Liberty Global plc (LBTYK) Q3 2011 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Liberty Global’s 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 expressed written consent of Liberty Global is strictly prohibited. At this time, all participants are in a listen-only mode. Today’s formal presentation materials can be found under the Investor Relations section of Liberty Global’s website at www.lgi.com. Following today’s formal presentation, instructions will be given for a question-and-answer session. As a reminder, this conference call is being recorded on this date, November 3, 2011. I would now like to turn the conference over to Mr. Mike Fries, President and CEO of Liberty Global. Please go ahead, sir. Mike Fries – President and Chief Executive Officer: Great, thank you operator. Good morning everybody or good afternoon wherever you maybe. We have a number of people on the call with us this morning as we usually do and folks you will likely hear from are Bernie Dvorak and Charlie Bracken, our Co-CFOs; Diederik Karsten, Managing Director of our European Operations; Balan Nair, our Chief Technology Officer; Mauricio Ramos who runs Latin America; and of course Rick Westerman. Before we get going, I think we have a Safe Harbor statement. Operator?

Thank you. Page 2 of the slides details the company’s Safe Harbor statements regarding forward-looking statements. Today’s presentation may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including the company’s expectation with respect to its outlook for 2011 and future growth prospects and other information and statements that are not historical facts. These forward-looking statements involve certain risks that could cause actual results to differ materially from those expressed or implied by these statements. These risks include those detailed from time-to-time in Liberty Global’s filings with the Securities and Exchange Commission, including its most recently filed Forms 10-K/A and 10-Q. 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 back over to Mr. Mike Fries. Mike Fries – President and Chief Executive Officer: Great, thanks. The agenda we will use here is pre-typical. I will make some opening remarks, talk about the highlights of our business, little bit our operations and then Charlie will run through the financials and then we will try to get to your questions hopefully in about 20 minutes. As the operator said we are going to be speaking from slide today and I am going to start with slide four which is a quick snapshot of the quarter for us. I think the key storyline continues to be our subscriber growth. This was our strongest third quarter in history with 320,000 net new RGUs added. In fact as most of you know, the summer months are typically very quiet in our business and yet we just delivered the second biggest quarter we have ever had. And the driver continued to be the strong demand for our high-speed high-value bundles, especially in Europe which represented over 90% of our sub-growth and were eighth out of our 11 European markets are growing faster this year than last year. Our financial results reflect this growth I’ll just hit a few key numbers. Our rebased revenue was up 4% in the quarter which has been the trend pretty much all year. And year-to-date OCF growth is up 5% rebased of course. Now, you will notice that OCF growth in the third quarter was only 2%, but as Charlie will describe in more detail, this number was impacted by our higher than expected sub-growth and the associated CAC and marketing costs as well as some unique items meaningfully higher otherwise. Looking at the bottom line, free cash flow was up 36% in the quarter and is trending for the year right at our mid-teens guidance. Complementing the continued improvement in growth is the stability of our balance sheet and Charlie will flush this out in more detail, but you will see that leverage continues to trend down a bit. We are at 4.3 gross leverage and 3.7 net with an average maturity approaching years. And our liquidity position remained strong at $2.3 billion. Of course, that number excludes the $1.4 billion we have set aside for the KBW acquisition and the $1.1 billion we expect to receive as part of the Austar disposition. With the volatility in our stock, we have already surpassed our target of $1 billion in buybacks. And as you can imagine, we remain active today and will remain active for the rest of the year. And of course this has been a busy year for us on the M&A front as we continue to focus resources on Europe and the opportunity to build market share across our existing footprint which spans now 10 contiguous European countries plus Ireland. During the quarter, we closed the Austar acquisition in Poland which added over 600,000 RGUs to a market that has consistently been one of our strongest performers. In Germany, the regulators have told us that we should expect a final decision on the KBW acquisition by mid December and despite the length of time that has transpired we remain positive about this transaction. And as you may have noticed we recently offered a number of remedies which we think effectively address the Federal Cartel Office’s competition concerns. The sale of our Australian business to FOXTEL is on a roughly similar timeline and we should hear back from the ACCC down there by November 30. So, on both cases, we should have regulatory clarity anyway and potentially resolution by year end. So, all the key elements of our business are working well. We are particularly pleased with the momentum in our subscriber growth. I think it’s pretty simple actually. Our bundles are faster and cheaper and the telcos are struggling to match us. Our sales reflect this just as importantly as our churn across markets and products has trended lower. And we are excited about the horizon launch in Q1 we will talk a bit more about that in a second, but we have introduced this horizon platform at a number of events, key notes, etcetera. And the feedback has been extremely positive. So, that is a little background, I’ll jump into some operating results starting slide five which shows our regular breakdown of subscriber growth by product. These are all pretty good looking charts and they compare this latest third quarter with the same period in 2010 and 2009. Starting on the top left, you will see our broadband net ads which totaled 192,000 that’s up 31% from last year, 80% higher than 2009. I will provide a bit more color on our broadband business in a minute. The chart at the top right shows voice ads, also over 190,000 in the quarter which I think essentially reflects success of our triple-play bundles which always include a voice product. But remember voice is not really a giveaway. Our average voice ARPU is around $22 and we are generating 80% gross margins. The bottom left of the slide shows our video losses for the quarter at 58,000 and that’s a 35% improvement year-over-year and a 23% sequential improvement in the second quarter. And this is attributable to two things, significant lower analog churn in Central and Eastern Europe which we always said would slowdown over time and the steady up-sell of analog customers to digital with 258,000 digital subs added in the quarter. And then you will see our total net ads at the bottom right of 327,000 which were up twofold from last year and nearly tripled 2009. Turn to slide six, we have got a regional breakdown on subscriber growth which today is predominantly Europe. Starting at the bottom, the blue part of the bar is all of Europe excluding Germany. So, these markets as you will see are performing extremely well adding 165,000 net new RGUs in the quarter up from under 70,000 last year. The Netherlands and Switzerland each have their best quarters of the year for both broadband and voice additions with Switzerland nearly tripling its combined voice and data ads. Ireland had a record quarter for RGU growth and continues to surprise us on the upside. And our Central and Eastern European region reversed the trend and added 64,000 RGUs in the quarter compared to a loss of 12,000 last year. The green part of the bar is Germany which represented 40% of our subscriber net adds in the quarter with 130,000 up 65% year-over-year. What I can say that I haven’t said this was (indiscernible) best quarter ever and when your bundles feature twice the broadband speeds for lower price than Deutsche Telecom, it’s easy to see why German consumers are using Cable. And at the top of the bar, the gray section is non-European operations namely VTR which had a great quarter as well. So basically all of our operations are meeting or exceeding expectations and have continued to perform right through the fourth quarter. Spend a minute on our broadband business on slide seven which is the core product of course in our bundle of offers and the engine behind our subscriber growth story. The chart at the top shows our year-to-date broadband net ads of 535,000 and how that compares to the same period in 2010 and 2009. And again the numbers look great. We are up 15% year-over-year and 65% over 2009. We have talked a lot about the key factors here primarily our 3.0 platform which now reaches all 11 European markets and 90% of our (indiscernible) homes and the fact that speed sells. We have seen a 30% increase in broadband sales across Europe. And if you look at the bottom left chart, you will see that over two-thirds of our broadband subscribers today in Europe have signed up for a 25-megabit or faster broadband service. That’s double where we were a year ago and we are rapidly moving to 50 megabits as sort of the new sweet spot in our tiered offerings in markets like now over the Switzerland. So, we are keeping the telcos on their heels, but also driving up ARPU. Just as importantly, speed is picky, right subs who take 25 megabits are higher products from us churn 20% less and customers at slower suite. So this is really we’re obviously winning today and we think we can continue to win for some time. Slide eight, about a quick update on our bundled customer numbers and ARPU growth in the main take away in the left side of the page is the growth in triple–play subs, which have doubled than the last three years and that represents 60% of our 7.1 million bundle subs. As we said before bundles help reduce churn and create stickier customers as well, for example in Holland our triple plays subs are 40% less like the churn than single play subs. Of course the bundle also drives household revenue or customers ARPUs which were up 17% on a reported basis to 4150 and 5% adjusted for FX, which is how we typically shown. Have the opportunity to present our business and the other day, to some U.S. cable operators, and while they were surprised by our $41 ARPU which were obviously lower than their ARPUs here in the states, they were even more surprised by our 47% EBITDA margins on that ARPU base. And this is probably a good lead into the next slide, which wraps up, with a few words on our strategic positioning in near–term outlook. I’m not trying to over simplify things but just about everything we do falls into one of these three buckets on slide nine. Starting with building scale that we’ve been working on this for while in the rebalancing in my view is paying off and we’ve completed or announced around 20 billion in M&A transactions in the last five plus years. Selling over 7.5 billion of asset tax efficiently in sizable market premiums and we are investing there as well as (indiscernible) capital, primarily into Europe at lower multiples and with significant financial and strategic benefits. And we’re bullish on our sector in Europe. We remember that 70% of our European revenue comes from four countries which had great fundamentals, Germany, Switzerland, Belgium and Netherlands. And we’ve grown right to the cycle with across Europe over the last few years. Scale helps drive organic growth and operational efficiency we just talked about our subscriber growth and our margins continue to take up as we drive operating efficiency across our networks our vendor relationships, our programming deals certainly one reason that we’re approaching 50% margins on a $40 ARPUs we only pay $4 to $5 a month for all of our content that certainly helps. Lastly our recent in future success is a function how we are going to innovate. DOCSIS 3.0 lit a fire under our broadband business you’ve seen the results. Horizon, our entertainment media platform that brings personal web and cable content together across multiple screens as at same potential. If you get a moment check out a video we’ve just posted to our website that kind of gives you a sense of horizon and taste of what it’s going to be. And then of course we are carefully exploiting opportunities in mobile. So, conclusion of fourth quarter is really after get start sub growth looks good and our rebased operating cash flow growth should come in higher than our third quarter. And we’re looking to leverage this tremendous RGU momentum that we’re experiencing into sustained revenue in margin expansion well into 2012. With that I will turn it to Charlie. Charlie Bracken – Co-Chief Financial Officer: Thanks Mike. Hi everybody. I’m going to go to the financial section and that begins on slide 11, which summarizes the year–to–date results. If you look at the slide on our reported basis our revenue increased by 16% or 1.1 billion to 7.66 billion and OCF grew by 18% or $540 million to $3.58 million. On our reported growth rates have benefited unfavorable foreign currency movements because over the nine months period the U.S. dollar is roughly 7% lower versus the Euro compared to last year. Outside of foreign exchange, and mergers and acquisitions, the principle driver rebased revenue in OCF growth is increased subscription revenue (indiscernible) services as Mike mentioned. Over the last 12 months we got a 2.6 million over our service RGU that’s up 14% (indiscernible) period ending September 30, 2010. Rebased revenue growth in Q3 was 4% that’s been around 4% in each of the last three courses of this year or the first three courses this year. And rebased OCF growth was 5% year–to–date including 2% in Q3 and I’ll talk about that a bit more in a minute. We’ve seen an expansion of our year–to–date OCF margin which is increased by 60 basis points to 46.7% that despite of meaningfully higher subscriber volumes, which impact CAC and marketing costs. %: Meanwhile, our Dutch and Belgium operations have each grown rebased revenues of 5% and with respect to OCF, the Netherlands delivered 8% rebased OCF growth this year and Belgium posted 5% rebased OCF growth. Rounding out the Big 4, Switzerland increased rebased revenue in OCF growth by 2% and 4% respectively. That’s a meaningful increase over the growth rates that they posted the same time last year, which were 1% revenue growth and a flat OCF figure. Our other operations in Western Europe namely Ireland and Austria, account for roughly 10% of our European business, in terms of OCF, and collectively have delivered rebased revenue and OCF growth of 3% and 6% respectively which is led by Ireland, which is our fastest growing market with over 20% rebased OCF growth this year. And then finally, central and eastern Europe, which includes our DTH operations have reserved in our central and other segment that count for about 15% of our revenue and OCF, in Europe. On a combined basis, we’ll begin to see more favorable growth trends year-over-year. Poland continues to deliver the best, as it achieved year-to-date rebased revenue and OCF growth of 10% and 9% respectively. If you go to slide 13, this looks at our Q3 results by operating region and we’ll drill then with the OCF growth, which is tempered in the quarter by three primary factors, 3 of which are country specific, and the third related to our overall strong subscriber growth. On a pan European basis excluding Belgium, our distribution business generated $1.6 billion of revenue and $824 million of OCF in Q3 and that reflects rebased revenue of 4% and rebased OCF growth of 5%. In Belgium, Telenet reported rebased revenue and OCF growth of 5% and 1%, respectively, on revenue and OCF, of $489 million and $251 million. Now, Telenet’s lower rebased OCF growth in the quarter, as compared to the 7% that it realized in the first half of 2011 reflects in large part roughly $10 million of programming related costs relating to the recently-won Belgium football rights. Going forward, we expect these football rights will amount to run €9 million to €11 million in Q4 and it’s important to note that the account of this cost is treated definitely under U.S. GAAP, as compared to IFRS, which is what Telenet reported on last week. Outside of Europe, our Chilean business posted revenue of $230 million and OCF of $89 million representing rebased growth of 4% in revenue and a rebased decline of 7% in OCF. Similar to the first two quarters of the year, our OCF was negatively impacted by incremental cost associated with our 4G project, which totaled approximately $5 million in the quarter. We expect this cost to run significantly in Q4 as compared to launch of service next year. And finally in Australia, our DTH business generated rebased revenue in OCF growth of 1% and 6.5% respectively as also I’d managed to control costs in what is a challenging business climate. Back to our overall rebased and OCF growth rate of 2%, we touch on both of the Telenet in and VTR impacts, which totaled about $15 million combined in the quarter. In an addition, our rebased OCF growth was also adversely impacted by a rebased year-over-year increase of over $20 million in customer acquisition and marketing costs, which resulted from a strong RGU growth in the quarter. Adjusting for these tactics are reported rebased OCF growth rate will actually be meaningfully higher. If you go to slide 14, this slide recaps our capital expenditures and adjusted free cash flow performance for this year. In terms of CapEx, we reported capital spending of $474 million or $1.5 billion for the three and nine months ending September 30, 2011. These figures translated into CapEx as a percentage of revenues, 18.2% and 19.5% respectively as a left hand chart illustrates and they compared very favorably to the 20.4 on the 19.7% that we reported for the same period in 2010. Now as Mike noted, we are gearing for our mobile launch in Chile next year and our CapEx investment has been renting. In Q3, we invested $90 million which brings our total year-to-date spend on the project to $38 million. As to our CapEx in the fourth quarter, we would expect to report higher CapEx as a percentage of revenue as compared to the third quarter given our subscriber growth and the continued investment in our Chilean and 4G project. Now is the right hand chart highlights, our Q3 adjusted free cash flow at $61 million was up 36% versus last year’s figure of $45 million. This brings year-to-date totals of $491 million or 15% growth of last year’s adjusted free cash flow $427 million. The drivers behind adjusted free cash flow EBITDA for both periods are principally related to higher OCF and favorable FX movements, which more than offset higher boring costs which include derivative and capital spending. Now as you think about Q4, we would expect to generate much higher adjusted free cash flow in Q4 as compared to third quarter due to process of timing of our cash interest payments on our debt and some working capital cash flows. Turn to slide 15, this reviews are balance sheet position on the debt side we ended September 30th $22.4 billion of total debt and capital lease obligations. Reflecting a decline roughly $1.4 billion from the second quarter, a last part of the decline was due to foreign currency movement. From risk management perspective we remain substantially had some both foreign exchange and rates and nearly 90% of our consolidated debt due to 2016 or later. The bar chart on the left looks at our adjusted leverage ratio, which adjust for $1.2 billion (indiscernible). The ratios declined from five times to 4.3 times in the just last year, OCF growth and just reiterate remain returns remain within four to five times target. We ended Q3, were $2.3 billion of consolidated liquidity was consistent $1.4 billion of cash and billion dollars in maximum borrowing capacity under our credit facilities. Our liquidity and cash amounts exclude the $1.4 billion of cash held in escrow in connection with the pending KBW acquisition. Our $1.4 billion of consolidating cash decline by approximately $2 billion in June quarter led by activity at Turner, which paid term loans we made cash distributions to shareholders including LGI. On the remaining use of cash come large explain by the funding of our Polish acquisition and the cash reviews for stock repurchases. Cisco the conclusion side on slide 16, so in conclusion subscriber growth with the (indiscernible) higher in the quarter at clearly demonstrates we are capitalizing on network advantage and on our superior product offerings. On the M&A front, we should have the both the Austar and KBW situations resolved, from the regulatory standpoint by year end. In respect to our repurchase activity, we always are capitalizing on softness in our stock price and we were certainly more aggressive in the third quarter as we repurchased $11.6 million shares roughly $440 million. Additionally, all there in completed of $1 billion buyback target for 2011, we remain active purchases of our equity and (indiscernible) market literally every day. As you alluded to on this call remain on track to ten all of our 2011 guidance targets and so we have recompiling those today. And finally perhaps an even more importantly if these strong subscriber gains continue to three year end, we should great momentum as we moving to 2012. That’s it from us operator to an open to questions.

(Operator Instructions) And we’ll take our first question from Jeff Wlodarczak with Pivotal Research Group. Jeff Wlodarczak – Pivotal Research Group: Good morning guys. Normally fourth quarter is the strongest hard you quarter season of the year. Is there any reason I believe that change this year given stronger third quarter was follow up?

Well, I mean I am going given you just after first quarter results of course but I will say that as been strong start in the fourth quarter. So this was an unusually robust third period as you noted and as people would know given history of those summer months and fact that its generally not a strongest. But I mean I won’t give you directionally at answer there (indiscernible) started very, very strongly. Jeff Wlodarczak – Pivotal Research Group: Fair enough. And then when do you expect you very strong hard you results of going translate into accelerating rebased revenue growth.

Right into 2012, so as we look at ‘12 we should certainly see the benefits of this larger customer base in our financial results. Jeff Wlodarczak – Pivotal Research Group: Great, thank you.

Great, yeah.

All right. And we’ll take our next question from James Ratcliffe with Barclays Capital. James Ratcliffe – Barclays Capital: Good morning, thanks for taking the question. On marketing spend, the acceleration this quarter is that something that given what you seen on subscribers you’d expect to extent into 4Q or is that more of a timing issue year-on-year that last year we spent more in 4Q and this year, more shifted to 3Q. And also if you talk a little bit about programming cost you mentioned Telenet and the line and your program cost small, but have gone up. How they changed at this call as a percentage of our video revenue or how is that affected video gross profit and how would you expect that change in the future?

I will adjust the second one and (indiscernible) you can start thinking about the marketing spend question. Turning today, you would know that we have certainly high video gross margins and our numbers indicate that those margins as on a percentage terms might come down slightly or will come down slightly as we add digital customers. So that on an analog customer which paying us €15, we’re going to have an 85% gross margin on the analog programming cost and digital customer that might pay a €30. We’re going to have significantly more gross margin, but potentially slightly lower gross margin percentage. All in, it’s still on 80%. So, our job is to keep programming cost in check. We don’t have the pressure that a lot of the U.S. operator feels from one or another dominant programming group because of the nature of our market in the fact it’s so fragmented. I’ll also point out that when we launch Horizon in Holland in the first quarter we’ll launch that product with over a 65 plus channels of linear streaming television and over 3000 hours of on-demand content including catch up TV, movies, etcetera and we’ve been able to assemble that content for that platform very, very inexpensively. Because of the relationships we have with programmers in Holland because of our history and the size of the our business there so, I think when you look at where programming costs will be going over the long run as more or more of activity comes on demand and/or over the top to a horizon platform. We’re able to maintain regionally good programming cost there and I think in the end they are going to hang around that area that might come down slightly, but our long range plan does not show a material (indiscernible) programming launches.

Yeah, hi guys, the increase which you see in Q3 is largely volume driven and it’s tracing to I’d say higher absolute numbers in the sales cost particularly the commission – the sales commissions. It’s not so far the variable gross related to the higher volume. It’s not so much to a more fixed piece of the marketing cost like above the line that leads to the conclusion that what we see is that there is more effectiveness of our campaign and that may have to do with effect of this year we started to apply I’d say learning from one country to the other country so the effective campaigns from one country start to well so and take effect in others. So, I’d say largely volume driven, sales cost, which is rising the total.

I think it’s fair to say as a result that if we have very strong progress in Q4 and I think as Mike mentioned we started well, but not making any promises you might see a similar effect in Q4. It’s good capital investment, obviously we’re getting subscribers in return with a good payback. James Ratcliffe – Barclays Capital: Great, thank you.

Thank you. I want to ask you guys about the high speed data subscriber growth in the quarter particularly in the larger markets so from like detailed the both, can you guys give us a sense, I mean, nine months to-date what do you think your flow share is on sort of new customers in broadband across determining Netherlands and Switzerland and how we can generalize our each market is different. And then second related question is what do you say the incremental ARPU or marginal customer is bringing in on ARPU for data relative to the base because I think you talk about revenue accelerating next year, Mike and certainly if the subscriber growth that you are seeing comes in without any ARPU degradation or impact ARPU goes up and that certainly it’s sort of a hockey stick effect. So, I was wondering if you guys could talk about this.

Sure. I can tell you that we do calculate market share of net adds or net gain in every territory pretty regularly and in the markets are two reference Germany and Netherlands, were anywhere from 80% to 100%. If you look at Netherlands for example in the third quarter, we added something new order I think 30,000 roughly 30,000 broadband net adds and that’s on our 30% footprint. I think KPN reported someone order of 20,000 loss, guys, something like that 9,000 loss maybe but I think loss, sorry 11,000 net adds loss. So, we gained roughly 30,000 net adds in the third quarter I think were backwards 11,000 they have nationwide footprint. So if you extrapolate that, clearly were getting all gain in the marketplace and that has been in the case for six, seven quarter here. You could got it I mean we’ve had between 20,000 and 30,000 net adds in Holand going back for five years here and they’ve essentially last customers every quarter. Germany, I think the number of cost 70%, 80% of net adds, there are other operator non-DT operators in that market. But there is no question our bundles are formal compelling on speed and product basis. And that’s really positive things in terms of ARPU, I would say and Diederik can comment on this well as we’ve ramped up speed for example Holand as we taken the sweets spot are primary bundle for 25 meg, 50 meg we’ve added ARPU are priced to that bundle price. So what was €45 and €49 we are trying to maintain not just stable ARPU for bundles into broadband but also ARPU appreciation if you will on those products and services. And some instances there promotional discounts for period of time and those will see a little kicker in ARPU. But we are trying to look at, if you look at the ARPU cost products in the video side of our business, we are growing ARPU every months, because as we at digital customers, the video revenue we generate out of each home on double. So on average our overall video ARPU continues to grow broadband and guys have been stabled slightly down as we but somewhat allocation issue as well because the vast majority of our sales something in orders 70% of our sales in Germany are triple play bundles. And how do you want allocate that ARPU it’s not simple is to be relate principle maybe ended the number one factor for us all we get more money at home. So every quarter were focused on whether the ARPU are generating on each customers household is growing and that is through up 5% to 8% every quarter. And that’s I think to key metric mix of that ARPU whether its coming from digital or broadband how much of bundle you want allocate to each product that science or maybe. But I think main goal we are driving ARPU out of the household pretty regularly and adding products into that household. James Ratcliffe – Barclays Capital: And you think just finish up on Switzerland you think the flow share also was over half of the marketing footprint you’re taking?

DT going 80% to that and we had really good quarters which have been we added 10,000 broadband net adds and eight quarter in terms of shares. I think its over 50% today.

Yeah, right and it has been rising we are not there in Switzerland like you said where we are in the Netherland and where we take the full growth in the market at the expense of DSO. But we are picking up share points in Switzerland with the strengthened portfolio which indeed like you said Mike is also moving to kind of between 30 and 50 make as sweep going and that’s also under bidding superiority we are able still to construct in our products. I mean we are still having lot of flexibility in the speed and if we get with the speed increases we can also step wise raise the ARPU in Switzerland is a healthy after market willing to keep that way. We feel confident about for the further growth looking at Germany for example our base share is only 12% growth and so we still see enormous potential to make people switch from DSO still largely eight DSO lowest speed and towards our products and its just matter all kind of keep supporting it and keep relying on the market. In the Netherland and Switzerland are base share is higher or so it will go at the expense of the DSO players in somewhat more aggressive (indiscernible) so far with Holand taking more than 100% of the growth and Switzerland 50, we’re confident we are on the right side. James Ratcliffe – Barclays Capital: Okay, thank you guys.

Yep.

All right. And we’ll take our next question from David Joyce with Miller Tabak Company. David Joyce – Miller Tabak Company: Thank you. I was wondering if you could give us an update on what your past might be towards doing all digital in the event you might need a free of capacity for the horizon rollout.

Sure, (indiscernible), you want to just add.

Sure. We have movements to go all digital in the near future, our sense is that what the price that would be past issues and we’re doing a number of studies internally, but certainly you’re not going to see as do anything in the next 24, 36 months in the future. David Joyce – Miller Tabak Company: And secondly if I might could you please update us on the relative size of your commercial market in the video voice and data subs.

Sure, you just want adjusted B2B in Europe.

Yes, what we see in B2B is very successful country particularly behind a new – renew mix where we focus more than previously on the (indiscernible) with products, which have their origin in superior broadband mix as make us the fixed voice and there are some countries like Germany where we’re starting from stretch so where we still have great opportunities, but we have to build – seems it is building from the stretch take us sometime. And that will also help us to further strengthen the total European contribution of this decision which we still see as a highly potential that related to just adding countries to the group, which is already successful and that’s the way we built it. There are may be some (indiscernible) growth, there are may be some acquisition opportunities that will be very cautious for example DSL providers and so forth is not on our list so, it’s going to be mainly autonomous growth buy out so hope careful CapEx that may be some acquisitions when feasible.

Yeah, it’s a relatively small piece of our overall revenue stream, 3% to 4% may be and growing at about 5% organically, but it has a potential to be much larger especially when you considered the fact that markets like Germany we had zero B2B revenue because the historical owner just never exploited that opportunity. So, I think there are tremendous upside in the B2B business especially as (indiscernible) said in the so over small medium segment. We’ve launched cloud services in a number of markets to relatively positive result in some cases we owned data management and all type businesses so with the mixed bag in each market, it’s not necessary a consistent product offer in each country, but most of our countries have the beginning of or at the medium stages of relatively interesting and robust B2B businesses that we are trying to take advantage of a more consistent base across Europe. David Joyce – Miller Tabak Company: All right, thanks for the update and nice execution in the phase of this market.

Thank you.

We’ll take our next question from (indiscernible).

Thank you. I just want to focus on the KBW deal account for second. Could you talk around the various concessions that you offered to the cost all of this and essentially what the financial impact of those might be has to do progresses, thanks.

Sure, just to generally we want to keep this process tight with regulator, but the concern expressed by the German regulator revolved around two principle areas, one was the role that cable operators play in the large housing associations and the attempt to which cable operators might someday expand or extend their reach across orders into other territories where they don’t operate today to provide more competition in that MDU or housing association market and the second concern was about the role we play and what they called the feed in market where our programmers are looking for distribution across our networks. We have a very different view of cable position in the German market and was expressed by the regulatory. We view – cable is the only industry sector that is investing in next generation networks 100 megabit broadband speeds there is a reason why we are getting 70%, 80% of net gain is because we’re providing the products in the servicers and consumers one and we are very, very small in the scheme of the German marketplace to combined KBW and Unitymedia would be something like a €1 billion of revenue compared to 35 billion for Deutsche Telekom in Germany alone. So, it’s almost, it’s a very, very strange and we may respect the analysis has come out but nonetheless we are very cognizant of it, this is an important deal for the market. And we’re trying to be responsive in the two or three things we’ve done, we think our responsive one of which is to continue in Unity what KBW is already been doing and that is unencrypting in basic digital package to make access to that basic digital package easier not just for consumers but essentially resellers and which we’re happy to do and has had little to no effect on KBW business. And also looking at, perhaps changing the nature of our relationship for certain housing authorities in a way that might make it easier for other operators to enter into those markets are context. In the end it’s hard to know what impact these we have on our business and so, I can’t give you a number. But we do feel that in the context of the importance that this merger hold not just for us but for the German market and for German consumers they were not costly.

Very clear, thanks, I have one follow–up actually. I just wanted to understand a bit back to the motivation behind the switch. That you talked about toward vendor financing arrangements which I think is sort of a non–cash additions profit in equipment I think you mentioned is started in the second quarter. And I just wanted to understand who is providing the financing over what assets and what’s the impact, this in terms of CapEx and OpEx and what it made for the customer. Thanks

I think.

I’m not saying in general we been very much focused on try to improve our working capital management benchmark ourselves (indiscernible) company resulted there are opportunities left for us to exploit. So, which one is better financing it’s really a (indiscernible) payments we been trying to push our average (indiscernible) up from 45 to 60 days and there were 60, 70 days. And the way you counting work we have to fund, has been the financing work I think (indiscernible).

I would reply the dramatic shift is going on but what it means that we are trying to (indiscernible) reduced our prepayment cash or our relationship with our vendors some that gives classes when the plans because if we go beyond 90 days with the vendor that becomes that’s the small path of general push on working capital. And the way impact is on CapEx is that we report cash CapEx to any in terms on CapEx I means affected the cash CapEx as we impacted by that. But the scheme of the numbers we’re talking about I don’t believe it’s material the size of our cash (indiscernible) costs base. So I, wouldn’t have replied.

I guess, so it’s not a change your approach around set–top box is (indiscernible).

No, sorry it’s not taping on that, no it’s just been a working capital management. Which is the good take.

All right. Thank you.

And our next question comes from Daniel Morris with JPMorgan. Daniel Morris – JPMorgan: (indiscernible)

Hello.

We are not able to hear you Mr. Morris. Can you speak up please? Daniel Morris – JPMorgan: It’s now better.

Much better, thank you. Daniel Morris – JPMorgan: Okay, thank you very much. An interview today your chairman expressed an interest in the U.K. market. Now I appreciate that he is interested in other sectors but can you comment on where do you see value in U.K. cable and if there is a (indiscernible) tax assets help you future U.S. cash (indiscernible) needs. And I have a follow up thank you.

Well, that interview actually took place along with the new think three or four weeks at least when we were in London together. And I red it briefly yesterday I haven’t studied the course of the article. But I would not read anything into that I guess that’s a point. What’s your follow–up. Daniel Morris – JPMorgan: Okay thanks. The follow up is just on the subs versus revenue growth question. Can you just gives an idea and how back end related to subscriber grows was in Q3 of the margin maybe September would be a very strong month?

Do you comment on that?

Yes that’s true. September was a strong month within (indiscernible) that’s followed always to watch which was so far to strongest. So, it is September strongest than August and July, it’s correct. Daniel Morris – JPMorgan: Okay, thank you very much.

Yep.

And our next question comes from Hugh McCaffrey with Goldman Sachs. Hugh McCaffrey – Goldman Sachs: Good afternoon guys, I’ve got a couple of questions please. Firstly if and the decision from the SCU is negative. Are there any other options you have to pursue the deal with KPW and careful on a little bit is there any deadline associated with the (indiscernible) structure. And secondly just can you give us an update on regulation on do you have any view on sort of the suggested copper price comps have come up with (DC). Thank you.

Yeah, I think it’s soon to respond the third one I’m not sure what is there any impact that would have I don’t know (indiscernible) add anything to that in terms of the German transaction it’s been clearly articulated that December 15, they will have at that point assembled all of the information they need from the market, we will have continued our dialog with them on remedies and they will reach a decision about the transaction. At that point, there is very few things we could do certainly if they were not to be a positive result I can if you could expect that we would pursue litigation, but that’s just normal in ordinary course I wouldn’t you in our view this is a transaction that certainly be clear and may not be the last time we have such a situation in front of us or other operators for that matter. So, we would certainly look to understand better, at least led a (indiscernible) whether this is the right situation, but that would take a longtime so, I wouldn’t expect that would necessary lead to a reversal in the amount of time necessary to only asset that would really be for seeking market clarity if you will down the road, really there are a lot of options beyond that. You stand on the business if you don’t have regulatory approval regulatory approval is a important necessary precedent closing and so if it don’t happen on the 15 we’re really there are no other easy options. Hugh McCaffrey – Goldman Sachs: Okay, that’s clear. Thanks Mike.

Yep.

And we’ll take our final question today from Jason Bazinet with Citi. Jason Bazinet – Citi: Thanks so much. As it relates to Austar, I think on the last earnings call I think a reasonable manner of optimism that ultimately the sale we go through and I was just wondering is there anything changed only or…

No, I think the situation, the fluid as it always is in these matters, but there is a very good healthy dialog among Austar, Foxtel, and the ACCC, the competition commission in Australia, there we’ll continue to be up until the moment that they provide the ruling and also point out there is a new ACCC commissioner who is now sort of assume the position almost after the fact of the objection is being published and has in our view the reasonable approach to this interestingly though unlike Germany if that announcement did not go the way we wanted to go, that could be reversed rather quickly in the courts and was recently a similar transaction was recently reversed and them closing. So, I think there is far more optionality or far more control over outcomes in that marketplace. Having said that, I really feel like in the end this transaction has great potential to be proceed favorably with or without remedies in that I’m hopeful that will get that done. Jason Bazinet – Citi: Okay, thank you very much.

Yep. Mike Fries – President and Chief Executive Officer: I think that said we appreciate everybody here on the phone call with us this morning. And as I said, we look forward to talking to you about a robust fourth quarter and until then, we wish you well and thanks for joining us.

Ladies and gentlemen, this concludes Liberty Global 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.lgi.com. There you can also find a copy of today’s presentation materials.