Liberty Global plc (LBTYA)

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Liberty Global Inc. (LBTYA)

Q3 2008 Earnings Call

November 6, 2008 12:00 pm ET


Mike Fries – President and Chief Executive Officer

Gene Musselman – President and Chief Operating Officer, UPC Broadband

Mauricio Ramos – President, Liberty Global Latin America and CEO, VTR Global SA

Miranda Curtis – President, Liberty Global Japan

Bernie Dvorak – SVP and Co-Chief Financial Officer (Principal Accounting Officer)


[James Rackell] – Barclays Capital

[Matthew Harrigan]

Alan Gould – Natixis

David Joyce – Miller Tabak

Jason Bazinet – Citi

David Gober – Morgan Stanley

David Kestenbaum – Morgan Joseph

Steve Malcolm – Arete Research



(Operator Instructions). I would now like to turn the conference call over to Mr. Mike Fries, President and CEO of Liberty Global, please go ahead sir.

Mike Fries

Let me just take a second to introduce who is on the call with us today. In addition to myself, we have Gene Musselman, Miranda Curtis and Mauricio Ramos who will each talk about their respective regions in Europe, Japan and Chile, Charlie Bracken and Bernie Dvorak our Co-CFO's, Rick Westurban who you all know, and various other senior management.

Before I get started I think we have a Safe Harbor statement.


And thank you, page two of the slides details the company's Safe Harbor statement 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 with respect to Liberty Global's outlook and future growth prospects, this expectation regarding competitive and economic conditions and the liquidity and other 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 Forms 10-K and 10-Q.

Liberty Global disclaims any obligation to update any of these forward looking statements to reflect any change in its expectations or on 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

So as usual we're speaking from some slides that I think are available on our web site. And on the agenda slide you'll see that there's three parts to the call as usual. I'll make some introductory remarks then Gene, Miranda and Mauricio will spend a couple of minutes on their respective operations. Charlie is going to hit the financial results and balance sheet and then we'll get to your questions.

So I'm on slide four, entitled Where Are We Today. And when we were thinking about how to start this call, we decided that it might be a good idea to step back and take a moment to put our business in the proper context here, given the current environment.

And as we did that, I think we quickly landed on four key points that represent both the foundation of our story and the factors that set us apart from any of our peers in the media and telecom sector.

I think the first perhaps the most important, despite all the concern around consuming spending and recession, our business continues to grow. That means we're adding digital TV, broadband and voice subscribers at a steady clip. We're increasing the amount of revenue we generate out of each home in every region.

We're delivering above average cash flow growth, both operating and free cash. And we're achieving record OCF margins. I think it bears repeating that we're not selling cars, high end clothing or organic food here. We provide utility light services that connect the most important devices in your daily life, your phone, your PC and your TV to the outside world. And at times like this that's a pretty good business to be in.

Second point that should jump out at you is that our geographic diversity is a strength in this environment. Let's take currencies for example. If you look at our platform of 15 countries and four continents, they represent a basket of 11 different currencies, including a healthy blend of first world countries like Japan and Switzerland which have actually appreciated or held their own against the dollar.

On a macro level the vast majority of our cable revenue, around 70% comes from Western Europe and Japan. Which are experiencing their own challenges but not necessarily the same type of consumer related issues resulting from the sub-prime housing crisis here in the U.S.

And where we expect to feel some pressure in the future, like in certain Central and Eastern European countries, Hungary and Romania, for example, I think it's important to note that we've already repositioned our products because of competition to be extremely cost effective for consumers in those markets.

So we actually think the situation could help us in the long run, by flushing out some of the weaker lower quality operators in Central and Eastern Europe who are clearly feeling financial pressure.

Third point should also resonate with investors given the dislocation in credit markets today, and I'm referring of course to the strength of our balance sheet. I mean there's three key things to stress here. First we have substantial liquidity, totally $3.2 billion in cash and undrawn facilities at quarter end. And we consider this to be a significant asset.

Second we're working, or have worked diligently and purposely over the last three years to de-risk our balance sheet by extending our maturity dates with around 90% of our debt due after 2011, so 2012 and beyond. And we also fixed our interest rates and hedged our currency exposure.

And lastly and perhaps most importantly each of our major operations generate positive free cash flow to support their own balance sheets. We currently sit around, at just under four times leverage. And we're certainly not going to do sub-optimal financing to stay within our target of four to five. We'll naturally delever over time if the markets remain as they are.

And then finally I'll just say a few words about our core value creation strategies, which remain largely intact, especially on the operating front, where we continue to launch and drive penetration of new products like DVRs HD and most recently DOCSIS 3.0. We now have 100 megabit plus broadband speeds available in two markets and expect to have the vast majority of our footprint launched next year.

On the M&A front the pipeline remains large, but as you might expect slow moving. We had done a couple of important deals in Belgium and Japan recently and perhaps more interesting though is the possibility that we might find ourselves well positioned to consolidate smaller or struggling operators again who are feeling the pressure. And of course we'll also look at asset sales where we think we can derive a private market premium.

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