LBTYA

Liberty Global plc (LBTYA)

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Liberty Global, Inc. (LBTYA)

Q2 2008 Earnings Call Transcript

August 06, 2008, 2:00 PM ET

Executives

Mike Fries – President and CEO

Gene Musselman – President & COO, 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-CFO (Principal Accounting Officer)

Analysts

Vijay Jayant – Lehman Brothers

David Kestenbaum – Morgan Joseph

David Gober – Morgan Stanley

Alan Gould – Natixis

Paul Kagan – PK Worldmedia

Camille McLeod Salmo [ph] – Forces Investments [ph]

Presentation

Operator

Good day, 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, August 6, 2008.

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

Thank you and welcome everybody to our second quarter call. I'll do some quick introductions, we have online with us today Gene Musselman, President and COO of UPC; Mauricio Ramos, President of VTR in Chile; Miranda Curtis, President of Liberty Global Japan and Graham Hollis; Bernard Dvorak and Charlie Bracken, our Co-CFOs. We have Shane O'Neill, our Chief Strategy Officer; Liz Markowski, our General Counsel; and Rick Westerman, who you all know. And I think, before we get rolling here, the operator is going to do quick remarks.

Operator

Thank you so much, sir. Page two of the slide 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, its expectations regarding competition and M&A activity and other statements that are not historical facts.

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 those details 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 or revise 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

Thank you. So our agenda will follow our typical path here. I'll do some highlights briefly, I'll turnover to Gene and Mauricio and Miranda to give you some color on their respective regions and Bernie is going to wrap with financials and then we will get to your questions.

The operator said we are talking from slides. So, I'm going to start on slide 4, hope you all have that with the big picture, so to speak. And first of all I think we have a lot of good things to talk about this quarter. I'm going to begin at the top with our growth in value added services. We've talked a lot about the two key drivers for us in the past year, consistent subscriber additions in voice and data, and ARPU growth supported by our digital TV rollout. And if you follow the results of our domestic peer group, you probably you would have noticed that they reported pretty good numbers in these two areas and I think we can certainly include that in our highlights as well.

For the quarter, we added 320,000 voice and data RGUs, that's inline with our second quarter last year and 336,000 digital TV add, that's a record for us. So our growth remained strong and consistent in this high ARPU, high margin products. The one area of subscriber weakness continues to be low-end analog TV costumers in Europe, a topic we discuss and analyzed with you often and we'll do it again today, and Gene will address the issues and what we're doing about them. The impact of these two conflicting trends partly explains why we would describe our financial results as stable for the quarter and year-to-date.

On the positive side, operating cash flow year-to-date of $2.26 billion is up 14% rebased for foreign exchange and M&A, inline with our expectations and actually pushing operating cash flow margins to another high point of 42.2%. Revenue of $5.34 billion on the other hand is up 6% year-to-date, which is below our guidance and explained largely again by a few markets in Europe which we will run through. The last point I'll make here is that the other key value drivers in our business are working and they are working well.

Certainly our free cash flow of $318 million in the quarter and $445 million year-date is a highlight. That ladder figure is up fivefold from the first of last year. And despite all the rumors lately, we continue to remain disciplined on the M&A front. And the bottom line is that most sellers either are reading the newspapers or talking to other banks because price expectations simply haven't budged. I'm not sure how long that can last, and so we will wait patiently on the right deal and at the right price.

Having said that, we did make two sizable infill transactions in Japan and Belgium. J:COM will increase its ownership in STM, the last of its unconsolidated managed franchises with nearly 200,000 RGUs. And Telenet agreed to buy Interkabel, the business in Flanders which will add around 800,000 TV customers and give it nearly 100% of Dutch speaking Belgium. Both deals are smart and highly creative transactions that we closed this year.

And then lastly, (inaudible) we remain the largest buyers of our stock here, with $800 million purchased in the second quarter and $1.6 billion year-to-date and now over $5.2 billions since we started, this shouldn't surprise anybody. We're clearly positive and bullish on our business going forward and if we liked it 12 months ago, you can imagine we love it today.

Read the rest of this transcript for free on seekingalpha.com