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Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Liberty Global's Second Quarter 2025 Investor Call. This call and the associated webcast are property of Liberty Global, and any redistribution, retransmission or rebroadcast of this call or webcast in any form without expressed written consent of Liberty Global is strictly prohibited. Today's formal presentation materials can be found under the Investor Relations section of Liberty Global's website at libertyglobal.com. As for 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 facts. These forward-looking statements involve certain risks that could cause actual results to differ materially from those expressed or implied by these statements. These risks include those detailed 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 expectations or in the conditions on which any such statement is based. I would now like to turn the call over to Mr. Mike Fries.
Thank you, operator, and hello, everyone. We appreciate your participation in our second quarter results call. I hope you're having a fantastic summer, wherever you are. As always, we aim to keep these calls consistent, and I have my key leadership team with me. After Charlie and I share our prepared comments, we'll open the floor to your questions. We will be referencing slides, starting with Slide 3, which summarizes the key highlights of the quarter. The first point is that our management team and Board are entirely focused on creating and delivering value for our shareholders. We pursue this through three core platforms: Liberty Telecom, Liberty Growth, and Liberty Services. Starting with Liberty Telecom, our objective is to generate commercial momentum and unlock value for you, much like we did with our Swiss subsidiary, Sunrise. I will address our approach to this later, but first, I want to share some operational observations. Our markets are very competitive, impacted by new entrants like Altnets in the U.K. and low-cost providers affecting both customer additions and churn. Given these challenges, our subscriber results varied, with some markets showing improved churn and others experiencing ongoing difficulties in sales and net additions. In spite of these pressures, we are performing reasonably well financially, delivering revenue and EBITDA consistent with our guidance expectations, aided in part by price increases and healthy ARPU results. Every market is adopting similar strategies to enhance commercial momentum, including fixed mobile convergence and supporting mobile sales through flanker brands, utilizing AI-driven retention and marketing tools to reduce churn, and implementing loyalty programs to strengthen customer satisfaction. We are also dedicated to maintaining the highest quality networks everywhere we operate, and our fiber and 5G upgrade plans are progressing on schedule. We have obtained spectrum in the U.K. and recently expanded our presence in the Netherlands, and we plan to monetize these networks where possible. Additionally, we have tower and fiber transactions planned for the latter half of the year to encourage growth and reduce leverage. Transitioning to Liberty Growth, our strategy remains unchanged. Our portfolio now stands at $3.4 billion, a slight increase from Q1, attributable to new investments and favorable currency movements. This portfolio is highly concentrated, with the top six investments accounting for over 80% of its value—three in media and two in infrastructure, alongside our tech investments. Our future goal is clear: to reinvest in higher-return opportunities in sectors with favorable conditions, while strategically using our capital for beneficial transactions within Liberty Telecom, as we did with Sunrise. We project asset sales ranging from $500 million to $750 million this year—this target is achievable, but we won’t rush to close deals for less favorable prices. If this extends into Q1, that’s acceptable. In this context, we've sold our stake in Vodafone, which contributed 10% to 15% toward our goal. Now, onto a couple of updates. I’m thrilled about Formula E's advancements this season. Our recent London race capped an incredible year, and we just extended our exclusive license with the FIA for all electric single-seater racing through 2053, reflecting substantial growth in global fan engagement, which now totals 400 million. We remain committed to expanding our digital infrastructure through investments in companies like AtlasEdge and leveraging our current assets like EdgeConneX, a leading data center platform. On the service platform and corporate operating model front, I want to take a moment to highlight that our dedication to managing corporate costs is paying off. Our previous guidance was to spend just under $200 million this year, and we’re now improving that by at least $25 million as we refine our operating model. This is a positive development, and we’ll provide more information as the year progresses. Our cash balance at the end of the quarter was $1.9 billion, and we repurchased about 3% of our shares. Depending on our asset sales, we anticipate that cash figure to increase by year-end. With that context, I’ll now delve into our telecom business before handing it over to Charlie for the financial specifics. On Slide 4, you will see key updates for each operation, starting with Virgin Media O2. We’re excited about nearing the completion of our merger with Daisy, which will create a strong B2B entity in the U.K. and become the second-largest solutions provider to SMEs, generating £1.4 billion in revenue and £150 million in EBITDA. As is typical with our deals, we expect substantial synergies, with a net present value of £600 million factoring in integration costs and projecting annual savings of about £70 million by 2030. With regard to mobile, VMO2 recently acquired 80 megahertz of spectrum from VodafoneThree, elevating our market share to 30%, which solidifies our competitive position in the mobile sector. Furthermore, Lutz and his team are actively enhancing our customer service, successfully cutting Virgin Media complaints in half year-over-year—a remarkable feat. They’re also making product upgrades, such as data rollover for O2 premium plans and multi-SIM features for the Volt proposition. Turning to VodafoneZiggo, we are starting to see positive signs following management’s strategic shift. The sale of our Dutch towers is progressing well, and we expect it to finalize in the second half, with proceeds earmarked for reducing debt. We also formed a productive partnership with Delta, providing access to another 600,000 off-net homes in the South, establishing us as a true nationwide operator. In Belgium, we’re making strides with Proximus on a fixed network collaboration project, which promises to drive infrastructure investment. Our launch of BASE continues to thrive, reaching 2 million homes, and our significant investment in 5G recently earned Telenet recognition for the best coverage in the country. Lastly, we are nearing completion of our full fiber rollout in Ireland, targeting 80% coverage by year-end and the remainder by next year's first half. We’ve just rolled out Ireland’s first 5 gigabit fiber broadband service and added our third wholesale fiber client, bringing our network utilization to 16%. We’re gaining traction in mobile as well with our recent €15 For Life offer. Now, just a few more slides before I turn it over to Charlie. Regarding our strategic developments in the Benelux region, I want to highlight advancements in the Dutch market. Our management team has implemented a new strategy characterized by streamlined processes, faster decision-making, and optimized costs, leading to significant operational savings and a more competitive stance against KPN. A recent broadband price adjustment resulted in improved churn rates, indicating positive trends. Additionally, we have established a clear network strategy, emphasizing our strong HFC network's capabilities for future speed upgrades while remaining cost-effective compared to building new fiber infrastructure. In Belgium, we’re progressing on collaborations with Proximus to enhance fiber rollout in Flanders. Both sides are working closely with regulators and aim to launch a market test this September, which is encouraging. To summarize our collaboration: in urban areas, both companies will build fiber independently, while in medium-density regions, we will work together, optimizing our resources. Finally, I want to reaffirm our mission to deliver shareholder value. Before the Sunrise spin-off, it was valued at around 5.5x EBITDA as part of Liberty Global. Now, as an independent Swiss entity, it trades at 8x EBITDA with an 8% dividend yield. The market capitalization of Sunrise now exceeds that of Liberty Global, which strongly indicates a disconnect that we aim to bridge. We plan to separate our remaining operating assets from Liberty Global, confident that this will eliminate the conglomerate discount currently affecting our stock. We have various strategies available to us, including spin-offs and IPOs, and we aim to execute these over the next 12 to 24 months. As we finalize our plans, we will keep you updated. Importantly, our strategy to reduce stock discount does not hinge on M&A activity. With that, I'll hand it over to Charlie.
Thanks, Mike. Moving on to our operating highlights slide, and starting with Virgin Media O2. In broadband, despite delivering our highest market share of gross adds during the quarter, net adds saw a similar decline to Q1, and this was driven by a continuation of higher churn due to the competitive pressures in the U.K. market, largely from the Altnets, as well as the impact of One Touch switching. Fixed ARPU was stable after four consecutive quarters of growth. In postpaid, the decline in net adds was primarily driven by lower value B2B disconnects in the quarter. But encouragingly, O2 postpaid churn fell year-over-year, and we continue to drive initiatives to improve performance going forward and see growing momentum on the giffgaff brand. We continued recent growth in mobile postpaid ARPU, supported by price adjustments, which were implemented from April. Moving to VodafoneZiggo. In broadband, despite the continued competitive fixed market dynamics, we saw encouraging early signs of the new strategy with a modest improvement in broadband net adds supported by lower churn through the quarter. On fixed ARPU, despite the front book repricing impact starting to flow through, ARPU continues to have some support from the prior year price adjustments. Postpaid net adds were again impacted by B2B port outs, though it's worth noting that consumer net adds did grow modestly in the quarter. And mobile churn also improved, including the impact of our B brand, hollandsnieuwe. Turning to Telenet, we returned to broadband net add growth, supported by improving churn and some easing on the competitive front. We continue to gain momentum with BASE's fixed mobile convergent offering, including expansion in the south of Belgium. And we delivered strong fixed ARPU growth driven by the earlier implementation of the price adjustment across Telenet from April, which was compared to June of the prior year. Encouragingly, we saw positive postpaid net adds during the quarter, leveraging base to defend against the impact of Digi's launch in the market late last year. However, Belgium mobile postpaid ARPU remains under pressure from the competitive environment, especially B brand price points in the market. And then lastly, turning to Virgin Media, Ireland. Broadband performance was impacted by an intensified competitive environment, resulting in higher churn during the quarter. Now despite this, our growing wholesale traffic is acting as an offset and supporting strong fiber uptake. Fixed ARPU also remains under pressure due to the pricing environment. And Irish postpaid mobile saw an improvement in performance following the launch of new mobile offers in May. The next slide sets out a summary of the quarterly revenue and EBITDA performance in our key markets. VMO2 reported a modest revenue decline of 0.4% on a guidance basis in Q2, which was primarily driven by lower B2B fixed revenue, whilst overall fixed and mobile service revenue remained stable. VodafoneZiggo reported a revenue decline of 2.4% during the quarter, mainly driven by a decline in the fixed base and the impact of the front book repricing, which was partially offset by improved monetization of Ziggo Sport and the UEFA content. Telenet reported a revenue increase of 0.6%, supported by growth in both cable subscriptions off the back of an earlier price adjustment and continued strong programming revenues. Moving to our Q2 adjusted EBITDA performance. VMO2's adjusted EBITDA grew 1.1% on a guidance basis, supported by lower year-on-year operating expenses. And VodafoneZiggo's adjusted EBITDA declined 0.1% in the quarter, driven by the fixed base decline and the impact of its new strategy and in particular, the repricing of its front book. Telenet's adjusted EBITDA grew 2.8%, supported by price adjustments and lower direct costs. The next slide provides an update on our key capital allocation metrics. Now starting from the top left, in the first half of the year, we saw cash flow generation in line with our expectations and with our full year guidance. As has been the case in previous years, we have limited cash distributions from the JVs in the first half, which tend to come in Q4. Moving to the bottom left, I wanted to reinforce a number of midterm free cash flow drivers. Firstly, there's no expected material U.S. tax expenses at Liberty Corporate from 2026 with the U.S. transition tax now behind us, and that's been around $100 million a year annual headwind. As we noted earlier in the year, Telenet ServCo free cash flow is expected to turn positive from 2026 as 5G and digital CapEx spend falls away. Similarly, with significant progress made on the Irish fiber-to-the-home rollout, CapEx is expected to fall from 2026, driving free cash flow back into positive territory at Virgin Media Ireland. Turning to our cash walk at the top right. Our consolidated cash balance sits at $1.9 billion at the end of Q2, down modestly from our Q1 closing balance of $2.1 billion. We saw outflows in the quarter related to continued investments in the Liberty Growth portfolio and the execution of our share buyback program. Moving to the Liberty Growth walk in the bottom right. The fair market value of our Liberty Growth portfolio increased by around $100 million during Q2 to reach $3.4 billion. This was primarily driven by the increase in dollar terms of our largely European currency-denominated investments as well as additional investments in EdgeConneX and Formula E. Additionally, the exit of our Vodafone collar position generated around $82 million in proceeds. Turning to our treasury update. We maintain a strong balance sheet position with our debt split equally between bank debt and bonds. We maintain a siloed and portable debt capital structure at our operating businesses, where the variable bank debt is fixed using independent swaps, allowing us to refinance the credit spreads on our near-term maturities, whilst also benefiting from the full term of the swaps. Across the OpCos, the cost of debt is around 4% to 5% with an average tenor of approximately five years. Now in general, we look to manage our debt maturities so that there are no material refinancing commitments over the next 2 to 3 years. During the quarter, we remained very active, completing an $850 million private tap to extend the 2028 maturities of VMO2, and we also successfully completed just over $1.3 billion of debt financing for the Daisy acquisition by VMO2, which closed today. In aggregate, we've completed $5.5 billion of refinancings during 2025 at attractive spreads. We remain opportunistic and flexible in our financing approach, and we intend to continue to proactively push out existing maturities to maintain tenor. Turning to our guidance slide. We are improving guidance on two metrics. At Telenet, we're tightening our adjusted EBITDA guidance, which we now expect to be low single-digit decline, which is an improvement and at the top end of our previous guidance range. And this has really been supported by a strong first half performance by the company. The revised guidance continues to include the tough comparator coming up at Q3 due to the prior year having a EUR 17 million one-off deferred revenue benefit in Q3 of 2024. And at Liberty Services and Corporate, we're upgrading our adjusted EBITDA guidance to be around negative $175 million as opposed to $200 million. We are reconfirming all the remaining guidance metrics of BMO2, VodafoneZiggo and Telenet. Now that concludes our prepared remarks for Q2, and I'd like to hand over to the operator for the questions and answers.
分析師問答
The first question comes from Robert J. Grindle with Deutsche Bank.
I'd like to ask about Telefónica's comments on the U.K. NetCo. So is this just not a good idea for one of the parties, and that's it? Or is it an idea to be debated further? Why do you think the idea has not landed in Madrid?
Thanks, Robert. Look, I think our partner has been pretty clear, and you can read into their remarks, they did their call the other day around their position on the ownership of networks, the financing of networks. And I'm not going to go back through that. But I would make this point, which is there are other ways to achieve some of the very same goals that they seem to be pursuing. So we have a great joint venture called nexfibre together with Infravia. Nexfibre is in the midst of building, has already built over 2 million fiber homes. It's well capitalized and represents a terrific vehicle for exploring Altnet consolidation, for example. There's a lot of strategic and fiscal cooperation that VMO2 can do with Nexfibre. So I do see us playing a role in the consolidation, which was one of the main benefits of the NetCo project that we were exploring together. I think there is an open mind to playing a significant role in consolidation, just perhaps doing it through different vehicles and in a different manner. So as we get closer to having specific either transactions or structures to communicate, we will. But we have a very good dialogue on this front. I think there are many things about the NetCo strategy that Telefonica would agree with and other aspects, they don't. And so as good partners, we'll work to find the areas of agreement and head forward. So that's the answer.
Got it, Mike. Is the HFC upgrade piece of the strategy still moving ahead?
Sure. We are upgrading HFC homes to fiber at a relatively strong clip with economics on those upgrades looking very similar. Remember, today, VMO2 has access to about 18.5 million homes, if you include the Nexfibre homes in that number. And of those 18.5 million, over 7 million are already fiber. So there's an 18.5 million footprint that VMO2 markets to today, of which more than 7 million are fiber. It's a combination of Nexfibre and our own upgrades at VMO2. So we're already a very large player in the fiber business in the U.K., and I expect that we will continue to get larger.
The next question comes from the line of Joshua Mills with BNP Paribas.
Coming back to Slide #7, which is a helpful outline of the rationale you're putting forward for taking more corporate action. Firstly, if you could maybe just clarify when you talk about timing in the next 12 to 24 months, is that focused on the Liberty Telecom assets? Or could we see Liberty Growth and Liberty Services assets monetize in some way first before coming to the telecom assets? And then secondly, if I look at the telco businesses, and you correctly point out that Sunrise created a lot of value. I guess that asset has a relatively stable revenue and EBITDA growth profile, visibility on the network upgrades and subsequent to your cash injection brought leverage down to 4.5x given that the leverage for VMO2 of if I just say go some way above that. And Telenet is in the midst of a big network upgrade at the moment, how many steps do we have to go through for each of these assets before they're in a position where they could be spun off in IPOs? And do you think that leverage or operational performance is the key thing you need to get in place before you take corporate activity on the Liberty Telecom assets?
Thank you for your excellent questions. I'm pleased we have the opportunity to discuss this further. The timing involves several considerations, and our legal and tax advisors encourage caution in our commitments and discussions because many factors are at play. I want to be careful rather than vague. A timeline of 12 to 24 months seems viable for one or more of our initiatives to materialize. As you pointed out, this could involve assets from our growth portfolio or our telecom portfolio, potentially in various combinations depending on what is most sensible. The important takeaway is that we possess the technology to adapt and identify which businesses and assets present the best opportunities and create the most value. Regarding the distinction between growth and leverage, both are significant. As you know, Sunrise isn't a high-growth business but is quite profitable and adheres to a dividend strategy that appeals, particularly to Swiss institutions. An 8% tax-free dividend yield in a 0% interest rate environment is attractive and has proven effective for us. Operationally, the key focus isn't just on revenue growth, but rather on delivering free cash flow and maintaining a dividend strategy that attracts long-term investors. As you are aware, our larger assets generate free cash flow. Your point on leverage is also valid. For Sunrise, we've made substantial progress in reducing leverage to 4.5 times. Currently, it seems investors are satisfied with this level, so if we view 4.5 times as appropriate, we must be innovative and proactive in our approach to improvement. While I won't detail specific ideas now, we have numerous strategies in mind. Lastly, we have the capability to completely spin off a business or just an interest in one, as demonstrated with Sunrise. This relates to my comments about M&A. It's not an indication that we will proceed with this, but if we chose to track or spin our interest in VMO2, for instance, we could offer investors a chance to directly own the shares we hold in that business. I'm not suggesting this will happen, but I want to emphasize that we have many options, which is encouraging because it shows that there's a feasible way to address the value gap, and having multiple opportunities to achieve this is exciting.
The next question comes from the line of Polo Tang with UBS.
I have a question on the U.K. for Lutz. So if you look at Virgin Media O2, it posted a second successive quarter of heavy broadband declines. But can you comment in terms of your view in terms of what has driven the declines? And how optimistic are you that the level of broadband declines can reduce going forward? So do you need to accelerate the upgrade of the cable network to fiber? Do you need to accelerate footprint expansion with Nexfibre? And what have you seen in terms of broadband net adds in July?
Lutz, go ahead.
Yes, your observation is correct. In the second quarter, we experienced the same loss of fixed customers as in Q1, primarily due to churn. Our gross additions remain strong across both Nexfibre and our existing services, indicating that we aren't struggling with sales but rather facing challenges with churn. The main factor driving this churn is price sensitivity, compounded by a highly competitive market. Competitors are offering substantial incentives to attract customers away from us, leading to customers leaving before even considering staying. The sole reason for this departure is price, not technology. In response, we have implemented a comprehensive retention strategy that has helped us increase our ARPU over the past 18 months, making it the highest in this market. We now need to develop an effective prevention strategy to extend customer lifetime value and secure new contracts. Many customers are currently on minimum contract lengths, often exceeding six months. Regarding your last question, July showed some improvement, but conditions remain challenging. We are not providing guidance on fixed net additions quarterly, but we are making progress with our prevention strategy, bringing more customers into minimum contracts, and we are optimistic about stabilizing the situation. I hope this provides clarity.
The next question comes from the line of Matthew Harrigan with the Benchmark Company.
I was just curious what you see on the broadband consumption front that is driving consumer utility and pricing power, maybe as AI agents, live sports, streaming, gaming, low lag apps. But do you see the consumers being more facile in the use of broadband? Or is it fairly plain vanilla? And then secondly, as you're well aware, I mean, Charter has had some postponements on DOCSIS 4.0, really talking about some of the expensive network requirements. Clearly, I guess, your network topology in the Netherlands is very favorable. And as people know, it's very dense population and flat topology, but it's still pretty striking that it's 90% less expensive than doing fiber all the way. It seems like a bit of an anomaly. Could you just clarify that?
Sure, Matt. On the broadband consumption side, it's interesting. I know we don't have the chart here, but I would say consumption, both on mobile and fixed, is not growing as fast as it did historically. Consumers haven't stopped wanting to do things; it’s just that before, we might have seen a 20% to 30% increase in mobile consumption, and now those patterns are leveling off a bit. They may spike again for various reasons, like streaming or apps, which is a positive for us because it allows us to provide better quality while potentially investing a bit less in capacity. We're currently seeing a slowdown in the rapid increase in consumption. Our pricing power comes from the quality of the network and the speeds that matter; consumers want the apps they use to be quick and fast. So, they're paying for speed rather than just high consumption levels. On the DOCSIS 4.0 side, there are notable differences between the U.S. and the Netherlands. We start with an 862 megahertz network, and moving to 1.2 megahertz isn't complicated; we will also achieve 1.8 megahertz. The network upgrades are straightforward for us. We believe we have timely access to the right equipment and technology to start trialing and rolling out speeds up to 10 gig next year. Another advantage we have, similar to Charter and Comcast, is our ability to maximize capacity from the DOCSIS 3.1 network, potentially reaching 2 to 3 gig, which is sufficient for most consumers. We feel confident about our timeline and cost estimates, as they fall within our existing capital expenditure allocations, and we don't foresee a significant increase in capital costs. Enrique or Stephen, do you want to add anything specific about the relative costs of fiber versus DOCSIS 4.0 in the market?
Yes. Nothing really to add. I mean, we've been together with the other CableLabs members developing the technology over the last few years. We're pretty confident we've done live demonstrations of DOCSIS 4.0 in the VodafoneZiggo network. As Mike pointed out, we're not going all the way from where we are today to DOCSIS 4.0. We are also doing upgrades on 3.1. So we're pretty confident these numbers are accurate. And as you pointed out in the question, the VodafoneZiggo network is quite friendly to the upgrade. So we're certainly taking advantage of that.
I have a follow-up prompted by Lutz's earlier answer. In the U.S. market for postpaid services, T-Mobile is rapidly gaining market share for various reasons, and you are leading in the customer switching category. However, I don't understand how, amid the economic stress in the U.K. and the financial difficulties faced by the Altnets and CityFibre, people can justify paying what I assume is around $300 per customer's contract. This behavior seems economically irrational, especially considering they've had ample time to understand the situation. It appears that some individuals are not grasping this concept quickly.
Yes. I mean, go ahead Lutz.
Yes, particularly Altnets are facing challenges due to high capital costs. They need to refinance, and investors are eager to see more utilization of the networks they've created, which essentially means increasing market penetration. Their only strategy seems to be price reductions. Consequently, they engage in very aggressive pricing tactics and are incentivizing customers to break existing contracts. If you're in a vulnerable position, this is your response. I completely agree, this is not a sustainable long-term strategy for the market.
The next question comes from the line of James Ratzer with New Street Research.
You've mentioned some indications about cash flow generation for 2026, particularly regarding changes in capital expenditures at Telenet and in Ireland. Could we explore that further to grasp the scale of these changes? Currently, Irish capital expenditures are roughly EUR 180 million annually, but prior to the fiber upgrade, they were around EUR 80 million. Should we expect to revert to that level? Regarding Telenet, you've indicated it will reach a free cash flow positive state in the ServCo, but we lack guidance on the NetCo. Total capital expenditures for Telenet this year are projected to be about EUR 1.1 billion. What are your expectations for next year's expenditures?
Well, I appreciate the question. James, those are good ones. I'm pretty sure we're not going to be able to give you guidance for 2026 on this call. But Charlie, do you want to manage that?
Yes. I mean, to be honest, I'm afraid it's almost like saying, give us guidance for '26. It's just too early. I do understand why you'd want to know that, but we have to be allowed to go through our planning process. But what we can say is that certainly in the case of the Telenet ServCo, which I agree, we haven't clearly shown the separation. That's one of Mike's referenced in his slides. We have seen the peak level of CapEx, particularly on 5G and also on digital. So there should be a positive free cash flow profile from next year onwards.
The next question comes from the line of David Wright with Bank of America.
So I guess just following on from Joshua's question, I believe it was in your answer, Mike. I'm just trying to think about these opportunities for tracking, spinning, IPO or evolutions of that. You did mention, I think, Mike, that maybe analysts were not recognizing or penalizing you guys on the sort of cable side of network versus fiber. I'm just thinking it was clear, and you alluded to this, that the Sunrise asset always had a real fighting chance because of the interest rate environment in Switzerland, but that is quite unique. Why do you think analysts would value any of the other assets any differently from where Liberty Global is currently? I appreciate that the market is a lot smarter than analysts. I'm not going to argue that one. But what do you think creates value when these assets come out of the Liberty Global Group? Is it maybe just that a lot more European PMs can buy them within their mandate? Is it just a technical kind of opportunity there instead of buying the U.S. list? Or what gives you confidence that the markets would value these assets any higher than they currently are in the Liberty Global Group?
I think it's a few things, David. I think it's a few things. Number one, you pointed it this. There is a demand among European institutions to own either pure-play or local telecom assets. You see that across the board. As a NASDAQ-listed company, we were able to attract some of those investors, but many don't look at it either because it's perceived to be offshore, not onshore or perhaps has a layer of complexity that makes it challenging for them to assess value. But when you can create a pure-play telecom asset as we did in Switzerland, I think, number one, you start to look at peers more in a different light. While Swisscom is an excellent peer, KPN might be even better, trade at 9x EBITDA. And when you line VodafoneZiggo up to KPN on almost any operating metric when it comes to physicals or financials, it looks pretty good. What are the differences? The difference of the balance sheet, of course, you've already raised that point, leverage and squeezing free cash flow out of the operations. And I think those would be only two hurdles to a higher multiple on VodafoneZiggo, for example, as a pure-play stand-alone business, I'm pretty sure we can find a way to improve that. Second big difference is investors in Europe and investors of European telecom assets like dividends, clearly, and that's most of our peers, if not all of our peers, pay a large dividend. Sunrise is demonstrating that an 8% dividend yield even with that high yield, it's trading at a great multiple. I think the dividend yield at KPN is maybe 5%. So can you generate enough free cash in these businesses to adopt a capital markets strategy or a balance sheet strategy that delivers dividends to investors on a reasonable, predictable long-term basis. Those are not hard equations to solve when you have stable businesses as we do. I understand it's not immediately obvious how we do those things. But trust me, when I say that to put a slide like this up on the screen implies we believe we have a path in each of these instances to create a story that will be appealing to investors. And that's how I'd leave it.
The next question comes from the line of Carl Murdock-Smith, with Citigroup.
I was just wondering if you could expand a little bit more and talk about your turnaround in VodafoneZiggo and early evidence both competitively and operationally in terms of how that's going. Wondering if you could talk a bit more.
Sure. I'll let Stephen elaborate on that. I’m not sure if you heard my earlier remarks, but there is a detailed slide in the presentation addressing this. Stephen, please add more to that.
I think the slide that you published, Mike, earlier in the slide deck is probably the best summary of it. So we've got four specific areas that we've looked at as I came into the organization. We've tucked in behind each of those four. We've reset our organizational model. It gave us an opportunity to take some costs out as well, which we needed to do, specifically pointed at being more aggressive in the marketplace. I think over the last couple of years, we've taken a step back from that. Secondly, as part of that, getting broadband pricing right for the market, I think we're at a kilter with the marketplace and getting that as a first step right was important. Like Lutz, tackling the churn problem. We don't have a gross adds problem either. We have a churn problem. Part of the solution set there was fixing our pricing, but also fixing our trading practices and our contracting. You are seeing the green shoots. May and June were pleasing to us having implemented much of this in April and May. The overhang of are we good enough broadband network, we've taken away. We're fully back in the plan to roll out HFC. We've got an aggressive plan, I think, over the next 18 months to land at. And then I think we were short on marketing. We were short on positioning the Ziggo brand where it needed to be back in the net connectivity world. We were short on investing in FMC, which you'll see coming soon. And we think there's great opportunity for us to attack with hollandsnieuw. We think there's a market space for us to go after that. So I think just tightening everything up, being more focused and bring an organization behind a plan that puts us, as I said, on the front foot and in the attack, and that's where we are today, and you'll see more from us over the next 12 months.
And then just as a follow-up, kind of just looking at the voluntary redundancy scheme that was announced the other day and then also the improvements in the services and corporate guidance today, should we be drawing a line between those two things or not? And given the timing within the year, could that potentially mean that next year could see further improvements within that kind of services and corporate EBITDA line?
Yes, I want to be really thoughtful on commenting on internal restructuring or employee matters as they should be, that article was obviously not authorized by us. But suffice it to say, the trajectory we're trying to illustrate here is a good one. And there are lots of tools in the toolbox to ensure and deliver an operating structure that is more flexible and more aligned and fit for purpose. All that really means is, yes, I think you can assume that over time, we will be through either new revenue sources or new operating models, we will be providing to you guidance for that number, which is lower and lower and lower. So I do think if you're one of those analysts that puts a big multiple on it, I would get the pencil out, start determining on your own what that number could be, might be. And hopefully, that's a tailwind to your target price. I think we have time for maybe one or two more operator.
The next question comes from the line of Steve Malcolm with Rothschild & Company Redburn.
I want to revisit the situation in the U.K., particularly regarding your churn issue. This seems to be partly due to your lack of complete coverage in the U.K., and it appears that your efforts to expand have slowed down over the past year. Nexfibre seems to be carefully considering whether to invest in areas where there are already two providers. You mentioned consolidation, which leads to a two-part question. First, have you given much thought to how you can close that coverage gap? Openreach serves 30 million lines, while you only serve 18 million. Second, how do you view the opportunity to bridge that gap? Would you consider once again utilizing Openreach, as you haven't done so in a while? It seems like a logical step given the discrepancy between your fixed and mobile coverage, which could help you expand your market and potentially address some of the natural churn challenges you're facing. I’m eager to hear your thoughts on this.
Thanks, Steve. It's the right question, and it's a good one. As you point out, we do reach 18.5 million homes. It's not the entire marketplace. Obviously, we do look at other means of reaching another 10 million homes, let's say. And I'm not going to be specific on this call, except to say it is the right long-term strategic move for VMO2 to be a national player on fixed as it is in mobile. How we get there, with whom we get there, those are more technical questions, which I'm not going to get into this morning, but you're right to ask us about it, and we see it similarly.
The last question comes from Albert Rat with Bernstein - Société Générale Group.
Most of my questions have been answered. So let me ask this. Mike, I think in your prepared remarks, you mentioned framing the exit from Vodafone. Could you provide some context on what happened there, why you decided to exit at this point in time, and how you view the situation?
Sure. Sure, sure. And I will say right upfront, I don't necessarily want you to assume that the reason we've exited the position is because we don't have faith in the stock or in Margarita, that's not the case. We just have to look at what's the best use of our capital. We had really limited exposure to the stock given the collar structure of the position anyway. And there was not much strategic value in the end to the position. So I think it's the right move for us to put our capital into the best possible use. And in this case, I don't think that long-term holding was achieving that. So that's really the only color I can give you on that.
So is that a change when you actually purchased it?
Not necessarily. At the time, we were uncertain about the future. While we were optimistic that there might be more favorable conditions and a different outcome, we ultimately have to make decisions regarding where to allocate our cash every day. This decision reflects more on our immediate priorities rather than a long-term strategic perspective on Vodafone as a company. I appreciate everyone joining the call. We're now over the hour mark, and while the markets are challenging, as you've heard, we are actively engaged. The management teams you’re hearing from are focused on investing, innovating, and winning. Value creation is our guiding principle, and we would like to see shareholders realize that value. We have many options available, and we will pursue actionable strategies and communicate them once they are clear and executable. Regardless of the outcome, these efforts will lead to results, which is essential for us. We are confident in our ability to create value for you. Enjoy your summer, and thank you all for joining.
Ladies and gentlemen, this concludes Liberty Global's Second Quarter 2025 Investor Call.