Growth(2) Growth(2) 2008 2008 Western Europe $ 420 15% $ 1,245 13% C & E Europe p 193 7% 550 7% Other(3) (56) -- (178) -- UPC Broadband 557 15% 1,617 14% Telenet (Belgium) 187 8% 552 10% J:COM (Japan) 290 12% 849 11% VTR (Chile) 72 12% 230 18% Other 63 -- 176 -- Total LGI $ 1,168 13% $ 3,424 14% (1) Please see Appendix for a definition and reconciliation of OCF. (2) Please see Appendix for information on rebased growth. (3) Represents central and corporate operations of UPC Broadband. 12
  • 13. FCF(1) Progression 2007 2008 ($mm) $545 $318 $225 $128 $125 $100 $58 $42 Q1 Q2 Q3 YTD FCF Expected to Increase Meaningfully in Q4 ’08 13 (1) Please see appendix for definition of FCF and for reconciliation.
  • 14. Balance Sheet Snapshot For periods ended 2008 Adj. Sept 30(3) June 30 Sept 30 ($mm) Total Debt $ 19,786 $ 19,262 $ 18,317 T t l Cash(1) Total C h (1,691) (2,057) (2,057) Net Debt $ 18,095 $ 17,205 $ 16,260 Gross Leverage(2) () 4.3x 4 3x 4.1x 4 1x 3.9x 3 9x Net Leverage(2) 3.9x 3.7x 3.5x Gross & Net Leverage Ratios Trending Lower (1) Cash includes restricted cash related to our debt instruments of approximately $480 million at June 30, 2008 and $476 million at September 30, 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. 14 (3) Adjusted September 30 excludes our debt related to our borrowings against our News Corp. and Sumitomo shares.
  • 15. Capital Structure Review Significant consolidated liquidity (cash & borrowing capacity)  Financial leverage at low-end of target range  Floating interest rates & currencies hedged on debt  Diversified base of lenders & counterparties  Positive FCF at key credit groups  Long-term maturity profile  15
  • 16. (1) Debt Amortization Schedule Total debt & capital leases of $19.3 bn ($bn) $14 $12.6 (2) UPC VTR Telenet J:COM Austar Other $12 $10 $8 $6 $4 $2.4 $2.2 $2 $1.2 $0.4 $0.3 $0.1 $0 $ Q4 2008 2009 2010 2011 2012 2013 Thereafter Limited Near-Term Amortizations Near Term (1) Includes principal amount of capital leases. 16 (2) UPC excludes VTR.
  • 17. Conclusions Driving penetrations of high-ARPU advanced services gp g  14% rebased OCF growth YTD & record OCF margin in Q3 % ebased OC g o t eco d OC ag  Positioned to weather extension of current credit environment  Balancing liquidity & commitment to levered equity strategy  17
  • 18. Appendix pp
  • 19. 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 receives our service in two premises (e g a primary home and a vacation home) service. hand, (e.g., 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 balances for RGUs or customer relationships, as the case may be, for the period. y, p OCF margin is calculated by dividing OCF by total revenue for the applicable period. 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 and nine months ended September 30, 2007, respectively to (i) include the pre-acquisition revenue and OCF of certain entities acquired during 2007 and 2008 in our rebased amounts for the three and nine months ended September 30, 2007 to the same extent that the revenue and OCF of such entities are included in our results for the three and nine months ended September 30, 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 and nine months ended September 30 2007 to the same extent that such 30, entities were excluded from our results for the three and nine months ended September 30, 2008, and (iii) reflect the translation of our rebased amounts for the three and nine months ended September 30, 2007 at the applicable average exchange rates that were used to translate our results for the three and nine months ended September 30, 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 September 30, 2007 include JTV Thematics, Telesystems Tirol, nine small acquisitions in Europe and three 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 nine months ended September 30, 2007 include JTV Thematics, Telesystems Tirol, fourteen small acquisitions in Europe and four 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 the three and nine months ended September 30 2007 include our broadband communications operations in Brazil and Peru and our Liveshop 30, 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 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 p q p j 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. 19
  • 20. 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 iincome taxes and minority i d i i interests i presented b l is d below. OOperating cash fl i h flow should h ld 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 Nine months ended September 30, September 30, 2008 2007 2008 2007 in millions Total segment operating cash flow............................................... $ 1,168.1 $ 917.6 $ 3,423.6 $ 2,603.2 (42.0) (57.8) (125.3) (141.3) Stock-based compensation expense ............................................. (711.9) (615.4) (2,160.0) (1,819.6) Depreciation and amortization ..................................................... — (146.0) — (146.0) Provision for litigation ................................................................. (1.4) (11.6) (3.2) (17.5) Impairment, restructuring and other operating charges, net ........... 412.8 86.8 1,135.1 478.8 Operating income .................................................................. (293.4) (247.1) (863.7) (706.4) Interest expense ........................................................................ 23.5 36.1 75.4 84.6 Interest and dividend income ...................................................... 2.4 5.9 5.2 29.0 Share of results of affiliates, net .................................................. Realized and unrealized gains (losses) on derivative 18.2 (134.8) 89.2 (71.2) instruments, net ....................................................................... (286.7) (31.7) 96.3 41.6 Foreign currency transaction gains (losses), net ............................ Unrealized losses due to changes in fair values of certain (129.2) (0.3) (84.4) (230.5) investments and debt, net ......................................................... -- 1.6 -- (21.7) Gains (losses) on extinguishment of debt, net ............................... (0.4) (0 4) 552.8 552 8 (1.8) (1 8) 553.1 553 1 Gains (losses) on disposition of assets, net ................................... G i (l ) di iti f t t (0.5) 1.0 1.8 (3.6) Other income (expense), net ....................................................... Earnings (loss) before income taxes and minority interests ........ $ (253.3) $ 270.3 $ 453.1 $ 153.7 20
  • 21. 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 Nine months ended September 30, 30 September 30, 30 2007(1) 2008 2007(1) 2008 in millions Net cash provided by operating activities .................. $ 697.4 $ 624.7 $ 2,224.1 $ 1,675.9 Capital expenditures ............................................... (597.7) (499.4) (1,679.1) (1,451.2) $ 99.7 $ 125.3 $ 545.0 $ 224.7 FCF .................................................................. FCF ....................................................................... $ 99.7 $ 125.3 $ 545.0 $ 224.7 (37.4) (50.4) (109.0) (139.2) Capital lease additions............................................. Adjusted FCF ..................................................... $ 62.3 $ 74.9 $ 436.0 $ 85.5 (1) Our cash provided by operations for the three and nine months ended September 30, 2007 differs from the previously reported amounts due to the reclassification of cash flows 21 related to derivative instruments to align with the classification of the applicable underlying cash flows.