Market Overview

Liberty Global Reports Second Quarter 2018 Results

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Record Q2 Virgin Media rebased revenue growth and subscriber additions

Q2 continuing operations operating income up 31.0% year-over-year to
$263.9 million

Q2 continuing operations rebased OCF growth of 3.3%, led by Belgium

Reconfirming all 2018 guidance

_____________________________________________________________________________

Q2 Revenue & YoY Growth4
$3.0bn |
+2.7%

Q2 OCF & YoY Growth4
$1.3bn | +3.3%

Q2 Revenue & YoY Growth4
$4.0bn |
+3.1%

Q2 OCF & YoY Growth4
$1.9bn | +3.7%

Liberty Global plc today announced its three months ("Q2") and six
months ("YTD" or "H1") 2018 financial results. Our operations in
Germany, Austria, Hungary, Romania and the Czech Republic (collectively,
the "Discontinued European Operations") and the former LiLAC Group have
been accounted for as discontinued operations. Unless otherwise
indicated, the information in this release relates only to our
continuing operations. As used in this release, the term "Full Company"
includes our continuing operations and the Discontinued European
Operations. For additional information, including the reasons that we
present selected information on a Full Company basis, see note 1. In
addition, on January 1, 2018, we adopted new revenue recognition rules
on a prospective basis and a new presentation of certain components of
our pension expense on a retrospective basis. All information in this
release is presented on a comparable basis with respect to both of these
accounting changes. For additional information concerning our
discontinued operations and these accounting changes, see notes 2 and 3.

               
2018 Guidance5 Rebased

OCF Growth

P&E

Additions

New Build

& Upgrade

Adjusted Free
Cash Flow

Continuing Operations ~4% $4.0 BN $0.8 BN Not provided
Full Company ~5% $5.1 BN $1.2 BN $1.6 BN
 

CEO Mike Fries stated, "Our second quarter results were
underpinned by continued momentum at Virgin Media, which generated
record Q2 rebased4 revenue and subscriber growth, delivering
a 4.1% top-line increase while adding 112,000 net RGU additions.
Enhanced broadband speeds and the continued roll out of our V6 set
top box helped deliver a substantial increase in our triple-play
acquisitions, improved growth on our existing footprint and increased
ARPU. Our other operations delivered mixed results, with Germany
achieving a solid performance, offset by challenging competitive markets
in Switzerland and Belgium.

"We recently announced several management changes that highlight our
commitment to putting the best and brightest in critical positions.
Enrique Rodriguez was named our Chief Technology Officer. Enrique brings
a wealth of C-level experience to the table and we're excited to tap his
deep industry and technical knowledge. At Virgin Media, we announced the
appointment of Lutz Schüler as Chief Operating Officer. Over the past
eight years, Lutz has guided Unitymedia in Germany to unprecedented
success, and we couldn't be happier to keep him in the Liberty family.
Finally, we announced the appointments of Severina Pascu as CEO of UPC
Switzerland and Eric Tveter as Chairman of our Swiss business and CEO of
our operations in Eastern Europe.

Last week, we announced the closing of the sale of UPC Austria for over
$2 billion or ~11x OCF, generating net proceeds of approximately $1.1
billion after taking into account the repayment of debt that we
attribute to UPC Austria. These net proceeds will be used to increase
our share repurchase program by $500 million and to repay additional
debt across select credit pools of Liberty Global. With respect to the
Vodafone deal announced back in May, we continue to target a mid-2019
closing.

At June 30, 2018, our continuing operations had an average debt tenor6
of more than seven years, a fully-swapped borrowing cost of 4.0% and a
liquidity7 position in excess of $3 billion. During Q2 we
significantly ramped our share repurchase activity and bought back
nearly $800 million of stock."

About Liberty Global

Liberty Global (NASDAQ:LBTYA, LBTYB and LBTYK)) is the world's largest
international TV and broadband company, with operations in 10 European
countries under the consumer brands Virgin Media, Unitymedia, Telenet
and UPC. We invest in the infrastructure and digital platforms that
empower our customers to make the most of the video, internet and
communications revolution. Our substantial scale and commitment to
innovation enable us to develop market-leading products delivered
through next-generation networks that connect 21 million customers
subscribing to 45 million TV, broadband internet and telephony services.
We also serve 6 million mobile subscribers and offer WiFi service
through 12 million access points across our footprint.*

In addition, Liberty Global owns 50% of VodafoneZiggo, a joint venture
in the Netherlands with 4 million customers subscribing to 10 million
fixed-line and 5 million mobile services, as well as significant
investments in ITV, All3Media, ITI Neovision, Casa Systems, LionsGate,
the Formula E racing series and several regional sports networks.

* The figures included in this paragraph include both our continuing
and discontinued operations, adjusted for our July 31, 2018 sale of UPC
Austria

YTD and Q2 Highlights (on a continuing
operations basis unless otherwise noted
)

  • YTD and Q2 rebased revenue up 2.7% in each period
    • Q2 residential cable revenue8 of $2.0 billion decreased
      1.8% year-over-year
    • Q2 residential mobile revenue8 increased 7.1%
      year-over-year to $0.4 billion
    • Q2 B2B9 revenue8 increased 8.0%
      year-over-year to $0.5 billion
  • YTD operating income decreased 6.7% year-over-year
    • Q2 operating income grew 31.0% year-over-year
  • YTD rebased OCF growth was 2.8% to $2.6 billion, including 3.3% growth
    in Q2
    • YTD results supported by strong performances in Belgium and Virgin
      Media
  • RGU additions of 17,000 in H1 2018, including 43,000 in Q2
  • Built over 150,000 new premises in Q2
    • Virgin Media delivered 118,00010 new premises in the
      U.K. & Ireland
  • Solid balance sheet with $3.5 billion of liquidity before considering
    the net proceeds received from our disposition of UPC Austria
  • Net leverage11 of 4.9x for the Full Company
  • Fully-swapped borrowing cost of 4.0%
  • Completed sale of UPC Austria to T-Mobile Austria in July
               

Liberty Global
(continuing operations unless
otherwise noted)

Q2 2018

YoY
Growth(i)

YTD 2018

YoY
Growth/(Decline)
(i)

 

Subscribers

Organic RGU Net Additions12 42,900 14.4 % 17,400 (89.3 %)
 

Financial (in USD millions)

Revenue
Continuing operations $ 3,045.1 2.7 % $ 6,139.6 2.7 %
Full Company 3.1 % 3.6 %
OCF:
Continuing operations $ 1,309.8 3.3 % $ 2,581.6 2.8 %
Full Company 3.7 % 4.2 %
Operating income $ 263.9 31.0 % $ 384.3 (6.7 %)
 
Adjusted FCF:
Continuing operations $ (131.1 ) $ (1,127.9 )
Pro forma continuing operations(ii) $ (81.1 ) $ (991.8 )
Full Company $ 214.8 $ (410.3 )
Cash provided by operating activities $ 1,464.9 $ 2,142.9
Cash used by investing activities $ (389.1 ) $ (896.3 )
Cash used by financing activities $ (1,387.6 ) $ (3,037.5 )
(i)   Revenue and OCF YoY growth rates are on a rebased basis.
(ii) Pro forma Adjusted FCF gives pro forma effect to certain increases
in our recurring cash flows that we expect to realize following the
disposition of the Discontinued European Operations. For additional
details, see the information and reconciliation included within the
Glossary.
 

Subscriber Growth

    Three months ended     Six months ended
June 30, June 30,
2018     2017 2018     2017
 
Organic RGU net additions (losses) by product
Video (11,500 ) (16,200 ) (72,600 ) (26,200 )
Data 22,000 44,800 52,700 138,900
Voice 32,400   8,900   37,300   50,500  
Total 42,900   37,500   17,400   163,200  
 
Organic RGU net additions (losses) by market
U.K./Ireland 112,200 78,100 157,100 236,100
Belgium (8,400 ) (15,300 ) (29,900 ) (27,300 )
Switzerland (53,800 ) 6,100 (97,500 ) (2,800 )
Continuing CEE (Poland, Slovakia and DTH) (7,100 ) (31,400 ) (12,300 ) (42,800 )
Total 42,900   37,500   17,400   163,200  
 
Organic Mobile SIM additions (losses) by product
Postpaid 90,600 89,200 194,200 173,700
Prepaid (36,400 ) (92,900 ) (85,800 ) (165,900 )
Total 54,200   (3,700 ) 108,400   7,800  
 
Organic Mobile SIM additions (losses) by market
U.K./Ireland 20,700 (7,500 ) 45,900 (4,100 )
Belgium 26,100 (3,100 ) 48,400 400
Other 7,400   6,900   14,100   11,500  
Total 54,200   (3,700 ) 108,400   7,800  
 
  • Cable Product Performance: During Q2 we
    added 43,000 RGUs, a 14.4% improvement over the prior-year period,
    mainly driven by improved volumes in all regions except for
    Switzerland. On the fixed product side, data showed a year-over-year
    decrease, while video adds were largely in-line. Telephony net adds
    increased year-over-year
  • U.K./Ireland: Record Q2 RGU additions of
    112,000 were higher than the prior year, with a larger contribution
    from both new build areas and our existing footprint. This was driven
    by our core offers in the U.K. focused on triple-play bundles, which
    included a doubling of broadband speeds combined with our cutting-edge V6
    set-top box
  • Belgium: RGU attrition of 8,000 in Q2 was
    primarily due to continued intensified competition. Our converged
    quad-play package additions continued to grow, as we gained 18,000 new
    "WIGO" subscribers during Q2
  • Switzerland: Lost 54,000 RGUs in Q2,
    compared to a gain of 6,000 in Q2 2017, primarily due to heightened
    competition
  • Continuing CEE (Poland, Slovakia and DTH):
    Lost 7,000 RGUs in Q2, as compared to a loss of 31,000 in the
    prior-year period
  • Next-Generation Video Penetration (including
    Horizon TV, Horizon-Lite, TiVo, Virgin TV V6 and Yelo TV)
    :
    Added 158,000 subscribers to our advanced platforms in Q2 and reached
    6.7 million or 77% of our total cable video base (excluding DTH) by
    the end of the quarter
  • WiFi Connect Box: Deployments of our
    latest WiFi Connect box increased by over 360,000 in Q2, ending the
    quarter with an installed base of nearly 5.1 million or 55% of
    broadband subscribers across our continuing operations
  • Mobile: Added 54,000 mobile subscribers
    in Q2, as 91,000 postpaid additions were partially offset by continued
    attrition in our low-ARPU prepaid base
    • Belgium added 29,000 mobile subscribers during Q2, a strong
      year-over-year improvement, as the prior-year period was
      negatively impacted by the regulated prepaid registration process
      and its related churn
    • U.K./Ireland added 21,000 mobile subscribers in Q2 as postpaid
      growth was partially offset by low-ARPU prepaid losses. The
      penetration of 4G at Virgin Media increased to 68% of our postpaid
      base at the end of Q2 and 36% of our U.K. mobile base has been
      migrated to our full MVNO platform, which went live in Q4 2017
    • Switzerland mobile subscriber additions were in-line
      year-over-year with 8,000 mobile subscriber additions in Q2,
      driven by continued penetration of mobile in the fixed customer
      base

Revenue Highlights

The following table presents (i) revenue of each of our consolidated
reportable segments for the comparative periods and (ii) the percentage
change from period to period on both a reported and rebased basis:

    Three months ended     Increase/(decrease)     Six months ended     Increase/(decrease)
June 30, June 30,
Revenue

2018

   

2017(3)

%

   

Rebased %

2018

   

2017(3)

%     Rebased %
in millions, except % amounts
 
Continuing operations:
U.K./Ireland $ 1,734.9 $ 1,563.8 10.9 4.1 $ 3,513.1 $ 3,066.3 14.6 4.7
Belgium 753.9 684.8 10.1 (1.0 ) 1,513.5 1,344.8 12.5 (1.1 )
Switzerland 332.2 338.7 (1.9 ) (1.9 ) 677.1 669.0 1.2 (1.6 )
Continuing CEE 152.9 141.8 7.8 0.3 313.4 276.3 13.4 0.7
Central and Corporate 72.0 42.7 68.6 59.3 123.8 83.5 48.3 31.8
Intersegment eliminations (0.8 ) (0.9 )   N.M. N.M. (1.3 ) (4.0 )   N.M. N.M.
Total continuing operations $ 3,045.1   $ 2,770.9   9.9   2.7   $ 6,139.6   $ 5,435.9   12.9   2.7  
 
Discontinued European Operations(i):
Germany 4.5   7.3  
Austria 4.4   3.5  
Discontinued CEE 4.1   5.7  
 
Full Company 3.1   3.6  

N.M. - Not Meaningful

(i) For information concerning our discontinued operations,
see note 2.

  • Reported revenue for the three and six months ended June 30, 2018,
    increased 9.9% and 12.9% year-over-year, respectively
    • These results were primarily driven by the impact of (i) positive
      foreign exchange ("FX") movements, mainly related to the
      strengthening of the British Pound and Euro against the U.S.
      dollar, and (ii) organic revenue growth
  • Rebased revenue grew 2.7% in each of the Q2 and H1 2018 periods. The
    result in the YTD period included:
    • A $5.6 million headwind from the expected recovery of VAT paid in
      prior periods with respect to copyright fees in Belgium, which
      benefited revenue in H1 2017
    • A $6.4 million headwind from the release of unclaimed customer
      credits in Switzerland in H1 2017
    • The unfavorable $3.9 million impact due to the reversal during the
      first quarter of 2018 of revenue in Switzerland that was
      recognized during prior-year periods
  • Our residential cable business reported a rebased revenue decline of
    1.8% in Q2 and grew 0.4% in H1 2018
  • Our B2B business (including SOHO and non-subscription revenue)
    reported rebased revenue growth of 8.0% in Q2 and 7.9% in H1 2018
  • Our residential mobile business (including interconnect and handset
    sales) posted 7.1% rebased revenue growth in Q2 and 6.9% in H1 2018

Q2 2018 Rebased Revenue Growth - Segment Highlights

  • U.K./Ireland: Rebased revenue growth of
    4.1% in Q2 reflects (i) 2.5% growth in our residential cable business
    supported by subscriber growth and accelerating cable ARPU, (ii) 16.1%
    rebased growth in residential mobile revenue (including interconnect
    and mobile handset revenue), reflecting higher revenue from mobile
    handset sales that was partially offset by lower mobile subscription
    revenue, and (iii) 2.7% rebased revenue growth in our B2B business,
    driven by continued growth in the SOHO segment
  • Belgium: Rebased revenue decline of 1.0%
    in Q2 was mainly driven by the net effect of (i) growth in B2B
    revenue, (ii) lower residential cable revenue and (iii) lower mobile
    revenue
  • Switzerland: Rebased revenue declined
    1.9% in Q2, primarily due to the net effect of (i) lower residential
    cable subscription revenue, which was driven primarily by competitive
    pressures, (ii) an increase in B2B revenue, (iii) higher mobile
    revenue and (iv) higher revenue from the distribution of MySports
    channels
  • Continuing CEE (Poland, Slovakia and DTH):
    Rebased revenue growth of 0.3% in Q2 due to the net effect of (i)
    growth in our B2B business and (ii) lower residential cable revenue
  • Central and Corporate: Rebased revenue
    increased 59.3% in Q2 due largely to the low-margin sale of customer
    premises equipment to the VodafoneZiggo JV, which began in the second
    quarter of 2018

Operating Income

  • Operating income of $263.9 million and $201.3 million in Q2 2018 and
    Q2 2017, respectively, representing an increase of 31.0%
    year-over-year. For the six months ended June 30, 2018, our operating
    income of $384.3 million million reflects a decrease of 6.7% as
    compared to $412.0 million in H1 2017
  • The increase in operating income in the QTD period primarily resulted
    from higher OCF, as further described below, partially offset by
    increases in depreciation and amortization. The decrease in operating
    income in the YTD period primarily resulted from higher OCF that was
    more than offset by increases in depreciation and amortization and
    impairment, restructuring and other operating items, net

Operating Cash Flow Highlights

The following table presents (i) OCF of each of our consolidated
reportable segments for the comparative periods, and (ii) the percentage
change from period to period on both a reported and rebased basis:

    Three months ended     Increase/(decrease)     Six months ended     Increase/(decrease)
June 30, June 30,
OCF 2018    

2017(3)

%     Rebased % 2018    

2017(3)

%     Rebased %
in millions, except % amounts
 
Continuing operations:
U.K./Ireland $ 763.6 $ 701.0 8.9

2.4

$ 1,526.2 $ 1,343.9 13.6

3.9

Belgium 383.7 316.7 21.2 9.0 741.3 613.2 20.9 5.8
Switzerland 189.0 212.4 (11.0 ) (11.0 ) 375.5 416.1 (9.8 ) (12.3 )
Continuing CEE 67.9 64.8 4.8 (2.5 ) 139.8 123.1 13.6 0.8
Central and Corporate (83.6 ) (98.7 ) 15.3 21.9 (182.7 ) (191.7 ) 4.7 13.0
Intersegment eliminations (10.8 ) (8.4 )   N.M. N.M. (18.5 ) (16.2 )   N.M. N.M.
Total continuing operations $ 1,309.8   $ 1,187.8   10.3   3.3   $ 2,581.6   $ 2,288.4   12.8   2.8  
 
OCF margin - continuing operations 43.0 % 42.9 % 42.0 % 42.1 %
 
Discontinued European Operations(i):
Germany 4.3   8.0  
Austria 3.5   2.9  
Discontinued CEE 9.1   8.9  
 
Full Company 3.7   4.2  

N.M. - Not Meaningful

(i) For information concerning our discontinued operations, see note 2.

  • Reported OCF for the three and six months ended June 30, 2018,
    increased 10.3% and 12.8% year-over-year, respectively
    • This result was primarily driven by (i) the aforementioned
      positive impact of FX movements and (ii) organic OCF growth
  • Rebased OCF growth of 3.3% in Q2 and 2.8% in H1 2018 included:
    • The net unfavorable impact on our revenue of certain items, as
      discussed in the "Revenue Highlights" section above
    • Higher costs of $23.8 million in U.K./Ireland during both 2018
      periods resulting from the net impact of credits recorded during
      the second quarter of 2017 ($28.8 million) and the second quarter
      of 2018 ($5.0 million) in connection with a telecommunications
      operator's agreement to compensate Virgin Media and other
      communications providers for certain prior-period contractual
      breaches related to network charges
    • Unfavorable network tax increases of $4.6 million and $13.0
      million, respectively, following an April 1, 2017 increase in the
      rateable value of our existing U.K. networks, which is being
      phased in over a five-year period to 2021
    • Favorable impacts of $12.7 million and $19.4 million,
      respectively, due to the expected settlement of a portion of our
      2018 annual incentive compensation with Liberty Global ordinary
      shares through a shareholding incentive program that was
      implemented in 2018
    • An unfavorable $6.4 million increase in costs during the 2018
      periods due to the reassessment of an accrual in the U.K.
  • As compared to the prior-year period, our Q2 and H1 2018 OCF margins
    were up 10 and down 10 basis points, respectively, to 43.0% and 42.0%

Q2 2018 Rebased Operating Cash Flow Growth -
Segment Highlights

  • U.K./Ireland: Rebased OCF growth of 2.4%
    was negatively impacted by the aforementioned increase in U.K. costs
    relating to compensation for prior period contractual breaches related
    to network charges, the reassessment of an accrual and higher network
    taxes. Aside from these items, rebased OCF growth resulted from the
    net effect of (i) increased revenue, (ii) higher handset costs and
    (iii) lower marketing costs
  • Belgium: Rebased OCF growth of 9.0%,
    largely driven by the net effect of (i) lower direct costs as a result
    of the migration of subscribers to our own mobile network and (ii) the
    aforementioned revenue decrease
  • Switzerland: Rebased OCF decline of 11.0%
    in Q2, due to the aforementioned revenue decline, an increase in
    interconnect costs and an increase in expenses associated with the
    MySports Platform that was launched in Q3 2017
  • Continuing CEE (Poland, Slovakia and DTH):
    Rebased OCF declined 2.5%, driven by the net effect of (i) the
    aforementioned revenue trend and (ii) the accrual of $2.6 million of
    additional costs during the second quarter of 2018 following the
    reassessment of an operational contingency

Net Earnings (Loss) Attributable to Liberty Global Shareholders

  • Net earnings was $912.6 million for the three months ended June 30,
    2018, as compared to a net loss of $683.2 million for the prior-year
    period. On a YTD basis, our net loss was $273.9 million and $1,009.7
    million during the 2018 and 2017 periods, respectively

Leverage and Liquidity

  • Total capital leases and principal amount of
    third-party debt
    : $31.8 billion for continuing operations
  • Leverage ratios11:
    At June 30, 2018, our adjusted gross and net leverage ratios for the
    Full Company were 5.0x and 4.9x, respectively.
  • Average debt tenor : Over 7
    years, with ~72% not due until 2024 or thereafter for continuing
    operations
  • Borrowing costs: Blended fully-swapped
    borrowing cost of our third-party debt was 4.0% for continuing
    operations
  • Liquidity: $3.5 billion, including (i)
    $0.9 billion of cash at June 30, 2018 and (ii) aggregate unused
    borrowing capacity13 under our credit facilities of
    $2.6 billion, for our continuing operations

Forward-Looking Statements and Disclaimer

This press release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995,
including statements with respect to our strategies, future growth
prospects and opportunities; expectations with respect to our OCF
growth, our Adjusted FCF, our new build and upgrade and our P&E
additions, each on a continuing operations and full company basis;
expectations with respect to the development, enhancement and deployment
of our innovative and advanced products and services; the anticipated
closing of the Vodafone transaction; expectations with respect to the
use of proceeds from the sale of UPC Austria; expectations regarding our
share buyback program; the expected settlement of a portion of our 2018
annual incentive compensation with Liberty Global ordinary shares; the
strength of our balance sheet and tenor of our third-party debt; and
other information and statements that are not historical fact. These
forward-looking statements involve certain risks and uncertainties that
could cause actual results to differ materially from those expressed or
implied by these statements. These risks and uncertainties include
events that are outside of our control, such as the continued use by
subscribers and potential subscribers of our and our affiliates'
services and their willingness to upgrade to our more advanced
offerings; our and our affiliates' ability to meet challenges from
competition, to manage rapid technological change or to maintain or
increase rates to subscribers or to pass through increased costs to
subscribers; the effects of changes in laws or regulation; general
economic factors; our and our affiliates' ability to obtain regulatory
approval and satisfy regulatory conditions associated with acquisitions
and dispositions; our and affiliates' ability to successfully acquire
and integrate new businesses and realize anticipated efficiencies from
acquired businesses; the availability of attractive programming for our
and our affiliates' video services and the costs associated with such
programming; our and our affiliates' ability to achieve forecasted
financial and operating targets; the outcome of any pending or
threatened litigation; the ability of our operating companies and
affiliates to access cash of their respective subsidiaries; the impact
of our operating companies' and affiliates' future financial
performance, or market conditions generally, on the availability, terms
and deployment of capital; fluctuations in currency exchange and
interest rates; the ability of suppliers and vendors (including our
third-party wireless network providers under our MVNO arrangements) to
timely deliver quality products, equipment, software, services and
access; our and our affiliates' ability to adequately forecast and plan
future network requirements including the costs and benefits associated
with network expansions; and other factors detailed from time to time in
our filings with the Securities and Exchange Commission, including our
most recently filed Forms 10-K and 10-Q. These forward-looking
statements speak only as of the date of this release. We expressly
disclaim any obligation or undertaking to disseminate any updates or
revisions to any forward-looking statement contained herein to reflect
any change in our expectations with regard thereto or any change in
events, conditions or circumstances on which any such statement is based.

Balance Sheets, Statements of Operations and Statements of Cash Flows

The condensed consolidated balance sheets, statements of operations and
statements of cash flows of Liberty Global are in our 10-Q.

Rebase Information

For purposes of calculating rebased growth rates on a comparable basis
for all businesses that we owned during 2018, we have adjusted our
historical revenue and OCF for the three and six months ended June 30,
2017 to (i) include the pre-acquisition revenue and OCF of entities
acquired during 2018 and 2017 in our rebased amounts for the three and
six months ended June 30, 2017 to the same extent that the revenue and
OCF of these entities are included in our results for the three and six
months ended June 30, 2018, (ii) include revenue and certain operating
and SG&A expenses associated with the framework services agreement with
the VodafoneZiggo JV to reflect amounts equal to the framework services
agreement amounts included in our results for the three and six months
ended June 30, 2018, (iii) exclude the revenue and OCF of entities
disposed of during 2017, (iv) include revenue for the temporary elements
of the Split-off Agreements with Liberty Latin America as if the
Split-off Agreements had been in place at the beginning of 2017, (v)
reflect the January 1, 2018 adoption of the new revenue recognition
standard (ASU 2014-09, Revenue from Contracts with Customers) as
if such adoption had occurred on January 1, 2017 and (vi) reflect the
translation of our rebased amounts for the three and six months ended
June 30, 2017 at the applicable average foreign currency exchange rates
that were used to translate our results for the three and six months
ended June 30, 2018. We have reflected the revenue and OCF of these
acquired entities in our 2017 rebased amounts based on what we believe
to be the most reliable information that is currently available to us
(generally pre-acquisition financial statements), as adjusted for the
estimated effects of (a) any significant differences between U.S. GAAP
and local generally accepted accounting principles, (b) any significant
effects of acquisition accounting adjustments, (c) any significant
differences between our accounting policies and those of the acquired
entities and (d) other items we deem appropriate. We do not adjust
pre-acquisition periods to eliminate nonrecurring items or to give
retroactive effect to any changes in estimates that might be implemented
during post-acquisition periods. As we did not own or operate the
acquired businesses during the pre-acquisition periods, no assurance can
be given that we have identified all adjustments necessary to present
the revenue and OCF of these entities on a basis that is comparable to
the corresponding post-acquisition amounts that are included in our
historical results or that the pre-acquisition financial statements we
have relied upon do not contain undetected errors. The adjustments
reflected in our rebased amounts have not been prepared with a view
towards complying with Article 11 of Regulation S-X. In addition, the
rebased growth percentages are not necessarily indicative of the revenue
and OCF that would have occurred if these transactions had occurred on
the dates assumed for purposes of calculating our rebased amounts or the
revenue and OCF that will occur in the future. The rebased growth
percentages have been presented as a basis for assessing growth rates on
a comparable basis, and are not presented as a measure of our pro forma
financial performance.

The following table provides adjustments made to the 2017 amounts to
derive our rebased growth rates:

    Revenue     OCF

Three months ended
June 30,

   

Six months ended
June 30,

Three months ended
June 30,

   

Six months ended
June 30,

2017 2017 2017 2017
in millions
Continuing operations:
Acquisitions $ 23.6 $ 40.9 $ 9.8 $ 19.5
Revenue Recognition (ASU 2014-09) (4.0 ) (8.8 ) (7.6 ) (13.4 )
Dispositions(i) (6.4 ) (15.0 ) (2.6 ) (7.1 )
Foreign Currency 175.6   516.2   72.4   211.7  
Total increase $ 188.8   $ 533.3   $ 72.0   $ 210.7  
 
Discontinued European Operations:
Revenue Recognition (ASU 2014-09) $ (4.9 ) $ (9.9 ) $ (3.2 ) $ (5.1 )
Foreign Currency 74.3   206.6   43.7   119.2  
Total increase $ 69.4   $ 196.7   $ 40.5   $ 114.1  
 
Full Company:
Acquisitions $ 23.6 $ 40.9 $ 9.8 $ 19.5
Revenue Recognition (ASU 2014-09) (8.9 ) (18.7 ) (10.8 ) (18.5 )
Dispositions(i) (6.4 ) (15.0 ) (2.6 ) (7.1 )
Foreign Currency 249.9   722.8   116.1   330.9  
Total increase $ 258.2   $ 730.0   $ 112.5   $ 324.8  

(i)

  Includes rebase adjustments related to agreements to provide
transitional and other services to the VodafoneZiggo JV and Liberty
Latin America. These adjustments result in an equal amount of fees
in both the 2018 and 2017 periods for those services that are deemed
to be temporary in nature. The net amount of these adjustments
resulted in decreases in both revenue and OCF of $0.8 million for
the three months ended June 30, 2017 and decreases in revenue and
OCF of $1.7 million and $1.5 million, respectively, for the six
months ended June 30, 2017.
 

Summary of Debt, Capital Lease Obligations & Cash and Cash Equivalents

The following table(i) details the U.S. dollar equivalent
balances of the outstanding principal amount of our continuing
operations debt, capital lease obligations and cash and cash equivalents
at June 30, 2018:

        Capital     Debt & Capital     Cash
Lease Lease and Cash
Debt(ii), (iii) Obligations Obligations Equivalents
in millions
Liberty Global and unrestricted subsidiaries $ 2,170.9 $ 57.1 $ 2,228.0 $ 670.6
Virgin Media(iv) 16,824.8 73.5 16,898.3 38.2
UPC Holding 6,980.1 80.6 7,060.7 5.9
Telenet 5,320.5   461.6   5,782.1   147.7
Total $ 31,296.3   $ 672.8   $ 31,969.1   $ 862.4

______________________________

(i)   Except as otherwise indicated, the amounts reported in the
table include the named entity and its subsidiaries.
(ii) Debt amounts for UPC Holding and Telenet include notes issued
by special purpose entities that are consolidated by the respective
subsidiary.
(iii) Debt amounts for UPC Holding include those amounts that are not
a direct obligation of the entities to be disposed within the UPC
Holding borrowing group. Certain of these obligations have been or
are expected to be repaid with portions of the proceeds from the
disposition of UPC Austria and the Vodafone Disposal Group.
(iv) The Virgin Media borrowing group includes certain subsidiaries
of Virgin Media, but excludes the parent entity, Virgin Media Inc.
The cash and cash equivalents amount includes cash and cash
equivalents held by the Virgin Media borrowing group, but excludes
cash and cash equivalents held by Virgin Media Inc. This amount is
included in the amount shown for Liberty Global and unrestricted
subsidiaries.
 

Property and Equipment Additions and Capital Expenditures

The tables below highlight the categories of the property and equipment
additions for the indicated periods and reconcile those additions to the
capital expenditures that are presented in the condensed consolidated
statements of cash flows in our 10-Q.

    Three months ended June 30,
2018     2017     2018     2017     2018     2017

Continuing
operations

Discontinued
European Operations

Full Company
in millions, except % amounts
Customer premises equipment $ 242.3 $ 218.0 $ 58.0 $ 86.2 $ 300.3 $ 304.2
New Build & Upgrade 190.4 233.4 73.9 72.1 264.3 305.5
Capacity 84.9 139.8 33.7 23.2 118.6 163.0
Baseline 190.7 153.0 48.1 47.9 238.8 200.9
Product & Enablers 156.6   209.0   31.1   21.2   187.7   230.2
Total P&E Additions 864.9 953.2 $ 244.8   $ 250.6   $ 1,109.7   $ 1,203.8
Reconciliation of P&E Additions to capital expenditures:
Assets acquired under capital-related vendor financing arrangements(i) (551.6 ) (605.0 )
Assets acquired under capital leases (22.6 ) (71.3 )
Changes in current liabilities related to capital expenditures 21.1   (19.3 )
Total capital expenditures, net(ii) $ 311.8   $ 257.6  
 
Capital expenditures, net:
Third-party payments $ 343.7 $ 358.5
Proceeds received for transfers to related parties(iii) (31.9 ) (100.9 )
Total capital expenditures, net $ 311.8   $ 257.6  
 
P&E Additions as % of revenue3 28.4 % 34.4 %
 
    Six months ended June 30,
2018     2017     2018     2017     2018     2017

Continuing
operations

Discontinued
European Operations

Full Company
in millions, except % amounts
Customer premises equipment $ 539.9 $ 440.9 $ 136.7 $ 159.3 $ 676.6 $ 600.2
New Build & Upgrade 378.4 364.6 148.8 130.7 527.2 495.3
Capacity 211.4 239.6 60.1 40.0 271.5 279.6
Product & Enablers 364.4 318.4 59.2 37.5 423.6 355.9
Baseline 356.3   268.2   105.5   89.0   461.8   357.2
Total P&E Additions 1,850.4 1,631.7 $ 510.3   $ 456.5   $ 2,360.7   $ 2,088.2
Reconciliation of P&E Additions to capital expenditures:
Assets acquired under capital-related vendor financing arrangements(i) (1,187.9 ) (1,164.1 )
Assets acquired under capital leases (46.5 ) (97.9 )
Changes in current liabilities related to capital expenditures 181.8   218.3  
Total capital expenditures, net(ii) $ 797.8   $ 588.0  
 
Capital expenditures, net:
Third-party payments $ 855.1 $ 782.9
Proceeds received for transfers to related parties(iii) (57.3 ) (194.9 )
Total capital expenditures, net $ 797.8   $ 588.0  
 
P&E Additions as % of revenue3 30.1 % 30.0 %

______________________________

(i)   Amounts exclude related VAT of $88 million and $94 million
during the three months ended June 30, 2018 and 2017, respectively,
and $186 million and $184 million during the six months ended June
30, 2018 and 2017, respectively, that were also financed by our
vendors under these arrangements.
(ii) The capital expenditures that we report in our consolidated
statements of cash flows do not include amounts that are financed
under vendor financing or capital lease arrangements. Instead, these
expenditures are reflected as non-cash additions to our property and
equipment when the underlying assets are delivered, and as
repayments of debt when the related principal is repaid.
(iii) Primarily relates to transfers of centrally-procured property
and equipment to our discontinued operations and the VodafoneZiggo
JV.
 

ARPU per Cable Customer Relationship

The following table provides ARPU per cable customer relationship for
the indicated periods:

    Three months ended June 30,     %     Rebased
2018    

2017(3)

Change % Change
 
Liberty Global $ 58.73 $ 54.58 7.6 % 1.0 %
U.K. & Ireland (Virgin Media) £ 51.11 £ 50.29 1.6 % 1.6 %
Belgium (Telenet) 55.15 55.04 0.2 % 0.6 %
UPC 30.83 33.39 (7.7 %) (2.4 %)
 

Mobile ARPU

The following tables provide ARPU per mobile subscriber for the
indicated periods:

    ARPU per Mobile Subscriber
Three months ended June 30,     %     Rebased
2018    

2017(3)

Change % Change
Liberty Global:
Including interconnect revenue $ 18.88 $ 19.15 (1.4 %) (3.5 %)
Excluding interconnect revenue $ 15.08 $ 15.36 (1.8 %) (4.5 %)
 

Footnotes for Consolidated Operating Data and Subscriber Variance
Tables

(i)   We have approximately 197,000 "lifeline" customers that are counted
on a per connection basis, representing the least expensive
regulated tier of video cable service, with only a few channels.
(ii) Our Internet Subscribers exclude 36,200 digital subscriber line
("DSL") subscribers within Austria that are not serviced over our
networks. Our Internet Subscribers do not include customers that
receive services from dial-up connections. In Switzerland, we offer
a 2 Mbps internet service to our Basic and Enhanced Video
Subscribers without an incremental recurring fee. Our Internet
Subscribers in Switzerland include 79,400 subscribers who have
requested and received this service.
(iii) Our Telephony Subscribers exclude 28,300 subscribers within Austria
that are not serviced over our networks. In Switzerland, we offer a
basic phone service to our Basic and Enhanced Video Subscribers
without an incremental recurring fee. Our Telephony Subscribers in
Switzerland include 141,200 subscribers who have requested and
received this service.
(iv) In a number of countries, our mobile subscribers receive mobile
services pursuant to prepaid contracts. As of June 30, 2018, our
mobile subscriber count included 501,000 and 442,700 prepaid mobile
subscribers in Belgium and the U.K., respectively.
(v) Pursuant to service agreements, Switzerland offers enhanced video,
broadband internet and telephony services over networks owned by
third-party cable operators ("partner networks"). A partner network
RGU is only recognized if there is a direct billing relationship
with the customer. At June 30, 2018, Switzerland's partner networks
account for 129,000 Cable Customer Relationships, 301,100 RGUs,
which include 108,200 Enhanced Video Subscribers, 110,100 Internet
Subscribers, and 82,800 Telephony Subscribers. Subscribers to
enhanced video services provided by partner networks receive basic
video services from the partner networks as opposed to our
operations. Due to the fact that we do not own these partner
networks, we do not report homes passed for Switzerland's partner
networks.
 

Additional General Notes to Tables:

Most of our broadband communications subsidiaries provide telephony,
broadband internet, data, video or other B2B services. Certain of our
B2B revenue is derived from SOHO subscribers that pay a premium price to
receive enhanced service levels along with video, internet or telephony
services that are the same or similar to the mass marketed products
offered to our residential subscribers. All mass marketed products
provided to SOHOs, whether or not accompanied by enhanced service levels
and/or premium prices, are included in the respective RGU and customer
counts of our broadband communications operations, with only those
services provided at premium prices considered to be "SOHO RGUs" or
"SOHO customers." To the extent our existing customers upgrade from a
residential product offering to a SOHO product offering, the number of
SOHO RGUs or SOHO customers will increase, but there is no impact to our
total RGU or customer counts. With the exception of our B2B SOHO
subscribers, we generally do not count customers of B2B services as
customers or RGUs for external reporting purposes.

In Germany, homes passed reflect the footprint and two-way homes passed
reflect the technological capability of our network up to the street
cabinet, with drops from the street cabinet to the building generally
added, and in-home wiring generally upgraded, on an as needed or
success-based basis. In Belgium, Telenet leases a portion of its network
under a long-term capital lease arrangement. These tables include
operating statistics for Telenet's owned and leased networks.

While we take appropriate steps to ensure that subscriber statistics are
presented on a consistent and accurate basis at any given balance sheet
date, the variability from country to country in (i) the nature and
pricing of products and services, (ii) the distribution platform, (iii)
billing systems, (iv) bad debt collection experience and (v) other
factors add complexity to the subscriber counting process. We
periodically review our subscriber counting policies and underlying
systems to improve the accuracy and consistency of the data reported on
a prospective basis. Accordingly, we may from time to time make
appropriate adjustments to our subscriber statistics based on those
reviews.

Subscriber information for acquired entities is preliminary and subject
to adjustment until we have completed our review of such information and
determined that it is presented in accordance with our policies.

   
Consolidated Operating Data — June 30, 2018
            Video                

Homes

Passed

Two-way

Homes

Passed

Cable
Customer
Relationships

Basic Video

Subscribers(i)

   

Enhanced
Video
Subscribers

    DTH

Subscribers

    Total

Video

Internet

Subscribers(ii)

Telephony

Subscribers(iii)

Total

RGUs

Total Mobile

Subscribers(iv)

 
Continuing operations:
U.K. 14,229,900 14,218,100 5,473,200 3,888,400 3,888,400 5,166,500 4,486,100 13,541,000 3,034,400
Belgium 3,333,300 3,333,300 2,159,200 220,200 1,783,000 2,003,200 1,679,400 1,295,500 4,978,100 2,724,900
Switzerland(v) 2,302,500 2,302,500 1,168,500 469,200 665,300 1,134,500 725,100 530,400 2,390,000 129,400
Ireland 903,500 869,800 435,100 10,700 260,100 270,800 371,100 352,500 994,400 64,200
Poland 3,408,400 3,351,900 1,430,200 180,600 1,029,300 1,209,900 1,147,800 636,800 2,994,500 3,500
Slovakia 609,200 594,400 192,800 26,700 140,200 166,900 133,300 81,100 381,300
DTH     778,300       778,300   778,300   10,900   10,900   800,100  
Total continuing operations 24,786,800   24,670,000   11,637,300   907,400   7,766,300   778,300   9,452,000   9,234,100   7,393,300   26,079,400   5,956,400
 
 
Discontinued European Operations:
Germany 13,037,900 12,959,500 7,164,600 4,665,400 1,640,400 6,305,800 3,541,000 3,311,400 13,158,200 292,900
Austria 1,420,300 1,420,300 657,400 92,600 359,200 451,800 524,900 472,600 1,449,300 81,200
Romania 3,137,400 3,097,600 978,400 245,800 685,800 931,600 589,800 557,300 2,078,700
Hungary 1,807,300 1,789,800 853,200 77,400 610,300 687,700 680,300 652,700 2,020,700 99,000
Czech Republic 1,537,100   1,517,300   615,800   174,000   360,400     534,400   501,400   178,800   1,214,600  
Total Discontinued European Operations 20,940,000   20,784,500   10,269,400   5,255,200   3,656,100     8,911,300   5,837,400   5,172,800   19,921,500   473,100
 
   
Subscriber Variance Table - June 30, 2018 vs March 31, 2018
            Video                
Homes

Passed

Two-way Homes

Passed

Cable
Customer
Relationships

Basic Video

Subscribers(i)

   

Enhanced
Video
Subscribers

    DTH

Subscribers

    Total

Video

Internet

Subscribers(ii)

Telephony

Subscribers(iii)

Total

RGUs

Total Mobile

Subscribers(iv)

 
Continuing operations:
U.K. 142,600 142,600 20,600 48,400 48,400 31,000 40,100 119,500 16,400
Belgium 7,000 7,000 (15,600 ) (12,900 ) 4,000 (8,900 ) 3,200 (2,700 ) (8,400 ) (101,200 )
Switzerland(v) 12,100 12,100 (37,000 ) (26,800 ) (8,800 ) (35,600 ) (13,100 ) (5,100 ) (53,800 ) 7,700
Ireland 7,100 7,800 (3,100 ) (3,000 ) (3,000 ) (1,500 ) (2,800 ) (7,300 ) 4,300
Poland 33,200 33,400 (2,400 ) (2,900 ) 2,600 (300 ) 2,600 2,800 5,100 (300 )
Slovakia 2,800 2,700 (2,100 ) 400 (1,300 ) (900 ) (200 ) 100 (1,000 )
DTH     (11,200 )     (11,200 ) (11,200 )     (11,200 )  
Total continuing operations 204,800   205,600   (50,800 ) (45,200 ) 44,900   (11,200 ) (11,500 ) 22,000   32,400   42,900   (73,100 )
 
 
Discontinued European Operations:
Germany 33,400 34,000 6,400 (11,500 ) (2,700 ) (14,200 ) 38,200 37,100 61,100 (11,000 )
Austria 5,400 5,400 1,300 400 (4,100 ) (3,700 ) 3,600 6,500 6,400 8,400
Romania 17,300 20,400 (3,000 ) (9,100 ) 5,600 (3,500 ) 2,600 9,500 8,600
Hungary 10,400 10,400 3,700 (6,200 ) 8,600 2,400 6,700 12,000 21,100 5,100
Czech Republic 4,800   4,900   (1,600 ) (900 ) 2,500     1,600   600   5,700   7,900    
Total Discontinued European Operations 71,300   75,100   6,800   (27,300 ) 9,900     (17,400 ) 51,700   70,800   105,100   2,500  
 
   
Subscriber Variance Table - June 30, 2018 vs March 31, 2018
            Video                
Homes
Passed

Two-way
Homes
Passed

Cable
Customer
Relationships

Basic Video

Subscribers(i)

   

Enhanced
Video
Subscribers

    DTH

Subscribers

    Total

Video

Internet

Subscribers(ii)

Telephony

Subscribers(iii)

Total

RGUs

Total Mobile

Subscribers(iv)

 

Organic Change Summary:
U.K. 142,600 142,600 20,600 48,400 48,400 31,000 40,100 119,500 16,400
Belgium 7,000 7,000

(15,600

) (12,900 ) 4,000 (8,900 ) 3,200 (2,700 ) (8,400 ) 26,100
Other Europe 55,200   56,000   (55,800 ) (32,300 ) (7,500 ) (11,200 ) (51,000 ) (12,200 ) (5,000 ) (68,200 ) 11,700  
Total Organic Change 204,800   205,600   (50,800 ) (45,200 ) 44,900   (11,200 ) (11,500 ) 22,000   32,400   42,900   54,200  
 
Q2 2018 Adjustments:
Q2 2018 Belgium Adjustment                     (127,300 )
Net Adds (Reductions) 204,800   205,600   (50,800 ) (45,200 ) 44,900   (11,200 ) (11,500 ) 22,000   32,400   42,900   (73,100 )

Footnotes

1   The term "Full Company" includes our continuing operations and our
the Discontinued European Operations, which is the basis (i) on
which analyst consensus estimates for our key performance indicators
are currently derived and on which we originally provided our 2018
guidance for OCF, Adjusted FCF and Property and Equipment Additions
and (ii) that we use to calculate our respective leverage ratios for
debt covenant compliance purposes. We present revenue, OCF, Adjusted
FCF and Property and Equipment Additions on a Full Company basis in
order to allow readers to track our performance against analyst
consensus estimates and our original 2018 guidance, as applicable.
We plan to provide Full Company information with respect to our
original 2018 guidance in our third and fourth quarter 2018 earnings
releases so that investors can continue to track our progress
against this guidance.
2 On December 29, 2017, the former LiLAC Group was split-off into a
separate public company, and on May 9, 2018, we agreed to sell our
operations in Germany, Hungary, Romania and the Czech Republic.
Previously we had agreed to sell our operations in Austria and this
transaction was completed on July 31, 2018. As a result of the
foregoing, the former LiLAC Group and our operations in Germany,
Austria, Hungary, Romania and the Czech Republic have all been
accounted for as discontinued operations in our June 30, 2018 Form
10-Q ("10-Q"). Unless otherwise indicated, the information in this
release relates only to our continuing operations. For a summary of
selected quarterly information of our continuing and discontinued
operations, as adjusted to give pro forma effect to the adoption of
ASU 2014-09 and retrospective effect to the adoption of ASU 2017-07
(as further discussed below in note 3), see the Appendix. For
additional information regarding our discontinued operations, see
note 4 to the condensed consolidated financial statements included
in our 10-Q.
3 Effective January 1, 2018, we adopted Accounting Standards Update
No. 2014-09, Revenue from Contracts with Customers ("ASU 2014-09"),
on a prospective basis. All applicable 2017 amounts in this release
are presented on a pro forma basis that gives effect to the adoption
of ASU 2014-09 as if such adoption had occurred on January 1, 2017.
In addition, on January 1, 2018, we adopted ASU No. 2017-07,
Improving the Presentation of Net Periodic Pension Cost and Net
Periodic Postretirement Benefit Cost ("ASU 2017-07") on a
retrospective basis. Accordingly, the operating income and OCF
amounts for the 2017 periods in this release have been
retrospectively revised to reflect the impact of ASU 2017-07. For a
summary of selected quarterly information of our continuing and
discontinued operations, as adjusted to give pro forma effect to the
adoption of ASU 2014-09 and retrospective effect to the adoption of
ASU 2017-07, see the Appendix. For additional information regarding
these accounting changes, see note 2 to the condensed consolidated
financial statements included in our 10-Q.
4 The indicated growth rates are rebased for acquisitions,
dispositions, FX and other items that impact the comparability of
our year-over-year results. Please see Rebase Information for
information on rebased growth.
5 Based on FX rates as of February 13, 2018. New build and upgrade
spend excludes related CPE.
6 For purposes of calculating our average tenor, total third-party
debt excludes vendor financing.
7 Liquidity refers to cash and cash equivalents plus the maximum
undrawn commitments under subsidiary borrowing facilities, without
regard to covenant compliance calculations.
8 Includes subscription and non-subscription revenue. For additional
information regarding how we define our revenue categories, see note
16 to the condensed consolidated financial statements included in
our 10-Q.
9 Total B2B includes subscription (SOHO) and non-subscription revenue.
B2B and SOHO growth rates include upsell from our residential
businesses.
10 During the first six months of 2018, we have recognized in Virgin
Media's program–to–date totals a further 8,100 premises where
construction was completed in prior periods, but serviceability was
confirmed during 2018. These 8,100 premises have been included in
our Q2 Project Lightning build number, in addition to the 109,800
premises constructed in Q2.
11 Consistent with how we calculate our leverage ratios under our debt
agreements, we calculate our debt ratios on a Full Company basis,
with the gross and net debt ratios defined as total debt and net
debt, respectively, divided by annualized OCF of the latest quarter.
Net debt is defined as total debt less cash and cash equivalents.
For purposes of these calculations, debt is measured using swapped
foreign currency rates, consistent with the covenant calculation
requirements of our subsidiary debt agreements, and excludes the
loans backed or secured by the shares we hold in ITV plc, Sumitomo
Corporation and Lions Gate Entertainment Corp. We have not presented
leverage ratios on a continuing operations basis as we believe that
such a presentation would overstate our leverage and would not be
representative of the actual leverage ratios that we will report
once all dispositions are completed. This is due to the fact that
our continuing operations exclude all of the OCF of the entities to
be disposed but include a portion of the debt that we expect to
repay with the proceeds from such dispositions. For additional
information, see the details of our pro forma Adjusted FCF within
the Glossary and note 4 to the condensed consolidated financial
statements included in our 10-Q.
12 Organic figures exclude RGUs of acquired entities at the date of
acquisition and other nonorganic adjustments, but include the impact
of changes in RGUs from the date of acquisition. All subscriber/RGU
additions or losses refer to net organic changes, unless otherwise
noted.
13 Our aggregate unused borrowing capacity of $2.6 billion represents
the maximum undrawn commitments under the applicable facilities of
our continuing operations without regard to covenant compliance
calculations. Upon completion of the relevant June 30, 2018
compliance reporting requirements for our credit facilities, and
assuming no further changes from quarter-end borrowing levels, we
anticipate that the borrowing capacity of our continuing operations
would be $2.3 billion.
 

Glossary

Adjusted Free Cash Flow (FCF): net cash
provided by our operating activities, plus (i) cash payments for
third-party costs directly associated with successful and unsuccessful
acquisitions and dispositions and (ii) expenses financed by an
intermediary, less (a) capital expenditures, as reported in our
condensed consolidated statements of cash flows, (b) principal payments
on amounts financed by vendors and intermediaries and (c) principal
payments on capital leases (exclusive of the portions of the network
lease in Belgium and the duct leases in Germany that we assumed in
connection with certain acquisitions), with each item excluding any cash
provided or used by our discontinued operations. We believe that our
presentation of Adjusted Free Cash Flow provides useful information to
our investors because this measure can be used to gauge our ability to
service debt and fund new investment opportunities. Adjusted Free Cash
Flow should not be understood to represent our ability to fund
discretionary amounts, as we have various mandatory and contractual
obligations, including debt repayments, which are not deducted to arrive
at this amount. Investors should view Adjusted Free Cash Flow as a
supplement to, and not a substitute for, U.S. GAAP measures of liquidity
included in our condensed consolidated statements of cash flows.

The following table provides a reconciliation of our net cash provided
by operating activities from continuing operations to Adjusted Free Cash
Flow for the indicated periods. In addition, in order to provide
information regarding the changes to our Adjusted Free Cash Flow that we
expect will occur following the sale of the Discontinued European
Operations, we also present Adjusted Free Cash Flow on a pro forma basis
for three and six months ended June 30, 2018 as if the sale of the
Discontinued European Operations had been completed on January 1, 2018.

   
Three months ended June 30,
2018    

2017((i))

    2018    

2017((i))

    2018    

2017((i))

Continuing operations Discontinued European Operations Full Company
in millions
 
Net cash provided by operating activities of our continuing
operations
$ 1,464.9 $ 1,085.1 $ 520.9 $ 423.4 $ 1,985.8 $ 1,508.5
Cash payments for direct acquisition and disposition costs 3.2 4.2 3.2 4.2
Expenses financed by an intermediary(ii) 409.1 314.0 77.8 32.8 486.9 346.8
Capital expenditures, net (311.8 ) (258.0 ) (121.2 ) (186.2 ) (433.0 ) (444.2 )
Principal payments on amounts financed by vendors and intermediaries (1,675.3 ) (984.5 ) (130.1 ) (82.6 ) (1,805.4 ) (1,067.1 )
Principal payments on certain capital leases (21.2 ) (22.3 )   (1.5 ) (1.0 )   (22.7 ) (23.3 )  
Adjusted FCF (131.1 ) $ 138.5   $ 345.9   $ 186.4   $ 214.8   $ 324.9  
 
Pro forma adjustments for sale of the Discontinued European
Operations related to:
Interest and derivative payments(iii) (0.5 )
Transition services agreements(iv) 50.5  
Pro forma Adjusted FCF(v) $ (81.1 )
 
   
Six months ended June 30,
2018    

2017((i))

    2018    

2017((i))

    2018    

2017((i))

Continuing operations Discontinued

European Operations

Full company
in millions
 
Net cash provided by operating activities of our continuing
operations
$ 2,142.9 $ 1,558.4 $ 1,122.2 $ 854.5 $ 3,265.1 $ 2,412.9
Cash payments for direct acquisition and disposition costs 4.8 6.0 4.8 6.0
Expenses financed by an intermediary(ii) 916.4 577.2 128.3 67.4 1,044.7 644.6
Capital expenditures, net (797.8 ) (588.0 ) (281.2 ) (356.6 ) (1,079.0 ) (944.6 )
Principal payments on amounts financed by vendors and intermediaries (3,353.3 ) (1,944.4 ) (248.9 ) (136.9 ) (3,602.2 ) (2,081.3 )
Principal payments on certain capital leases (40.9 ) (41.8 )   (2.8 ) (1.9 )   (43.7 ) (43.7 )  
Adjusted FCF (1,127.9 ) $ (432.6 )   $ 717.6   $ 426.5   $ (410.3 ) $ (6.1 )  
 
Pro forma adjustments for sale of Discontinued European Operations
related to:
Interest and derivative payments(iii) 33.6
Transition services agreements(iv) 102.5  
Pro forma Adjusted FCF(v) $ (991.8 )

_______________

(i)   Adjusted free cash flow for the three and six months ended June 30,
2017 has been restated to reflect our January 1, 2018 adoption of
ASU 2016-18, Restricted Cash.
(ii) For purposes of our condensed consolidated statements of cash flows,
expenses financed by an intermediary are treated as hypothetical
operating cash outflows and hypothetical financing cash inflows when
the expenses are incurred. When we pay the financing intermediary,
we record financing cash outflows in our condensed consolidated
statements of cash flows. For purposes of our Adjusted Free Cash
Flow definition, we add back the hypothetical operating cash outflow
when these financed expenses are incurred and deduct the financing
cash outflows when we pay the financing intermediary.
(iii) No debt, interest or derivative instruments of the UPC Holding
borrowing group, other than amounts that are direct obligations of
the entities to be disposed, was allocated to discontinued
operations in the condensed consolidated financial statements that
are included in our 10-Q. Notwithstanding the foregoing, we expect
to use proceeds from the disposition of the Vodafone Disposal Group
and have used proceeds from the July 31, 2018 sale of UPC Austria to
repay debt of the UPC Holding borrowing group to the extent
necessary to maintain a leverage ratio that is approximately four to
five times UPC Holding's Covenant EBITDA. As a result, this pro
forma adjustment represents the estimated interest and related
derivative payments that would not have been made by UPC Holding if
the sale of the Discontinued European Operations had been completed
on January 1, 2018. These estimated payments are calculated based on
the Discontinued European Operation's pro rata share of UPC
Holding's OCF and the weighted average interest rate of the UPC
Holding borrowing group at June 30, 2018. Although we believe that
these estimated payments represent a reasonable estimate of the
reduction in annual interest and related derivative payments that
will occur as a result of the sale of the Discontinued European
Operations, no assurance can be given that the actual debt
repayments will result in reductions equivalent to the amounts
presented. No pro forma adjustments are required with respect to
Unitymedia's interest and derivative payments as substantially all
of Unitymedia's debt and related derivative instruments are direct
obligations of entities within the Vodafone Disposal Group. As a
result, the interest and related derivative payments associated with
such debt and derivative instruments of Unitymedia are included in
discontinued operations
.
(iv) Represents our preliminary estimate of the net cash flows that we
would have received from transition services agreements if the sale
of the Discontinued European Operations had occurred on January 1,
2018. The estimated net cash flows are based on the estimated
revenue that we expect to recognize from our transition services
agreements during the first 12 months following the completion of
the sale of the Discontinued European Operations, less the estimated
incremental costs that we expect to incur to provide such transition
services.
(v) Represents the Adjusted FCF that we estimate would have resulted if
the sale of the Discontinued European Operations had been completed
on January 1, 2018. Actual amounts may differ from the amounts
assumed for purposes of this pro forma calculation.
 

ARPU: Average Revenue Per Unit is the
average monthly subscription revenue per average cable customer
relationship or mobile subscriber, as applicable. Following the adoption
of ASU 2014-09, subscription revenue excludes interconnect fees, channel
carriage fees, mobile handset sales and late fees, but includes the
amortization of installation fees. Prior to the adoption of ASU 2014-09,
installation fees were excluded from subscription revenue. ARPU per
average cable customer relationship is calculated by dividing the
average monthly subscription revenue from residential cable and SOHO
services by the average number of cable customer relationships for the
period. ARPU per average mobile subscriber is calculated by dividing
residential mobile and SOHO revenue for the indicated period by the
average number of mobile subscribers for the period. Unless otherwise
indicated, ARPU per cable customer relationship or mobile subscriber is
not adjusted for currency impacts. ARPU per RGU refers to average
monthly revenue per average RGU, which is calculated by dividing the
average monthly subscription revenue from residential and SOHO services
for the indicated period, by the average number of the applicable RGUs
for the period. Unless otherwise noted, ARPU in this release is
considered to be ARPU per average cable customer relationship or mobile
subscriber, as applicable. Cable customer relationships, mobile
subscribers and RGUs of entities acquired during the period are
normalized. In addition, for purposes of calculating the percentage
change in ARPU on a rebased basis, we adjust the prior-year subscription
revenue, cable customer relationships, mobile subscribers and RGUs, as
applicable, to reflect acquisitions, dispositions, FX and the January 1,
2018 adoption of the new revenue recognition standard (ASU 2014-09, Revenue
from Contracts with Customers
) on a comparable basis with the
current year, consistent with how we calculate our rebased growth for
revenue and OCF, as further described in the body of this release.

ARPU per Mobile Subscriber: Our ARPU per
mobile subscriber calculation that excludes interconnect revenue refers
to the average monthly mobile subscription revenue per average mobile
subscriber and is calculated by dividing the average monthly mobile
subscription revenue (excluding handset sales and late fees) for the
indicated period, by the average of the opening and closing balances of
mobile subscribers in service for the period. Our ARPU per mobile
subscriber calculation that includes interconnect revenue increases the
numerator in the above-described calculation by the amount of mobile
interconnect revenue during the period.

Basic Video Subscriber: a home, residential
multiple dwelling unit or commercial unit that receives our video
service over our broadband network either via an analog video signal or
via a digital video signal without subscribing to any recurring monthly
service that requires the use of encryption-enabling technology.
Encryption-enabling technology includes smart cards, or other integrated
or virtual technologies that we use to provide our enhanced service
offerings. We count RGUs on a unique premises basis. In other words, a
subscriber with multiple outlets in one premises is counted as one RGU
and a subscriber with two homes and a subscription to our video service
at each home is counted as two RGUs.

Blended fully-swapped debt borrowing cost:
the weighted average interest rate on our aggregate variable- and
fixed-rate indebtedness (excluding capital leases and including vendor
financing obligations), including the effects of derivative instruments,
original issue premiums or discounts and commitment fees, but excluding
the impact of financing costs.

B2B: Business-to-Business.

Cable Customer Relationships: the number of
customers who receive at least one of our video, internet or telephony
services that we count as RGUs, without regard to which or to how many
services they subscribe. Cable Customer Relationships generally are
counted on a unique premises basis. Accordingly, if an individual
receives our services in two premises (e.g., a primary home and a
vacation home), that individual generally will count as two Cable
Customer Relationships. We exclude mobile-only customers from Cable
Customer Relationships.

Customer Churn: the rate at which customers
relinquish their subscriptions. The annual rolling average basis is
calculated by dividing the number of disconnects during the preceding 12
months by the average number of customer relationships. For the purpose
of computing churn, a disconnect is deemed to have occurred if the
customer no longer receives any level of service from us and is required
to return our equipment. A partial product downgrade, typically used to
encourage customers to pay an outstanding bill and avoid complete
service disconnection, is not considered to be disconnected for purposes
of our churn calculations. Customers who move within our cable footprint
and upgrades and downgrades between services are also excluded from the
disconnect figures used in the churn calculation.

DTH Subscriber: a home, residential
multiple dwelling unit or commercial unit that receives our video
programming broadcast directly via a geosynchronous satellite.

Enhanced Video Subscriber: a home,
residential multiple dwelling unit or commercial unit that receives our
video service over our broadband network or through a partner network
via a digital video signal while subscribing to any recurring monthly
service that requires the use of encryption-enabling technology.
Enhanced Video Subscribers are counted on a unique premises basis. For
example, a subscriber with one or more set-top boxes that receives our
video service in one premises is generally counted as just one
subscriber. An Enhanced Video Subscriber is not counted as a Basic Video
Subscriber. As we migrate customers from basic to enhanced video
services, we report a decrease in our Basic Video Subscribers equal to
the increase in our Enhanced Video Subscribers.

Homes Passed: homes, residential multiple
dwelling units or commercial units that can be connected to our networks
without materially extending the distribution plant, except for DTH
homes. Certain of our Homes Passed counts are based on census data that
can change based on either revisions to the data or from new census
results. We do not count homes passed for DTH.

Internet Subscriber: a home, residential
multiple dwelling unit or commercial unit that receives internet
services over our networks, or that we service through a partner
network. Our Internet Subscribers do not include customers that receive
services from dial-up connections.

MDU: Multiple Dwelling Unit.

Mobile Subscriber Count: the number of
active SIM cards in service rather than services provided. For example,
if a mobile subscriber has both a data and voice plan on a smartphone
this would equate to one mobile subscriber. Alternatively, a subscriber
who has a voice and data plan for a mobile handset and a data plan for a
laptop would be counted as two mobile subscribers. Customers who do not
pay a recurring monthly fee are excluded from our mobile telephony
subscriber counts after periods of inactivity ranging from 30 to 90
days, based on industry standards within the respective country. In a
number of countries, our mobile subscribers receive mobile services
pursuant to prepaid contracts.

MVNO: Mobile Virtual Network Operator.

NPS: Net Promoter Score.

OCF: As used herein, OCF has the same
meaning as the term "Adjusted OIBDA" that is referenced in our Form
10-Q. OCF is the primary measure used by our chief operating decision
maker to evaluate segment operating performance. OCF is also a key
factor that is used by our internal decision makers to (i) determine how
to allocate resources to segments and (ii) evaluate the effectiveness of
our management for purposes of annual and other incentive compensation
plans. As we use the term, OCF is defined as operating income before
depreciation and amortization, share-based compensation, provisions and
provision releases related to significant litigation and impairment,
restructuring and other operating items. Other operating items include
(a) gains and losses on the disposition of long-lived assets, (b)
third-party costs directly associated with successful and unsuccessful
acquisitions and dispositions, including legal, advisory and due
diligence fees, as applicable, and (c) other acquisition-related items,
such as gains and losses on the settlement of contingent
consideration. Our internal decision makers believe OCF is a meaningful
measure because it represents a transparent view of our recurring
operating performance that is unaffected by our capital structure and
allows management to (1) readily view operating trends, (2) perform
analytical comparisons and benchmarking between segments and (3)
identify strategies to improve operating performance in the different
countries in which we operate. We believe our OCF measure is useful to
investors because it is one of the bases for comparing our performance
with the performance of other companies in the same or similar
industries, although our measure may not be directly comparable to
similar measures used by other public companies. OCF should be viewed as
a measure of operating performance that is a supplement to, and not a
substitute for, operating income, net earnings or loss, cash flow from
operating activities and other U.S. GAAP measures of income or cash
flows.

A reconciliation of our operating income to total OCF is presented in
the following table:

    Three months ended June 30,     Six months ended June 30,
2018    

2017(3)

2018    

2017(3)

Continuing
operations

   

Full
Company

Continuing
operations

   

Full
Company

Continuing
operations

   

Full
Company

Continuing
operations

   

Full
Company

in millions
 
Operating income $ 263.9 $ 745.6 $ 201.3 $ 467.6 $ 384.3 $ 1,238.7 $ 412.0 $ 887.0
Share-based compensation expense 45.5 48.7 51.4 53.4 88.2 94.5 80.3 86.8
Depreciation and amortization 970.2 1,077.1 922.0 1,178.5 2,017.5 2,373.5 1,789.7 2,306.8
Impairment, restructuring and other operating items, net 30.2   38.9   13.1   18.2   91.6   102.5   6.4   30.0  
Total OCF $ 1,309.8   $ 1,910.3   $ 1,187.8   $ 1,717.7   $ 2,581.6   $ 3,809.2   $ 2,288.4   $ 3,310.6  
 

OCF margin: calculated by dividing OCF by
total revenue for the applicable period.

Property and equipment additions (P&E Additions):
includes capital expenditures on an accrual basis, amounts financed
under vendor financing or capital lease arrangements and other non-cash
additions.

RGU: A Revenue Generating Unit is
separately a Basic Video Subscriber, Enhanced Video Subscriber, DTH
Subscriber, Internet Subscriber or Telephony Subscriber. A home,
residential multiple dwelling unit, or commercial unit may contain one
or more RGUs. For example, if a residential customer in our U.K. market
subscribed to our enhanced video service, fixed-line telephony service
and broadband internet service, the customer would constitute three
RGUs. Total RGUs is the sum of Basic Video, Enhanced Video, DTH,
Internet and Telephony Subscribers. RGUs generally are counted on a
unique premises basis such that a given premises does not count as more
than one RGU for any given service. On the other hand, if an individual
receives one of our services in two premises (e.g., a primary home and a
vacation home), that individual will count as two RGUs for that service.
Each bundled cable, internet or telephony service is counted as a
separate RGU regardless of the nature of any bundling discount or
promotion. Non-paying subscribers are counted as subscribers during
their free promotional service period. Some of these subscribers may
choose to disconnect after their free service period. Services offered
without charge on a long-term basis (e.g., VIP subscribers or free
service to employees) generally are not counted as RGUs. We do not
include subscriptions to mobile services in our externally reported RGU
counts. In this regard, our June 30, 2018 RGU counts exclude our
separately reported postpaid and prepaid mobile subscribers.

SIM: Subscriber Identification Module.

SOHO: Small or Home Office Subscribers.

Telephony Subscriber: a home, residential
multiple dwelling unit or commercial unit that receives voice services
over our networks, or that we service through a partner network.
Telephony Subscribers exclude mobile telephony subscribers.

Two-way Homes Passed: homes passed by those
sections of our networks that are technologically capable of providing
two-way services, including video, internet and telephony services.

U.S. GAAP: United States Generally Accepted
Accounting Principles.

YoY: Year-over-year.

Appendix

The former LiLAC Group and the Discontinued European Operations have
been accounted for as discontinued operations. In addition, on January
1, 2018, we adopted ASU 2014-09 on a prospective basis and ASU 2017-07
on a retrospective basis. The following table provides a summary of
selected quarterly information for our continuing operations for the
past six quarters that gives pro forma effect to the adoption of ASU
2014-09 and reflects the retrospective changes of ASU 2017-07. For
additional information concerning our discontinued operations and these
accounting changes, see notes 2 and 4 to the condensed consolidated
financial statements included in our 10-Q.

    Three months ended
Continuing operations

March 31,
2017

 

June 30,
2017

 

September 30,
2017

 

December 31,
2017

 

March 31,
2018

 

June 30,
2018

in millions, except ARPU amounts
Revenue:
U.K./Ireland $ 1,502.5 $ 1,563.8 $ 1,609.9 $ 1,709.6 $ 1,778.2 $ 1,734.9
Belgium 660.0 684.8 758.7 758.1 759.6 753.9
Switzerland 330.3 338.7 351.7 345.5 344.9 332.2
Continuing CEE 134.5 141.8 149.9 155.1 160.5 152.9
Central and Corporate and intersegment eliminations 37.7   41.8   50.0   45.2   51.3   71.2  
Total revenue $ 2,665.0   $ 2,770.9   $ 2,920.2   $ 3,013.5   $ 3,094.5   $ 3,045.1  
 
OCF:
U.K./Ireland $ 642.9 $ 701.0 $ 708.2 $ 805.8 $ 762.6 $ 763.6
Belgium 296.5 316.7 356.4 327.0 357.6 383.7
Switzerland 203.7 212.4 214.1 199.5 186.5 189.0
Continuing CEE 58.3 64.8 70.6 74.7 71.9 67.9
Central and Corporate and intersegment eliminations(i) (100.8 ) (107.1 ) (108.8 ) (107.2 ) (106.8 ) (94.4 )
Total OCF $ 1,100.6   $ 1,187.8   $ 1,240.5   $ 1,299.8   $ 1,271.8   $ 1,309.8  
 
 
 
Operating income $ 210.7 $ 201.3 $ 210.7 $ 149.4 $ 120.4 $ 263.9
Share-based compensation expense 28.9 51.4 21.5 60.4 42.7 45.5
Depreciation and amortization 867.7 922.0 953.7 1,070.5 1,047.3 970.2
Impairment, restructuring and other operating items, net (6.7 ) 13.1   54.6   19.5   61.4   30.2  
OCF $ 1,100.6   $ 1,187.8   $ 1,240.5   $ 1,299.8   $ 1,271.8   $ 1,309.8  
 
ARPU per cable customer relationship:
Liberty Global $ 52.94   $ 54.58   $ 57.07   $ 57.43   $ 60.41   $ 58.73  
U.K. & Ireland (Virgin Media) £ 50.64   £ 50.29   £ 50.10   £ 50.73   £ 51.58   £ 51.11  
Belgium (Telenet) 54.43   55.04   55.07   55.18   54.90   55.15  
Switzerland CHF 70.69 CHF 71.53 CHF 70.55 CHF 70.03 CHF 68.49 CHF 70.36
Continuing CEE 16.01   16.43   16.36   16.56   16.75   16.48  
 
ARPU per mobile subscriber:
Excluding interconnect revenue $ 14.35   $ 15.36   $ 15.59   $ 15.67   $ 14.80   $ 15.08  
Including interconnect revenue $ 17.97   $ 19.15   $ 19.83   $ 19.71   $ 18.60   $ 18.88  

_______________

(i)   Includes amounts related to transactions between our continuing
operations and Discontinued European Operations, which eliminations
will no longer be recorded subsequent to the disposals of the
Discontinued European Operations.
 

The following table provides a summary of selected quarterly information
for the Discontinued European Operations for the past six quarters that
gives pro forma effect to the adoption of ASU 2014-09 and reflects the
retrospective changes of ASU 2017-07. For additional information
concerning our discontinued operations and these accounting changes, see
notes 2 and 4 to the condensed consolidated financial statements
included in our 10-Q.

    Three months ended
Discontinued European Operations

March 31,
2017

 

June 30,
2017

 

September 30,
2017

 

December 31,
2017

 

March 31,
2018

 

June 30,
2018

In millions, except ARPU amounts
Revenue:
Germany $ 616.2 $ 642.1 $ 685.3 $ 702.3 $ 782.8 $ 728.9
Austria 92.5 96.1 103.2 104.1 109.7 108.8
Discontinued CEE (Hungary, Czech Republic & Romania) 136.2 146.6 156.6 162.5 170.3 164.8
Intersegment eliminations (0.7 ) (0.9 ) (1.0 ) (0.9 ) (1.2 ) (2.2 )
Total revenue $ 844.2   $ 883.9   $ 944.1   $ 968.0   $ 1,061.6   $ 1,000.3  
 
OCF:
Germany $ 381.6 $ 409.7 $ 440.5 $ 457.4 $ 492.1 $ 463.4
Austria 49.6 52.9 57.2 58.7 58.8 58.9
Discontinued CEE (Hungary, Czech Republic & Romania) 52.7 58.0 67.4 70.3 67.2 68.6
Intersegment eliminations(i) 8.4   9.3   10.5   11.6   9.0   9.6  
Total OCF $ 492.3   $ 529.9   $ 575.6   $ 598.0   $ 627.1   $ 600.5  
 
Operating income $ 208.7 $ 266.3 $ 307.0 $ 332.3 $ 372.7 $ 481.7
Share-based compensation expense 4.5 2.0 1.7 3.5 3.1 3.2
Depreciation and amortization 260.6 256.5 262.8 263.2 249.1 106.9
Impairment, restructuring and other operating items, net 18.5   5.1   4.1   (1.0 ) 2.2   8.7  
OCF $ 492.3   $ 529.9   $ 575.6   $ 598.0   $ 627.1   $ 600.5  
 
ARPU per cable customer relationship:
Germany (Unitymedia) 25.14   25.45   25.62   25.77   25.87   26.15  
Discontinued Other Europe (UPC Holding) 19.72   19.82   19.88   19.78   19.89   19.94  

_______________

(i)

  Includes amounts related to transactions between our continuing
operations and Discontinued European Operations, which eliminations
will no longer be recorded subsequent to the disposals of the
Discontinued European Operations.
 

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