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Liberty Global Reports Q3 and YTD 2016 ResultsLiberty Global plc ("Liberty Global") (NASDAQ: LBTYA, LBTYB, LBTYK, LILA and LILAK), today announces financial and operating results for the three months ("Q3") and nine months ("YTD") ended September 30, 2016 for the Liberty Global Group1 and the LiLAC Group1. CEO Mikes Fries stated, "As we signaled on our last investor call, our Q3 results reflect the acceleration in operating performance that we anticipated in Europe (excluding Ziggo), where we generated over 5% rebased2 OCF3 growth. This result was the by-product of strong performances at Unitymedia and Virgin Media, which posted 7% and 6% rebased OCF growth, respectively, as well as operating efficiencies from our Liberty Go program. With respect to top-line drivers, our YTD subscriber additions in Europe were up nearly 50%, while customer ARPU4 in Q3 increased 3% year-over-year. This growth was due in part to our success with quad-play offers and our advanced video and OTT services. Our B2B5 business in Europe delivered another quarter of solid results, bringing our YTD rebased revenue growth to 9%. In addition, our new build activities, which are underway in nearly all markets, continue to deliver promising results. At the end of Q3, we had built nearly 850,0006 new homes across Europe this year, and we are on pace to deliver over 1.3 million homes by year end. We are confirming our full-year 2016 financial targets for our European business, including better cash flow growth in Q4, but we expect to end up at the lower end of our 4-5% rebased OCF growth range due to the phasing of our new build program and the impact of certain commercial initiatives in the U.K." "On the M&A front, we continue to expect that our joint venture with Vodafone in the Netherlands will close around the end of the year. During the quarter, we took steps to recapitalize the combined entity's balance sheet and raised an additional $3.2 billion of debt, of which we expect to receive 50% of the proceeds at closing. We will also receive up to an additional €1 billion at closing, subject to adjustment, from Vodafone to equalize ownership in the JV. Also of note, we announced the proposed acquisition of the third largest cable operator in Poland, Multimedia Polska, in October. This will significantly expand the reach of our market-leading platform in that market, and will allow us to drive further efficiencies across our business." "LiLAC, our Latin American and Caribbean tracking stock, reported 5% rebased OCF growth in Q3. CWC's7 Q3 financial results were below our expectations, but we have already started laying the groundwork for improved future performance. We now expect LiLAC Group, excluding Cable & Wireless, to achieve 6% rebased OCF growth for full year 2016. With respect to CWC, we expect that the business will deliver OCF between $215 and $225 million8 in Q4 2016, including the estimated negative impact of Hurricane Matthew. To further support future growth, we have now reviewed our combined asset base and we expect to deliver $150 million of new LiLAC/CWC synergies by year-end 2020, which are over and above the $125 million of efficiencies already announced between CWC and Columbus. Our view of LiLAC's combined OCF growth remains robust, and within the previously disclosed 7-9% target range over the next few years." "Our balance sheet remains in great shape with nearly $4.6 billion of total liquidity9, including around $500 million of cash on hand for each of Liberty Global and LiLAC Group. During the quarter, we aggressively purchased approximately $640 million of Liberty Global Group stock, upping our year-to-date total to $1.6 billion of buybacks. Over the next five quarters, we look forward to purchasing an additional $2.4 billion of additional Liberty Global Group equity, fulfilling our $4 billion stock repurchase program by the end of 2017." European Highlights
* Revenue and OCF YoY Growth Rates are Rebased Growth Rates LiLAC Group Highlights
* Revenue and OCF YoY Growth Rates are Rebased Growth Rates Subscriber Statistics - Liberty Global Group (Europe) At the end of Q3, the Liberty Global Group provided 26 million unique customers with 54 million fixed-line subscription services ("RGUs") across our footprint of 50 million homes passed12 in Europe. During Q3, we increased our subscriber base by 257,000 organic RGUs, resulting in 22.5 million video, 17.3 million broadband internet and 14.4 million fixed-line telephony subscribers at September 30, 2016. Supported by new build initiatives across most of our markets, we added 27,000 organic customer relationships13, our best quarterly result in nearly two years. We ended Q3 2016 with a bundling ratio of 2.1 RGUs per customer, as 46% of our customers subscribed to triple-play (11.9 million), 18% to double-play (4.5 million) and 36% to single-play products (9.3 million). Regionally, our Q3 2016 organic subscriber growth consisted of 159,000 and 98,000 RGU additions in Western Europe and Central and Eastern Europe ("CEE"), respectively. In the U.K., Virgin Media added 92,000 RGUs, its best Q3 performance in seven years, supported by a combination of our attractive bundles featuring superior broadband speeds and new build activity. Our German operation reported 89,000 RGU additions in Q3, powered by the reintroduction of our "Highspeed Weeks" campaign in September, which drove 75% of sales into our high-tier bundles. In the Netherlands, we reported an 11,000 subscriber loss, our lowest quarterly RGU attrition in two years. This result was mainly due to higher sequential sales related to our successful marketing campaigns and lower year-over-year churn associated with investments in our product propositions and customer service programs. Elsewhere in Europe, Telenet added 4,000 RGUs, a decline from the prior year period, primarily as a result of lower telephony additions. Of note, our innovative, converged product "WIGO" resonated well in the Belgian market as Telenet sold 100,000 quad-play bundles during Q3. Meanwhile, in Switzerland, UPC lost 13,000 RGUs during Q3, a result identical to the prior-year period, as improvements in video churn were offset by weakness in broadband internet and fixed-line telephony. In late September we launched new product portfolios in Switzerland. The "Connect" portfolio features significantly faster broadband speeds along with a basic TV offer, with the option to upgrade to include Horizon TV and increased broadband speeds. In terms of our video performance, we lost 39,000 subscribers in Q3 2016, which was a significant improvement versus our video attrition of 62,000 in Q3 2015. This result was mainly driven by 11,000 net video additions in the U.K. on the back of Project Lightning, as well as lower churn in the Netherlands, where Ziggo's video attrition dropped 56% from 44,000 in the prior-year period to 19,000 in Q3 2016. At the end of Q3, we had 14.3 million enhanced video subscribers14 , representing 66% penetration15 , and 7.4 million basic video subscribers16 . With respect to our next-generation17 video subscriber base, which includes TiVo, Horizon TV (including Horizon-Lite) and Yelo TV, we added 278,000 subscribers in Q3 2016. Horizon TV (excluding Horizon-Lite), added 155,000 subscribers, including 79,000 in the Netherlands. As of mid-October, we also began offering Horizon TV in Austria, confirming our product leadership in that market. Meanwhile, Horizon-Lite, which provides a Horizon-like user interface on legacy set-top boxes, continued to grow in Hungary, Slovakia and the Czech Republic as our base expanded by 53,000 in Q3 2016. Rounding out our next-generation platforms, Virgin Media (U.K.) and Telenet added 67,000 and 3,000 next-generation video subscribers in Q3 to the TiVo and Yelo TV platforms, respectively. Over 7.4 million subscribers, or 38% of our total video base, subscribed to one of our innovative next-generation TV platforms as of September 30, 2016, a substantial increase as compared to 6.2 million or 31% at the end of Q3 last year. In addition to improvements in our video performance, organic subscriber growth was bolstered by our broadband internet and fixed-line telephony results. During the quarter, we added 178,000 broadband internet subscribers, led by 60,000 and 56,000 additions in the U.K. and Germany, respectively. On the fixed-line telephony front, our European operations delivered 117,000 organic RGU additions. Turning to our wireless business, we ended Q3 2016 with 6.8 million mobile subscribers18 . This was a sequential increase of 65,000 as compared to Q2 2016 and was driven by the addition of 122,000 postpaid subscribers that was only partially offset by a decrease of 57,000 lower-ARPU prepaid subscribers. The increase was mainly driven by our Western European operations with net subscriber growth of 56,000, while our CEE countries contributed 9,000 additions. Our strong mobile growth in Western Europe was primarily driven by solid performances in the Netherlands and Switzerland, gaining 20,000 and 15,000 mobile subscribers, respectively. In the U.K., our postpaid base grew by 24,000 subscribers, driven by SIM-only products and our split-contracts19 Freestyle proposition, which was partially offset by a decrease of 17,000 prepaid subscribers. Another notable performance in Q3 was in Belgium, where our new converged WIGO offering has been supporting postpaid growth, with net adds accelerating to 52,000 in the quarter. This was partially offset by the loss of 40,000 prepaid subscribers from the former BASE business. Meanwhile, in Switzerland, we added another 15,000 mobile subscribers during Q3 on the back of our "Mega Deal" campaign and continued to leverage our retail presence as part of our Mobilezone retail store agreement. We also added a combined 12,000 mobile subscribers in Austria, Ireland, CEE and Germany. On the product innovation front, our U.K. mobile 4G launch is anticipated by mid-November, while during Q3 we introduced our split-contracts proposition and new mobile B2B offerings in Austria. Revenue - Liberty Global Group (Europe) Revenue attributed to the Liberty Global Group increased 1% to $4.3 billion and 2% to $13.1 billion for the three and nine months ended September 30, 2016, respectively, as compared to the corresponding 2015 periods. For both periods, our reported revenue growth was driven primarily by the inclusion of BASE in Belgium and organic revenue growth, partially offset by negative foreign currency ("FX") movements, mainly related to the strengthening of the U.S. dollar against the British pound. When adjusting to neutralize the impact of acquisitions, dispositions and FX, our operations attributed to the Liberty Global Group achieved year-over-year rebased revenue growth of 2% and 3% during the three and nine months ended September 30, 2016, respectively. When excluding Ziggo, rebased revenue growth of the Liberty Global Group for the Q3 and YTD period was 3% and 3.5%, respectively, as compared to the corresponding 2015 periods. Our rebased revenue performance during the Q3 and YTD periods included the net effect of certain nonrecurring or non-operational items. The most significant of these items during the three-month comparison was a $9 million reduction in cable subscription revenue resulting from a change in the regulations governing payment handling fees that Virgin Media charges its customers in the U.K. For the YTD comparison, the most significant of these items was (i) a $19 million reduction in cable subscription revenue resulting from the aforementioned regulatory change in the U.K. and (ii) the favorable $12 million impact of higher amortization of deferred upfront fees on B2B contracts in the U.K. Our rebased revenue performance during the Q3 and YTD periods was also impacted by the net negative impact of upfront recognition of mobile handset revenue, primarily in connection with our split-contract programs in the U.K., Belgium and Switzerland of $26 million and $5.5 million, respectively. Geographically, we delivered 2% rebased revenue growth in Western Europe during the quarter, while our Central and Eastern European operations generated 4% rebased revenue growth. From a country specific perspective, our Q3 performance was led by 6% rebased revenue growth in Germany, driven by higher cable subscription revenue as a result of increases to ARPU per RGU and subscribers. Our largest operation, Virgin Media in the U.K. and Ireland, recorded 3% rebased revenue growth. This performance was attributable to the net benefit of higher cable subscription revenue, primarily due to subscriber growth and improvements in ARPU per RGU, increases in other revenue, primarily as a result of an $8 million benefit in Q3 from higher mobile handset sales pursuant to our split-contract program, and higher business revenue, all of which was partially offset by lower mobile subscription revenue, largely due to a $28 million decline from the split-contract program in the U.K. Turning to the Netherlands, Ziggo reported a nearly flat rebased revenue performance in Q3, our best result in six quarters, as a lower average number of RGUs was partially offset by higher ARPU per RGU and an increase in mobile subscription revenue. Elsewhere in Western Europe, our Switzerland/Austria segment posted 1% rebased revenue growth in Q3 as higher mobile revenue growth and an increase in ARPU per RGU was partially offset by lower subscriber volumes. In Belgium, Telenet reported 1% rebased revenue growth primarily due to higher cable subscription revenue. Finally, our CEE region posted 4% rebased revenue growth, mainly driven by subscriber growth, primarily in Romania, Poland and Hungary, partially offset by lower ARPU per RGU across the region. Our B2B (including SOHO) and mobile (including interconnect and handset sales)20, businesses reported 10% and 1% rebased revenue growth, respectively, for the nine months ended September 30, 2016, respectively. Operating Income - Liberty Global Group (Europe) For the three and nine months ended September 30, 2016, operations attributed to the Liberty Global Group reported operating income of $764 million and $1.8 billion, respectively, representing increases of 60% and 17%, respectively, when compared to the prior-year periods. These increases were primarily due to (i) decreases in depreciation and amortization and (ii) decreases in share-based compensation expense. Operating Cash Flow - Liberty Global Group (Europe) OCF for the operations attributed to the Liberty Global Group remained flat at $2.1 billion and $6.1 billion for the three and nine months ended September 30, 2016, respectively. The outcome for both periods was the result of organic OCF growth and the aforementioned inclusion of BASE21 being fully offset by the adverse impact of FX movements, mainly related to the appreciation of the U.S. dollar relative to the British pound. On a rebased basis, the operations attributed to the Liberty Global Group reported OCF growth for the three and nine months ended September 30, 2016 of 3% and 2%, respectively. When excluding Ziggo, the rebased OCF growth of the Liberty Global Group for the Q3 and YTD periods was 5% and 3%, respectively, as compared to the corresponding 2015 periods. The Liberty Global Group rebased OCF performance for the Q3 comparison included the net negative impact of certain items, the most significant of which were the aforementioned nonrecurring or non-operational revenue items. From a YTD perspective, our rebased OCF performance included the net unfavorable revenue items mentioned above and other items. The most significant of these items were the $18 million negative impact of reduced network infrastructure charges in the U.K. in YTD 2015 and the $24 million positive impact of lower year-over-year Ziggo integration expenses in the Netherlands. Regionally, our operations in Western Europe posted 3% rebased OCF growth in Q3 2016, while our CEE operations delivered 2% rebased OCF growth. The CEE performance was our best quarterly result in two years, supported by strong performances in Hungary and our DTH business. Looking at the Liberty Global Group's five largest operations, our Q3 performance was driven by Unitymedia in Germany and Virgin Media in the U.K./Ireland, which reported 7% and 6% rebased OCF growth, respectively. Our performance in Germany was the result of the aforementioned revenue drivers, while Virgin Media benefited from higher revenue and a year-over-year margin expansion, partially attributable to cost controls that more than offset increased programming costs. Our operation in Belgium delivered 3% rebased OCF growth, supported by marginal revenue growth and operating efficiencies, partially offset by BASE integration costs. In Switzerland/Austria, UPC reported 2% rebased OCF growth primarily attributable to the net effect of revenue increases, higher direct costs including mobile handsets and lower staff-related costs associated with the Swiss/Austria integration. Finally, in the Netherlands, Ziggo posted a 4% rebased OCF contraction, reflecting the net effect of revenue declines, lower indirect expenses related to declines in integration-related costs stemming from the merger of Ziggo and UPC Netherlands and higher direct costs, including increases in content costs related to Ziggo Sport. The Liberty Global Group reported OCF margins22 of 47.8% and 46.9% for the three and nine months ended September 30, 2016, respectively, as compared to the 48.1% and 47.8% margins that were reported for the corresponding prior-year periods. Both year-over-year declines were primarily affected by the inclusion of BASE, which has structurally lower OCF margins than our fixed-line cable business in Belgium. Net Earnings (Loss) - Liberty Global Group (Europe) For the three and nine months ended September 30, 2016, operations attributed to the Liberty Global Group reported net losses of $137 million and $247 million, respectively, as compared to net earnings (loss) of $111 million and ($853 million), respectively, during the corresponding prior-year periods. Property and Equipment Additions - Liberty Global Group (Europe) Operations attributed to Liberty Global Group reported property and equipment ("P&E") additions23 of $1.1 billion or 25.2% of revenue for the three months ended September 30, 2016, as compared to $981 million or 22.9% of revenue in the prior-year period. On a YTD basis, we reported P&E additions of $3.1 billion or 23.8% of revenue during 2016 as compared to $2.8 billion or 22.1% of revenue for the corresponding prior-year period. The increase in our absolute P&E additions for the YTD period was due to higher spend for line extensions, upgrades/rebuild and scalable infrastructure, higher spend on support capital, spend related to the acquisition of BASE and higher spend on customer premises equipment ("CPE"), partially offset by the strengthening of the U.S. dollar against the British pound. The drivers for the increase in absolute P&E additions for the Q3 period were similar to the YTD drivers. With regard to the allocation of our Q3 2016 P&E additions by category, our Q3 2016 P&E additions by category, 48% was related to line extensions, upgrade/rebuild and scalable infrastructure, 24% pertained to CPE and 28% was categorized as support capital. Condensed Consolidated Statements of Cash Flows - Liberty Global Group (Europe) For the nine months ended September 30, 2016, the Liberty Global Group's net cash provided by operating activities was $3,814 million, as compared to $3,958 million during the prior-year period. This decrease in cash provided is primarily attributable to the net effect of (i) higher payments for interest, (ii) higher cash receipts related to derivative instruments and (iii) higher payments for taxes. For the nine months ended September 30, 2016, the Liberty Global Group's net cash used by investing activities was $2,833 million, as compared to $2,531 million during the prior-year period. This increase in cash used is primarily attributable to the net effect of (i) an increase in cash used of $1,336 million associated with higher cash paid in connection with acquisitions, (ii) a decrease in cash used of $681 million associated with lower cash paid related to investments in and loans to affiliates and others, (iii) a decrease in cash used of $119 million related to the sale of investments, (iv) an increase in cash of $112 million related to net inter-group cash payments and receipts, (v) a decrease in cash used of $79 million due to lower capital expenditures and (vi) a decrease in cash used of $70 million as a result of cash proceeds received in the 2016 period in connection with the settlement of certain litigation. For the nine months ended September 30, 2016, the Liberty Global Group's net cash used by financing activities was $1,215 million, as compared to $1,621 million during the prior-year period. This decrease in cash used is primarily attributable to the net effect (i) an increase in cash used of $334 million related to lower net borrowings of debt, (ii) $271 million due to lower payments for financing costs and debt premiums, (iii) $259 million due to lower payments related to derivative instruments, (iv) $142 million related to purchases of additional shares of our subsidiaries during the 2015 period (v) $130 million associated with an increase in cash received from call option contracts on Liberty Global ordinary shares and (vi) $100 million due to higher repurchases of Liberty Global ordinary shares. Adjusted Free Cash Flow - Liberty Global Group (Europe) For the three and nine months ended September 30, 2016, our operations attributed to the Liberty Global Group generated adjusted free cash flow of $558 million and $970 million, respectively, as compared to $759 million and $1.7 billion, respectively, in the prior-year periods. The decline in our adjusted FCF in Q3 2016, as compared to the prior-year period, was attributable to the net effect of (i) higher interest payments (including related derivative instruments), (ii) lower benefits from capital-related vendor financing activities, (iii) improvements in cash provided from OCF and related working capital items, including benefits from operating expense-related vendor financing activities, and (iv) favorable movements in FX. The YTD year-over-year decrease was attributable to the net effect of (a) lower benefits from capital-related vendor financing activities, (b) higher interest payments (including related derivative instruments), (c) favorable movements in FX and (d) a decrease in cash provided from OCF and related working capital items, including benefits from operating expense-related vendor financing activities. Leverage, Liquidity & Shares Outstanding - Liberty Global Group (Europe) We had total third-party debt and capital lease obligations of $38.2 billion and cash and cash equivalents of $506 million attributed to the Liberty Global Group at September 30, 2016. Our total third-party debt and capital lease obligations decreased by $7.7 billion from Q2 2016, due primarily to the application of held-for-sale accounting in connection with the pending formation of the Dutch JV. In this regard, the outstanding third-party debt and capital lease obligations of Ziggo Group Holding and certain of its subsidiaries are now classified as long-term liabilities associated with assets held for sale and, accordingly, are not reflected in our third-party debt balances. After excluding $2.3 billion of debt backed by shares we hold in ITV plc, Sumitomo Corporation and Lions Gate Entertainment Corp., the Liberty Global Group's consolidated adjusted gross and net leverage ratios24 at September 30, 2016 were 5.1x and 5.0x, respectively, which were broadly in-line with our reported numbers at June 30, 2016. At the end of September 2016, the Liberty Global Group's average tenor25 of third-party debt was over seven years, with more than 90% of such third-party debt not due until 2021 or beyond. In addition, at September 30, 2016, the blended fully-swapped borrowing cost26 of our third-party debt was 4.8% and our consolidated liquidity position was approximately $3.6 billion, including $506 million of cash and the aggregate unused borrowing capacity under our credit facilities27 of $3.1 billion. At October 27, 2016, we had 907 million Liberty Global Group shares outstanding, including 257 million Class A ordinary shares, 11 million Class B ordinary shares and 639 million Class C ordinary shares. Subscriber Statistics - LiLAC Group At the end of Q3, the LiLAC Group provided 2.9 million customers with 5.4 million subscription services across its footprint of 6.1 million homes passed, predominantly within Latin America and the Caribbean. During the third quarter of 2016, we increased our subscriber base by 27,000 RGUs driven by 30,000 broadband gains and 5,000 video additions, partially offset by 7,000 fixed-line telephony losses. At September 30, 2016, we had 1.7 million video, 2.0 million broadband internet and 1.7 million fixed-line telephony subscriptions. We ended Q3 2016 with a bundling ratio of 1.85 RGUs per customer, providing ample runway for growth, as 29% of our customers subscribed to triple-play (0.8 million), 27% to double-play (0.8 million) and 44% to single-play products (1.3 million). Our organic RGU performance resulted from contributions from all three of our geographically diverse entities. In Chile, our third quarter results showed continuation of the operating momentum that we established during the first half of the year, as year-over-year improvements in our video and broadband internet subscriber growth supported a total of 13,000 RGU additions in Q3. During the third quarter of 2016, VTR added 4,000 video subscribers, our best Q3 result in three years due to continued traction of our "Vive Más" bundles, which feature Chile's most robust HD channel line-up. We experienced similar success in our broadband internet performance, as we added 21,000 subscribers during Q3, our strongest third quarter result in nearly ten years. Finally, we lost 12,000 fixed-line telephony subscribers in Chile as we continue to see customers opting for mobile-only telephony solutions. At Cable & Wireless, we added 9,000 RGUs during the quarter, with subscriber growth across all three products. In terms of broadband internet, we added 7,000 organic subscribers on the back of 5,000 RGU additions in Jamaica. In Panama, we recently launched our "Mast3r" bundles featuring HD, play from start, live pause and rewind functionality and 300 Mbps broadband speeds. From a video perspective, we added 1,000 RGUs, primarily driven by the success of our DTH business in Panama, where we have seen strong demand for our prepaid TV product. Our Q3 2016 organic RGU additions of 5,000 in Puerto Rico were broadly in line with our prior-year performance with gains in broadband internet and fixed-line telephony, offset by video attrition. Our continued subscriber growth has been a testament to our market-leading broadband speeds and innovative TV offerings, including our lower-ARPU Spanish language packages, as we continue to face macroeconomic headwinds on the island. Turning to our wireless business, the LiLAC Group lost 20,000 mobile subscribers on an organic basis, ending the quarter with a total of 3.6 million subscribers. Our postpaid subscriber count increased by 18,000 during the quarter, while we experienced organic prepaid attrition of 39,000 subscribers. Our Chilean mobile performance continues to enjoy a resurgence with 14,000 subscriber additions during the quarter, our highest quarterly result in nearly four years. At quarter end, our mobile base in Chile stood at 153,000 subscribers, which is the largest in VTR's history. The continued success of our mobile offering can be attributed to operational improvements, including refreshed packages, that were implemented earlier this year at VTR. Elsewhere in the region, we added 4,000 and 3,000 mobile subscribers in the Bahamas and Jamaica, respectively. Acquisition of Cable & Wireless - LiLAC Group On May 16, 2016, a subsidiary of Liberty Global acquired CWC. Accordingly, CWC has been included in our financial results under Liberty Global's U.S. GAAP accounting policies effective May 16, 2016. Revenue - LiLAC Group For the three and nine months ended September 30, 2016, revenue for the operations attributed to the LiLAC Group increased 190% to $894 million and 98% to $1.8 billion for the three and nine months ended September 30, 2016, as compared to the corresponding prior-year periods. Our reported growth for the Q3 period was primarily driven by the acquisition of CWC and, to a lesser extent, organic growth in VTR and Puerto Rico, partially offset by adverse movements in foreign currencies. For the YTD period, our reported revenue growth was primarily driven by the acquisitions of CWC and Choice, as well as organic growth in VTR and Puerto Rico, offset by adverse FX movements. Adjusted for acquisitions and FX movements, our operations attributed to the LiLAC Group reported a rebased revenue decline of 1% in the Q3 2016 period and rebased revenue growth of 1% for the YTD 2016 period. Geographically, VTR in Chile delivered 6% year-over-year rebased revenue growth in Q3 2016, primarily due to an increase in cable subscription revenue. During Q3 in Puerto Rico, we had relatively flat year-over-year rebased revenue growth, as increases in revenue from our B2B business and higher subscriber volume was partially offset by a decline in ARPU per RGU. Finally, our recently acquired CWC business, reported a 4% rebased revenue contraction during Q3 2016, as strength in Jamaica, driven by continued subscriber growth compared to the corresponding prior-year period, was more than offset by competitive and macroeconomic factors, including in the Bahamas, Barbados and Trinidad and Tobago. In Panama, we experienced sustained intense competition in the mobile market, however we maintained mobile revenue in-line with the corresponding prior-year period as we focused on the acquisition and retention of high-ARPU postpaid subscribers. Overall revenue in Panama during Q3 2016 declined compared to the prior-year period due to the completion of certain non-recurring B2B projects in the prior year. Operating Income - LiLAC Group For the three and nine months ended September 30, 2016, operations attributed to the LiLAC Group reported operating income of $139 million and $178 million, respectively, representing an increase (decrease) of 108% and (4%) when compared to the corresponding prior-year periods. These changes were primarily due to the net effect of (i) increases in OCF, as described below, (ii) increases in depreciation and amortization and (iii) increases in impairment, restructuring and other operating items, net. The changes in these factors were primarily due to the inclusion of CWC. Operating Cash Flow - LiLAC Group Our OCF attributed to the LiLAC Group increased by 177% to $355 million and 95% to $708 million for the three and nine months ended September 30, 2016, as compared to the same prior-year periods. Our reported growth for each period was primarily driven by the acquisition of CWC and organic growth in Chile and Puerto Rico. Growth in the YTD period was partially offset by adverse FX movements, primarily associated with the depreciation of the Chilean Peso against the U.S. Dollar. On a rebased basis, LiLAC posted OCF growth of 5% for each of the three and nine month periods ended September 30, 2016. Regionally, our Q3 performance was led by our Puerto Rican operation, which delivered 21% rebased OCF growth in the quarter. Our Puerto Rico result benefited significantly from the reversal of a previously-recorded provision and related indemnification asset in connection with a favorable ruling on an outstanding legal case. Cost controls, primarily over our indirect expenses, also contributed to this growth. Elsewhere in the region, VTR reported 3% rebased OCF growth in the quarter, as the aforementioned revenue drivers were partially offset by higher costs for programming and increased staff-related costs. The higher programming costs were due in part to an increase in enhanced video subscribers and the impact of foreign currency exchange rate fluctuations on our U.S. dollar-denominated programming contracts, while the higher staff-related costs primarily reflect higher incentive compensation. Rounding out our operations, CWC delivered 2.5% rebased OCF growth during Q3 2016, despite the aforementioned decline in revenue. This growth was driven by the continued realization of staff- and network-related synergies following the Columbus acquisition, further cost discipline across CWC's markets and reduced integration costs. These factors were partially offset by a significant increase in content costs, as compared to the prior year quarter, largely due to the amortization of acquired Premier League rights starting in Q3 2016. We reported OCF margins for the LiLAC Group of 39.7% and 39.3% for the three and nine months ended September 30, 2016. In the corresponding prior-year periods, LiLAC Group's OCF margins were 41.4% and 40.0%, respectively. The year-over-year declines in each period were primarily related to the inclusion of CWC's lower OCF margin from the date of acquisition. Excluding CWC, LiLAC Group's YTD OCF margin improved from 40.0% in YTD 2015 to 41.4% in YTD 2016. Net Earnings (Loss) - LiLAC Group For the three and nine months ended September 30, 2016, operations attributed to the LiLAC Group reported net losses of $68 million and $222 million, respectively, as compared to net earnings of $30 million and $62, respectively, during the corresponding prior-year periods. CWC Historical Financials - LiLAC Group The following table provides a reconciliation of CWC's previously-disclosed Adjusted EBITDA under International Financial Reporting Standards, as adopted by the European Union ("EU-IFRS)" based on CWC's pre-acquisition definitions and policies to OCF under U.S. GAAP using Liberty Global's definitions and policies. The OCF amounts below have been or will be used for purposes of computing rebased growth rates, as further adjusted for foreign currency impacts. Amounts presented below are subject to adjustment as we continue the accounting integration process.
Synergies - LiLAC Group As a result of a review undertaken following the CWC acquisition, we expect the LiLAC Group, through its combination with CWC, to deliver $150 million of synergies by year-end 2020. Fifty percent of the anticipated savings represents OCF improvements, primarily in the form of recurring operating costs reductions, and the remaining 50% represents recurring and nonrecurring capital expenditure reductions. These amounts have not been reduced for related one-time integration costs. Areas of savings include the elimination of public company expenses, further corporate and administrative rationalization of existing LiLAC Group operations with those of CWC, leveraging the combined scale in areas such as content, procurement, and product development, and capitalizing on CWC's terrestrial and submarine network assets, B2B expertise and product portfolio to further drive savings in the combined operations. Property and Equipment Additions - LiLAC Group The LiLAC Group incurred P&E additions of $160 million or 17.9% of revenue for the three months ended September 30, 2016 as compared to $59 million or 19.1% of revenue in Q3 2015. From a YTD perspective, the LiLAC Group reported P&E additions of $365 million or 20.3% of revenue in Q3 2016 as compared to $185 million or 20.4% of revenue in Q3 2015. For the Q3 period, the increase in absolute P&E additions was due to the acquisition of CWC, higher spend on CPE and the appreciation of the Chilean peso against the U.S. dollar, partially offset by decreases in support capital and scalable infrastructure. The increase in absolute P&E additions for the YTD period was driven by the acquisition of CWC and, to a much lesser extent, Choice in Puerto Rico, higher spend on CPE, higher spend for line extensions, upgrade/rebuild and scalable infrastructure and higher spend on support capital, partially offset by the depreciation of the Chilean peso against the U.S. dollar. In terms of our Q3 P&E additions by category, excluding CWC, 55% was spent on CPE, 34% on scalable infrastructure, line extensions and upgrade/rebuild activity and 11% on support capital. Condensed Consolidated Statements of Cash Flows - LiLAC Group For the nine months ended September 30, 2016, the LiLAC Group's net cash provided by operating activities was $228 million, as compared to $202 million during the prior-year period. This increase in cash provided is primarily attributable to the net effect of (i) an increase in cash provided by OCF and related working capital items due to the impact of the acquisition of CWC, (ii) higher payments for interest and (iii) higher payments for taxes. For the nine months ended September 30, 2016, the LiLAC Group's net cash used by investing activities was $308 million, as compared to $440 million during the prior-year period. This decrease in cash used is primarily attributable to the net effect of (i) an increase in cash received of $290 million in connection with acquisitions and (ii) an increase in cash used of $173 million related to higher payments for capital expenditures. For the nine months ended September 30, 2016, the LiLAC Group's net cash provided by financing activities was $270 million, as compared to $378 million during the prior-year period. This decrease in cash provided is primarily attributable to the net effect of (i) a decrease in cash of $112 million related to net inter-group payments and receipts, (ii) an increase in cash provided of $86 million due to higher net borrowings of debt and (iii) a decrease in cash provided of $25 million due to higher payments for financing costs and debt premiums. Adjusted Free Cash Flow - LiLAC Group For the three and nine months ended September 30, 2016, our operations attributed to the LiLAC Group reported negative adjusted FCF of $39 million and $55 million, respectively, as compared to positive FCF of $12 million and $40 million, respectively, in the prior-year periods. The year-over-year declines for both Q3 and YTD, as compared to the prior-year periods, were primarily the result of including the negative adjusted free cash flow attributable to CWC's business. Excluding the impact of CWC, both periods were also impacted by negative changes in working capital and higher income taxes payments. In addition, the increase in P&E additions was largely offset by benefits stemming from our vendor financing program. Leverage, Liquidity & Shares Outstanding - LiLAC Group At the end of Q3, we had approximately $6.0 billion of total third-party debt and capital lease obligations and $471 million of cash and cash equivalents attributed to the LiLAC Group. The LiLAC Group third-party debt and cash balances stayed relatively stable as compared to Q2 2016. With respect to our leverage position at September 30, 2016, we had consolidated gross and net leverage ratios associated with debt attributed to the LiLAC Group of 4.2x and 3.9x, respectively. The LiLAC Group's average tenor of third-party debt was approximately five and a half years, with less than 10% of such third-party debt due prior to 2021. In addition, at September 30, 2016, the blended fully-swapped borrowing cost of our third-party debt was 6.5% and our consolidated liquidity position was approximately $1.0 billion, including $471 million of cash and $598 million of aggregate unused borrowing capacity under our credit facilities27. At October 27, 2016, we had 174 million LiLAC shares outstanding, including 51 million Class A ordinary shares, 2 million Class B ordinary shares and 121 million Class C ordinary shares. Forward-Looking Statements This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements with respect to our strategies, future growth prospects and opportunities; expected RGU additions; expected future revenue, OCF (including with respect to CWC) and adjusted FCF growth; expectations with respect to the development, enhancement and expansion of our superior networks and innovative and advanced products and services, including the roll-out of our 4G mobile product in the U.K.; plans and expectations relating to new build and network extension opportunities, including estimated number of homes to be constructed; the expected impact of Hurricane Matthew on our operations in the Bahamas; the acquisition of CWC, the pending joint venture in the Netherlands and the proposed acquisition of Multimedia Polska and the anticipated benefits, costs and synergies in connection therewith; expectations regarding our share buyback program; the strength of our balance sheet and tenor of our third-party debt; and other information and statements that are not historical fact. These forward-looking statements involve certain risks and uncertainties that could cause actual results to differ materially from those expressed or implied by these statements. These risks and uncertainties include the continued use by subscribers and potential subscribers of our services and their willingness to upgrade to our more advanced offerings; our ability to meet challenges from competition, to manage rapid technological change or to maintain or increase rates to our subscribers or to pass through increased costs to our subscribers; the effects of changes in laws or regulation; our ability to maintain certain accreditations; general economic factors; our ability to obtain regulatory approval and satisfy regulatory conditions associated with acquisitions and dispositions; our ability to successfully acquire and integrate new businesses and realize anticipated efficiencies from businesses we acquire; the availability of attractive programming for our video services and the costs associated with such programming; our ability to achieve forecasted financial and operating targets; the outcome of any pending or threatened litigation; the ability of our operating companies to access cash of their respective subsidiaries; the impact of our operating companies' future financial performance, or market conditions generally, on the availability, terms and deployment of capital; fluctuations in currency exchange and interest rates; the ability of suppliers and vendors (including our third-party wireless network providers under our MVNO arrangements) to timely deliver quality products, equipment, software, services and access; our ability to adequately forecast and plan future network requirements including the costs and benefits associated with network expansions; and other factors detailed from time to time in our filings with the Securities and Exchange Commission, including our most recently filed Form 10-K and Form 10-Qs. These forward-looking statements speak only as of the date of this release. We expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. About Liberty Global Liberty Global is the world's largest international TV and broadband company, with operations in more than 30 countries across Europe, Latin America and the Caribbean. We invest in the infrastructure that empowers our customers to make the most of the digital revolution. Our scale and commitment to innovation enables us to develop market-leading products delivered through next-generation networks that connect our 29 million customers who subscribe to over 60 million television, broadband internet and telephony services. We also serve 10 million mobile subscribers and offer WiFi service across seven million access points. Liberty Global's businesses are comprised of two stocks: the Liberty Global Group (NASDAQ: LBTYA, LBTYB and LBTYK) for our European operations, and the LiLAC Group (NASDAQ: LILA and LILAK, OTC Link: LILAB), which consists of our operations in Latin America and the Caribbean. The Liberty Global Group operates in 12 European countries under the consumer brands Virgin Media, Ziggo, Unitymedia, Telenet and UPC. The LiLAC Group operates in over 20 countries in Latin America and the Caribbean under the consumer brands VTR, Flow, Liberty, Mas Movil and BTC. In addition, the LiLAC Group operates a sub-sea fiber network throughout the region in over 30 markets. For more information, please visit www.libertyglobal.com Footnotes
Balance Sheets, Statements of Operations and Statements of Cash Flows The condensed consolidated balance sheets, statements of operations and statements of cash flows of Liberty Global are included in our 10-Q. For attributed financial information of the Liberty Global Group and the LiLAC Group, see Exhibit 99.1 to our 10-Q. Revenue and Operating Cash Flow In the following tables, we present revenue and operating cash flow by reportable segment for the three and nine months months ended September 30, 2016, as compared to the corresponding prior-year periods. All of our reportable segments derive their revenue primarily from consumer and B2B services, including video, broadband internet and fixed-line telephony services and, with the exception of Puerto Rico, mobile services. For detailed information regarding the composition of our reportable segments, see note 14 to our condensed consolidated financial statements included in our 10-Q. For purposes of calculating rebased growth rates on a comparable basis for all businesses that we owned during 2016, we have adjusted our historical revenue and OCF for the three and nine months ended September 30, 2015 to (i) include the pre-acquisition revenue and OCF of certain entities acquired during 2015 and 2016 in our rebased amounts for the three and nine months ended September 30, 2015 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, 2016, (ii) exclude the pre-disposition revenue and OCF of "offnet" subscribers in the U.K. that were disposed in the fourth quarter of 2014 and the first half of 2015 from our rebased amounts for the three and nine months ended September 30, 2015 to the same extent that the revenue and OCF of these disposed subscribers is excluded from our results for the three and nine months ended September 30, 2016, (iii) exclude the revenue and OCF related to a partner network agreement that was terminated shortly after the Ziggo acquisition from our rebased amounts for the nine months ended September 30, 2015 to the same extent that the revenue and OCF from this partner network is excluded from our results for the nine months ended September 30, 2016, (iv) exclude the pre-disposition revenue, OCF and associated intercompany eliminations of Film1, which was disposed in the third quarter of 2015, from our rebased amounts for the three and nine months ended September 30, 2015 to the same extent that the revenue, OCF and associated intercompany eliminations are excluded from our results for the three and nine months ended September 30, 2016, (v) exclude the revenue and OCF of multi-channel multi-point (microwave) distribution system subscribers in Ireland that have disconnected since we announced the switch-off of this service effective April 2016 for the three and nine months ended September 30, 2015 to the same extent that the revenue and OCF of these subscribers is excluded from our results for the three and nine months ended September 30, 2016 and (vi) reflect the translation of our rebased amounts for the three and nine months ended September 30, 2015 at the applicable average foreign currency exchange rates that were used to translate our results for the three and nine months ended September 30, 2016. We have included CWC, BASE and two small entities in whole or in part in the determination of our rebased revenue and OCF for the three months ended September 30, 2015. We have included CWC, BASE, Choice and two small entities in whole or in part in the determination of our rebased revenue and OCF for the nine months ended September 30, 2015. We have reflected the revenue and OCF of the acquired entities in our 2015 rebased amounts based on what we believe to be the most reliable information that is currently available to us (generally pre-acquisition financial statements), as adjusted for the estimated effects of (a) any significant differences between Generally Accepted Accounting Principles in the United States ("U.S. GAAP") and local generally accepted accounting principles, (b) any significant effects of acquisition accounting adjustments, (c) any significant differences between our accounting policies and those of the acquired entities and (d) other items we deem appropriate. We do not adjust pre-acquisition periods to eliminate nonrecurring items or to give retroactive effect to any changes in estimates that might be implemented during post-acquisition periods. As we did not own or operate the acquired businesses during the pre-acquisition periods, no assurance can be given that we have identified all adjustments necessary to present the revenue and OCF of these entities on a basis that is comparable to the corresponding post-acquisition amounts that are included in our historical results or that the pre-acquisition financial statements we have relied upon do not contain undetected errors. The adjustments reflected in our rebased amounts have not been prepared with a view towards complying with Article 11 of Regulation S-X. In addition, the rebased growth percentages are not necessarily indicative of the revenue and OCF that would have occurred if these transactions had occurred on the dates assumed for purposes of calculating our rebased amounts or the revenue and OCF that will occur in the future. The rebased growth percentages have been presented as a basis for assessing growth rates on a comparable basis, and are not presented as a measure of our pro forma financial performance. Therefore, we believe our rebased growth rates are not a non-U.S. GAAP financial measure as contemplated by Regulation G or Item 10 of Regulation S-K. The following table provides adjustments made to the 2015 amounts to derive our rebased growth rates for the Liberty Global Group and the LiLAC Group:
In each case, the following tables present (i) the amounts reported by each of our reportable segments for the comparative periods, (ii) the U.S. dollar change and percentage change from period to period and (iii) the percentage change from period to period on a rebased basis:
______________________________ * - Omitted; N.M. - Not Meaningful
* - Omitted; N.M. - Not Meaningful
* - Omitted; N.M. - Not Meaningful
* - Omitted; N.M. - Not Meaningful
OCF Definition and Reconciliation As used herein, OCF has the same meaning as the term "Adjusted OIBDA" that is referenced in our 10-Q. OCF is the primary measure used by our chief operating decision maker to evaluate segment operating performance. OCF is also a key factor that is used by our internal decision makers to (i) determine how to allocate resources to segments and (ii) evaluate the effectiveness of our management for purposes of annual and other incentive compensation plans. As we use the term, OCF is defined as operating income before depreciation and amortization, share-based compensation, provisions and provision releases related to significant litigation and impairment, restructuring and other operating items. Other operating items include (a) gains and losses on the disposition of long-lived assets, (b) third-party costs directly associated with successful and unsuccessful acquisitions and dispositions, including legal, advisory and due diligence fees, as applicable, and (c) other acquisition-related items, such as gains and losses on the settlement of contingent consideration. Our internal decision makers believe OCF is a meaningful measure because it represents a transparent view of our recurring operating performance that is unaffected by our capital structure and allows management to (1) readily view operating trends, (2) perform analytical comparisons and benchmarking between segments and (3) identify strategies to improve operating performance in the different countries in which we operate. We believe our OCF measure is useful to investors because it is one of the bases for comparing our performance with the performance of other companies in the same or similar industries, although our measure may not be directly comparable to similar measures used by other public companies. OCF should be viewed as a measure of operating performance that is a supplement to, and not a substitute for, operating income, net earnings or loss, cash flow from operating activities and other U.S. GAAP measures of income or cash flows. A reconciliation of total segment OCF to our operating income is presented below.
Summary of Debt, Capital Lease Obligations and Cash and Cash Equivalents The following table1 details the U.S. dollar equivalent balances of our third-party consolidated debt, capital lease obligations and cash and cash equivalents at September 30, 2016:
Property and Equipment Additions and Capital Expenditures The tables below highlight the categories of the property and equipment additions attributed to the Liberty Global Group and the LiLAC Group for the indicated periods and reconciles those additions to the capital expenditures that are presented in the attributed statement of cash flows information included in Exhibit 99.1 to our 10-Q: Liberty Global Group
LiLAC Group
Adjusted Free Cash Flow Definition and Reconciliation We define adjusted free cash flow as net cash provided by our operating activities, plus (i) excess tax benefits related to the exercise of share-based incentive awards, (ii) cash payments for third-party costs directly associated with successful and unsuccessful acquisitions and dispositions and (iii) expenses financed by an intermediary, less (a) capital expenditures, as reported in our condensed consolidated statements of cash flows, (b) principal payments on amounts financed by vendors and intermediaries and (c) principal payments on capital leases (exclusive of the portions of the network lease in Belgium and the duct leases in Germany that we assumed in connection with certain acquisitions), with each item excluding any cash provided or used by our discontinued operations. We believe that our presentation of adjusted free cash flow provides useful information to our investors because this measure can be used to gauge our ability to service debt and fund new investment opportunities. Adjusted free cash flow should not be understood to represent our ability to fund discretionary amounts, as we have various mandatory and contractual obligations, including debt repayments, which are not deducted to arrive at this amount. Investors should view adjusted free cash flow as a supplement to, and not a substitute for, U.S. GAAP measures of liquidity included in our condensed consolidated statements of cash flows. Beginning with the third quarter of 2016, we changed the name of this metric from "free cash flow" to "adjusted free cash flow." We have not changed how we calculate this metric. The following table provides the reconciliation of our net cash provided by operating activities to adjusted FCF for the indicated periods:
ARPU per Customer Relationship8 The following table provides ARPU per customer relationship for the indicated periods:
Mobile Statistics The following tables provide ARPU per mobile subscriber11 and mobile subscribers12 for the indicated periods:
RGUs, Customers and Bundling14 The following table provides information on the breakdown of our RGUs and customer base and highlights our customer bundling metrics at September 30, 2016, June 30, 2016, and September 30, 2015:
Footnotes for Operating Data and Subscriber Variance Tables
Additional General Notes to Tables: As a result of our decision to discontinue our Multi-channel Multipoint Distribution System ("MMDS") service in Ireland, we have excluded subscribers to our MMDS service from our externally reported operating statistics effective January 1, 2016, which resulted in a reduction to Homes Passed, RGUs, and Customer Relationships in Ireland and Slovakia of 22,200 and 500, respectively. Most of our broadband communications subsidiaries provide telephony, broadband internet, data, video or other B2B services. Certain of our B2B revenue is derived from small or home office ("SOHO") subscribers that pay a premium price to receive enhanced service levels along with video, internet or telephony services that are the same or similar to the mass marketed products offered to our residential subscribers. All mass marketed products provided to SOHOs, whether or not accompanied by enhanced service levels and/or premium prices, are included in the respective RGU and customer counts of our broadband communications operations, with only those services provided at premium prices considered to be "SOHO RGUs" or "SOHO customers." SOHO customers of CWC are not included in our respective RGU and customer counts as of September 30, 2016. With the exception of our B2B SOHO subscribers, we generally do not count customers of B2B services as customers or RGUs for external reporting purposes. Certain of our residential and commercial RGUs are counted on an EBU basis, including residential multiple dwelling units and commercial establishments such as bars, hotels and hospitals in Chile and Puerto Rico and certain commercial and residential multiple dwelling units in Europe (with the exception of Germany and Belgium, where we do not count any RGUs on an EBU basis). Our EBUs are generally calculated by dividing the bulk price charged to accounts in an area by the most prevalent price charged to non-bulk residential customers in that market for the comparable tier of service. As such, we may experience variances in our EBU counts solely as a result of changes in rates. In Germany, homes passed reflect the footprint and two-way homes passed reflect the technological capability of our network up to the street cabinet, with drops from the street cabinet to the building generally added, and in-home wiring generally upgraded, on an as needed or success-based basis. In Belgium, Telenet leases a portion of its network under a long-term capital lease arrangement. These tables include operating statistics for Telenet's owned and leased networks. While we take appropriate steps to ensure that subscriber statistics are presented on a consistent and accurate basis at any given balance sheet date, the variability from country to country in (i) the nature and pricing of products and services, (ii) the distribution platform, (iii) billing systems, (iv) bad debt collection experience and (v) other factors add complexity to the subscriber counting process. We periodically review our subscriber counting policies and underlying systems to improve the accuracy and consistency of the data reported on a prospective basis. Accordingly, we may from time to time make appropriate adjustments to our subscriber statistics based on those reviews. Subscriber information for acquired entities, including CWC, is preliminary and subject to adjustment until we have completed our review of such information and determined that it is presented in accordance with our policies.
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