Welcome to Liberty Global's Third Quarter 2016 Results Investor Call. This call and the associated webcast are the property of Liberty Global and any redistribution, retransmission or rebroadcast of this call or webcast in any form without the express written consent of Liberty Global is strictly prohibited. [Operator Instructions]. As a reminder, this investor call is being recorded on this date, November 4, 2016. Page 2 of the slides details the Company's Safe Harbor statements regarding forward-looking statements. Today's presentation materials may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including the Company's expectations with respect to its outlook and future growth prospects and other information and statements that are not historical fact. These forward-looking statements involve certain risks that could cause actual results to differ materially from those expressed or implied by these statements. These risks include those detailed from time to time in Liberty Global's filings with the Securities and Exchange Commission, including its most recently filed Form 10-Q and 10-K. Liberty Global disclaims any obligation to update any of these forward-looking statements to reflect any change in its expectations or in the conditions on which any such statement is based. I would now like to turn the call over to Mr. Mike Fries.

Okay. Thank you, operator and good morning or good afternoon, everyone. Appreciate you joining us on our Q3 investor call today. I've got, as usual, a bunch of my senior leadership team from Europe and Denver on the call and they will chime in as needed during our Q&A. I will do things a bit differently today. We'll spend time on each of Europe and Latin America separately to try to give you a bit more data. And then starting next year, we'll most likely migrate to separate calls to provide better transparency and color on each of the asset groups. But today I'll get started with some brief remarks about the quarter, focusing on products and operations for each of the regions. And then Charlie Bracken, our co-CFO, soon-to-be CFO after Bernie's pending retirement at the end of the year, will take us through the financials. And then we'll get right to your questions. As a reminder, we're working off of slides. So if you can get access to those, it will make the presentation a lot more useful, I'm sure. I'm going to start off on slide 4 with key highlights for Europe. And there's seven key takeaways here on this page, all of them very important. I'll begin with perhaps the most important and that of course revolves around growth. On the last two calls we talked a lot about our expectation that we would deliver improved performance in the second half of the year as our Liberty Go initiatives around revenue, new-build and efficiencies began to take hold. And we're pleased to report operating and financial results this quarter that reflect that acceleration. Subscriber growth in Europe year-to-date is now up 50% over last year. And even more importantly, we delivered 5.2% rebased OCF growth in…

Thanks, Mike. First, I'll take you through the financial results for the Liberty Global group which consists of our European operations which include BASE and [indiscernible], followed by an overview of the LiLAC Group which consists of our operations in Chile and Puerto Rico. And, since May 16, cable and wireless. As a reminder, we will deconsolidate another from smart financial reporting once the Vodafone joint venture closes which is anticipated around the end of the year. So throughout my slides, I'll periodically mention certain metrics including the Netherlands to match the basis of our European guidance targets. On Slide 14, we present year-to-date financial results for Europe. Adjusting for FX and the impact of acquisitions, we grew our rebased revenue by 3% year over year to $13.1 billion for the first nine months of 2016. That's broadly in line with our top-line growth in the first nine months of last year. Our rebased OCF growth was 2% or $6.1 billion, for the first nine months and that increases to 3% when you exclude Ziggo in the Netherlands. PP&E additions of $3.1 billion in Europe were at 24% of revenue year to date. That's above the 22% that we reported in the first nine months of last year. Now, excluding the Netherlands, our capital intensity also stood at 24%. That's below our full-year guidance of 26% to 28% of revenue, as the largest portion of our new-build activity is expected to occur in Q4. Absolute PP&E additions increased by $290 million. That's an increase in the year-to-date period and that's largely due to an increased line extension and scalable infrastructure spend related to our new-build projects. In terms of the breakdown of our Q3 period additions, 48% pertain to line extensions, upgrade and rebuild and scalable infrastructure and 24% was…

[Operator Instructions]. And we will take our first question from Michael Bishop with Goldman Sachs.

Just two questions, please. Firstly, there's obviously a lot of moving parts in terms of the Liberty Go efficiencies. And you've pulled out some headcount reductions in the UK and also Germany, I believe. But just from a big-picture perspective, could you talk to us about how far you are through the efficiency savings for this year? And then, as an aggregate how should we think about the efficiency savings phasing in 2017 and 2018? And then just following up on the UK and the slower build, is this completely just a timing issue? And if so, could you just point us to the reasons for that? Or are you actually holding back the investment a little bit given the ongoing issues with BT? Because ultimately if that becomes quite a protracted process around open reach and does that change your overall investment plans in the UK? Thanks very much.

Thanks for the question. This is Mike. On the Liberty Go side, we originally explained that we thought that our cost over a three-year period would be reduced by approximately $1 billion. And that was essentially looking at our normalized increase in OpEx and suggesting that we felt we could keep OpEx indirect costs essentially largely flat over the next three years. And as a result of that, we would be generating efficiencies over what we would normally be spending as we drove revenue growth. And I would say if you look at that phasing, it's a three-year process for the most part and we're not quite a third of the way in. And this year, we're right on track with our anticipated efficiencies, roughly $280 million already realized through the course of this year. And the balance of those will phase in over the next two years or 24 months -- not necessarily equally. And of course, Ziggo moving the Dutch asset out of the group had some differences. We'll clarify those in the first quarter or year-end results call when that happens. But for the most part, that is the trend. We've got a little less than a third already underway this year and there's a bunch more yet to get done. But every one of those efficiency work streams is intact and managed. And getting this T&I reorg underway was a massive effort and that's going to drive a ton of benefits. So it's a long list of things we're doing across central and local market activities and functions and we're on track this year with about $290 million of those efficiencies. Turning to the UK build, I'll let Tom answer. But I'll simply say, no, we're not adjusting our speed to market at all based on BT. If anything, we're speeding up. But I'll let Tom deal with the phasing issues specifically. Tom?

Thanks, Mike. On Lightning, clearly we're continuing to build very, very successfully and we've got a large team out there that it is constantly increasing in its footprint. And we're also increasing the proportion of the build that we do on fiber to the premise. What we're finding -- there are issues particularly dealing with local government authorities and that does mean sometimes it is taking a little bit longer to get those planning permissions and actually getting to the ground. But in no sense is that diminishing our ambition. And particularly as we move to more and more fiber to the premise, we think we can increase the scale of each build we're doing. We'll be less dependent on doing smaller infills. And through that process, we can actually really lift this to the full scale that will get us to the 4 million homes over the period to really 2019. So there's not any sense at all about diminishing our targets or our ambition here. And I would point out again the chart Mike referred to earlier on Page 7 of the deck, that we're delivering these penetrations. We're very positives about the penetrations that we're getting and we're certainly targeting 2017, with the great bulk of our subscriber and RGU growth will be in Lightning homes.

Thanks. And maybe just a follow-up on the BT issue -- does that come into your thinking at all?

Frankly, if we were a cynic we might say that a bit of the disruption at BT is to our advantage. BT said publicly that they are going to hold back on investments while there's uncertainty about their position. But we're running our own race. BT had a long period of advantage in this country where the old Virgin Media wasn't investing. And now with Liberty Global as our shareholder, we've got the resources to do it. So we're running our own race and making a success of that.

And we will take our next question from [indiscernible].

One question -- on Project Lightning, you are bringing at least 200,000 new serviceable homes in 4Q. How have you readied yourselves and marketing efforts around that large volume being brought online? And what type of commercial activity can we expect as a result? Thanks.

Again, Mike, shall I comment on that?

Yes, go ahead.

We're running a fully integrated sales operation. Obviously, we know through the build process where these new homes are coming on stream. And what we do is we run a local marketing effort beforehand. But in particular, we rely on our door-knocker team, the direct sales guys, who will go down the street and knock them door by door. And we will have increasingly a targeted offer in those homes because these are homes where it's the first time they've ever had the opportunity to buy Virgin Media. We're particularly successful in getting Sky customers out of these homes. These are people who haven't had that choice before. And of course, the broadband is a big driver as well. But we have a scale across our wholesale effort that is really driving that direct sales effort into these homes at first pass.

And just one follow-up -- as you change your mix to more STTP, are we assuming this is within the same original geography? Are you moving to new areas?

To some extent, it is changing the geography because the FTTP will be more scale builds. You might see recently we announced we would do Rexam in Northern Wales. There's a significant community which has never had a choice apart from BT before. And we'll be doing that as a turnkey with an external supplier which will give us an entire community. So that's not an infill; that's much more of a line extension. So we'll continue to do the infill as well, but generally the FTTP will be scale builds in significant communities.

And we will take our next question from Vijay Jayant from Evercore ISI.

A couple of questions, I think first, Mike, you talked about one of your pillars of growth being mobile. And if you sort of look at the numbers through 2016, there seems to be some sort of a deceleration. Can you sort of talk to that? And obviously there's some headband on the top line associated with some handset-related negative impact. Can you also address how that works? And second, on your filing you talk about the possibility of a UK network infrastructure tax possibly next year and then the chance of that being reversed. Can you help us understand what that is and the chance of a reversal? Thank you.

Sure, Vijay. On the mobile business, I think we're -- as I said, for us it's strategically critical. We're focused on ensuring that we're developing a quad-play bundle in every market, that we have all the tools in place to be competitive with the product. Every quarter is going to be different. The deceleration I think you are referring to is largely attributable to the handset issue. In some cases, we're not selling handsets and that handset typically would go to revenue and in many cases we're using SIM cards only. So I think the handset revenue might provide a little bit of volatility. For us, what's most important is are we getting post-paid subs added to the footprint. And we're doing that over time to benefit from mobile comp, not just from the revenue of mobile -- certainly not just a one-time revenue, a handset sale where we're providing leasing options and the financing options. But also, more importantly, from the ongoing revenue from that customer and then of course the churn benefits from the quad-play offer. On the tax, Tom, I think you can address that. It's a bit of a nuance in the marketplace and it's -- I don't know how much disclosure we've provided on it, Tom, but you are welcome to address it.

The issue is it's not an infrastructure tax particular to our sector. It's the way that local government revenue is collected in the United Kingdom and the charge is allocated. And the charge does appear to be shifting more to network operators depending irrespective of what industry you are in. And that will be definitely costing us some more going forward. There are transitional arrangements, so it will be a phased increase. It's something that we will absolutely manage within our current potential footprint and won't be a major impact on our numbers going forward. But it's clearly something that we would prefer being handled differently.

And it's also impacting all operators, not just impacting us.

And we will take our next question from Michel Morin from Morgan Stanley.

I was wondering on LiLAC, specifically for this year there's expectations of no free cash flow. But what are your thoughts going into next year? I'm asking the question because we're seeing CapEx declines. And, as I recall, cable and wireless had given guidance of CapEx to sales of 14% for their fiscal March 2018. So I'm wondering how we should be thinking about that CapEx and the potential for free cash flow. And then related to that, are there any plans to possibly use the buyback for LiLAC? Thank you.

Good questions. We're not going to provide any guidance for LiLAC into next year. We'll certainly do that as we get closer, as we finish the year and normally in that February time frame. We'll give you some greater guidance -- I think Charlie addressed the free cash flow profile pretty clearly in his remarks. The business isn't a major generator of free cash flow today, largely because of the interest factor [Technical Difficulty] margins of the business. We expect over time, of course, that the combined LiLAC Group will generate meaningful free cash. And when we have the opportunity to provide a bit more information about that medium term guidance, we'll do it. For the time being, though, I will stick with the guidance that we've given. In terms of buybacks, at this point we haven't done anything with buybacks on LiLAC. Partially that's because of the cash position. There's a couple hundred million dollars of trapped cash in some of the markets. We want to make sure we've got the balance sheet way squared away, our free cash flow profile squared away. I think we're also -- I didn't mention, but we're also heading towards, in our mind, a pretty hard spin sometime next year. So it's our anticipation that sometime in 2017, probably the second half of 2017 because there's quite a bit of financial work that has to be done before you can spin, we will proceed with a spin. It's not a definitive statement, but it's one that's our intention to try to do that, as we've said to you in the past. And as we do that, as we prepare that business to be split out, then we'll certainly obviously be providing a bit more detail behind the scenes. But for the time being, we will stick with the guidance we have.

Mike, just on that last point about the hard spin, does that mean -- I think on the last conference call you had said that you expected to look to do additional deals before doing a hard spin. I think your wording was that you would put more cargo on the ship before letting it sail. Are you kind of changing your view on that now?

Not really. The cargo in that particular reference -- the cargo principally meant expertise, having a good understanding of the business and getting it set to move forward. So the cargo really implied the integration and the time spent as essentially a controlled business within the Liberty Global family, in my opinion, gave us the time to provide them with the expertise, the talent, the benefits of what we've learned in Europe, the procurement relationships, the programming relationships, the strategic guidance -- all of that stuff is what I referred to as cargo. It wasn't actually physical assets. In terms of the M&A front, we'll make the decision about M&A on a case-by-case basis. I'm not suggesting that there won't be or can't be any transactions until we spin. The tracker is a fully viable stock; it's got good liquidity and is trading solidly. So I don't think there's a reason why we couldn't use the tracking stock -- there is no reason why we wouldn't other than what is the deal and are we willing to use stock trading where it is for that deal. So from that point of view, I'd say it's really opportunistic on the M&A front. We wouldn't necessarily have to wait for a spin. But the timing of the spin is really around first, as I said, getting the business organized. And we think we've done that well. And then getting the mechanics of the spin and the accounting straightened out. And that's probably going to be in the second half next year.

And we will take our next question from Jeff Wlodarczak from Pivotal.

I wanted to focus on Germany. On German new-builds, correct me if I'm wrong, it appears you anticipate adding about 120,000 upgrades this year. How much do you expect that to accelerate next year? And then, BT recently has gotten, I guess -- towards the end of the summer has gotten more aggressive around pricing and promotion. Are there any signs of a competitive normalization there yet? And I've got a follow-up.

Well, Balan, I'll let you talk about the new-build program in Germany. On the competitive front -- and I don't know if Lutz is on the call -- but on the competitive front, I think we're holding our own. We've had a great quarter in Germany and I think we're not necessarily succumbing to the game that others are playing in that market. I don't think we need to for the most part. But if you look at our broadband adds and you look at our historical net adds across the market, we're right there we want to be, to 90,000 this quarter and 100,000 last quarter; averaged 90,000 to 100,000 in prior years per quarter. And that's being achieved, we think, in a profitable way. So while we're sensitive to the offers that BT and Vodafone and others are providing, we're not necessarily following right in line. We think that our product -- our speeds are faster our business and our opportunity -- our product opportunity is better for consumers. So we feel good about the market and principle there. In fact, we've got a pretty good push on in the fourth quarter. We should do some pretty meaningful net adds in the fourth quarter. And the cable business in Germany is more than holding its own in terms of new net adds in the market despite pressures from Deutsche Telekom and that's because it's a better product. It's just simply a faster, better bundle and that's what consumers in that market want. On the new-build -- I don't know, Balan, if you are on, if you have that number.

Sure, Jeff. For the upgrades in Germany specifically, we're probably keeping it pretty close to where we had in 2016. And there may be some slight increases. We're still looking for some opportunities, but it's going to be very opportunistic with a lot of the MMAs out there.

And then on Switzerland, you revamped all of your promotions right at the end of the third quarter. Can you provide any color on how those revamped promotions are doing -- how you are doing in the fourth quarter as a result of it?

Too early to tell. The connect-and-play launch is -- that slide I put out there on connect-and-play is essentially our go-to-market strategy -- is going to be our go-to-market strategy everywhere. Switzerland would be one of the first that we've actually rolled it out. The initial results are good. I'm not going to give you any specific guidance in terms of what the fourth quarter is looking like, but I'll tell you that it's resonating pretty well. Our sales are up in October 20%, 30%, so people are certainly excited about what's happening. So from our perspective -- so far, so good, but we want to be careful about providing too much guidance.

And we will take our next question from Ulrich Rathe from Jefferies.

My first question is on the UK. You are highlighting you had sort of a record Q3. But the year-on-year improvement of the intake was a lot lower than last quarter. So I'm wondering how you view that. Is that simply that Q3 in 2015 was a crazy quarter or is there something holding you back? Or how would you sort of describe that? And in this context, could you just clarify one thing on the UK penetration rates? These numbers look very impressive, but I think your competitor has suggested that you are a bit selective with sort of looking at these penetration rates only in certain regions or certain areas. Is this correct or are you doing this strictly over the whole of the new-builds? And then I have a follow-up. Thank you.

Well, on the first question I'm not sure I follow. Net adds are up on almost 50% in the third quarter this year versus third quarter last year and I think this year we did a little over 90,000 and last year somewhere like 65,000 or something like that. So net adds are up year over year -- maybe I misunderstood the question.

That's what I meant to say is that they are up less than in last quarter. That was the question, I suppose.

Well, that has a lot more to do with Q2 2015. Last quarter we did 66,000 RGU net adds in the course of the quarter. Before that was a flat quarter in Q2 2015 -- virtually zero. So that's going to show you obviously a pretty big variance. But a normalized rate is probably where we're and fourth quarter, obviously, we're expecting a pick-up from here. Because, to get the numbers that we're anticipating, both in terms of revenue and operating cash flow growth for the fourth quarter in the UK and with new-build coming on stream, we're certainly anticipating an even bigger number in the fourth quarter this year than we had in the third quarter. Do you want to address the second question, Tom?

I had not heard that one before about any questioning from our competitors and that's not a problem. But what you are seeing here is very directly the number of premises we've installed versus the number of homes that have been built. That's a very simple denominator and numerator and nothing there -- no subtlety to it.

My follow-up would be, again, on Switzerland. These tariff changes are quite interesting, I think, in that they sort of release people from, at least optionally, from the forced and the U-charges. And I think you said this is a blueprint for other countries. Does this mean that you are planning similar tariff structures also in Germany? Because that is quite a material deviation from the way [indiscernible] charged before. Thank you.

Yes and it's not necessarily the -- I'm not suggesting that the pricing structure is repeatable or would be repeated. I'm really talking more about how we will approach the bundle and how we see products marketed. The way we approach the pricing of each bundle in every market will be unique and specific to that market. But the idea of a connect-and-play bundle where you are focused on connectivity and then various entertainment options and various -- and variations of that, that is something we intend to try to do. And we think that's a very simple message for consumers. The pricing will be market by market, of course, depending on the competition, what our existing back-book looks like, et cetera.

And we will take our next question from Ben Swinburne from Morgan Stanley.

Mike, I would have thought the price increase in the UK in November would be a nice revenue tailwind, but you seemed to suggest at the beginning that it was going to drive enough churn maybe to be a net negative in the quarter. Add some color on the impact you'd expected from the price increase and maybe the thought process as to why you guys implemented one, I think, a little bit earlier than you typically do. And then on the new-build, I think you were at 7 million over the next few years back a year ago. Now it's been reduced a bit. And you've always talked about modulating that based on what you see. Do you think that number is set in stone now or do you think that might continue to move up or down depending on how the penetration returns appear over time?

On the new-build question, I think our number was 6 million to 7 million and now it's maybe 6 million. But I have to be honest with you, we're feeling a bit sheepish or shy about guidance these days. We just want to be giving people numbers that they can -- especially when we're providing -- in the case, like we did today, we're providing financial figures and things of that nature. So we haven't changed our long term view of new-build at all. We feel like we're on track with all of our initiatives in every country. But if we're going to put it on paper, we're going to be conservative. And so I think that's the better way to consider those numbers. And the price increase -- I'll let Tom address that more specifically. But certainly it has had an impact in the fourth quarter for those two months. But it also inevitably has some has some impact on -- not just on sales but also on churn. So we're going to see a mix of that. But the punch line is the UK is expecting to have a very strong fourth quarter across all metrics. And now when we provide guidance, we anticipate performing at that one level and then as we get into the quarter and we get in closer to that final period, we anticipate we look at performance up to that point. So it's really about modulating performance that we expected versus what we see, but it's all going to be pretty good. And we don't -- and you're right about that -- it will have a positive impact and you'll see that come through in the fourth quarter. Tom, do you want to address that?

I have nothing to add to that. I think absolutely we're very focused on delivering a very good Q4 result.

Super. All right. Thanks, everybody. Listen, we appreciate you putting up with slightly longer remarks. And, as I said, we will probably find a way to make this an easier series of calls going forward. We know that LiLAC shareholders want to get into the details of those businesses as well. On Europe, I would just leave you with the thought that we thought we told you we would have some liftoff here in the second half of the year. We think we have done just that. We have delivered results that should give you some confidence that what we've been saying will in fact occur. And in Latin America, I feel good about cable and wireless. We now have six months into this business. We really feel like we understand the opportunity better and we're going to be conservative about how we guide. But, more importantly, internally we're extremely excited about the opportunity, especially when you combine it with LiLAC and the 150 million of new synergies which could be conservative in my view. So, a lot of good things happening and we look forward to talking to you about our fourth quarter and year-end in February. Thanks for joining us.

Ladies and gentlemen, this concludes Liberty Global's third quarter 2016 results investor call. As a reminder, a replay of the call will be available in the investor relations section of Liberty Global's website at www.Liberty Global.com. There, you can also find a copy of today's presentation materials.