Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Liberty Global's Fourth Quarter 2016 Results Investor Call. As a reminder, the first portion of the call will focus on Liberty's European results. And the second portion, to begin at approximate 10:30 AM Eastern, will focus on the LiLAC Group. 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 a listen-only mode. Today's formal presentation materials can be found under the Investor Relations section of Liberty Global's website at www.libertyglobal.com. Following each of the European portion and the LiLAC portion of today's formal presentation, instructions will be given for a question-and-answer session. As a reminder, this investor call is being recorded on this date, February 16, 2017. Page two of the slides details the company's Safe Harbor statements regarding forward-looking statements. Today's presentation may include forward-looking statements within the meanings of the Private Securities Litigation Reform Act of 1995, including the company's expectations with respect to its outlook and future growth prospects and other information and statements that are not historical fact. These forward-looking statements involve certain risks that could cause actual results to differ materially from those expressed or implied by these statements. These risks include those detailed from time to time in Liberty Global's filings with the Securities and Exchange Commission, including its most recently filed Form 10-K. Liberty Global disclaims any obligation to update any of these forward-looking statements to reflect any change in its expectations or in the condition on which any such statement is based. I would now like to turn the call over to Mr. Mike Fries.

Thank you, operator, and welcome, everybody. We certainly appreciate you joining us today for our year-end results call. I will let you know right off the top that our agenda is going to be a little bit different than in the past. As we foreshadowed, we're essentially hosting two calls this morning. We will spend the first hour or so on Europe for Liberty Global Group shareholders and then we will transition to LiLAC and spend the second hour or so talking about our Latin American and Caribbean business. So it's going to be a longer morning for the shareholders of both stocks, but we hope a bit more informational and helpful for everyone. And of course, we welcome your feedback, so please reach out to Rick and the Team and let us know what you think. So I will kick it off, the first half of the call here on Europe, and as usual I am joined by Senior Execs in Denver and throughout Europe. I will make some brief remarks about 2016, try to give you the big picture, which we think, by the way, looks very bright indeed. Charlie will give you the numbers and then we will get right to your questions. As usual, we are working from slides so I hope you can down those slides, get them in front of you and follow along, because they've got a lot of great data in them. I'm going to begin on slide four with what we think the big takeaways are from the quarter. These are the things we think you need to know. First of all, on the back of a very strong fourth quarter, which included 7.5% rebased OCF growth, excluding Ziggo, we achieved our 2016 financial guidance targets. This was helped, of course,…

Thanks, Mike. I'm now on Page 12 where we present the full-year financial results for the Liberty Global Group. Two quick notes before I go into the details. First, our results include BASE in Belgium as of February 11, 2016. Second, since the joint venture transaction with Vodafone in the Netherlands closed on December 31 of 2016, our P&L and cash flow include the financial results of Ziggo for the full year of 2016, but we have deconsolidated the Netherlands from our balance sheet at year end. Starting on the left of this page and adjusting for FX and the impact of acquisitions, we grew rebased revenue by 2.5% year over year to $17.3 billion in 2016, or 3.3% excluding Ziggo. I will provide some color regarding the drivers in a minute. With respect to our OCF, we reported just over $8 billion for FY16 and when excluding the Netherlands as per our guidance, we delivered 4.3% rebased OCF growth in 2016, which was within our 4% to 5% guidance range for the year. 2016 was clearly a year with two halves. In the first half of the year, we reported rebased OCF growth of 2.4% whilst in the second half of 2016 we delivered rebased OCF growth of 6.4%, including 7.5% in Q4. This acceleration was partly driven by our Liberty Go efficiency program and we are please report that our overall indirect cost base of around $4.5 billion, when you exclude the Netherlands, was close to flat in 2016. Moving to our property and equipment additions, we spent $4.6 billion in Europe, or 27% of revenue in 2016, which is above the 23%, or $3.9 billion, in 2015. In line with our full-year guidance, absolute P&E additions increased by around $700 million in 2016, largely due to increased…

[Operator Instructions] We will take our first question from Nick Lyall from Societe Generale.

Morning. It's Nick from Societe Generale. Can I just ask a question on UK cost, please? Your [little] cost control was very strong in the fourth quarter, so could you tell us, in terms of programming costs, were costs down mainly because of BT and what do you expect the outlook to be, really, for programming costs into next year? Also, is there anything we should expect in terms of a reduction in the MVNO costs, with net cost, even with data rising from the new BT deal, please? Thank you.

Hi, thanks. First of all, everybody, appreciate you putting up with the long remarks. It was a lot to talk about, so sorry for that, but wanted to make sure you had all the info. On the programming costs, Nick, those are not a part of indirect costs as reported. We put that up in our direct costs and our direct costs are increasing year over year along with our revenue. Gross margin, largely flat but we are not, and nor have we, indicated material changes in our direct cost profile, which, where programming would reside. For the most part, we are increasing our programming costs every year to support the video platform as we've outlined. Tom, I don't, I think Tom is on but he's got a hoarse voice, so I'll let him chime in if he's up to it. We have not disclosed, nor are we going to disclose, any details from the MVNO agreement or extension with BT but suffice it to say that we would have been unlikely to reach an agreement with somebody for an additional five years that didn't contemplate improved pricing and improved product access and it is also, of course, a very full MVNO that gives us control of our customers. You should assume that the terms of our mobile access going forward will be better than they have been in the past and that is why we agreed to extend the contract. There was a bit of a competition for that as well, so I think we ended up with a good deal that will be, you will see that certainly over time in the numbers.

That's great, Mike. You mentioned as well, sorry, just to come back on the MVNO agreement, you mentioned MNO optionality for later. Should we read into that a little break clause or is there may be more to it that we should think about?

I think you have got it right. We wanted to ensure that we had flexibility in the event another strategic solution presented itself and so there are, and I think we have been public with that, there are some break cause terms built into that. That is all we will say.

That's great. Thank you.

You got it.

We'll take our next question from Ulrich Rathe with Jefferies.

Thanks very much. I was interested to discuss the UK cable service revenues. You mentioned that the rebased growth was around 4%. I think the first three quarters have averaged slightly below 4% as well. I understand there's a couple of one-offs in there, but still, given that there was a significant price increase about mid-quarter, I was wondering why that number would not be higher. In particular, if it is not simply the phasing of one-offs, I was wondering, have you used unusually strong retention measures to keep the churn down here? Is there a particular issue in the quarter on the price increase with retention measures that is different from the ones you would usually apply, or do you have any other reasons why the growth came in the way it did? Thank you.

Tom, are you to answering that? I know you've got a cold.

Mike, I'm here and hello, everybody. We certainly used retention measures very effectively through the period. I wouldn't call them unusually strong. I think the issue we had with the price rise, of course, it was the second price rise we took in calendar 2016. We had a price rise in February, this second price rise in November. It's been quite a common practice in the market amongst our competitors, but its something that Virgin Media certainly had not done in recent times. I think we did come under some more pressure under churn and we used our wide range of retention measures in addressing that. That clearly has an offset and in the end, it does retain those customers. As alluded to earlier, we have seen that churn performance recover and we have certainly seen a strong sales performance that ran throughout 2016 on the back of the core business and Lightning continue and so we do see a good recovery in volumes coming through.

Thanks. Can I follow up with a very quick one on the financing? Charlie, you said that you're increasing exposure here. Could you explain why you are actually increasing exposures, because the spend of financing deals are becoming better, because people are desperate to jockey for a place in your list or is it simply attractive rates and that's the reason why you increase it, or are they actually getting better and that's the reason why you are increasing it? Thank you.

There were two big issues. One issue is, is that the type of spend that we are increasing is new-build construction and typically the sweet spot of vendor financing is the new-build construction firms, because obviously it's hard labor so they have to pay their wages in two weeks and clearly us paying them earlier rather than later is very attractive them. I think the second issue is, is that because of the controls in financing the supply chain, not at our level, obviously, but small to midsize companies, source of financing from us is very attractive and arguably a cheaper source of financing they get from the bank market in Europe today.

Thank you very much.

We'll take our next question from Michael Bishop with Goldman Sachs.

Two questions, please. Firstly, on Virgin Media, you clearly mentioned the phasing of growth will effectively build throughout the year, but I wanted to understand will the phasing of new builds, ie the $800 million, will that also phase in a similar fashion to 2016 and might there be this issue where we have homes passed but not marketable again so we should think about that in terms of the growth for 2018 versus 2017? Secondly, Telenet presents a very upbeat message about moving to 1 gigabits across the footprint by the end of 2018 and having completed over 30% of the node upgrades, so I was wondering if you could update us on the progress there across the rest of the footprint? Thanks.

On the Telenet question, I think the strategy is clear, and Balan is on, he can address it as well, we need capacity in that market and the one gig upgrade has been something we have been on for quite some time. Not sure what else to add to it. The business is solid. We have not seen the sort of impact that we estimated to see from the resale provisions although Orange is certainly doing their best and maybe start to try to drive growth. I think the real story of Telenet is of course getting the mobile platform to fully integrated, getting the customers moved over and continuing to press forward on the quad-play offering, which we think is unique and by far the best in the marketplace. We are confident that Telenet can continue to drive good mid-single-digit growth this year. I think that was our guidance and it makes sense. A few headwinds on the mobile revenue side. I think they articulated that as well. But for the most part, really swinging to more aggressive growth as they start to migrate customers from BASE, or for Telenet over to the BASE platform and of course saving that many that they're otherwise paying in MVNO costs. You should see, I would say, accelerated growth from Telenet and that's been the storyline over the next 24 months and that is one of the reasons we are excited about it. Tom, I'm not sure how much you want to say on the phasing of the build. I think historically we have certainly focused on the second half of the year for all kinds of reasons and the marketable question will be one that evolves. This was a particularly unique fourth quarter but I will say we have decided to define a homes passed as a basically a premise that can be powered up and made operational within three month of construction. And the reason for that is we spent the capital. We want you to see that the capital, actually 90%-plus of it, has gone to building that premise and when it gets connected with power and those sorts of things, if it's within 90 days, we will start marketing it. The point I'll make is if it does continue through this year you will see our denominator in the penetration rates will be a bit higher because we do include, in that denominator, even those homes that are not yet marketed. It is not a marketed-only ratio, if you follow me. We will keep you abreast of that quarter by quarter. You've got the numbers for this quarter, 140,000, a bunch of them already hooked up, within 90 days should be hooked up and then you will have that number every quarter from us. Not sure if you wanted to add anything to that, Tom.

Nothing to add, thanks, Mike.

Just to quickly follow up on the Telenet [indiscernible] costs, really I was after where you are in terms of upgrading the network speeds across the rest of the footprint, given Telenet's comments about getting to one gig by the end of 2018. Is that the sort of metric we should be thinking about for the other markets as well, or will they be slightly behind?

Well, the other markets will be driven mostly by DOCSIS and we are field trying that this year. We are not going public with our network plan yet or maybe ever in terms of where we intend to be one gig and why, but you should assume that, that is around the corner for us and with marginal expense for the most part with DOCSIS 3.1. Balan, I don't know if you're on. If you want to add anything to that, go ahead.

Sure. We have been upgrading all across the board, all of our CMT assets, to be DOCSIS 3.1 capable and get us to the one gigabit with much better spectral efficiency. You will start saying that, as Mike stated, by the end of 2017 we will have the one gigabit product around a lot of Europe, starting with trials and then full rollout as well.

That's great. Thank you very much.

And we'll take our next question from Jeff Wlodarczak with Pivotal.

Good morning, guys. I wanted to focus on the UK as well. Specifically on the 5% decline in business revenue, how much of that is broader economic market weakness versus the inherently lumpy nature of that business and if you could talk about the prospects for business in the UK going forward? Then there's some speculation you are going to launch a UK budget brand, I guess to go after some players, TalkTalk or Plusnet from BT. Is that something that's interesting?

Tom, do you want to hit those?

On B2B, I think the apparent decline is entirely due to a positive adjustment we had in the prior period. I think the underlying B2B revenue was up and our profit contribution from B2B significantly up. I think we are continuing in B2B to have a good growth business across SoHo and SME and with a much more focused effort on MLE where we have gone in and really made sure the capital allocation is efficient.

There was a GBP12 million, I believe that was the number, GBP12 million of revenue in Q4 2015, Jeff. Something to do with settlements disputes with mobile operators. That was the [indiscernible] compared to that.

In our public sector business, I think we are rigorous. We did a quite extensive review of that two years ago. We've made sure all of those accounts are a positive and significant internal rate of return and we tend to be in that area of the public sector, a bit more regional, bit more emergency services, which seems to be a steadier business than some of our competitors experienced in dealing with the central government. I think in terms of B2B we see it as a continued growth area, particularly SoHo/SME but pretty much across the board.

And then the UK budget brand potential?

I think we're always reviewing the way we go to market. I think the budget area is of less interest to us than maybe our competitors, but we are constantly thinking about how we can get through the emerging segments in the marketplace and so we will keep items under review.

Thanks very much.

We'll take our next question from Vijay Jayant with Evercore ISI.

It's James Ratcliffe for Vijay. Two if I could. It looked like there was a significant rise, about 12% organically in Germany OpEx. There was some mention of additional costs there. What was driving that? Is that from one-time or otherwise? Secondly, when you look at the 2017 OCF growth of 6% to 7%, can you help us break that down? How much of that is organic growth of the business? How much is ongoing contribution from Liberty Go? How much is any tailwind from footprint expansion? Thanks.

Sure. On the second question, James, and I think Lutz is on. He can address the OpEx. On the second question of the, we're not going to provide a whole lot of color here on where that 6% to 7% comes from, but you should assume it's not going to be materially different than 2016. Clearly, efficiencies will be a part of that as we continue to roll out and implement all of the various things we're doing across the business to be more efficient in how we were in the business and so that is going to be a chunk of it. There will be organic growth as, steady-state growth as we saw this year in markets like the UK where we grew basically the same as 2015 in the business as usual segment. You're going to see new-build obviously kicking and in various markets along with price increases. We took price increases again across the board, some more aggressive than others, but if you laid them out year over year 2016/2017 we continue to take reasonable price increases on our products to reflect the investment we're making in customer service and innovation all that good stuff. I don't think it is going to be materially different and we'll certainly give you more color on it as the quarters unfold. In terms of Germany OpEx, Lutz, if you're on, I think you can address that. It's mostly to do with marketing and customer growth. Go ahead.

I think the cost development on the business as usual to keep the lights on is indeed decreasing, so we are getting efficiencies. We have done also, we're in the middle of a restructuring program and laying 20% of staff off. Why is cost increasing? Because we have new sources for growth, so investments in B2B, we fuel growth there, getting more customers. We have new-builds now so we have generated 200,000 homes and we have a dedicated sales team for that, to if not to generate the customers and we have ramped up also marketing activities for the consumer. You see that in the numbers, especially in quarter four. Therefore, the increasing cost at the end is simply to make sure we have the same growth speed also in the future.

Thank you.

I would point out, though, that the operating cash flow margin in the fourth quarter was still 62.5%. It continues to be a profitable business and that is up from 61.5%, 61.8% in the first half of the year, so they are continuing to scale.

Great. Thank you.

We'll take our next question from Matthew Harrigan with Wunderlich Securities.

Thank you. I wanted to get your view from a European perspective. [As you try ]at Supermobility and I think on occasions that cable's almost in a uniquely advantageous spot for 5G, given the density, the cell site locations, the right away, the powering and everything and he was saying it's almost inefficient in stateside for mobile providers to build out in these efforts and small-cell topologies and then there are things happening on the technology side, even using 802.11 waveforms for LTE over time. It could further advantage the cable. When you look at Europe, given your situation in Belgium with BASE and your JV in the Netherlands now and in other markets, how do you feel about 5G? And do you think that part of the winning game plan might be to carry even more data for other operators beyond the cell tower business you have right now? Thank you.

Sure, Matt. I think we have talked about 5G pretty much on every call and we've said the same thing, which it is certainly an evolutionary technology, one that people will embrace, operators and consumers. It's going to take time, four to five years before I think even launch and certainly longer than that before any material penetration. So we believe you are accurate and correct that, that technology does require more infrastructure on the ground, the back haul and other matters and we think our networks clearly will play a role. But the important point to make is we are in the mobile business and we intend to be even more successful in the mobile business over the next three to five years so we will be a 5G provide. Not only will we benefit from the developments that will occur and all of the positive consumer benefits that will occur, but we will be actually delivering those benefits to customers as a mobile operator and obviously to the extent we have network in those markets, we'll be benefit, utilizing our own networks. It is a win-win for us. It's not simply a, we're not a taker in the sense that we hope 5G works and they come to us knocking on the door and asking for access, it is the other way around. We're in the mobile business, so either through our MNO or MVNO relationships we intend to be a player in 5G and then of course to take advantage of the fact that we have the densest, most accessible network for back haul and other things that are necessary. So it is a win-win, as we see it.

Thanks, Mike.

You got it.

We'll take our next question from Ben Swinburne with Morgan Stanley.

Thank you. Good morning. Mike just going back to your comments on entertainment being a core differentiator for you in a lot of markets, you've also talked recently about acquisition opportunities around content. You have done some small broadcaster acquisitions. Can you maybe update on your thoughts on how content assets may or may not play a greater role going forward for the company? And then just for Charlie, I think you or Tom mentioned the phasing for OCF growth in the UK would be back-half weighted. Is that probably also a good place for us to be for the overall company in Europe in terms of phasing to the 6% to 7% guidance? Just need more color. I figured since the UK is so big it probably is, but I thought I'd come back and ask.

Good questions. Listen on the entertainment side, and I will repeat what we said before, nothing has changed. There are no Disneys or Time Warners in Europe. We need to be looking at the content on a market-by-market basis, being opportunistic about the kind of product that people want in those markets and what we can gain access to a efficient way. In many ways, Holland is a great case study, incredible functionality on the entertainment platform, available on every device, so we've completely neutralized the impact of OTT, if you will, integrating great OTT apps like Netflix right into the core product and then topping it off with exclusive sports, exclusive HBO. When you add it all up, we are not betting the farm on that sort of package. That is a really affordable and, we think, manageable set of content investments in a market where we need it to differentiate and it is working, as you can see in the numbers. What we do another country will be case by case. Free-to-air assets have worked in for us in Belgium and Ireland, but fortunately those were small investments and the benefits are clear. We're extend reach, we're developing, getting right in the middle of original production. We're offering content that is only available to our customers. We'll start zero rating that content. So having a relationship with free to air in some of those markets where we can access that asset efficiently and extensively, I might add, importantly, I might add, makes sense for us. But we're going to look at it case by case. I think there is no big bang that we see across Europe. We're going to be smart about content and start to focus on what customers want first part. That is the strategy. It hasn't really changed and I think we're going to be, certainly you will know more as the year unfolds but that's the basic approach to it. Charlie, you want to hit the phasing point?

I agree with you. I think the phasing of the acceleration will come towards the back half of the year not the least because clearly we are building momentum in the new-build. We continue to drive these synergies in the Liberty Go program on the cost side. I would assume a much faster growth in the second half than the first half.

Thank you both.

You got it.

We'll take our next question from Amy Yong with Macquarie Capital.

Thanks. Two questions for you. First on Germany, I know convergences is really important for the model, but clearly you're early in Germany. What are your thoughts on mobile going forward? Is that even a necessity given the footprint? How has your relationship with Vodafone evolved since the Ziggo JV? Thanks.

In Germany, Lutz can chime in, it is not yet a quad-play market. It's got the lowest quad-play penetration of any country. It's certainly early days. The beauty of this market is we continue to penetrate broadband, all broad providers are doing it, penetrate broadband quarter after quarter. We're doing 60,000 net adds in just at Unitymedia every quarter. The cable industry is doing 140,000, 150,000 net adds every quarter, which is 50% more than the entire DSL industry, but they are also adding 100,000. You are adding 250,000, 300,000 new broadband customers every quarter across the industry in Germany and that is a piece of the business you want to be owning and we think we are over achieving, of course, on our footprint. So it is clearly very much a broadband market. The entertainment piece is evolving, of course, and something where we think we are leading the charge in and convergence will happen over time. We are developing. We have a mobile product out there today. We have 350,000 SIMS, something like that in the marketplace. I think we are also being cautious and putting our money where the opportunity is at this moment, which is clearly in broadband and video. On the Vodafone side in Holland, it has been, it's gone swimmingly. We have got a great team on the ground, could not be happier with the combined management group. It's so far a very high functioning relationship in terms of what we can achieve and what we need to achieve in that market to be competitive. I am hopeful, we are all hopeful that Holland starts to rationalize when it comes to pricing and discounts and we think it should and probably will. We have a number of, I can't talk about them and I won't talk about them, but we have a whole host of arrows in our quiver here to be able to, are implementing this year as we start cross-selling and converging the product. Then not to forget the synergies that we believe are achievable as we integrate the business. So lots of good things that are going to happen there. The relationship with them has been super. We're excited about Holland collectively and individually. And it's not going to happen overnight. It's going to take some time. The mobile business there in particular is challenging, as you would have noticed from their numbers if they've reported yet. But it is nice to have the Ziggo piece going well and bedding down the biggest part of it and, but we are excited.

Great. Thanks.

You got it.

And we will take our last question from James Ratzer with New Street Research.

Thank you much, indeed. Two questions, please, first one for Charlie. Just wondering if you could discuss a little about how you are thinking about leverage going forward. You mentioned you're at now 4.5 times post the closing of the Dutch transaction. That's given you some flexibility to increase the share buyback going forward. How are you thinking about an optimal capital structure in the medium term? And then the second question I had, please, was thinking about Project Lightning take-up in the UK. Kind of question in two parts, firstly, you are saying now after 15 months you've got 32% take-up. Do you think in the medium term maybe 40% could be conservative? And then the second part, I noticed that after 12 months of take-up you have cut the number since November from 29% take-up now to 25%. It sounds like there is something going on with the Q4 2015 cohort that you released to market. What is going on with that quarter of homes released? Is that just a one-off or is that something we need to dig into in more detail? Thank you.

I will let Tom flesh it out, but on the Virgin question, the Project Lightening question, you're going to have some variability as you release homes into that cohort. Remember, even in, as I said, the denominator includes homes we have not even released to marketing yet. So that's going to show some variability year-over-year and month-to-month or cohort-to-cohort and we will try to provide transparency where we can, but it's not atypical that you'll see that kind of variability. Depending on how many homes you put into the denominator and how long you been marketing them and all that good stuff. In terms of upside, we're not sitting here today saying there is more upside to 40%, but we think 40% is a good number and again, if we get there, that is GBP1 billion of margin. So we are hopeful to get those kind of numbers and that would be, for us, more than successful in terms of our deployment of capital. So we are not upping that number today. Charlie, you want to hit the leverage point?

Yes, I think our guides have been for a very long time four to five times. We are very comfortable at the top end of that range, particularly given the interest rates remain very, very low, particularly compared to when we set that guidance and that our debt continues to be fixed rate, fully swaps at very attractive rates. I think our all-time lowest cost of borrowing came in this quarter at 4.7%. I think you can assume whilst we have no immediate need to do it, we're very comfortable if we had to, to get to five times again.

Great. Tom, did you have any more details on that Q4 2015 cohort at all?

I don't at hand. I think inevitably it will be because the cohorts, as we move forward, the pool in the cohort is going to vary and the mix will vary. We'll come out with that in more detail and make sure that we are completely transparent on how we are reporting those numbers.

Great. Thanks, guys.

Okay. We appreciate everyone hanging in there and a little longer call today, but glad you could join us. We are going to transition to the Latin America and I think if you want to just hang on, I believe, Operator, is all you have to do, but we're going to pause and then let others join. Is that correct?

That is correct.

Great. All right, thanks, everybody.