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Good morning, ladies and gentlemen. Thank you for standing by and welcome to Liberty Global's Second Quarter 2026 Investor Call. This call and the associated webcast are the property of Liberty Global. Any rebroadcast or retransmission of this call or webcast in any form without the expressed written consent of Liberty Global is strictly prohibited. At this time, all participants are in a listen-only mode. Today's formal presentation materials can be found under the Investor Relations section of Liberty Global's website at libertyglobal.com. After today's formal presentation, instructions will be given for our 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 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.
Alright. Welcome, everyone. Thanks for joining us. We have got plenty to share with you today. I am going to jump right in and then hand it over to Charles. We are speaking from slides today. I am going to kick it off on slide 5. I like to start with this graphic because I think it demonstrates clearly how we operate and how we allocate capital and create value for Liberty Global. Our story is anchored by world-class telecom assets in Europe that generate €22 billion of revenue and €8 billion of EBITDA in the aggregate. While each of these markets has its own unique operating characteristics, Europe as a whole, in my opinion, is catching a bit of a tailwind. Deregulation, sovereignty, and the benefits of AI are colliding to change the narrative, and we will benefit from those trends. Despite the size, scale, and growth prospects of our businesses, we believe our stock today reflects no value for these assets. I will show you how I get to that conclusion in a moment. That belief is what is driving us to unlock the intrinsic value of our telecom businesses. Fortunately for us, unlike many of our peers, we are lucky to have both the financial and structural flexibility to achieve transactions like the spin-off of Sunrise, which by any measure created meaningful value for all of us. As we will discuss, we are making outstanding progress on our plan to do the same thing in the Benelux with the Ziggo Group next year. At the same time, as we reshape Liberty Global, we have pivoted resources toward our Liberty Growth portfolio, where we have demonstrated our ability to create significant value in media, sports, infrastructure, and tech. The recent sale of our stake in EdgeConneX, where we realized $750 million and a 4x return over about 10 years, is the latest example of that. Finally, we have reshaped our corporate structure to be more agile, more efficient, and more focused on these two core platforms. We are generating today hundreds of millions of dollars of annual revenue into Liberty Global Corporate from tech, financial, and management services that we provide to both our telecom and growth operating companies. With the recent restructuring and reduction of headcount, we have effectively brought down our net corporate cost by nearly 75% over the last two years, and we believe we are on our way to a breakeven position as early as next year. That is the broad picture. Let me jump into the three key highlights from this quarter. First, it was a strong commercial quarter, particularly in the Netherlands, where VodafoneZiggo continues to execute brilliantly on its turnaround plan. This was our best consumer broadband performance in six years. I will touch on that more. Second, our plan to spin off the newly formed Ziggo Group, which consists of our Dutch and Belgian operations, is right on track. The fiber-sharing arrangement with Proximus resulting in a single fixed network across 75% of Flanders was approved by the Belgian regulator yesterday. This is a big milestone for our operational and balance sheet initiatives in Belgium. We will be closing on the acquisition of Vodafone's 50% interest in the Dutch business at the end of this month. Third, we overachieved in our plans to monetize assets and generate cash from our Liberty Growth portfolio. Year to date, we have raised $1.2 billion, well in excess of what we might have indicated, including $900 million from disposals and $3 million from an asset-backed loan on our Wyre stake in Belgium. This $1.2 billion is above and beyond the €1.2 to €1.4 billion we intend to raise from asset sales in Belgium and the Netherlands to reduce debt in those markets. As a result, we are increasing our year-end corporate cash forecast for the Vodafone acquisition from $1.5 billion to $2 billion. Essentially, we will end the year roughly where we started from a cash point of view. On Ziggo Group progress: we are making substantial progress on the key building blocks required to achieve this major milestone for shareholders. We have the approvals we need and are on track to close on Vodafone's 50% stake in the Netherlands by the end of the month. This is foundational for the creation of Ziggo Group and unlocks multiple other benefits, including financial and cross-market synergies. The completion of our NetCo/ServCo split in Belgium into Wire and Telenet was another landmark achievement. This gives us four key things: first, a fully financed fiber build-out that is off the Ziggo Group balance sheet; second, the rationalization of the fiber market in Flanders through our cooperation agreement with Proximus; third, the opportunity to raise capital and reduce debt through the sale of a portion of our Wyre stake; and fourth, the rebalancing of debt between Wire and Telenet, which will result in a less-levered Telenet with a declining CapEx profile that goes into our Ziggo Group structure. We have announced Stephen van Rooyen as the CEO of Ziggo Group and Jeroen Hoencamp as the incoming CFO, and we are making significant progress rounding out the balance of the team. We have internally increased our estimate of the synergies from this transaction and expect them to be meaningfully higher than the €1 billion net present value we previously announced. As a result of this progress, we are a bit more ambitious on the timing of the spin-off and are currently saying mid-2027 versus H2 2027. As we said in the past, the equity story is built around two things: reducing leverage to 4.5x and driving free cash flow to €500 million in the 2028 time frame. The bridge to €500 million of free cash flow we discussed previously and the deleveraging is supported by the asset sales of €1.2 billion to €1.4 billion, all of which are underway. On valuation metrics: our current stock price, roughly $11, represents a 20% discount to the fair market value of our cash and our Liberty Growth assets alone, and it implies essentially zero equity value attributed to our Liberty Telecom operations. About 19 months ago we spun off Sunrise, which we now believe represents $12 per Liberty Global share. Sunrise trades on the Swiss exchange at roughly an 8x EBITDA multiple and has unlocked substantial value. We believe, over time and on a fully distributed basis, Ziggo Group itself could trade on Euronext at a value of up to $14 per Liberty share assuming management can confidently guide to the €500 million free cash flow target and 4.5x leverage and the market applies similar free cash flow yields. That is what we are playing for. From an $18 stock when we announced the Sunrise spin-off, we see a clear opportunity to create $37 to $40 of value for shareholders, and we are squarely focused on delivering that value. Our confidence in Ziggo Group is bolstered by the turnaround at VodafoneZiggo. In Q2 2025, VodafoneZiggo lost 26,000 broadband subs and 5,000 mobile subs, after a long period of declining performance. Through a combination of commercial strategies—including new pricing structures, new broadband bundles, converged propositions, premium sports content, and a strong campaign promoting the quality of our broadband network—Stephen and the team have delivered quarter-after-quarter improved results since then, culminating in our first positive broadband quarter in Q2 and the best performance in six years, along with 32,000 new postpaid mobile subs. On ARPU: fixed ARPU at VodafoneZiggo was stable both sequentially and year over year around €56 despite new front-book pricing, attributable to price indexation and content moves. Mobile ARPU was largely flat sequentially at €17.60 and down 2% year over year. Telenet in Belgium continued its commercial turnaround with improved broadband and mobile net adds versus last year, driven by new campaigns promoting our base brand and a revamped FMC offering that allows customers to tailor their own packages. Broadband and mobile ARPUs in Belgium were stable sequentially and year over year. Turning to the U.K.: Virgin Media O2 is the only scaled challenger in the U.K., one of Europe's largest markets, with the number one mobile network by connections and the number two most reliable broadband network per recent research. Our fixed network reaches just under 19 million homes, nearly half of which are already fiber. We have strong brands—Virgin Media, O2, Giffgaff—supporting over £10 billion of annual revenue and facilitating the launch of new services like O2 Satellite, broadband via Giffgaff, and Volt, our new FMC product. This is a highly competitive market where the consumer retail sector, particularly with alternative networks and MVNOs, has become very competitive. We have hired Lutz Schuler as the new CEO of Consumer; she has the entire consumer division reporting to her and spent 10 years at Sky launching broadband, mobile, and Sky Glass. She is already making a difference in our commercial strategy. We have great potential in wholesale—mobile wholesale generates €800 million of highly profitable revenue and we will shortly launch Monzo to our list of MVNO customers. In fixed wholesale, we aim to capitalize on scale and our growing fiber footprint; the Netomnia acquisition will advance that once approved. Lutz and the team are underway with AI-driven efficiency and growth programs. Our 5G reach is now 88%, and we already offer 1-gig broadband across the market in many places. These investments will pay dividends in both B2C and B2B. On capital structure, Charles will address specifics, but both Liberty and Telefónica are aligned on our commitment to this business long term. We appreciate that leverage exceeds our original targets due to slower growth and decisions to reinvest in networks, and we have many tools—organic and inorganic—to drive greater free cash flow and lower leverage over time. On VMO2 results: broadband and mobile net losses were better than a year ago but competition and increased churn persist. Mobile ARPUs are up sequentially and flat year over year as we focus on retention and maintaining value over volume. Fixed ARPUs were flat sequentially but down 4.6% year over year, largely in line with market pricing. Lutz is on the call and we can dig into results during Q&A. Virgin Media Ireland broadband net adds have been steady over five quarters, supported principally by our wholesale fiber business. Our fiber rollout is on track to be substantially complete at year-end, and we will expand our retail footprint off-footprint. Fixed ARPUs have been steady at €61, and mobile postpaid net adds remained positive, supported by 15-year offers and retention strategies. On AI: the headline is that the telco sector is well positioned to realize AI benefits and, over time, AI should be transformational for us and our peers. We sit on the assets AI needs most: large proprietary datasets, massive cost structures like call centers and field operations, millions of daily consumer touchpoints, and infrastructure like connectivity and data centers. We are pursuing the same opportunities as peers: driving margins through cost efficiencies, customer revenue growth through hyper-personalization, demand for our infrastructure including power and space, and investor interest as markets rotate toward AI beneficiaries. A key lesson for me is finding the right balance between building and buying solutions; partners can help us integrate faster and scale more effectively. Examples of current initiatives include reaching 65% of our VMO2 customer base with our personalization engine, generating 75% call containment rates through generative AI pilots in the Netherlands, reducing fraud, optimizing CapEx, and lowering truck rolls and technician costs. We expect to generate annual savings in the hundreds of millions, though we are just scratching the surface. Work with McKinsey and Google on operating expenses suggests achievable savings between 20% to 40%, and in some areas up to 70% like customer care; these are indications, not guidance. These savings are realistic because models are getting smarter and suppliers are offering early renewals in exchange for passing along AI savings. As we develop these initiatives, we will share more detail. Remember, this example covers OpEx; there are significant revenue and CapEx benefits as well. Finally, we are prioritizing opportunities to invest in AI companies through Liberty Growth. Historically, we have invested around $700 million into our tech portfolio and realized around $600 million through distributions and exits, leaving a net $100 million and a market valuation of $400 million. We have pivoted to AI-driven investments where strategic fit makes sense, such as ElevenLabs for voice AI, cybersecurity, Skale AI, Arrcus for next-generation network infrastructure, and others. We typically invest with top-tier VCs and partners. Our infrastructure vertical is also playing in the AI space through our data center investments in AtlasEdge and alternative energy investments. We are taking a 360-degree view of the AI opportunity. It's going to be an exciting journey. I am excited about what we are doing. Happy to get into questions. Charles, over to you.
Thanks, Mike. Turning to our Q2 financial highlights, our OpCo performance continues to track against 2026 guidance. We closed the quarter with $2.4 billion of corporate cash, supported by proceeds from our EdgeConneX disposal and additional corporate liquidity provided by a new Wyre-stake asset-backed loan. We have completed $4.1 billion of financings year to date, including the imminent separation of the Wire and Telenet capital structures following the recent approval of the fiber-sharing agreement. The next slide sets out the Q2 financial results for our Benelux companies. As a reminder, we now present Telenet's financial performance excluding Wire to provide greater clarity given the full separation of the two companies and their capital structures, which, as Mike presented, is set to happen following Belgian regulator approval of the fiber-sharing agreement. Revenue trends at VodafoneZiggo sequentially improved during the quarter, supported by fixed customer volumes returning to growth in line with the How We Win plan. While repricing remains a headwind today, we anticipate that impact to reduce as we move into 2027. Adjusted EBITDA declined in line with our guidance, reflecting the in-year impact of the How We Win plan and some one-off investments in network resilience which we identified when we gave guidance. Cost reduction initiatives remained firmly on track and continue to support our expectation of returning the business to EBITDA growth from 2027. Adjusted EBITDA less P&E additions were lower year on year, primarily reflecting higher CapEx in the quarter related to the network resilience investments. At Telenet, revenue continued to be impacted by our strategic decision not to renew Belgium football rights for a season and a one-off adjustment related to a VAT dispute, partly offset by higher revenue from the new Wire management services agreement. EBITDA growth was driven by the Wire management services agreement and lower Wire wholesale fees. Going forward, we will see adjusted EBITDA impacted by the return of costs associated with the new Jupiler League contract in the second half. In the U.K. and Ireland, Virgin Media O2 service revenue was broadly in line with our expectations. Competitive intensity in the fixed market remained elevated, while the O2 business continued to rationalize parts of its portfolio to support long-term growth, resulting in a reduction in headline revenues. This was partially offset by wholesale revenue growth in our market-leading MVNO business. There was also an improvement in mobile service revenue trends sequentially. Adjusted EBITDA declined by 2.9%, driven by lower revenue but supported by further cost-efficiency measures. At Virgin Media Ireland, service revenues modestly declined, impacted by continued competition in consumer fixed markets, and adjusted EBITDA declined by 4.7%. We remain committed to our disciplined capital allocation model, rotating capital into high-growth investments and strategic opportunities that drive long-term value creation. Capital intensity at our key OpCos remains elevated, but all within guidance ranges for the full year. Virgin Media O2 continues to see elevated CapEx driven by higher investments in mobile capacity, including spectrum integration from Vodafone, the ongoing fiber upgrade program, and IT digital spend to position for seamless FMC offerings. VodafoneZiggo CapEx was driven by network upgrades, including DOCSIS 4.0 digitization efforts and one-off investments in network resilience and service reliability in 2026. CapEx has meaningfully stepped down at Telenet as the 5G network upgrades are largely complete, and we have completed much of our investment in digital platforms; we expect this to continue to trend down further next year. Virgin Media Ireland CapEx continues to step down in 2026 as we largely complete the fiber upgrade of around 1 million premises. We expect Ireland to be free-cash-flow positive in Q4 for the first time since the beginning of the upgrade program. Moving to Liberty Growth: the fair market value of our growth portfolio decreased to $2.9 billion in Q2, mainly driven by the successful sale of EdgeConneX and UPC Slovakia, partially offset by modest investments in Formula E, Nexfibre, and the AI/RAN tech pillar. Key fair market value adjustments included the realized value for EdgeConneX on sale and an increase in Lionsgate stock price. On our cash walk, we ended the quarter with a consolidated cash balance of $2.4 billion, mainly driven by proceeds from EdgeConneX and UPC Slovakia transactions. This excludes the $340 million of additional liquidity provided by the Wyre loan facility, half of which resides outside Ziggo Group according to the terms of the Vodafone transaction. On EdgeConneX: this was an excellent outcome and validates our strategy. We first invested in 2015 with around $177 million of gross equity in total. We funded its growth without overcommitting capital. EdgeConneX is now a global platform with over 50 data centers across more than 40 markets. We monetized the position in stages and achieved a full exit in Q2 2026 with $604 million of proceeds from the final stake on top of $122 million from earlier sales—$177 million invested, $726 million total proceeds, roughly a 30% IRR, and a 4x multiple of money. The outcome validates our plan for digital infrastructure and is the playbook we are applying to AtlasEdge. On treasury: we have been proactively dealing with our 2028 and 2029 maturities and have successfully refinanced more than $4 billion across our credit silos year to date. In Belgium, we are formally separating the capital structures between Telenet and Wyre following approval of Wyre's fiber-sharing agreement with Proximus. Wyre can draw down the €4.35 billion fully underwritten facility to repay a €2.3 billion intercompany loan with Telenet and a €400 million Wyre dividend as part of the wider debt rebalancing. Telenet will use proceeds to repay €2.5 billion of 2028 maturities. At VodafoneZiggo, we refinanced €1.3 billion, leaving us with no 2028 maturities and reducing 2029 maturities. We remain opportunistic ahead of the spin-off and, as Mike noted, are on track to execute several deleveraging steps pre-spin. At Virgin Media O2, we remain opportunistic in the debt market as we seek to push out 2029 maturities, while acknowledging recent trading levels. We remain committed to a stable long-term capital structure for VMO2. Telefónica recognizes that leverage is above our 4x–5x target and that credit spreads are currently elevated, but both shareholders believe the investments we are making will deliver EBITDA growth to deleverage towards the target range. We are investing CapEx at 22% of sales—25% if you exclude hardware sales—above the through-the-cycle average for a telecom company to support network investments and digital IT transformation to realize AI-driven cost reductions. A small projected dividend will be reinvested into the Netomnia transaction, a key deal for Virgin Media O2 to keep investing in its fiber plan, which we believe will strengthen VMO2's product offering, help establish a credible second fiber network to compete with BT, and unlock wholesale revenues. Both shareholders continue to consider inorganic opportunities. We remain on track to deliver this strategy and will update investors as always in February next year. Finally, on full-year guidance for 2026: we are reconfirming all guidance metrics at VMO2, VodafoneZiggo, and Telenet, as well as our guidance for corporate adjusted EBITDA. We are upgrading our full-year corporate cash target from $1.5 billion to $2 billion, supported by the EdgeConneX proceeds and the Wire asset-backed loan. That concludes our prepared remarks for Q2, and we will now open the call for questions.
分析師問答
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 one 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 will pause momentarily to give everyone an opportunity to join the queue. Your first question will go to Joshua Mills with BNP Paribas. Joshua, your line is open.
Hi, thanks for taking the question. I'll keep it to the U.K. First, on the U.K. ARPU trends: in the past you have talked about issues from declining legacy revenue such as voice and TV, but today you mentioned more that declines relate to front-book price competition. Is it fair to say this is no longer just a legacy issue and is now more about current market conditions? Do you think we are at trough ARPU declines and trough service revenue declines now, or could things continue to get worse in the second half given the level of competition? Second, on volumes: in the past when you had sub losses in markets like the Netherlands and Switzerland, you took bold steps to rebase customers proactively onto cheaper tariffs to stabilize the base, which seemed to have a positive effect in the Netherlands. Is that something you would consider doing in the U.K. as well, or will you remain okay with the current rate of subscriber losses in the near term as long as you protect ARPU? Thank you.
Thank you for the question. When we provided guidance for 2026, we expected the market to be very competitive. We estimated that around 70% of the service revenue decline would come from fixed consumer, which is now materializing. The market is more competitive: compared to Q2 2025, the average selling price in the market is down about 4%. That explains much of the pressure. On your question about re-contracting customers: we are not radically recontracting customers indiscriminately. We have built a sophisticated retention machine where we know, down to small cohorts, what customers want and can offer tailored propositions. We have built a prevention machine as well; the biggest driver for ARPU pressure is targeted prevention steps. We now have more than 80% of our customers on contracts with significant remaining term. We will continue with that targeted approach. As to whether we are at a trough, it is hard to say because market evolution depends on competitor actions and regulatory developments. There have been promotions announced tied to Openreach changes that, if accepted and implemented from October, could make the market even more competitive; if not, we would expect similar competitive levels and our prevention work to help us. I hope that helps.
Thank you. Our next question will go to Robert Grindle with Deutsche Bank. Robert, your line is open.
Hi everyone and thank you. Well done on getting regulator approval. It took a bit longer than you thought, but you have been preparing in the meantime. What is the timeline from here on the fiber collaboration and the separation of Telenet? Alongside that, the monetization of Wyre—would you hope the monetization announcement is this year, or is that pushed into next year because things have gone a bit more slowly? Thank you.
Thanks, Robert. It has taken some time to get here, but as I said earlier, this approval is a foundational building block and now opens up many next steps. Telenet is already split operationally: Wyre and Telenet have functioned as separate businesses for a while and we have reported on them separately. The regulator approval allows us to rebalance the capital structure between the two entities and to proceed with the sale of a stake in Wyre, which is well underway. We have a dedicated team and advisers working on this and are diligently proceeding through year-end. It is possible we will conclude that transaction as soon as year-end or perhaps in Q1. This is one of many positive steps that the approval unlocks and it helps accelerate the timing on the Ziggo Group spin.
To add clarity on the timeline: the banking process was supposed to take place next week, and then Wyre will be able to access the €4.35 billion of financing to repay intercompany debt and rebalance the capital structure.
Thank you. Our next question will go to Polo Tang with UBS. Polo, your line is open.
Thanks for taking the question. This is about VodafoneZiggo and broadband. Can you clarify when you will start offering broadband in the Delta Fiber footprint? Also, what had the biggest impact in stabilizing the VodafoneZiggo broadband base—ESPN content offers, pushing harder on recontracting customers, any tailwind from the Odido data breach, or something else? Do you expect improving or positive net adds going forward or is stable more likely? Thanks.
Hi Polo, thanks for the question. On Delta Fiber, we are planning to roll out in the Delta footprint that we operate in during the second half of the year and expect to see that reflect in our numbers in the fourth quarter. On what stabilized the broadband base: it was not one single action but a sequence of measures. We brought our front-book pricing in line with the marketplace, invested in the core proposition, increased speeds—today we are the only operator offering 2-gigabit across much of the country—differentiated with a Wi-Fi guarantee, launched the ESPN bundle, and changed our marketing to focus more on connectivity while competing harder. It is a combination of these moves that helped. Our expectation is to continue to build momentum through the second half of the year.
Thanks, Polo. Our next question will go to Nick Lyall with Berenberg. Nick, your line is open.
Hello. Following up on the U.K., what makes you think this is not a long-term decline? Your pricing is quite a bit above BT's and substantially above the altnets. You have many customers locked in today, but why can you sustain this pricing point long term? Is it rolling out fiber, completing the fiber footprint, or something else? Also, Charles, when you mentioned inorganic options in the U.K., did you mean potentially buying assets rather than selling to reduce debt? Have I got that right? Thanks.
The point we are making is both Telefónica and Liberty are firmly behind Virgin Media O2. We are committed and investing at elevated levels to secure the long-term competitiveness of the business. We are open to inorganic moves, whether buying or selling, but I am not being specific about transactions now. We are on track with the plan for this year and will provide the next update in February.
To add to Charles: the Netomnia deal is an example of an inorganic transaction we believe is beneficial to VMO2 from both a credit and equity perspective for the reasons we have previously articulated. Inorganic can include many types of transactions beyond cost and revenue initiatives.
High level: we have three strong brands—Virgin Media, O2, and Giffgaff—and we can offer products across these brands to different target groups. We recently launched Giffgaff Broadband and are gaining traction. On average, every second household is a customer of ours but only one in three of their products are with us, which indicates upside. We have very strong mobile connectivity, broadband connectivity, and video products for different segments, and we will be prepared for continued competitiveness. Our strategy is to offer good value for money with good service, and we will continue progressing along those lines.
Thank you. Our next question will go to Ulrich Rathe with Bernstein. Ulrich, your line is open.
Thanks. I wanted to ask about the quantification of AI cost benefits. How confident are you that you can retain these kinds of benefits? Cost benefits available to the industry often get diffused. You mentioned McKinsey was involved—those firms are mechanisms for diffusion. What are the reasons why such cost benefits are ultimately good for the bottom line in the longer term? Thank you.
If you mean whether these benefits are real and sustainable, I will say they are coming from two directions: organic adoption of AI within our companies and AI-driven efficiencies provided by suppliers. Every company in the group—both in growth and telecom portfolios—is implementing solutions that are making operations more efficient now. The trend is only one way: models are getting smarter and solutions are getting faster and cheaper. Many of our suppliers are offering early renewals and passing along savings. We are still only about 20–25% in the cloud, with 75–80% of our business still on-premises, so there is much more to do. This will require rethinking operating models, talent, and technology. I believe these improvements are real and sustainable and we are aggressively pursuing them over the next two to three years.
Thank you. Our next question will go to Matthew Harrigan with Stonix. Matthew, your line is open.
Thanks. On industrial AI implementation: do you expect a discrete inflection point for benefits around 2028–2029, or is it a gradual process? Relatedly, are you seeing concerns about token costs that could reduce net benefits? Some U.S. peers feel there may be modest benefits in 2027 and a bigger inflection further out. On the revenue side, are you modeling material revenue upside from AI or keeping that more closed? Thank you.
I think it will be gradual rather than an immediate step function. Implementation depends on technology, partners, organizational structure, talent, and operating models. We are focused on end-to-end adoption across our businesses. On revenue upside, many initiatives are already in action, like Lutz's personalization engine that drives churn reduction and best-next-offer programs. We will pursue revenue and CapEx benefits as well as OpEx benefits, but we aim to do this one piece at a time and ensure we can implement effectively.
On token costs and economics: like others in the industry, we are watching token cost evolution closely. We do not see a major issue with token-cost increases because we are disciplined in applying tokens to business cases that deliver net benefits. We expect a continuing story, and we do see significant net benefits, even accounting for increases in usage and related costs.
Thank you. Our next question will go to James Ratzer with New Street Research. James, your line is open.
Good afternoon. Telefónica has announced a major cost restructuring in Germany and has appointed a new CFO at Virgin Media O2. Do you see scope to take similar radical cost-reduction actions at VMO2? Also, you just raised your topco cash target to $2 billion—would you consider injecting any of that cash back into VMO2 to help deleverage? Thank you.
Thanks James. It is premature to discuss specific capital allocations. We believe the business is generating free cash today and can generate more. On cost reductions, we are in business-planning mode with Lutz and the team and are looking at organic and inorganic tools to drive free cash flow and reduce leverage. Those are realistic options and will be considered as part of planning.
The business is on track with the plan set out at the beginning of the year and has reconfirmed guidance. We will continue to work with management on the right next steps, which could include cost reductions, and will update you in February.
Thank you. Our next question will go to David Wright with Bank of America. David, your line is open.
Hi. I wanted to ask about the accounting change at VMO2 related to amortizing commissions over an extended period. It seems counterintuitive to extend amortization when you are experiencing increasing net losses and higher churn. Why did you choose this approach, and is it a one-off impact or something we should expect to persist? Does this adjustment sit within EBITDA guidance or outside it? Was it anticipated when you gave your EBITDA guidance? Also, Charles, you mentioned an update in February—should we view that as potentially significant or as routine planning? Thank you.
On the February update: this is our normal annual planning update and we do not want to overemphasize it—it's a routine update. Regarding the accounting change: accounting estimates are revised based on facts, aligned with our auditor, and reflect our real-life experience. While it may seem counterintuitive given market competition, these are the factual adjustments and are the appropriate accounting treatment in our view. It has some impact on EBITDA and was probably not anticipated in the original guidance, but it is not a material number in the larger context. The key metric for us to watch is free cash flow; this is a noncash accounting timing item that has a short-term benefit to EBITDA but in prior years has sometimes gone the other way. So consider it part of the normal swings of accounting.
To add some clarity: when we do a lot of prevention and recontract customers onto new 24-month contracts, we pay commissions for that activity and then amortize those commissions over the new contract lifetime. If you combine the recontracting activity with the accounting rules, it explains what may appear counterintuitive on the surface. In short: more recontracting leads to commissions being capitalized and amortized over a longer period, which impacts EBITDA timing. These are smaller accounting items relative to the whole business.
That concludes the question-and-answer session. I would now like to pass the conference back to Mr. Mike Fries for any closing remarks.
Thanks everyone for joining. We appreciate your time. There is a lot of information to digest; you know where to find us if you have follow-ups. It will be a busy summer for us across the group, particularly in the Benelux, so stay tuned for announcements and speak soon. Thanks very much.
Ladies and gentlemen, this concludes Liberty Global's Second 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, where you can also find a copy of today's presentation materials. Thank you for joining and you may now disconnect.