Liberty Global (NASDAQ:LBTYA) reported third-quarter financial results on Tuesday. The transcript from the company’s third-quarter earnings call has been provided below.
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Summary
Liberty Global reported a strong cash position with $2 billion on hand and no current debt, emphasizing a strategy focused on unlocking shareholder value from its telecom assets.
The company is on track to spin off the Ziggo Group in Q2 2027, citing significant progress in transaction leadership and operational synergies expected to exceed €1 billion.
Virgin Media O2 in the UK announced a strategic plan to reduce costs by £800 million over 36 months, including a 30% headcount reduction, while halting further fiber build on its balance sheet.
Liberty Global plans to continue share buybacks, expecting to repurchase 3.7% of shares in Q4 2026, with a full-year target of $200 million in buybacks.
The company reported sequential improvement in broadband net adds in the Netherlands and Belgium, alongside robust mobile postpaid additions.
Liberty Global expressed disappointment with the CMA’s interim report on the Netomnia transaction, emphasizing its belief that the report’s conclusions are flawed.
The company reaffirmed that it does not intend to inject corporate cash into its telecom businesses, emphasizing their self-sufficiency in managing investment plans.
Liberty Global’s financial guidance remains on track, with no material debt maturities expected until 2029.
The company highlighted ongoing operational improvements, including the rollout of DOCSIS 4 in the Netherlands and 5G network expansion in the UK.
Full Transcript
OPERATOR
Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Liberty Global’s third quarter 2026 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. At this time, all participants are in listen-only mode. Today’s formal presentation materials can be found under the Investor Relations section of Liberty Global’s website at libertyglobal.com.
After today’s formal presentation, instructions will be given for a question-and-answer session. Page 2 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 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 in Liberty Global’s filings with the Securities and Exchange Commission, including its most recently filed Forms 10-Q and 10-K, as amended. Liberty Global disclaims any obligation to update any of these forward-looking statements to reflect any change in its expectation or in the conditions on which any such statement is based. I would now like to turn the call over to Mr. Mike Fries.
Mike Fries (Chief Executive Officer)
All right, welcome. Good afternoon or good morning wherever you may be. Certainly appreciate you dialing in to our third quarter call. I’ve got the broader team with me for Q and A as I usually do, but I’m going to jump right in with prepared remarks that largely track the investor deck that we’ve put together for you. So hopefully you’re following along there on slide four. And we continue to lead with this slide because we think it helps both frame our current operating model and separate us from other European telecom platforms.
The first point here is that Liberty Global itself is an operator and investor across both telecom and other growth sectors with 2 billion in cash, no debt and a nearly break even corporate cost center. Second, we see the top two unique asset groups, a telecom portfolio you know well national champions, where our primary focus has been and remains on unlocking equity value for shareholders. You know the playbook we delivered with the Sunrise spinoff, which now trades at an equivalent of around $11 per Liberty share, has paid dividends totaling 600 million since its Swiss listing in November 2024.
As you know, we remain focused on doing the exact same thing next year with the newly created Ziggo Group in the Benelux. Meanwhile, Virgin Media O2 in the UK announced today a new strategic plan that will radically reduce cost and simplify its operating model to drive growth and cash generation. So more on both of these developments in a moment. But we also control, as you know, a portfolio of growth assets reasonably valued by external parties at $2.9 billion, where two-thirds of that value resides in five clear investments.
Two things to remember about this portfolio. First, we have a track record of realizing fair value for these investments, typically at or above the marks you see each quarter in our filings. Just in the last five years alone we’ve exited investments in this portfolio totaling approximately 2 billion, nearly all of them with positive return to shareholders. And then secondly, this growth portfolio has largely funded itself as we’ve recycled that 2 billion of cash back into our growth portfolio, typically into more scale-based platforms or growth assets in infrastructure, sports and tech.
And each of those we think will yield better returns over time. Now with that as background, we move on to slide and tab of Q3 highlights. And I think there’s just three core takeaways from today’s call and I’m going to dig into them both largely here at the top line level and then into more detail. But first of all, we are on track to spin off the Ziggo Group in the second quarter of next year. I’ll get into this in more detail, I promise. But our confidence is supported by significant progress at the transaction leadership and operating level.
I referenced the strategic plan that VMO2 published, which calls for, among other things, run rate cost savings of £800 million within 36 months. Of course we totally support and have encouraged the goal of becoming a leaner, more agile business to both drive growth and cash generation. By the way, this program is already underway and it includes headcount reduction, a simpler operating model and changes to capital allocation, which I’ll discuss.
Finally, we bought back 2.9% of the company in Q3 and we intend to continue at that pace in Q4. At current prices, that means the additional 100 million buyback would result in another 3.7% of the shares being retired, so nearly 7% in the second half of the year. Now it’s difficult to not see the value here and for what it’s worth, I will be in the market buying shares tomorrow when my window opens as well. I’ve seen this movie before. If you look at the sum-of-the-parts analysis on the right hand side of the slide at $8 per share, plus or minus where we are, we’re trading at a near 50% discount to the combined value of our unencumbered corporate cash and growth portfolio I just went through. Of course, by definition, that attributes zero value, perhaps even negative equity value to the entirety of our telecom business. Just to make a couple of points clear here.
First, we do not intend at this time to put any cash currently on our balance sheet into our telecom businesses. And why would we? These businesses are all free cash flow positive, have strong market positions and are set up to manage their investment plans and balance sheets entirely on their own. That’s why they were put together the way they were. So the notion that some investors might be applying negative equity value is misguided. Second, you don’t need to make heroic assumptions to arrive at positive equity value.
For the Ziggo Group, we’ve previously guided you towards $500 million of free cash flow and a 4.5 times leverage multiple in 2028. And we suggested that the Sunrise free cash flow yield of roughly 12% might be appropriate. By the way, that would result in a $13 tax free dividend to shareholders at spin, implying a $21 stock price today, just adding our $8 on top of that. But just to be conservative, you assume $400 million of free cash flow and a 16% yield to reflect either more leverage or less growth or market conditions.
You arrive at an $8 tax free dividend even with 300 million of free cash flow. And let’s get extreme at 20% yield in that free cash, you’re talking about $5 per share, a 62% premium to our current stock price. So just a reminder, this is not an IPO. Yes, we will host a capital market day in Q1. Yes, management will go on a global roadshow to generate awareness and interest in the stock, just as we did with Sunrise. But we are not building a book or relying on banks to underwrite an equity offering. The new Ziggo Group stock will be distributed tax free to shareholders and will trade at the outset wherever the market determines fair value resides. And in our estimation, it will appreciate from that point as synergies, growth and deleveraging continue to unfold.
This is why we remain committed to the transaction and the timing. So let’s dive into the Ziggo Group spinoff, the progress we’ve made thus far on slide 6. First of all, I’m excited about the leadership team. How could I not be? Stephen has done an incredible job at VodafoneZiggo of course. And he’s built a great team at Ziggo Group. Jani Fruttier is familiar to many of you, I hope, as the CFO of Sunrise. By the way, before, during and after that successful spin, he’s actually Dutch, has returned to Amsterdam as CFO of Ziggo Group to work with Liberty on the pre-spin process and importantly execute the synergies.
And Rocio Lorenzo was a very senior executive at Liberty Latin America, most recently running the Panama business. She just started this week as CEO of Telenet, replacing John Porter, who as you saw, announced his retirement after over 30 years—outstanding years—with me at Liberty. And John will be around till year end and undoubtedly an important source of advice for us going forward. Now, of course there’s a host of other senior executives rounding out a very strong Ziggo Group team.
And it all starts with the people on the ground. And from that point of view, we are in very, very good shape. Now we’ve continuously updated you on all those building blocks, so let’s cover a few more. First of all, we have finalized a lead banking team. Goldman Sachs, BNP Paribas and ABN Amro are all going to do an outstanding job for us. They provide really strong coverage across all equity markets and each of them remains very encouraged and positive about both the deal and the timing. Second, we can report that due to several factors, we will realize over $700 million in tax assets in the combined group structure.
Those tax benefits will constitute a significant part of the synergies which are now expected to be well in excess of 1 billion euros. That’s the target we previously provided. Third, the deleveraging of Ziggo Group continues. The sale of the VodafoneZiggo towers is expected to close imminently, delivering gross proceeds of 670 million euro that will delever VodafoneZiggo, and the wire sell down will further deleverage Telenet to 4.5 times. And then finally, we expect to be filing initial confidential prospectuses with both the SEC and AFM in December next month, which should provide more than enough time to meet the Q2 27 spin timing.
As you can see, this is a full court press inspired in part by the confidence we see in the businesses themselves, but also by that sum of the parts chart that I just showed you, which is a great segue to the next slide highlighting operating progress in Ziggo Group’s biggest market. The Netherlands portfolio on Ziggo is becoming a much, much stronger competitor in this market. That much should be clear to everybody. Revenue is back to growth for the first time since 2024 with the best broadband results since 2019. Perhaps the most exciting recent development is the world’s first major launch of DOCSIS 4, which is now delivering 4 and 8 gigabit speeds today and will ultimately reach 8 million homes. This strategy, I have to say, validates both the quality of our HFC networks and the decision not to build fiber in this market.
DOCSIS 4 future proofs the network for any demand scenarios. DOCSIS 4 avoids disruption to customers and community since we’re not digging up streets and DOCSIS 4 costs 10 times less than building fiber. So that means we’re achieving this network-wide transformation—best-in-market speeds—within the current capex envelope and that’s going to provide greater flexibility for future capital allocation decisions around leverage and dividends post spin.
Now moving to actual operating results for the Netherlands and Belgium on slide 8 you’ll see on the left hand side what I’ve already said. VodafoneZiggo continues to deliver strong and improving broadband performance with 12,000 net adds and its best quarterly result in over seven years. That was helped in part by an expanded footprint, but also by new loyalty programs that are making a big difference. Meanwhile, fixed ARPU improved 1%. That’s despite lower front book pricing because we saw price indexation kick in and an ESPN surcharge because Dutch football is now available on all TV packages.
Mobile postpaid additions were strong, 31,000 in the quarter. That’s driven by a renewed tenure-based loyalty program. I think it’s a very positive move for Stephen with strong early customer engagement and a new FMC proposition and faster broadband speeds. Telenet also had a good quarter, about 4,000 broadband net adds supported by strong base FMC growth, and residential mobile of about 4,000 net adds and that’s driven by premium handsets and a new mobile promotion on 15 gigabit tariffs.
It’s just the sort of momentum you want to see from both of these businesses going into Q4 and 2027. Now let’s switch gears to the UK. I know this is a market and a topic on everybody’s minds here. Let me start with some context on slide 9. I know we talk about it every quarter and many of you are following the market as closely as we are, but the UK has been and remains one of the most challenging operating environments in Europe for telcos. Since the formation of our JV five years ago, retail revenue market-wide in fixed and mobile has declined over 5 billion pounds or 13%—that’s according to Ofcom.
In fixed, this is explained by falling home telephony subscriptions and more recently, intense price competition with the arrival of unsustainable fiber players. And in mobile, we’ve seen rapid erosion in pricing with delayed MNO consolidation way too long and the arrival of MVNO and branded competitors. Despite these headwinds, as you can see on the chart, VMO2 has produced stable EBITDA, growing from £3.6 billion in 2020, the year before our JV started, to £4 billion in 2023 and then remaining largely steady since then at about £3.9 billion.
So while Lutz and the team have struggled historically to drive customer growth and revenue in this difficult market, they have been able to stabilize profit and a commitment to cost efficiencies. It’s also worth pointing out that, as the slide does here, over that same five year period, VMO2 invested heavily in its networks, brands and digital platforms, an investment that has produced four of the most recognizable brands in the market, a number one position in mobile connections, a strong broadband base with faster average speeds—far faster than those that are delivered by BT—and a number two position in B2B.
So two points here. While VMO2 is a strong scale-based national champion which, in the face of serious headwinds, has delivered a steady financial performance over the last five years, it has not been enough, which is why we asked for and management has delivered the new transformation program announced today. And you can see the core elements of that plan on slide 10, including £400 million of run rate cost reductions next year, growing to £800 million by 2029. That’s funded in part by a leaner, simpler organization and a 30% headcount reduction. There have already been changes at the senior operating level here, including the appointment of Lisa McGowan who now oversees the entire B2C division—putting customers first, organizing around key brands, launching simpler products and propositions.
She’s off to a great, great start. Importantly, the team’s already redirecting capex to clearer, higher-return projects, which has prompted the decision, by the way—saying it today—that we aren’t going to build any more fiber on the VMO2 balance sheet regardless of the outcome on the Netomnia. Instead, we see a big opportunity to upgrade nearly 70% of the HFC network to 2 gig speeds next year. That will have a huge impact and give Lisa a tremendous asset to start marketing.
So given the significance of this entire program, VMO2 is going to provide a capital markets update for debt and equity investors in the first quarter of next year, hopefully around our year end results, and that will certainly run through the progress on cost reductions and provide a deep dive into the commercial business. Now, regarding the Netomnia transaction, we remain committed to this deal and we made a decision to keep our remarks today short and to the point. I’m sure you’ve seen our public statements and are fully aware of the debate. All I’ll say is that we are deeply disappointed by the CMA’s interim report. It is so fundamentally flawed with conclusions and counterfactuals that do not reflect the commercial and financial reality of the UK market.
In particular, the assumption that CityFibre, another operator, would have or will have acquired Netomnia is not a credible basis to judge our transaction—I think you’re well aware of CityFibre’s financial condition—nor is the assumption that the billions of pounds of investment enabled by this deal would simply happen anyway. As I’ve just indicated to you, we’re halting the fiber build on VMO2’s balance sheet. So this is a big moment for the UK telecom sector for sure, but I think it’s an even bigger moment for the UK.
Investors are watching to see whether or not UK regulators are prepared to apply the law in a fair and reasonable manner, particularly one that does not pick winners or prop up failing bidders. So stay tuned. It ain’t over. Turning to Q3 operating results in the UK and Ireland briefly, to wrap up my section here, VMO2 delivered year-over-year sequential improvement in both broadband and mobile net losses in the quarter despite the highly competitive environment we just spoke about. Mobile ARPU has been growing while fixed ARPU declines over the last few quarters reflect promotional intensity. Despite the headwinds, the team remains on its front foot—this is key—with improved AI-supported customer service metrics.
We just extended the naming rights for the O2 Arena, a tremendous asset, and we’ve continued network investment, particularly in 5G where coverage is approaching 90%. And then finally, Virgin Media Ireland delivered its strongest total broadband result in seven quarters alongside continued positive mobile net adds. So you can read about that. So with that I’ll hand it over to Charlie and then the team and I will happily address any of your questions.
Charlie, over to you.
Charlie Bracken (EVP, CFO)
Thanks, Mike. Turning to our Q3 financial highlights, performance across our operating companies continues to be on track against our full-year guidance, which I will cover in more detail over the next few slides. As you’ve heard, VMO2 is focused on reducing leverage, and we are encouraged by the direction of a new strategic plan to simplify the business and reduce the cost base at Ziggo Group. The balance sheet is supported by a long-dated maturity profile with no material maturities expected until 2029.
Deleveraging across the Ziggo Group credit silos remains on track, as we demonstrated with the recently announced towers sale. The next slide sets out the Q3 financial results for VodafoneZiggo and Telenet. VodafoneZiggo returned to positive revenue growth for the first time since 2024, supported by price indexation, the ESPN surcharge and customer growth, which more than offset the pressure from front-book repricing and lower B2B mobile revenues. Adjusted EBITDA declined 6.9% in line with our guidance, reflecting the in-year impact of the How We Win plan and budgeted one-off investments in network resilience and security.
Adjusted EBITDA less property and equipment additions also continued to be impacted by the one-off investments reflected in higher capex during the quarter. At Telenet, revenue was broadly stable, supported by higher wire TSA revenues, increased handset sales and higher programming revenues associated with the new Jupiler Pro League agreement with DAZN. Adjusted EBITDA declined mainly due to lower subscription revenues and higher programming costs related to the new DAZN deal.
Adjusted EBITDA less property and equipment additions benefited from capex phasing and lower 5G capex spend. Turning to the UK and Ireland, at VMO2 total service revenue was broadly in line with our expectations, driven by continued pressure in the consumer fixed market and the planned rationalising of the O2 business portfolio to support long-term growth. Adjusted EBITDA declined 2.6%, driven by the lower headline revenues, offset by cost-efficiency measures and certain one-off benefits during the quarter in relation to legal matters and a reduction in sales commission expenses.
At Virgin Media Ireland, service revenues declined modestly, driven by lower Virgin Media TV revenue, and adjusted EBITDA was impacted by a €9 million one-off adjustment related to Virgin Media TV content amortization as well as the flow-through from lower revenue. Adjusted EBITDA less property and equipment additions reflected the last major quarter of fiber capex spend as we near the completion of our fiber rollout program. Turning to capital allocation, our operating companies continue to invest in their networks and digital transformations, though broadly capital intensity is moderating through the cycle. During the quarter, investment at Virgin Media O2 continued across the fiber upgrade program, mobile capacity and spectrum integration, as well as IT and digital transformation.
VodafoneZiggo investment reflected DOCSIS 4.0 network upgrades and the capex one-offs related to the network resilience program, and Telenet capex has stepped down as its 5G and digital upgrades complete, while Virgin Media Ireland is approaching the end of its fiber upgrade across approximately 1 million premises. Now on the top right, the fair value of the Liberty Growth portfolio was approximately $2.9 billion at quarter end. The movement from Q2 primarily reflected modest investments in Formula E and Blue. On corporate cash, we ended the quarter with around $2 billion. The biggest movements during the quarter related to the $1.2 billion payment to Vodafone for the 50% stake in VodafoneZiggo, the modest investments in Liberty Growth, and $100 million in share repurchases.
We’re now targeting to end the year with $1.8 billion of corporate cash, assuming that the full $200 million of share buybacks is completed. Now moving to the treasury slide, we remain focused on disciplined refinancing in a higher-for-longer interest rate environment. Our siloed capital structures are fully swapped with a fixed cost of debt, and base rate hedges remain in place through 2030. Despite challenges with the macro environment, we’ve completed $11.5 billion of financings year to date, including approximately $10 billion across Liberty Global Telecom. This activity has materially reduced near-term maturities compared with our position at the end of 2025.
At Ziggo Group, net of expected non-core asset disposals, we do not expect any material maturities in VodafoneZiggo or Telenet credit silos until 2029. Telenet recently closed a €427.5 million term loan A, the proceeds of which will be used to refinance an existing facility and other near-term maturities. And finally, turning to our full-year guidance for 2026, we are reviewing our options with respect to VMO2’s planned cash distribution to shareholders in 2026 and will provide an update in Q1 2027 when we announce the full-year results and know the outcome of the Netomnia transaction. Otherwise, we remain on track across all other guidance metrics across Liberty Global Telecom and corporate. That concludes our prepared remarks, and I would now like to hand over to the operator for Q&A.
OPERATOR
Thank you. The question and answer session will be conducted electronically. If you would like to ask a question, please do so by pressing the star or asterisk key followed by the digit 1 on your phone. In order to accommodate everyone, we request that you ask only one question. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. We’ll pause just for a moment to give everyone an opportunity to join the queue.
Our first question is from Robert J. Krindle with Deutsche Bank. Please go ahead.
Robert J. Krindle (Analyst)
Hi. Hi everyone. My question is about the UK. You’re suspending the UK fibre build and saving a good chunk of money there. Does that imply anything with regard to your ambition to wholesale on the existing 10 million or so fiber footprint? Ten million homes. Do you have the capex capacity within your target to connect either VMO2 or wholesale customers to that existing fiber network? Thanks.
Mike Fries (Chief Executive Officer)
And I’ll let Lutz chime in here. I think the main takeaway, Robert, from our decision to halt the fiber build on the balance sheet is that we remain opportunistic. Number one, the HFC network, as we’re demonstrating in Holland, is a powerful network and with 2 gig we will be in a great position across the market. By the way, the 2 gig upgrade is tiny in comparison—10 to 20 kind of number—to get the entire footprint ready and able to deliver 2 gig speed.
That’s a huge step in the right direction and we’ll see how the fiber situation unfolds. But we see no reason to be upgrading fiber today on the footprint that we operate. That doesn’t mean we won’t use other people’s fiber, doesn’t mean we won’t wholesale where we have fiber, doesn’t mean we won’t access fiber—our own or others—where it makes operating or economic sense. It simply means we don’t see the need at this point to follow along, if you will.
Fiber is a valuable asset, but not the only way to deliver broadband and, in our case, not the best use of capital today. Lutz, you want to add anything to that?
Lutz Schüler (Chief Executive Officer)
Yeah. So, I mean, so far we have the opportunity to sell our existing fiber network, which is, together with Nexfibre, around 9 million homes. Final decision how to progress with it will be then when the new plan is decided by the board end of November. But so far the technology is there, the platform is there and the cost could be handled in the plan for the next three years. Robert?
OPERATOR
Thank you. Our next question is from Andrew Lee with Goldman Sachs. Please go ahead.
Andrew Lee (Analyst)
Good afternoon. Just a follow-up to Robert’s question. So obviously you’re presenting a good counterfactual argument to the CMA today that may cause it to adjust its view, but that rental scenario needs to be credible for that. So just wanted to dig in a bit deeper on the rental scenario. What changed to make you decide building is not the best use of capital and HFC upgrades will be enough? And just in terms of renting, would the renting rather than building scenario, which you’re positioning as a hypothetical approach should Netomnia not go through, would renting give you the confidence to deliver and guide to service revenue growth on a medium-term basis? Thank you.
Mike Fries (Chief Executive Officer)
Sure. I’ll just say on one point, Lutz, and you take the question. Remember, renting versus building is not the only question. We are always looking to extend our footprint, and that by definition will require renting. So the idea that we will use other fiber networks where available to extend the reach of our brands is a foregone conclusion. So that’s something we should do that would obviously drive marketable homes, revenue and opportunity for the core business.
Lutz, do you want to address the first question?
Lutz Schüler (Chief Executive Officer)
Yes. So, I mean, our assumption was always that our HFC network will serve customers in a very good way for the time being. Right. I mean, the question is—and this is more in the perspective of the next 10 or 20 years—when are higher speeds than DOCSIS 3.1 required, which will give us the 2 gig. And for that we have started to build fiber, and for that we have also entered the wholesale service. Now, it’s very simple that during the course of the years when we built fiber, we could clearly see where you see three fiber networks, it is not economically viable for any of them.
So therefore we have already before stopped to overbuild altnets, and now we have stopped it entirely. So the question now is for the next couple of years we are safe with HFC, and then off-footprint, it’s a huge opportunity. And on-footprint we might get on other networks, or there are lots of inorganic opportunities still around the corner, and we will find a way to roll out fiber with partners where there are no two existing fiber networks. This is very important.
We would never build anywhere a fiber as a third fiber network. And of course we can’t give you at this time an outlook of service revenue. Right. I mean, Mike announced that we will have a capital markets day in Q1 next year. So be assured we are having a plan that is also considering the development of the service revenues that is showing growing operating free cash flow. But the details around that first need to be approved by the board and then will be shared with all of you in Q1.
Mike Fries (Chief Executive Officer)
By the way, it’s a bit of a wake-up call. Thank you. Can I just ask this regulatory posture—Rob, let me just add one thing. It’s a bit of a wake-up call to us, this regulatory posture that we’re faced with here. Never did we anticipate that this transaction with Netomnia would encounter such fierce resistance. It is a reflection of, as I mentioned, deeply flawed perspective and understanding of where this market is going. So we have to some degree been pushed into this direction as well.
It’s unclear to us how this market evolves over the long term, and I’m certain that the powers that be in government have no idea how it’s going to unfold. So this is a bit disconcerting for us and for Telefónica, which is why we need to buckle down and do what we can do—do what we know we can do—drive growth in the business, which Lisa and Lutz believe a 2 gig product is going to do wonders for us. And there’s so much untapped opportunity. We can’t wait around for the government to figure itself out.
Go ahead for a second.
Andrew Lee (Analyst)
Yeah, I think share price and bond prices show that people didn’t anticipate the receiving response either. Can I just ask one quick follow-up. Do you think that your new approach—or this clearer, maybe more straightforward approach—in terms of ceasing fiber build makes it more or less possible that you could sell assets to help reduce your debt pile? And is that on the agenda at the moment? Thank you.
Mike Fries (Chief Executive Officer)
Well, we’ve referenced in the past the remaining tower portfolio that we have an interest in. That is something we’ve always considered, other transactions involving our HFC network or fiber network. We always remain opportunistic, and you should assume we are looking at all sorts of opportunities here to raise cash. And so that’s on the table. We just can’t speak about it today. Thank you.
OPERATOR
Thank you. Our next question is from Matthew Harrigan with Jonex. Please go ahead.
Matthew Harrigan (Analyst)
Thank you. Especially with the commonality on the HFC side now between the UK and Ziggo Group and the very dramatic reductions in the cost plan that was submitted. Is there a fair amount of sharing in terms of the strategic planning and the technology roadmap? You talked a lot about AI, pretty substantial cost reductions in the prior call, but just curious as to whether there’s a lot of talk between the two companies?
Mike Fries (Chief Executive Officer)
Thanks, Matt. Absolutely. That’s always been our approach to running these businesses, whether we own 50% or 100%. There’s an open dialogue, Enrique and the team, whether it’s AI or network decisions. The CEOs of the various operating businesses are together frequently with me and our team, so there’s as much information and knowledge sharing as can happen. And when it comes to something like DOCSIS 4, there are very few people in the world as up to date on that as we are.
And Comcast and Charter and Vodafone, probably the four of us would be the most knowledgeable companies on the planet on this technology, which has proven to be robust, remains robust. And I think, as the Dutch market will demonstrate, 8 Gig is an outstanding product for customers and very effective and efficient to build. So, yes, lots of sharing, lots of common planning, and that’s what makes our approach to this pretty special.
Matthew Harrigan (Analyst)
So obviously you’re seeing a lot of new usage with the new 2 gig product.
Mike Fries (Chief Executive Officer)
Sorry, go ahead and say it one more time, Matt.
Matthew Harrigan (Analyst)
I assume you’re seeing a lot of usage growth and functionality with the new 2 gig product.
Mike Fries (Chief Executive Officer)
Yeah, I mean, Luke can address that more specifically, but whenever we’ve increased speeds or made technological leaps in the product quality of broadband, we see more usage, that’s for sure. I mean, even today, VMO2, given the size of its broadband base, the average speed received by a VMO2 customer is multiples of what the average UK customer is getting today because our network has always been the most robust. And whenever we have leaps in speed offerings, of course there’s more usage and just happier customers.
So there’s a marketing component to it as well, no question. But there’s also a fundamental technology component to it, and we continue to expect to see that.
Matthew Harrigan (Analyst)
Great. Thanks, Mike. Thanks, Lutz. Yeah,
OPERATOR
Thank you. Our next question is from Ulrich Rav with Bernstein Société Générale Group. Please go ahead.
Ulrich Rav (Analyst)
Thanks very much. I wanted to ask about the VMO2 cost cut announcements. Could you talk a little bit how this came about in terms of did you identify inefficiencies and decided therefore it’s time now for this, or is it driven by the situation in the debt stack? How would you position your thoughts at the moment about the situation, how the debt is trading, with regard to the possibility of debt restructuring? Thank you.
Mike Fries (Chief Executive Officer)
A lot of questions there. I’ll let Lutz speak a bit more about the organic evolution of this plan. I’ll just add that from a shareholder point of view, and as I said in my remarks, I think the team has always been quite good at managing an efficient business in the face of headwinds, revenue headwinds and growth headwinds. And so, looking out and understanding the market as we do, it seemed to us to be a great opportunity and a great moment to rethink the operating model.
Now, what’s driving that? Lots of things. You know, just running a more efficient business, bringing in new senior leadership, benefits of AI, et cetera, et cetera. I’ll let Lutz address that more concretely. And Charlie, you can take the last question. Go ahead, Lutz.
Lutz Schüler (Chief Executive Officer)
Yeah, I think three things came together, Ulrich. So one is we hired Lisa, our new consumer CEO, and she clearly came with a new strategy coming from the brands and a clear prioritization. So we have found the few things that will make the biggest difference for customers and aligned our resources behind that. Lisa also has started already earlier than the rest of the company to try to dramatically simplify the consumer operating model, and now we are enlarging this across the company.
So that’s one. The second thing is, of course, as Mike said, that our shareholders told us over summer to come up with a plan to generate a certain cost saving. And so this came quite nicely together and we challenged us across the company in operating model and other cost. And then thirdly, as discussed before, we made a strategic decision on fiber, which is also helping on the costing. So I would say these three things came together, Charlie,
Charlie Bracken (EVP, CFO)
And just on the debt, look, I think we recognize that the debt as a multiple is trading above our four to five times target. We also are committed to getting the leverage down towards our targets. I think we have to wait to see what the plan bottoms out. I think Lutz has done a lot of good things with the cost savings, with lots of other elements, and he’s still working through his budgeting cycle. So I think we’ll have more news on the debt and how we plan to refinance it in February around the Q4 results.
I mean, again, I would re-emphasize there is no maturity before 2029. So we have time to see how the market conditions evolve over the next few months and obviously how the company’s performance evolves. So stay tuned and we’ll come back to you in February, March.
Mike Fries (Chief Executive Officer)
Next question. Thanks very much.
OPERATOR
Thank you. Our next question is from James Ratzer with New Street Research. Please go ahead.
James Ratzer (Analyst)
Yes, good afternoon. Thank you for taking the question. I mean, hard to keep it to just one question. But the one I would have today, if possible, is, I mean, Mike, for equity holders in Liberty Global, you’ve made a pretty powerful statement today that you would put no cash from the topco into the telecom assets. So just to kind of reconfirm that, I was wondering if I could kind of stress test two potential scenarios. One is, you know, it becomes clear before the Ziggo Group spin actually happens that it’s going to be difficult to reach the four and a half times leverage target.
And the second one is, I mean, given where the Virgin Media bonds are trading, clearly everyone on the credit side is expecting some kind of debt restructuring to happen there. So, you know, there could be an amend-and-extend proposal and that can often involve some sponsors potentially putting capital into companies as part of that process. So just to be crystal clear, could you kind of confirm that in either of those two scenarios you still wouldn’t be putting any cash from the corporate company down into the telecom assets?
Thank you.
Mike Fries (Chief Executive Officer)
Well, yeah, in the first instance, we stand by the statement, obviously, and I think it’s the right position for us to have. In the first example where there’s a spinoff pending—and as I mentioned about that spinoff, it’s happening. Make that clear again: it’s happening. And we’re not waiting for all the stars to align. There’s no need to wait for all the stars to align. With the stock where it is today, it’s all good. So it’s happening. Now, the only reason we would consider potentially putting money into a spinoff, not into the company to reduce or to keep it humming on any other basis, is it’s essentially a dividend to shareholders. In the case of Sunrise, we put money in there, but that was effectively a dividend to shareholders tax free. So it was as if we were handing cash to shareholders. That is a different scenario. That’s a very optimistic, positive moment where we are unlocking value, unleashing value for shareholders.
We may think about that, but that is not on the table, because I think this business is trending in a manner that it doesn’t require any boost or kick in the pants. On VMO2, no comment. We made it clear. Charlie just made it clear. We have nothing to add to where we sit today. The business is generating free cash flow. Yes, it’s a lift up and above the high end of our leverage marks. Yes, we are—I think Lutz and the team are making extraordinary efforts to bring meaningful operating free cash flow to the business. Yeah, we need to wait to see where the market sits. Our interest rates are low with base rate hedging through the ’29 period.
But this is, in our minds anyway, not a crisis. And so I’m not prepared to address that hypothetical at all. I think there’s no need to. On the first one, I view that as a very positive moment. The only reason we would do that is if we thought we could get the stock out at 12 instead of 10 or something, and you should view that as a dividend to shareholders, not as an investment in the telco business per se. Because immediately the value of that equity injection would be realized to the benefit of shareholders, which we all like.
So that’s how I’d answer that question. I don’t know if, Charlie, you might add anything to that, but I think I’ve made the point.
Charlie Bracken (EVP, CFO)
No, I wouldn’t. I mean,
James Ratzer (Analyst)
On that point, Mike, wouldn’t—given you’re trying to steer the market to value the Ziggo Group on a cash flow yield basis—wouldn’t cash in the Ziggo Group on a cash flow yield basis be valued at a lower value than cash that sits in the corporate company? So I’m wondering why you would consider doing that.
Mike Fries (Chief Executive Officer)
The only reason is—you’re right, and that’s why it’s not very likely. So the only reason might be that yield itself would come down. Right. So if the business is trading at a certain leverage ratio, the yield might be closer to KPN’s yield of 5%, right, versus Sunrise up at 10 or 12. So to me, it’s less about the actual economic result or accounting result within the P&L or the balance sheet. It’s about market perception of what is the right free cash flow yield.
Having said that, trust me, this spinoff, absent some force majeure we can’t control, is happening. Shareholders will have a share of stock with Ziggo Group written on it in the second quarter, and they’ll value it where they choose to value it. And so the main answer is we don’t think it’s necessary—unlikely to do it—but you should perceive it, if it were ever to happen, as a very positive day, very happy day for investors. And only on that basis would we consider it.
James Ratzer (Analyst)
And would there be any kind of threshold that would make you consider that? I’m just trying to think about—because I think this is an important scenario for shareholders to consider—what could be those variables that might make you put a cash dividend into the Ziggo Group before the spin?
Mike Fries (Chief Executive Officer)
I don’t want to get into those. James, appreciate the question, it’s the right one, but I don’t think it’s appropriate for us to get into all those scenarios. We’ve got Capital Markets Day. You’ve got six to eight months to see how this unfolds. You’re going to have plenty of time, I think, to run the scenarios. That would be my response.
James Ratzer (Analyst)
Many thanks.
Mike Fries (Chief Executive Officer)
Yep, thanks, Jamie.
OPERATOR
Thank you. Our next question is from Polo Tang with UBS. Please go ahead.
Polo Tang
Yeah, hi, just question for Stephen. In terms of VodafoneZiggo, so operationally the company is seeing a turnaround, that’s clear. Can you maybe talk through the deleveraging profile and the moving parts to get to 4.5x leverage from 6 times currently? I think most investors, in terms of their maths, they can only get down to around about five times. But can you also talk about the bridge and the moving parts to get to 500 million of equity free cash flow in 2028?
And is this number, 500 million, sustainable longer term, given you’ve got longer-term debt maturities, but the bond yields are higher than your current cost of financing? Maybe a quick follow-up for Lutz, if that’s possible. On VMO2, you’ve outlined plans for significant cost savings, but can you give some detail about the measures you’re taking to improve subscriber trends and revenues? So are you looking to grow VMO2 longer term? Or alternatively, is this turnaround plan more focused on having a stable top line and boosting operating free cash flow from cost savings?
Charlie Bracken (EVP, CFO)
Mike, do you want me to talk about the financial leverage point?
Mike Fries (Chief Executive Officer)
Yeah, go ahead, Charlie.
Charlie Bracken (EVP, CFO)
Yeah, sorry, just. I mean, Stephen, obviously you’re the master who’s deriving all this. But first of all, we’ve given this medium-term target. We’re going through a detailed budgeting process. Mike just indicated that our synergies are actually looking substantially higher than the 1 billion we told you about. But we’re just not in a position to give you the integrated numbers. But you should assume that we see a roadmap to the 4.5 and the 500 million.
So you should assume that’s there. In terms of the actual details in the bridge, clearly there’ll be some EBITDA turnaround. I think that’s been pretty clear. And Stephen set the foundations. I think he’s guided there’s a very strong chance of EBITDA growth next year. But let’s wait for the final budgeting and synergies to come through so we can give you the exact number there. We’re still getting our feet. Racia has just started on exactly what the final plan is for Telenet. But based on the plan we have today, we feel pretty good about that.
And then in terms of the cash flow, I think we’ve indicated these synergies are pretty material and would underpin a big part of that 500 million. So I’m not trying to duck the question but I think it’s a little bit early for us to give you a line-by-line bridge, but I can assure you you will be seeing that in the capital markets day come whenever it is, and we recognize that’s a key question on everyone’s mind.
Mike Fries (Chief Executive Officer)
And capex reduction, particularly at Telenet where the mobile upgrade is complete and you’re going to see a big turnaround in free cash flow in ’27 and ’28. At Telenet that’s a big chunk of the 500. Stephen, we didn’t give you a chance to say anything there. Do you want to add anything?
Stephen
I think that was… Well, firstly thanks for the question. I think it was handled pretty well by Charlie. I mean, all I’ll do is I would re-emphasize, as you’ve seen our turnaround take root through this year, that my expectation is that the financials, which are a lagging indicator for the commercial stuff, [are] flowing through next year. So, as Charlie said, we’re in the budgeting process, but I fully expect us to see the EBITDA line start improving, which goes some way, alongside the synergies, towards getting to that target and the capex reduction.
Lutz Schüler (Chief Executive Officer)
Yeah, I mean, Paolo, we are not giving top line guidance today. Right. So we are also having our capital markets day contribution around in Q1 next year. But I think clear is we see not really a short-term recovery of the market. So we are not playing with that. Number two is of course mid-term. Right. We see a stabilized also top line. Right. And we will give you details for that. So it’s not that we are only working on cost saving and we forget about gross margin and top line.
Both things will come together that we can show you sustainable growth in operating free cash flow and we will give you details for that in Q1. Thanks.
OPERATOR
Thank you. Our next question is from Joshua Mills with BNP Paribas. Please go ahead.
Joshua Mills (Analyst)
Hi guys and thank you for the questions. First one is to Stephen. Obviously a lot of the focus this year has been about turning around the negative subscriber trends in broadband, which you’ve now done for two quarters in a row. I was just wondering if you could comment a bit about how you think about the balance in value and volume and commercial strategy as we push into next year. You’ve raised prices already de facto by putting the ESPN product in.
Is that the kind of pricing move we should expect to see more of going forwards, or do you still believe that volume gains, and the necessary price discounts which those entail, would be your focus? Maybe if I could just squeeze the second one in quickly. You’ve made the point very clearly on the call that you disagree with the CMA decision and will be challenging it. Can you explain to us the mechanisms by which you will be making that challenge? Because based on the CMA disclosure, I think they said you had until last Tuesday to submit remedies, you didn’t. And now you’re challenging them on the basis of their methodologies. So what is the legal route that you can explore there?
And when should we expect to get an update on whether that route is successful? Thank you.
Stephen
Yeah, so let me see if I can respond to the first part of your question and hand to Lutz for a second. So, look, you’re right. We have spent the balance of the last 18 months focusing on getting the decay in the broadband base, which contributes significantly to the financials, back to positive growth. And we’ve achieved that for two quarters in a row. And my expectation is we’ll be able to continue to see that for a while. Our plan longer term is once we’re in positive territory, which we’re in, is to sustain it at a reasonable level.
I mean, the market’s mature. There’s only so much growth that comes from the market. And so getting positive and staying positive is where we like to play. I think a healthy business is a growing business. Having said that, I think you’ll see a lot more focus on working on yield. I mean, a couple of things on that. Number one is we’ll be lapping the repricing that we did pretty soon. You know, we put that through almost two years ago now. So that’ll trade out of the numbers. We’ve introduced the highest speeds. We’ve got tiering plans on the highest speeds which come at a slightly better yield. We have further plans, like the one that we’ve executed for ESPN, to find new ways of growing revenue through our existing base.
And you see that in the fixed ARPU that we delivered today. We’ve been able to execute the repricing change as well as getting back to growth without disturbing OP as much as most people would have expected when we put through an entire repricing. So I see more of a balance coming between the volume, which we have now achieved in positive volume growth, and managing the financials through the product portfolio that we have. And I think there’s more that we can do on optimizing the product portfolio that we’ve still got, and I think you’ll see that play out in ’27.
On the CMA process. Obviously we submitted to the CMA our view of their interim report, as did most of the market. There is a hearing this week where we’ll have an opportunity to engage with the CMA, understand what they’re saying. We have also asked them to issue a supplemental interim report — not unprecedented. Asking them to revise their report may or may not happen. Either way, we expect some kind of final report from them mid-December and we’ll react and have an update once that occurs.
Lutz Schüler (Chief Executive Officer)
Thank you for your question, John. The only thing I would add to that is that also during the process now TalkTalk got acquired by BT. So the entire underlying market assessment of the CMA has to be reviewed. Right. So it’s not a really straightforward process and there are some questions also coming from that.
OPERATOR
Thank you. Our next question is from David Wright with Bank of America. Please go ahead.
David Wright (Analyst)
Yeah, thank you for the question. So, yeah, just back to the UK, given that the fibre build has halted, what sort of capex, more sustainable capex, could we be thinking about? And also whether you think there is a need for a little bit more expenditure on mobile, given the clear momentum or investment Vodafone is making. And I just wondered, you mentioned about the UK HFC upgrades, but it’s not DOCSIS 4. Can you just confirm why it’s not DOCSIS 4?
And actually in the Netherlands, how many DOCSIS 4 customers do you currently have? Thank you.
Mike Fries (Chief Executive Officer)
I’ll let Lutz answer all the questions, but DOCSIS 4 customers in the Netherlands, Steve, I imagine we have a handful. We just launched essentially, so I don’t think there’s much there. And Enrique, if you want to jump in on the why not DOCSIS 4 in the UK, you’re welcome to. Lutz, go ahead.
Lutz Schüler (Chief Executive Officer)
So, on fibre and investment, I think we disclosed before a number that we are paying a bit more than £100 per homes passed. So I think, David, you can run the math yourself. On mobile, well, we are the fastest improving network in Europe, so we are the ones who have done big steps. We have close to 90% 5G standalone coverage, the highest in this market, and we are putting now all the spectrum to work that we acquired on the back of the merger Vodafone 3.
So we are sitting on a very good mobile network now. Again, took a long time, but we are, and we will. We have the money in our three-year plan to really have that position. And on why don’t we build DOCSIS 4.0? Well, here it is simply cheaper to build fibre because, different to the Netherlands, this country is ducted. So therefore, to build fibre is much cheaper. But we talked about it, right? There has been built so much fibre that it will be either whole buying or it will be any inorganic way of merger, whatever, to get to a higher fibre coverage than the 9 million we have.
David Wright (Analyst)
But unless I’m wrong, you’re not upgrading — or are you upgrading — the residual HFC to DOCSIS 4.0 in the UK or not?
Lutz Schüler (Chief Executive Officer)
No, we are not. I tried to say, David, that this is pretty much the same cost like building fibre in our case, not in the Netherlands case, because our network is ducted. Therefore we will not do that.
David Wright (Analyst)
I see. Thank you. Thank you, Lutz.
OPERATOR
Thank you. Our next question is from Maurice Patrick with Barclays. Please go ahead.
Maurice Patrick (Analyst)
Yeah, thanks for taking the question, for the presentation. Just a quick one from me on the UK market. Sorry to come back to it, your fixed ARPU is down 5% year on year. Just curious to understand how much of that is driven by the front-book pricing pressure versus the back-book repricing. I saw some press article earlier this week talking about how you were going after the back-book customers and repricing them, maybe more than you were beforehand.
So just curious as to, of that 5% ARPU decline, how much of it’s front book, back book, whether it should continue. And maybe just a very quick sort of follow-on. I don’t think you’ve really given your views on the BT–TalkTalk acquisition yet, in terms of the extent to which you would challenge it or your views about it. Thank you.
Mike Fries (Chief Executive Officer)
Well, I think Lutz just mentioned it. We obviously are surprised, to say the least, that that transaction is being rushed through. Wouldn’t surprise you to know we were also looking at that asset, as were many others. So the idea that there was only one buyer or one solution for those customers, or that those customers were truly at risk, we think is wrong. So it should require the exact same scrutiny as any transaction, including ours. All they’re doing here, as far as we can tell, is strengthening the incumbent and their monopoly position without review.
That’s got to be a concern to anybody in the marketplace. Lutz, you want to address the ARPU question?
Lutz Schüler (Chief Executive Officer)
Yeah. I mean, the only talk talk. Right. The decision hasn’t been taken finally. Right. So, I mean, the State Secretary now has to decide will the CMA undertake a clear review process or not. And that decision is due in the next coming weeks. We agree maybe a quick decision was needed to ensure business continuity for vulnerable customers. Others, we strongly disagree with the fact that that means that now not a process and some actions can be taken.
And so we are waiting for that. And of course we are interested in customers where we have a network. On your ARPU question, I think it’s hard to quantify. I mean, high level, we are doing both, right. We have to be competitive in acquisition pricing and, of course, the acquisition price, especially for higher speeds, has gone down. And the other one is that we’ve done a lot of retention. So we have identified segments with a higher likelihood to churn and we have proactively lowered the price and invited them to stay for another two years with us.
So therefore, I think the overall amount of customers who are now within a minimal contract length with us is very, very high. And I think maybe the second one has driven, directed the ARPU a bit more. I mean, you haven’t asked for the outlook and it is hard to give. What I said before is we don’t expect that the market will recover in the near term. We’re not factoring that in. But Lisa is coming with a strategy that for sure will stabilize value for customers using video, using higher speeds and using adjacent services. We are going to share that with you in Q1.
Mike Fries (Chief Executive Officer)
All right, I think we’re at time, everybody. So, yeah, thanks, Lutz. We’re at time. So just a quick thank you from all of us. Appreciate you jumping on, lots of information to process. Obviously we’re around to chat. Stay tuned for early next year, some moments to engage with both VMO2 and Ziggo Group directly in an extended period. I think they’ll be very helpful for you. And we maintain our major focus on driving value for shareholders. That should be clear.
So thanks for joining us. Speak soon.
OPERATOR
Ladies and gentlemen, this concludes Liberty Global’s third quarter 2026 investor call. As a reminder, a replay of the call will be available in the investor relations section of Liberty Global’s website. There you can also find a copy of today’s presentation materials. Thank you all.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.
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