Liberty Global Ltd. (LBTYA) Earnings Call Transcript & Summary

Okay, everyone. Thank you very much for attending. David Wright here from the Bank of America telecoms research team. I'm delighted to be joined by Mike Fries, CEO of Liberty Global, joining us nice and early from Denver. So thank you very much, Mike. As ever, I would say to everyone attending, you have the opportunity to submit questions, which I'll do my very best to put to Mike during the call.

Listen, Mike, why don't we just dive in? You've just announced a big deal in the U.K. Some would say it's been a long time coming since those -- since you've had several negotiations, I think, in the U.K., but you've obviously committed quite a lot to convergent networks in your other footprint. It looks like a great deal, very strong industrial logic, future-proofs the business. Do you want to just give us a few highlights from your own perspective?

Sure. Well, first of all, thanks for having me. It's nice to be doing these by video actually, save a little bit of time and maybe a little bit of money on your end. So I hope -- for those on video, good to see you. I don't think the transaction, and I'm sure for you, as you just indicated, would be a surprise to anyone for a couple of reasons. Number one, we have been pursuing the strategy for the last 4, 5 years now of creating fixed mobile champions and challengers in all of our core markets. I think this is the fifth transaction, something like EUR 85 billion in aggregate so far and the eighth country where we worked very hard to put together the cable and the mobile assets, which are natural partners. In some cases, we're buyers, like in Belgium, we bought BASE. In other cases, we're sellers, like we sold Germany to Vodafone, just was a better strategy for us. And in other cases, we're partners, like in Holland with Vodafone. In this instance, of course, happy to be partners. The benefits of these transactions, hopefully to everybody now, are very, very straightforward. Number one, you're getting massive scale. Scale, in this case, the largest mobile operator, together with the fastest broadband network, reaching half the country, soon more. And you need that scale to drive 5G, 1 gig. Secondly, you're getting all the strength you need to compete in a highly competitive market with converged products, and we know converged products work brilliantly. We have examples. We can talk about them. You've seen them, whether it's Holland or Belgium. FMC works in Europe, works extremely well on churn and sales. And thirdly, huge synergies. How could we not be interested in capitalizing on over GBP 6 billion of synergies that come from putting these businesses together. And most of those are CapEx, OpEx, MVNO swapping over, things of that nature, relatively low synergies in comparison to the other deals we've been part of as a percentage. The other main benefit here, of course, is massive value creation. I mean there's 3 sort of legs of that stool, which hopefully we made clear to people in our earnings call, number one, we think the U.K. was getting 0 value in our stock. I don't mean like a little bit of value, I mean like 0 value. In this relative valuation exercise where real numbers here, we think there's at least $14 a share of value that O2 put or Telefonica put on our asset and we value their asset. Secondly, the value of the synergies alone are another $6 a share and the net cash-out is about $3 a share. You can get to our current stock price just on the U.K. and get anything else for free. It depends how you want to look at it. So clearly, we're trying to shrink that value gap. That's critical for us, and we think this transaction does it. Lots of other things I love about the deal. I mean it's the right asset. There were lots of assets in the market. It's the right asset, the largest, lowest churn, highest NPS, strongest brand by far. When we tested the brands are even better together. Lowest back book, front book exposure, lots of really positive things. I think secondly, they're the right partner. Telefonica is going to be great. I mean these are folks we get to see eye-to-eye with. I think we're going to be -- have a good, strong partnership. It doesn't take any other strategic opportunities off the table, we'll talk about some of those, which is a very big positive. And this is all about generating significant levered free cash flow, which many analysts have picked up on. This is going to be really free cash flow accretive. So a great deal for us, been well received. We've been in the debt markets, maybe some debt holders on the call here. Great reaction in the debt markets already to multiple financings we've done as we build up to closure. So far, regulatory reception very positive. So we're excited about it. It's a very good move for us and for our shareholders also.

Right. And if we maybe just jump into those synergies a bit. I always thought that the market slightly misinterpreted GBP 6 billion because you came from the perspective of synergies post the transfer of the MVNO, right?

Correct.

So when you talk synergies, you've already got Vodafone. And I think that's why I think the market thought that, that number could have been a little bit higher. So you've almost understated there. But one area where I feel like there is a real opportunity where maybe you didn't talk too much is tax. There's so many of the NOLs are in Virgin Media, the losses. Is it possible to be really taking them across into O2 and synergies and generating synergies there?

Yes. We're careful on the tax numbers just because we should be and we want to be, but those do not -- those numbers do not include any tax synergies. And you should assume there are tax synergies. But we haven't really gone out of our way to quantify those for people. We want to be thoughtful. We want to do some more work. We don't want this to be perceived as a transaction driven by taxes or tax savings, especially in an environment like this.

Right. And when we then think about the U.K. landscape, it does feel like Virgin is a premium brand, O2 is a premium brand. Does this feel like a business that is going to be rolling alongside BT? Or is this a business that you think can start to even defend or penetrate the lower end where maybe you don't have so much presence right now?

Well, I mean we have to be -- we have work to do to determine exactly what the marketing and launch strategy is. I'll tell you, at the first level, I think 80% of Virgin customers have some other mobile product. So that gives us a huge opportunity to sell O2 into our Virgin base. And I think half the O2 customers that don't have a Virgin product are highly interested in taking one. So we've got all the built-in data or all the built-in energy around fixed mobile convergence here to do -- to come out of the gate very strong, like we did in Holland, if you followed that. The Dutch JV came out of the gate very strong, and I think this is a similar option. In terms of branding, work to be done. We're being very careful and thoughtful about brand. We don't want to preemptively decide on the brand, what is the brand. We'll let the management teams work on that closely. But I do know that the brands enrich each other. When we put the brands together in research, people say we love them both even more when they're together. In terms of low-end markets, O2 has some prizefighter brands, and they have some lower-end brands targeting a different part of the market. We could conceivably do that. As you know, Virgin has been a premium product and does not have a low-end brand. We toyed with that idea a lot. So this could give this the impetus to take a run at that.

Right. And then on the regulatory side, I mean, it feels like there hasn't -- there were no obvious -- no major remedies in Vodafone Unity. You didn't really face too many with the deals in Belgium. BT bought EE. It doesn't feel like there should be too many headwinds for this one. Is 12 months a reasonable expectation for the execution?

I think so. We agree with you. As again, this is a case country where this has happened. They've all been approved swimmingly. We don't think there should be any reason for resistance here. We certainly will -- our first move is to file with the EU. That is what the law requires us to do. All conversations with the European Commission on this transaction just look and feel and sound a lot like the last 5 deals we put in front of them. So fixed mobile deals do not reduce competition. They create more competition. They stimulate investment overlap. We don't see any challenges.

Right, right. And then we had a conversation, I think it was back in January about Lightning, right, and about the possibility to do something with Lightning. And you've discussed a little on the call, could it even go off the balance sheet, could it be an infrastructure investor. There's obviously been a few debates on whether there could be a wholesale opportunity. If I could put you on the spot a little bit on this one, Mike, you and Charlie have been very vocal about the value of Lightning, and that it was always hidden within Virgin Media. And I get to a few investors and maybe even myself initially, I kind of see a 10x multiple and say it doesn't feel so special given that Lightning had been there. So how did you think about the value of Lightning versus the value of cable when you were kind of putting this together?

Yes. Good question. Well, I guess, first point is we had to make a decision, as did Telefonica, whether or not these infrastructure assets would be included and on what basis. And we all -- we both agree, I think, right off the bat that the towers that they own should be in the deal, right? They shouldn't be carved out and put on their balance sheet. And we also agreed with them that the network should be in the deal. So the infrastructure is in the deal, meaning we will both benefit from, take advantage of, be opportunistic with the infrastructure we collectively bring in to the deal. That includes our network and Lightning's engine of growth and their towers and opportunities around their growth. So that was point one. And anything we do together, we'll do creatively and for the benefit of both parties. And I think we are open minded. And as I said at the outset, nothing is off the table here. We always believe and still believe that with Virgin reaching half the country with 1 gig, and I think BT is at something like 2.5 million homes or something like that, with altnets maybe 1 million homes, so it's going to be slow going. I think BT told the world mid- to late '20s, they'll have 20 million homes, but they hope, subject to dividend and pension and growth and all the other things. We're cranking. I mean -- so together with a company that's got greater scale, greater strength, we can accelerate that build. The questions for us are how to do it most economically. And there's -- we know there's capital to be part of this exercise. We know there's creative ways to lift and shift and be -- to create value for shareholders. Generally, when we say stuff, you should assume we're really working on it. We don't really spin. We're pretty transparent. So this is something we remain very focused on. The market is right for growth. We're ideally suited to take advantage of that expansion. We'll just have to figure out how best to do it. First things first, we've got to get the deal done and closed. That's the -- we don't want to create any complications around that.

Right. And then I guess just on to this whole debate that's been -- had around wholesale. I mean it feels like -- and BT has very openly said that if they're going to put a lot of fixed CapEx into the ground, then the return on capital is totally geared to their ability to load that network. And they're going to come out of the blocks pretty quick with the big volume discounts, that they go and try and capture the resellers. On the basis that they're doing that, do you guys ever look at a -- well, here and now, a better network, which -- with the current cable infrastructure that is only used by yourselves and any additional wholesale -- GBP 12 a month you add on that is GBP 12 a month that hits the cash flow line, right? I mean, do you consider the opportunity to wholesale at all?

Yes. Well, I mean, look, anyone who's followed us for the last 15 years that I've been in the seat would know that our position on wholesale has evolved pretty far. We are already providing wholesale access in a market like Belgium. Now that was by regulatory requirement. But having done it, we see the benefits of it. We won the case in Holland, we will not be, at least voluntarily -- or involuntarily, be providing wholesale access in that market. But we certainly have looked at the U.K. as a place where that might be interesting. I mean, today, in our -- we only are occupying 40% of our capacity, right? I mean -- so there's 60% of the capacity to possibly -- now what do you have to weigh against that, you have to weigh against the impact on your own business, cannibalizing your own business. But as a way of -- what becomes exciting about that is an accelerant or an accelerator for new market expansion or network expansion because now to fund the investment you have to make in Lightning or the next 7 million homes, you've got 2 or 3 possible users of the network and maybe that revenue really makes the model much more interesting, especially to outside investors and to analysts like you who are valuing the model. So we are thinking that through. We don't expect to be required to do it, and we wouldn't agree to be required to do it. I mean there's no way we would allow that to become a remedy. On the other hand, it's our job to make sense of the infrastructure opportunities in front of us. And clearly, we have to be thoughtful about that particular one and how best to layer something like that in, in a value-accretive way.

Okay. So if we're kind of wrapping up on this one, is it reasonable to kind of expect Lightning to kick along at 400,000 homes? Is that a reasonable run rate for the next couple of years and then see how it goes with TEF after that?

I would say that's a good base case.

Okay. Very good. Let's much move on to the Belgium market. We've got John on Thursday, and I'm sure he'll be singing about potential Benelux mergers, more of the -- all of the benefits of that. He likes to do that. We know that. But listen, I guess when -- let's take a step back from that, but you know where I'm going. VodafoneZiggo, it's working nicely now. It always feels, I think, like you guys have a lot more DNA in the Dutch market than Vodafone perhaps. How do we think about a potential future owner? Or are you just happy with things the way they're going right now?

Well, I have to say I'm happy with things the way they're going now. How could I not be? They -- the management team, Jeroen Hoencamp and his team have done just a terrific job of executing on our base case plan. And the investment case and things, as you say, are clicking. So from a company that was essentially going backwards in many respects, it's now executed on or exceeded our synergy expectations. It's generating positive net adds in revenue. It's been looking at mid-single-digit EBITDA growth, tremendous free cash flow, big dividends to shareholders. It's now the largest retail presence in the marketplace, bigger than KPN in terms of B2C. So it's doing everything we asked it to do and rolling out 1 gig and 5G, and things are clicking. Now even through the COVID situation, which we'll talk about, things are starting to click. It's a great business, and we would love to own more of it and we're happy to own half of it. So we're opportunistic about that. We don't have -- I have not had -- really no conversations with Nick or Vodafone about what the future is. I mean we're all right now just managing through the current environment. But over time, you could see some transaction evolve there. If either party were interested in doing it, there are rights, of course, IPO rights, sort of stock put rights, and one or another party can decide to do it. But we're not really anxious to do it for the sake of doing it. It has to be a smart moment. The business is highly leveraged so we'd have to pay down debt. In terms of moving -- I know where you're going. In terms of a possible Benelux roll-up, yes, there is some compelling logic to that given that they're both relatively small markets, that together, there are some scale benefits, not massive, but there are some scale benefits. And certainly, we're obviously into building more opportunities to create wealth for shareholders, and that seems to be that it could be one on both sides of the equation for all parties involved. On the other hand, it's a triple backflip. There's a lot of moving parts, and it's very difficult for me or anybody, particularly for John Porter, to sort of speculate on that. I wouldn't, as an investor, put any -- put too much credibility into that idea, not now. It's just too many moving parts. But sure, it's fun to dream and maybe there's somewhere down the road a roll-up of these businesses is possible.

It feels like tax could play another part in that game, right? It feels like there's some tax inefficiencies building up...

Always. Taxes always figure into most things we do. And that synergies would be interesting. I mean, I'll tell you, I was well on the phone recently with Executive Vice President Vestager who runs many things now for the European Commission, who was with a bunch of telcos that the World Economic Forum put on just a week ago. She said in just many interesting things. Of course, that case that got overturned, the O2-Three case that was overturned, we didn't address that directly, but implicitly, she said she would love to see more cross-border mergers in the EU. She doesn't -- she's a little bit disappointed with the lack -- everything is about in-country consolidation, which, of course, as operators, we love because the scale benefits and synergy benefits are right there in front of you. But she would like to see more cross-borders. So it's interesting observation. She didn't specify a sector. She didn't say in the telco sector or the broadband or broadcast sector. But interesting observation from her perspective. So let's see, we've got more work to do in Europe and the capital to do it, the willingness and ability to do it. So I'm pretty -- I'm actually pretty excited about where things are going for us there.

Okay. Maybe an asset that's been a little more difficult for you guys over the last couple of years is the Swiss asset. Looked like you were kind of over the line with Sunrise. That's kind of -- that broke down. And with them now going with Salt, kind of feels like those guys will find their alternative sort of arrangement there. How do we think about the future for that Swiss asset? Feels like the second derivative is coming a bit better, but it's still in decline.

Look, I think we have -- it's where a lot of our attention is focused right now, having put together the businesses that we think makes sense in the U.K. Everybody else is doing really well operationally. Then I think a lot of our attention is on that market, both operational attention and financial attention, even M&A attention. So I don't want to be too prescriptive or too forward-looking on all that, except to say that as a stand-alone business, we think we can get -- continue to drive free cash flow growth. And we know, you know, investors are putting a premium on free cash flow growth. If you're a public company, that could be the dividends and yields and all the great things. If you're not a public company, it's still money up to the parent. So we're focused on free cash flow there. We think we can hit the numbers that we've anticipated and see steady growth in free cash flow in that marketplace. There's going to be ups and downs between competitors. Swisscom is a strong competitor. Salt and Sunrise are strong competitors. So you're going to see moving parts in terms of market share and top line growth and video ads. But we have all the elements we need. We've got 1 gig rolled out. We've got a great MVNO with Swisscom. We've got sports that we're sort of working our way through, but we have that in our back pocket. And then we have a strong -- it's a really strong opportunity. But like a lot of these turnarounds, as we've described it, you got to give it time to turn around. If something appears between now and then that's of interest to us, you should expect that we will take a look at that. But I don't really see either party there, Salt or Sunrise, particularly anxious. And why would they be? That's not a great posture to show up to a conversation in. So we'll see.

Okay. And then if we just sort of, I mean, maybe even take a little step forward. We've got the U.K. deal. Let's assume we bring that together. We've got VodafoneZiggo running nicely. We've got a listed Telenet. Is the kind of -- is a 3- to 5-year view that we've got essentially big, listed convergent players within a holdco? Is that the way you guys are kind of thinking about this?

Yes. I think -- look, I think there are -- I think that's partially correct. And a few things are driving that outcome. Number one, you'll put your finger on it. Our 3 largest businesses will be less than 100% owned, Holland, Belgium, U.K. And that was by design because we realized that in order to create the value, we had to either partner up or acquire or deal with public listing. So that's point one. Point two is, as I mentioned just a moment ago, it's all about free cash flow. And as OCF and revenue flattens a little bit in Europe, and you're a telco expert, you see that yourself, it's all about driving levered free cash flow, which is particularly attractive to investors, especially. And then the third thing I'd say is we have to create -- if we're going to have 50-50 JVs or public listings, we have to find a way to crystallize value for our investors. We have to be able to look down, like we do with Telenet. I can tell you Telenet's worth $4 a share. How do I know that? You just take the number of shares we have, multiply it by the stock price and divide it by my share. There is some beauty and some simplicity to having a portfolio of listed entities. And let's be clear, you would know this as well as anybody, local investors in Europe reward national champions and national challengers. They want to invest in national challengers and national champions in the telco space. They love to see fixed mobile converged companies. And they're happy with free to cash flow. They're happy with maybe not as robust top line and EBITDA but steady free cash flow, maybe dividends, things that drive their own institutional strategies. So all those things together, say, if we end up down the road with some listed vehicles here, that's not a bad thing. Somebody asked me, well, what about the holding company discount? I said, you know what, I'm getting 0 for the U.K. today. How about we take it public at the implied $15, $20 a share, and I'll take a discount on that. Today, it's 0. So it's hard to argue that the holding company discount would be reason not to pursue transactions that can crystallize value, demonstrate value and find sort of natural investors who are aligned to the kind of growth profile and free cash flow profile of those champion assets in those countries. Switzerland is not a bad place to put money to work last time I look. And Swiss investors need to own Swiss assets. And these are crown jewel assets. We own crown jewel assets for -- that will be around, if this crisis has proven anything. Our assets are crown jewels, and they'll be around a very long time, managed properly, capitalized properly. These are long-term assets you need to own. And that's an exciting possibility for us.

So essentially, the radar of investors, I mean, what we know as a challenge today is that there's a lot of European telco mandates that can't invest in U.S. stock, right? And there's a lot of U.S. investors who don't know the European landscape. So you're kind of -- you're in the middle of a Venn diagram of 2 big circles and you're not getting much kind of overlap. So the idea is essentially to extend that by opening the local listed guys. Now then I guess at the group level, you're going to have very visible equity stakes. You can have very visible dividend upstream. And then any conglomerate discount, you buy it back, right?

Buy it back if you need to, that's right. I mean that's been the playbook in the Liberty family for quite some time. If it's meaningful, you buy it back. Since I've been CEO, we've repurchased $25 billion of stock. And we just did $3.5 billion last year and have already done -- working our way through $1 billion this year, nearly all the way through. So I mean we're -- we believe in that, when there's a value gap, when there's a disconnect. And all the deals I described earlier, the 8 countries where we've created fixed mobile champions, in every instance, we did those transactions at multiples 2x where we're trading. So I've been in the cable business 30-plus years, there's always been a gap between private and public multiples. And if I can bridge that gap either with listings or transactions or anything that bridges that gap will be a positive for investors. And as a very large one myself, we're all focused on that very strategy. And I think it will work.

Right. Okay. So we've kind of been a little bit around the sort of -- the regional operations, Mike. So one of the opportunities from COVID -- I'm careful the way I actually put this. But one of the opportunities that's deriving is that COVID has accelerated some of the digitalization of the industry, even if it's the migration to online sales, the shift in customer care, et cetera. How are you looking at those opportunities? Because you're going through a lot of cost-cutting, you've got the central cost allocation right now. Are you seeing new opportunities to cut costs coming from COVID? Or is it an acceleration of existing clients?

Yes. Well, first of all, look, it is a challenging time for everybody. And I -- my heart goes out to anybody who's suffering and struggling through this period. On the other hand, I think we're in as good a position as anyone could be. We don't promote that too much. But if you look at our business and our situation, the virus is stabilizing, and almost all of our core markets, except Poland, I mean, back to sort of early March levels. That's a positive thing. I think there were -- in Switzerland and Ireland, maybe there were 15, 20 cases yesterday. I mean it's pretty -- just coming back hopefully to a normal place. We're running darn close to plan. So we aren't really in an industry or sector that's sort of imploding or going sideways. We're not advertising-based. We're not heavily dependent on sports. So I think we're lucky to be running darn close to plan, which is great. Our networks are resilient and robust. We're experiencing virtually no issues on the network side. And we've seen pretty good customer volumes. I mean we're almost back to sort of pre-COVID sales volumes. Churn is obviously better for reasons that you all have looked at, and NPS is ticking up. So I would say we're probably doing better than our COVID plan, what we put together, everybody put a COVID plan together right away. We're doing better than that COVID plan. And so I'm not suggesting the cost efficiencies aren't there. I'm just simply saying, it's not the first thing on our list. We want to get the engine of -- the revenue engine, continue that moving. Where we worry about? We've -- there's been a little dislocation in sports. No question about it. I think it's coming back to life, thank God. And in the U.K., we're being compensated. So we're really not losing any money on the sports situation. You're losing no money because -- maybe we've lost 10,000, 15,000 sports customers, but the ones that we've paused, Sky reimburses us for. So we're not really losing any money on sports. We're excited to get it back. We have to be thoughtful about the collections issue and bad debt, although we've gotten -- we started that process up, and we're not really seeing any big issues there. We have to stay focused on price increases, can we, should we, when would we, those sorts of factors. But for the most part, pretty positive. I mean we've learned some lessons, right? We got to be very focused on supply chain dependencies. We've moved all of our call centers in the U.K. from offshore to onshore. It just wasn't working. We have to be careful about making sure our relationship with customers is as good as it can ever be. We did -- like everybody out there, we provided them faster broadband speeds, more data, more television, and we feel we're in their corner, and we should be in their corner. And I think it's opportunity for us to -- that's a brand moment for us. On the digital side, that's probably one area where things have accelerated a little bit. I mean there's no question that we're pursuing digital in all of our markets. No question about it. So wherever we're pursuing digital, this is kind of a tailwind to that. So for example, in the U.K., if you look at sort of retail shops, I've talked about the call center issues or self-installs, all those things are picking up. So I think we're double the online sales levels in the U.K. today from where we were pre-crisis. We've shut down -- we only had 53 shops left. We had to shut them down for COVID. We're not opening them back up. So we're kind of moving off the retail street -- sort of high street strategy there. And self-installs are also up materially in the U.K. So the things that we were doing in digital, making customer journeys simple, light touch, online touch, digital touch, that's all being accelerated in all of our markets because that's what consumers are demanding now more than ever because of the situation. And it's been healthy. We'll always be thoughtful about cost-cutting, and we definitely want to hit our budgets and our guidance. So if we need to, we will. We haven't fired any people. We haven't taken any money from the government. We're not in that space where we need handouts. We truly about how we can -- as you sort of indicated, how do we supercharge what we're already doing.

And just on the U.K., one of the major concerns into the first quarter was the whole contract communication, the regulatory requirement that consumers were contacted by the end of contract, they're offered the next best contract, et cetera. And there was a concern. I think you guys openly flagged it within guidance, but there could be a bit of a spike in churn.

Right.

And if anything, it almost feels like as that was probably coming in, COVID came in with the lockdown and maybe churning a contract for a few pounds a month just became the last thing people were thinking about. So do you feel like it did sort of suppress it a little bit? And...

Yes, it did on both ends of the equation. So customers were not that anxious to switch. Installations weren't occurring. So if you called us up and switched to BT, BT says, sorry, I can't get there. So we were doing installs, a lot of self-installs. But BT was kind of shut down. So the whole sort of flux was slower. But also because call centers were stressed. A lot of us were just pausing. The government wasn't worried about that because you don't want to put extra -- you want to stimulate the call centers when you're already managing through the supply chain issues that you have. So I would say most of us paused that, but we're back at it, right? I mean we're now -- and I would say having looked at what happened pre-COVID and where we are today, the churn figures that we budgeted were largely what we expected. But the good news is we're not providing -- we're not finding that we have to provide a significant discount to keep -- as you would have expected, I mean, half as much discount is required to those who we need to keep or want to keep. That's a positive thing. So I think we'll do better than we probably -- remember, in our guidance, we said there's GBP 100 million of headwinds this year in the U.K. A big chunk of that was obviously the best offer as well as best tariff as well as the end of contract. And my guys won't be happy that I say, but I think we'll do better than we probably hope for there, but we'll see. We have -- the best tariff doesn't really kick in until the fall. So we're managing through it, and we're managing through it because we have a lot to offer. We gave every -- we gave 1 million people 100 meg that didn't have it. So we're doing -- we have a lot of tools in the toolbox to keep people happy customers. I lost your audio, David.

I'm back. Okay, there we go. So right now, you've got a lot of customers working from home, probably using that broadband speed more than they might have done if they would just be users or whatever it might be. Do you feel like -- I think this industry, and I say in particular, Europe, has struggled to really differentiate in the ARPU, higher versus lower-quality networks. It's certainly on the mobile side, but sometimes on the fixed side, it's been a real challenge to say it's a better network, it warrants a higher ARPU. Do you think that consumers and also SMEs are starting to kind of look at this quality differential now in networks and saying, okay, we know how much we rely on this. Okay, we can trade down GBP 3, GBP 4 a month, but that's not the trade we want to go down anymore?

It's going to lift all of us. I think the essential nature of what we're providing, the reliance that people have on what we all provide, I don't just mean cable or Virgin or fiber or HFC, all networks are providing a vital service. And I think all of us, this is going to be rising tides for all parties. We have to not mess it up, right? We can't overpromise. We have to keep over-delivering. But there was virtually no congestion across our networks, virtually no congestion across anybody's networks. Mobile, we might have seen an issue, except that everybody was switching to Wi-Fi. So we were taking more Wi-Fi traffic, more Netflix traffic, more YouTube traffic and no problem because, remember, our networks are spec-ed for the worst part of the day already. And if -- so you can run all day long in our networks, it doesn't matter. If we're spec-ed for the peak, for the prime time, you can hang out there all day long. So it's been pretty good, and I think consumers have seen the benefits of what great products, great bandwidth and great Internet connection provides. And I think for all of us, that's what I meant earlier, it's an opportunity to really capitalize on that relationship you have with that consumer right now.

Yes. And I also wonder, and this is a kind of hypothetical question we're asking sort of across the management teams is capitalizing as well with the governments and the regulators, you guys are probably more in touch with governments than you've ever been because they need to make sure your networks are working right now. And I think the appreciation for broadband infrastructure has probably never been higher across consumers, enterprises, governments and the like because it's kept us going, right? Do you think that given regulation, I think we typically agree, has been quite a headwind for this industry because it's typically promoted competition in wholesale access and all those things, do you think that now there could be a shift and maybe [ it's bound to ] [indiscernible] too, where the appreciation for invested networks, for advanced, next-generation networks means that regulators could possibly shift direction a little and per investment versus just absolute lower pricing?

I think we've been trending there for a while. And I think the answer to the question is yes, unequivocally yes. The fact that we've had no issues getting our transactions through the regulatory process, the fact that there was a 4 to 3 merger in Holland, right, for mobile operators, you have this legal case, the fact that 5G is looming as less of a revenue opportunity, much more of a CapEx moment for most mobile operators because we know that the revenue potential -- at least consumer revenue potential is not there, not for quite some time. And so I think you're going to see a little pressure relief. I think some people are -- hopefully, they're going to let a little pressure out and allow us to continue investing but also getting some returns because the average telco, and I don't consider myself a telco, but if you look at the average telco, it's been a very tough 10 years in Europe. The average incumbent telco has seen erosion of customer bases, serious regulatory headwinds on almost every revenue stream in mobile, spectrum at costs that are rising, 5G CapEx investments, 4G now leading to 5G CapEx investments and more and more competitors, MVNO and MNO. So it's been kind of a series of really difficult challenges, which I think are starting to tail off. I think you're seeing consolidation occur in mobile. You will see more of that. You're seeing sort of -- people see realistic expectations of 5G, not over -- unrealistic expectations, rational pricing. So I think it's a really important inflection point, and maybe that's where you're heading, in the sector. And all of it leads to -- the beauty of it is, and if I look at the fixed mobile champions we've created, we don't need to take market share from here to here. We just need to drive efficiencies, drive cash flows. It's a steady, solid, stable business. Get the cost base right, get the CapEx base right and watch the cash flow accumulate. And the free cash is what it's about. So I think the opportunity for driving free cash flow out of this region the next 5 to 10 years is very, very good.

Okay. And that's -- I think that's a pretty -- that's a good upbeat turn to maybe finish on, Mike. That is something that -- you've got $40 in that presentation of yours, I think, in the Q1 presentation. So there you go, that's the route. Thank you very much for freeing time. It's a great discussion today. And yes, we look forward to hearing from you again on Q2.

Thank you. Take care, everybody.

Bye.

Bye-bye.