Liberty Global : VodafoneZiggo Reports Preliminary Q2 2021 Results

VodafoneZiggo Reports Preliminary Q2 2021 Results

Achieved 3% Revenue Growth; Reconfirming 2021 Guidance

Utrecht, the Netherlands July 29, 2021: VodafoneZiggo Group B.V. ("VodafoneZiggo"), a leading Dutch company that provides fixed, mobile and integrated communication and entertainment services to consumers and businesses, is today providing select, preliminary unaudited financial1 and operating information for the three months ("Q2") and six months ("H1" or "YTD") ended June 30, 2021, as compared to the results for the same periods in the prior year (unless otherwise noted). The financial and operating information contained herein is preliminary and subject to change. We expect to issue our June 30, 2021 unaudited condensed consolidated financial statements prior to the end of August 2021, at which time the report will be posted to our website.

Highlights for Q2 2021:

• Robust commercial performance:
• • Added 14,000 converged2 households and 50,000 converged SIMs, driving our converged penetration rate to 44% of internet RGUs3 and 72% of consumer mobile postpaid SIMs4
  • Added 56,000 mobile postpaid SIMs, bringing the YTD total to 117,000 net additions
  • Delivered 3% fixed ARPU5 growth. Total internet RGUs declined by 6,000, compared to a 9,000 decline in the previous quarter, to a total of 3.35 million internet customers
• Strong financial growth and cash flow conversion:
• • Revenue grew 3% YoY, marking our ninth consecutive quarter of growth, primarily driven by customer base growth and fixed ARPU growth
  • Net loss decreased 92% YoY to €13 million, as lower losses on our derivative portfolio more than offset lower foreign currency exchange gains
  • Adjusted EBITDA6 decreased 2% YoY to €473 million, primarily due to the positive impact of certain benefits in the prior-year period, which more than offset the Adjusted EBITDA growth driven by strong revenue growth and disciplined cost control
  • Operating FCF7 (Adjusted EBITDA less property and equipment additions) of €244 million, representing 24% of revenue
• Successfully tested 26 GHz band for commercial 5G mobile deployment. We started the analogue radio switch-off on our cable network and remain on track to offer 1 Gbps download speeds nationwide by 2022
• Reconfirming 2021 guidance8: 1%-3% Adjusted EBITDA growth and €550 - €650 million cash distribution guidance

Jeroen Hoencamp, VodafoneZiggo CEO, commented:

"Our second quarter results show good momentum, with strong mobile customer growth, an increase in Fixed Mobile Convergence penetration, and a stable broadband customer base. We are well positioned to continue to invest in the Dutch Gigabit society, with our 1 Gigabit national roll-out program, nationwide 5G coverage, SmartWiFi offers, faster internet speeds, and the switch-off of analogue radio, to deliver high-speed connectivity and entertainment through our GigaNet. Revenue growth remained strong as we yet again recorded robust cable results, and as mobile handset sales and roaming revenue started to recover. Therefore, we are reconfirming our 2021 full year guidance."

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Consumer performance for Q2 and H1 2021:

Total consumer revenue grew 2% YoY in Q2 and H1 2021

Fixed:

Consumer cable revenue9 grew 1% YoY in Q2 and 2% YoY in H1 2021

• Q2 revenue growth was primarily driven by a 3% YoY increase in Consumer cable ARPU, more than offsetting the impact of a modest decline in our customer base
• Internet RGUs decreased by 13,500, as we focused on managing our customer base alongside our annual price actions, compared to a 17,000 decrease in the previous quarter
• Internet only package launched in June 2021 to complement our existing portfolio. The increased roll-out of SmartWiFi from 650,000 to 1 million by the end of 2021 combined with a 40% average increase in download and upload internet speeds will further strengthen our commitment to provide a truly fast and stable internet connection
• As part of our DOCSIS 3.1 roll-out, 3.4 million households were connected to 1 Gbps speeds in June 2021, representing 47% of our cable footprint. We are on track to achieve 80% penetration by the end of 2021, with nationwide coverage in 2022
• Strong progress on Mediabox Next roll-out continues as 1.6 million customers (52% of our enhanced video base) have the next-generation 4K video platform, including the upgraded Mediabox XL boxes, and we continue to integrate more content related OTT apps into the platform
• Having successfully switched off analogue TV, we have started switching over to digital radio in July 2021 to further expand our GigaNet capacity. The analogue radio switch-off program is expected to be completed by the end of 2021

Mobile:

Consumer mobile revenue10 grew 4% YoY in Q2 and 2% YoY in H1 2021

• Strong Q2 revenue growth was primarily driven by (i) higher handset sales volumes, (ii) strong customer base growth, partially offset by (iii) ARPU decrease
• • Consumer postpaid ARPU decreased 1% YoY to €18, primarily driven by (i) differences in phasing of converged discounts compared to the prior-year period and (ii) reduced national out-of-bundle revenue
• We added 37,000 net mobile postpaid customers in Q2 and 62,000 in H1, benefiting from record low mobile postpaid churn
• First operator in the Netherlands to successfully test the 26 GHz band in a commercial mobile network, in our 5G Hub in Eindhoven together with our partner Ericsson. This frequency band enables the transmission of very large amounts of data with ultra-low latency

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Business performance for Q2 and H1 2021:

Total B2B revenue grew 4% YoY in Q2 and 3% YoY in H1 2021

Fixed:

B2B cable revenue11 grew 7% YoY in Q2 and 9% YoY in H1 2021

• Revenue growth in Q2 and in H1 was primarily driven by growth in our SOHO ("Small Office Home Office") and Small Business customer base, and by increasing demand for our Unified Communication portfolio
• • Q2 SOHO cable ARPU increased 3% YoY to €62 and Q2 Small Business cable ARPU increased 1% YoY to €84
• We added 4,000 SOHO/Small Business customers subscribing to 7,000 Internet RGUs in Q2
• Successful expansion of Vodafone Business Marketplace with double digit revenue growth as compared to the previous quarter. The Marketplace offers a one-stop shop solution for all our Vodafone Business customers, to access a range of specific business apps such as Microsoft Office 365, to increase team collaboration and productivity
• 17,000 new Unified Communication seats added in Q2

Mobile:

B2B mobile revenue12 grew 1% YoY in Q2 and decreased 3% YoY in H1 2021

• Q2 revenue growth was primarily driven by (i) higher handset sales volumes, (ii) customer base growth, (iii) higher roaming and visitor revenue, partially offset by (iv) continued price pressure in the large corporate segment and (v) lower national out-of-bundle revenue
• • Q2 B2B postpaid ARPU decreased 10% YoY to €16 driven by pricing pressure in the large corporate segment and lower national out-of-bundle revenue
• 19,000 net mobile postpaid customers added in Q2. H1 net additions of 55,000, growing 15,000 faster compared to the prior-year period

Financial highlights for Q2 and H1 20211:

• Revenue grew 3% YoY in Q2 and 2% YoY in H1, primarily driven by customer base growth and fixed ARPU growth, which more than offset mobile postpaid ARPU decrease
• Reported net loss of €13 million in Q2, primarily driven by lower realized and unrealized losses on derivative instruments, partially offset by lower foreign currency transaction gains
• • H1 net loss decreased 66% YoY to €26 million, primarily driven by (i) higher realized and unrealized gains on derivative instruments, (ii) changes in income tax expense, partially offset by (iii) higher foreign currency transaction losses
• Adjusted EBITDA decreased 2% YoY to €473 million in Q2, primarily driven by the positive impact of certain benefits in the prior-year period, which more than offset strong revenue growth and disciplined cost control

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• • In the prior-year period, we received a non-recurring settlement of €11 million in relation to prior period network usage
  • In Q2 2020, during the early stages of the COVID-19 pandemic, we incurred lower Ziggo Sport production costs and postponed the amortization of certain sport broadcasting rights after live broadcasting was temporarily suspended. We estimate the positive net impact of these temporary broadcasting suspensions was €10 million
  • On a YTD basis, Adjusted EBITDA remained stable YoY at €942 million, as strong revenue growth and disciplined cost control were offset by the benefits in the prior-year period
• Property and equipment additions13 were 23% of revenue in Q2 and 21% in H1
• • Q2 additions were €22.5 million higher YoY, primarily driven by higher customer premises equipment and investment in mobile network, compared to the prior-year period
• Operating FCF decreased 12% YoY to €244 million in Q2, representing 24% of revenue compared to €277 million or 28% of revenue in the prior-year period, primarily due to the decrease in Adjusted EBITDA and the increase in property and equipment additions
• • H1 operating FCF increased 2% YoY to €518 million
• During the quarter, we paid €230 million of dividends and €23 million of interest on the Shareholder Notes, bringing the YTD shareholder cash returns total to €275 million
• In July 2021, we paid the remaining installment of spectrum license fees to the Dutch government with a total of €212 million, consisting of €208 million of principal and €4 million of statutory 2% interest rate. The principal payment was fully funded by new shareholder loans
• At June 30, 2021, our fully-swappedthird-party debt borrowing cost14 was 4.2% and the average tenor of our third-party debt (excluding vendor and handset financing obligations) was 7.2 years
• At June 30, 2021, total third-party debt (excluding vendor financing, other debt and lease obligations) was €9.5 billion, which is a decrease of €0.1 billion from March 31, 2021 related to the weakening of the USD. Furthermore, when taking into consideration the projected principal-related cash flows associated with our cross-currency derivative instruments, the total covenant amount of third party gross debt was €9.1 billion at June 30, 2021, which is a decrease of €0.1 billion from March 31, 2021. For information concerning the debt balances used in our covenant calculations, see Covenant Debt Information below
• At June 30, 2021, and subject to the completion of our corresponding compliance reporting requirements, (i) the ratio of Senior Net Debt to Annualized EBITDA (last two quarters annualized) was 3.59x and (ii) the ratio of Total Net Debt to Annualized EBITDA (last two quarters annualized) was 4.56x, each as calculated in accordance with our most restrictive covenants, and reflecting the Credit Facility Excluded Amount as defined in the respective credit agreements
• • Vendor and handset financing obligations are not included in the calculation of our leverage covenants. If we were to include these obligations in our leverage ratio calculation, and not reflect the Credit Facility Excluded Amount, the ratio of Total Net Debt to Annualized EBITDA would have been 5.40x at June 30, 2021
• At June 30, 2021, we had maximum undrawn Revolving Credit Facility commitments of €800 million. When our Q2 compliance reporting requirements have been completed and assuming no changes from June 30, 2021 borrowing levels, we anticipate that we will continue to have €800 million of our unused Revolving Credit Facility commitments available to be drawn

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Operating Statistics Summary

As of and for the three months

ended June 30,

		2021			2020
Footprint
Homes Passed15..............................................................................................................		7,311,900			7,278,400
Fixed-LineCustomer Relationships16
Fixed-LineCustomers.....................................................................................................		3,794,900			3,870,700
Q2 organic Fixed-Line Customer net additions (losses)...........................................		(21,100)			1,800
RGUs per Fixed-LineCustomer ...................................................................................		2.45			2.48
Q2 Monthly ARPU per Fixed-LineCustomer .............................................................	€	51		€	50
Fixed Customer Bundling
Single-Play........................................................................................................................		11.6%			12.5%
Double-Play......................................................................................................................		31.3%			27.0%
Triple-Play.........................................................................................................................		57.0%			60.5%
Mobile SIMs4
Postpaid..........................................................................................................................		4,873,700			4,614,400
Prepaid...........................................................................................................................		396,300			490,000
Total Mobile ..............................................................................................................		5,270,000			5,104,400
Q2 organic Postpaid net additions
	55,900			58,400
Q2 organic Prepaid net losses......................................................................................		(18,700)			(55,500)
Total organic Mobile net additions ........................................................................		37,200			2,900
Q2 Monthly Mobile ARPU
Postpaid (including interconnect revenue)...........................................................	€	17		€	18
Prepaid (including interconnect revenue).............................................................	€	4		€	3
Convergence2
Converged Households..................................................................................................		1,479,100			1,412,000
Converged SIMs..............................................................................................................		2,407,000			2,201,000
Converged Households as % of Internet RGUs.........................................................		44%			42%
Subscribers (RGUs)
Basic Video17....................................................................................................................		511,000			499,900
Enhanced Video18............................................................................................................		3,276,600			3,365,800
Total Video.................................................................................................................		3,787,600			3,865,700
Internet19...........................................................................................................................		3,347,800			3,377,900
Telephony20.......................................................................................................................		2,177,000			2,354,300
Total RGUs................................................................................................................		9,312,400			9,597,900
Q2 Organic RGU Net Additions (Losses)
Basic Video.......................................................................................................................		(400)			12,100
Enhanced Video...............................................................................................................		(23,200)			(10,200)
Total Video.................................................................................................................		(23,600)			1,900
Internet..............................................................................................................................		(6,400)			6,000
Telephony..........................................................................................................................		(45,800)			(28,500)
Total organic RGU net losses.................................................................................		(75,800)			(20,600)
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