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

Okay. Well, good morning, everyone, and welcome to the Bank of America TMT Conference for 2022. And to begin with, an apology to all those investors who were hoping to attend and to management teams, too. Of course, that was our ambition, but we were thwarted by rail strikes in the U.K. and really didn't have too much choice. But nevertheless, the power of technology means we can host these meetings perfectly well virtually, I hope. And I'm delighted this morning to be able to welcome from Liberty Global, we have CFO, Charlie Bracken. I also believe we have a couple of guys, Mike, from the IR team online as well. So Charlie, thank you very much for attending, and thank you to investors, too.

I thought we might begin just by inviting you to just give us a little update. We just fairly recently had the Q1 results, but just how you're observing the business evolution over the last couple of months, to what extent you are seeing a change as we feel these inflationary and interest rate pressures growing. Just a brief introduction that we can take on from that. Thanks, Charlie.

And I think -- hello, everybody, and it's great to be with you today. Again, it's virtual, but obviously, we'll master this. I think our business is -- we're lucky, of course, because we are obviously not a utility, but we are very much a necessary product, particularly the broadband product. And so we're actually proceeding in a pretty steady way. Just to remind everybody, we are really down to 4 core FMC assets. We obviously have other assets, and we'll make into that. But the majority of our value, 2 of them have got a lot of tailwinds because they've put a lot of synergies ahead of them. That's Switzerland and the U.K., everybody talked about that. But -- and they're proceeding very well with the synergy realization, which I think is obviously, in our mind, a relatively low-risk strategy because we've done a number of these FMC combinations. And if you look at the underlying businesses, and including here our Benelux businesses, churn is pretty stable. There is some pricing pressure, but we are expecting to see ARPU grow perhaps not at the full inflation level, but certainly over the next -- particularly in the second half when all the price rises are through. And we continue to see pretty good free cash flow conversion, and we're on track to hit all our targets for this year. So, so far, so good. The one thing that has hit us has been energy costs. We've actually been able to absorb that. I'd still be able to confirm our guidance. But we have seen an impact, for example, in the U.K., a little bit we've seen in the Benelux. And we continue to look to hedge out the rest of our exposure for the rest of the year. We are probably 60%, 70% hedged now, and we're obviously putting on longer-term hedges, but that is perhaps the only volatility in our P&L.

Okay. So maybe we could just dip into the regions. In the U.K., in the last quarter, you reported a broadly stable broadband subscriber base, but I think that was alongside fairly substantial price rises that we're seeing across the industry. There was a sense that the U.K. broadband market may have contracted a little just with that dynamic. How are you sort of seeing that evolve since those price rises? Has there been a little more consumer backlash? Or do you feel like the market is just absorbing this and moving on?

Well, I think when we did the price rises every year, there was a difference, I have to say, a year ago with COVID. But certainly, generally, when we do price rises, that is not a good quarter to our customers. And in relation to our competitors, we actually went first, if that makes sense, with the price rises. So it doesn't surprise us that we have pretty flat broadband subs. Remember, in the U.K., there's 2 dynamics. There's a new network being built. We just call it Project Lightning, but increasingly, we might do that off-balance sheet. But essentially, the idea of building it in the other homes outside the core Virgin footprint, clearly, we're getting some growth on that, and we can talk a bit about that. And on the underlying growth -- underlying footprint, we actually had a little bit of a decline, but broadly flat. So I would say that we weren't particularly surprised in Q2. In terms of the market as a whole, our churn actually wasn't very high. Our churn was pretty much in line. So it wasn't like we were seeing our customers leave. We were just having a problem with net adds. And our sense was where there was growth in the market in Q1, it was coming at the low end, particularly, I think, Vodafone who's a price-cutter, if you like, or a low-price offer. They did particularly well. I think the rest of the market was broadly flat. So we'll have to see how the market evolves. It's obviously hard for me to give you updates real time. But I think we had a pretty good May, and we're waiting to see what comes out in June. I mean April was still impacted a little bit by the legacy of this price increase. But I think broadly speaking, we still see the market as pretty stable.

And just in general on the price increases, inflation is the big topic, of course, it's the headlines on all of the newspapers now. How did you -- did you feel any kind of pressure from your analysis of consumer groups, maybe even political influences? Do you feel like there's a sort of sensitivity to raising prices right now that it's becoming increasingly difficult? Because one of the things, of course, is that yourselves, BT, all the big guys in the U.K., you did increase prices well above inflation, the sort of 12-months historic inflation level. So do you feel any kind of pressure politically to sort of moderate that?

Well, I'm going to regret this statement, but no, I don't think we did. I think the bigger pressure, remember, the U.K., like all telecoms markets in Europe, is competitive. And remember that sticking a price rise -- this was true, by the way, back in the days of lower inflation, isn't necessarily -- it's not a case of inflation is at 8%, we raise prices 8%, you get an 8% increase in ARPU, thank you very much, it's been a pleasure. There are a lot of other factors at play. For example, there is a secular decline in video usage. We're seeing a decline in our video subs. From a cash flow point of view, that's reasonably okay in the U.K. because we have -- we don't make a ton of margin on that. So we're relatively relaxed about that. We obviously have this decline in fixed telephony and the associated usage. So when you talk about ARPU, there's a lot of things that go into it. But I think underlying all of this is that consumers do recognize broadband is a good value product and it's a product that they need. And so I don't think we're under that much pressure. But as I said earlier on, in a competitive market, you will see people moving down towards the bottom end if they're price-sensitive. We're lucky enough to have a relatively high-end customer base. We have [ 2 ] of the highest ARPU. And our customers believe that they're getting that, and they are getting a high-quality service. So I think in our experience of these, so far, so good, but we'll see how the market unfolds over the next few months.

And do you think that general conversation around cyclicality applies less and less to telco, but it is an absolutely essential service now? Do you think that telco could be an industry that perhaps rides that inflationary pressure a little better than some of the more cyclical subsectors?

Well, I hope so. I mean I think, look, the one thing I think we've got to prove out is how much inflationary indexing can we get through. We have a couple of benefits going for us. One is we are a very -- I'm very careful to say not essential. We're a very desirable service, obviously, in a competitive market, and the regulator recognizes that we are competing. But I think we obviously have a very secure stable business. And I think we all agree, not least of the COVID thing, that broadband is a mission-critical thing to have. We're also lucky that a lot of our cost base, if you think about it, is amortization of large upfront capital investment networks, increasingly things like IT platforms and all the rest of it. So as a sector, we should be in a relatively good position to continue to drive good free cash flow conversion and growth despite the impact of higher inflation.

And then just on to the -- more of the sort of capital expenditure in the U.K., you announced pretty well a year ago that you were planning to build cable out across the current coax network. And then that since manifested, and we now have this plan to build the additional footprint, and that's very clearly with the remit of joint financial partners, et cetera. But it's been a little bit more -- it's perhaps my reading, and I would apologize for this, but a little more opaque, the sort of messaging on the kind of core 15 million coax. How you plan to structure that from a balance sheet perspective, how we could imagine partners, whether they'd be strategic or financial, and of course, the whole debate around will it be a full wholesale network, et cetera, could you just give us your latest thinking on that?

So I'd just remind everybody, the U.K. is, well, depending on how you look at it, 28 million or 30 million homes. We broadly have a network of, say, 16 million. That does include the stuff we built in recent years under a thing called Lighting. And on the core network that we bought back in the day, I think it was about 12 million back in 2013. On the core network, we are the market leader. We have about a 40% market share. And we are the high -- at the high end of the market. And we're actually pretty -- have been pretty successful. And we actually have a pretty stable market share despite competition through that period. And over the last 6, 7, 8 years, we've been able to steadily increase ARPU, though not perhaps as high as underlying wage inflation, but certainly in a steady way and drive free cash flow growth because we've obviously got margin expansion as we've been able to drive operational efficiencies. In addition, we have the opportunity to build some subset of the remaining, let's call it, 13 million homes in the U.K. Clearly, we're not going to build the ones that are uneconomic, but there are marginal hands and originally called -- a company called Lightning or a program called Lighting. And Lighting was all about building stuff within 50 meters, let's say, of the existing network. And if you think of the legacy network and going to where this was, it was essentially Swiss cheese, lots of holes. And so there was very economic builds, and we had good marginal economics. And increasingly, we think that's a -- well, not increasingly, we do think that's a very high IRR business. And it's a high IRR business because we believe that we can target and achieve around a 30% penetration. And because of our marginal economics because we're able to leverage our fixed infrastructure, we're able to get a pretty good IRR. And we talk, at least internally, we believe we're making a levered equity return in excess of 20%. As we look at the next phase of development, increasingly, there is a focus on fiber. We're not necessarily convinced fiber is necessarily a game-changer against a DOCSIS network. However, in the U.K., because we have duct, it is relatively cheap for us. It's about GBP 100 a home to upgrade the DOCSIS network to fiber. So on our existing homes, it's relatively cheap. So we launched a program, what we call Project Mustang, it's over 7 years, and that is filtering through our free cash flow. But essentially, what it allows us to do over 7 years is to upgrade the existing DOCSIS 15 million to our fiber network, which does future-proof it. It doesn't necessarily mean we've given up on DOCSIS. It just seems we have no regrets to move in, in the U.K. And that process actually is going pretty well. We're on budget to do that. We've slightly front-loaded it, which has had a slight impact on this year's free cash flow. But we believe it's a good long-term strategy. The second thing is how far do we proceed in building the remaining homes. And I think we felt the view that we would be in a position to start that building. And we should, all things being equal, be able to apply the Lighting economics, of the marginal economics. We must have the most scale. We have a track record of building 500,000. We obviously have the leading, in some respects, the leading ISP, at least on our footprint and currently build. So we think we have a pretty attractive proposition as compared to the other fiber overbuilders. And we very deliberately chose to do it as a joint venture between Liberty and Telefónica. And you might say, well, why isn't it a joint venture with Virgin? Well, clearly, we believe there's going to be some form of consolidation in the fiber overbuilders, not least there's rising interest rates and this underlying pressure on them, as they don't have module economics, they've got to get customers. And they often talk about in their business plans, at least the ones I've seen, a 50%, 60% market penetration, which is a stretch when you think that BT or Virgin nationwide have 50 between the 2 of them. So we think that sector will ultimately end up with some degree of consolidation. And having a vehicle to do that is very helpful. You can imagine that we saw this when we had -- this is when we ran the valuation of Virgin 3 or 4 years ago. It's very hard to valuate a negative free cash flow, high-growth newbuild company combined with a mature strong free cash flow generation company. And so, therefore, we think we're growing the optionality through that. And I think underlying both our existing footprint and in this new footprint is this concept of wholesale. Clearly, BT has 100% market share, and we think there's an opportunity for us to get some market share. And you should assume that we are in a dialogue, and that's hopefully an upside to the return on capital for our shareholders in both Virgin and indeed in this newbuild JV in terms of the future. So obviously, we haven't got any announcements. When we have got some announcements we made, then you should assume that, that is a long-term strategy here.

I guess the question that we often ask ourselves is, why wouldn't you? If you're going to be overbuilt by a wholesale BT in across most of the network, let's say, it's almost a zero-sum game. You should, therefore, wholesale. Otherwise, you only have net loss as opposed to potential [ sales ].

Yes, I think that's right. I mean -- but I think -- it's right. I think that's right. But I think we are very relaxed about wholesaling. We've done it in other markets. There was a time when we felt that there was an issue around regulatory. Those years have long passed. So I think we are definitely in the game of both being a wholesaler, and we'll talk about Swiss, and perhaps we're happy to obviously sell somebody else's fiber where it makes sense. And I think you -- I'm sure you all remember this as well, that there's an increasing divergence between this concept of ServCo and NetCo. I'm not sure we're quite ready to do that full hard split, but there are definitely different competencies. And we are, we believe, lucky enough to have some very, very effective ServCos in all our markets, which means that we can anchor these fiber builds. And we're also very relaxed about having today the best network in virtually all our markets, which allows us to be a very attractive wholesale partner.

And that brings us on to how we could structure this because I think from the way you guys have been talking and the comments that you just made, there is a sort of hypothetical scenario where there could be a Liberty InfraCo that sits possibly separately from the Liberty ServCos, that I'm being hypothetical with this. But I guess the question around the U.K. is, who owns this asset? Is it a JV of the JV? Is it an asset JV? Or could you guys look to actually take the InfraCo away and bring it into Liberty Global level and Telefónica has a share in that? So...

I think it's -- look, unfortunately -- and one of the questions is, is how best to structure this and particularly in the context of public markets because complexity isn't necessarily valued or priced, I would say, necessarily as easily as more simplicity. Clearly, Liberty has always been a long-term investor. We will take the view on long-term value creation. We're in the business where we're rewarding the long-term shareholder. And for us, we do think creating balance sheet JVs to leverage other people's capital sources to create consolidation vehicles, as we talked about in the U.K., makes sense. But we do recognize it causes complexity, and we obviously got a similar situation coming up as we win [ Mariposa ], so I think the deal in Belgium gets organized. So we'll see how it plays out. But I think long term, we're very cognizant of the importance of trying to create 2 management focuses. One is on building a network and leveraging that network and gave the highest return on capital in that, in other words, a much lower capital business to ServCo. We have some very strong ServCos, which I think are very attractive businesses as they develop and sell new retail services and also can be partners for other people's wholesale networks where it makes sense.

Okay. So let's go on to this complexity comment. I really do agree. I wonder whether this -- and it is an increasing trend across telcos to take, build off-balance sheet and partner. And I understand the benefits of that, but it does tend to bring an equal and opposite conglomerate discount into the TopCo. So the spreadsheet looks good, but the share price doesn't necessarily move so much. But if we think about complexity and the Liberty Group today, you've obviously got 2 substantial joint ventures off-balance sheet. You've got, obviously, Ireland, but you've then got the Swiss business and you've got a listed Telenet on-balance sheet, so to speak. And I think one of the observations certainly around Telenet that you guys have even shared is it's not working very well, as in there is a share price that I think most of us will probably argue significantly undervalues the business. How should we think about what you want Liberty Global to look like?

It's a great question. Look, I think there is a reason for the complexity. We actually -- I mean I won't talk about the ventures particularly, but often you have a partner because you want to get an expertise. We have partnerships, for example, with Discovery or Formula E and All3Media TV production business because they bring expertise. You want a partner because sometimes they bring a different cost of capital. And where we lost them, the infrastructure, investor prices, networks at a much lower cost of capital than we aspire to do for our shareholders. Sometimes you bring it because you want to end up with somebody who creates scale. Now I don't think Telefónica was necessarily a seller of O2. I don't think Vodafone was a seller of Vodafone Holland. But put 2 together, we can have a partnership. So -- and sometimes you do it because of local dynamics. In the case of Telenet, back in the day, it was because the local Belgian shareholders were very keen on the idea of having a publicly listed entity. So I do agree, I think complexity is not shareholder-friendly. If you look at the Liberty Global strategy, it has been to try and reduce that complexity, albeit there's still a lot left. So what have we done? We're trying to rationalize our markets. Mike made the point, we're actually a bigger company if you look at what's called our aggregate revenues than we were before we sold Germany and Eastern Europe and Poland and Austria and all the rest of it because we're more simple. We're market leaders in our 4 big markets and obviously, to some extent, in Ireland. So -- and I think the other thing is that what we're looking at is creating value by taking advantage, frankly, of this complexity. If you're a long-term shareholder, and it's not for me to price our securities, but a lot of the analysts, you included, probably have our value of the company around the $40 stock price level, and we're clearly trading in the low 20s. Arguably the highest return on capital is to buy that stock in, in a measured way and monetize that arbitrage. Clearly, at the end of this, when all these fiber builds are done off-balance sheet when we work through it, we have a couple of choices. Do we either end up distributing and spinning these companies into listed national champions, which are relatively simple equity stories? We could even sell them. I mean we've obviously done it in a lot of our assets, and we've seen a lot of interest from private markets to put a bigger valuation on these assets, at least currently, the public markets. Or do we consolidate back up? And I think it's a bit early for us to be definitive. But what we'd like to think we've done is we've demonstrated a willingness to make the right decision to create long-term shareholder value. And I think there are many management teams who would have sold, broadly speaking, half their business and shrunk the size of the company. And we did it because we thought it was the right long-term value creation.

So -- and if we do sort of focus on Telenet a little, obviously, today, we've even got some news on the spectrum side, and it does feel like there is a new entrant story that I think we've all kind of debated for some time. I think it's definitely in the share price, and it's certainly feeling it today. I don't know whether you've got any early view on how that could manifest?

I think it's a bit early. But actually, I must say, we have obviously heard about a fourth entrant for some time. I think the announcement of -- I would be careful what I say because I think it's really for John to say. I'm with you, I don't think this is unexpected news. Again, I would reiterate, Telenet is a very strong company, has a terrifically strong ServCo retail brand, a very, very good management. And at least today, it still sits with the premier network. So I think it has a lot of strengths and advantages. And I think, obviously, competition is always a fact of life. But it will be interesting to see what the strategy of the new entrant is and how they want to play in that in a pretty tight market. But let's see.

I think it was -- how long ago was that you guys made a tender offer for Telenet? Was it about 30...

It's a while ago. I'm trying to think, actually.

10 years?

I want to say, at least 10 years, but I could be wrong.

Yes. I think that was EUR 33 at the time, and I think you got pushed...

There's been a lot of dividend...

He says dividend.

There's been a lot of dividend. I think that -- at the time, that created a lot of value. They've been very, very successful. They are definitely under the squeeze. And I think this issue around the uncertainty around this network deal they've discussed publicly with Fluvius, which hopefully will get some sort of resolution on sooner rather than later, I think that has obviously hung over the stock price. And I think there are some technical issues. We recognize, whilst for many years, a listing worked very well that actually Telenet traded a pretty significant premium to the sector. Liquidity has, in recent times, dried up. And obviously, from a technical point of view, it's not working. We're not happy about that, not from a Liberty point of view, from our public shareholder partners. So we're partners with the public markets. It's in our, not just our interest, but it's our belief that we want to be good partners with the public markets, and Malone would reiterate that all the time. So I think what we all have to do is wait and see what happens when the news flow settles, particularly around this network JV in fibers. And then we can all make some decisions on what the right strategy is going forward to help improve the trading value of Telenet.

Okay. And then if we move on to the Benelux sibling, I guess, in VodafoneZiggo, it feels like it was a great joint venture. I'm not going to say it was, it is a great joint venture. But the joint venture, I think, had its formative years, the initial merger, the synergies, and that's been executed very well, I think, probably ahead of your expectations. But it feels like we're at this breakpoint. And the break point is the growth has kind of slowed, needs a little bit of reinjection, and there is very clearly this question around fresh capital and the network. Another classic sort of cable-fiber story. And that break point feels like it's also a very logical break point for management and the joint venture itself. How should we continue? Do we both on put capital in? Da, da, da. You guys are obviously still sitting with quite a lot of cash on the group balance sheet. But I think you've even sort of said, isn't the most optimal use of structure of capital right now. It feels like you guys have a lot more DNA in VodafoneZiggo historically. Could there be any ambition to bring that asset in? Is it an asset you'd like to own? Or do you feel like the joint venture can proceed very cleanly into a sort of fresh ramp?

Well, first of all, I would say I agree with you, I think it's been a very successful business. And I think we should really give credit to Jeroen and the rest of the team. I'm sure many of you know this, but they've built their leading consumer ServCo. They're the leading market share there. They're also closing the gap very fast in B2B. And actually, there's quite a bit of growth left in that space. And I think whilst there is still efficiencies to drive out of the cost base, they've done a really good job of closing up and doing free cash flow conversion. So I agree with you, we couldn't be happier. I think in terms of where they go from here, I think that they have, like all the cable companies, this question about how do they maintain network parity or superiority. To be fair, they've been competing with fiber a lot longer than most. I mean, for example, I think KPN has had 30%. For those who remember, Reggefiber, KPN has had 30% fiber build. And you can imagine it's in the urban areas for some time. And despite that, Jeroen and the team may actually get to market leadership. So an interesting perspective, at least on the importance of fiber. There is more fiber building going on, but they still seem to be maintaining a pretty good market share. Let's talk about how much they're starting to drift and lose a little bit of broadband subs. But I would observe that the aggregate revenues are pretty good. And I think what's really is a question for them is, and we talked about this at the Board, is the price elasticity of price versus volume because, yes, they are losing a few subs, but the aggregate revenues, I mean, look at it, right, you're growing pretty well in consumers. So I would say it's a pretty healthy business. In terms of the right strategy, from a network point of view, I think the Vodafone view, and I think we are very supportive of this, is that we should continue to invest in a measured way. Let's see what we can get out of the DOCSIS program. Where it makes sense, we might look at some fiber builds. But so far, so good. And as a result, it's a pretty strong free cash flow generation asset, which we're very pleased with. In terms of where to from here, look, Liberty is always opportunistic. I think that if it makes sense to sell that asset, we would sell it. There's a price which we'd sell. That's when I would say everything is for sale at a price. There's a price at which we would buy it. There's a price at which we would stay steady. So -- and I don't think -- Vodafone have been good partners. I don't think there's any price on the table at this stage. There's obviously a lot of private equity interest, and it's well documented that the private equity folks do like the Dutch market and there are other product players. Let's see what turns out from them. But I think from an investor point of view, I would give you with reassurance that we're going to trend do the right thing to create long-term value. And I don't think we're in love with the assets so much that we would buy it at uneconomic price just as much as we wouldn't sell it if there was an economic price on the table.

Okay. And then maybe on to Switzerland, I think we were possibly and unfortunately used to pretty tough numbers from the Swiss asset. Then we've obviously gone into the merger, and there's good opportunity around the synergies. But the Q1 number surprised us. I think, in general, they were very good. There was a slight sense that the market environment had eased a little, the competitive environment had eased. Is that something that's -- should we think about that as more temporary and just kind of stick with the sort of medium-term trends as we expected them? Or do you think the Swiss market could actually be looking a little better?

Well, first of all, Swiss market is a very good market, let's start there. It's a very high ARPU, very rich market, a market that's prepared for quality. It's got a reasonable market structure. We are lucky enough to have bought an excellent mobile brand. It's Sunrise, and we're obviously, with [ André Krause ], I think one of the best operators in Europe. So we're very happy with our position there. And it's obviously, from our perspective, the market has got a lot of synergies to realize, and they're well on track to be able to do that on budget and on time. So we have a pretty clear road map here to a pretty successful free cash flow asset. They did have a very, very good Q1. I think we'll be cautious about declaring there's a step change. These markets -- you've got to be careful about calling out competitive nature in these markets because 1 week changes through the other week and whatever, whatever. But there's more competition probably in the Swiss market. I'd say, Swisscom has been more aggressive than it has been in recent years. And I think also there's an element of phasing. So I don't think we're changing our long-term guidance for Switzerland, other than to say, I think we still are on track for a very strong free cash flow growth over the next 2 to 3 years. And obviously, the question is how best to get that valued or priced, I should say, in our stock price.

And then one of the things I did notice, Charlie, when I wrote the annual note on comp structures as you guys are levered into ventures, and ventures is something that I think maybe our weaknesses as sell-side analysts, but it's very difficult to take ventures and really put a price on it or understand the outlook for ventures. How should we think about ventures and how we can understand it better and really translate that into value per share?

Well, it's a great question. So look, I think traditionally, for us, ventures was a very different thing. We had a tech ventures fund, which we really were using to really outsource our R&D. So I'll give you an example, there was a company called Plume. With the smart WiFi pods in the home, it's actually a fantastic product. Never worked for it. I didn't invent it. And it's a real game-changer in terms of creating a smart WiFi. Because we're one of the large customers, I, along with Comcast and others, we were able to secure a very attractively priced equity stake. And as a result, obviously, we made quite a lot of money for our shareholders. I think it's hard to value that for our shareholders. I think ultimately, what's happened, we had a company called -- in the CMTS space, and we ended up making $150 million on that. Ultimately, that gets valued with cash. And to some extent, we've stopped focusing on that part of the ventures. And we've said to that fund, look, you can invest what you harvest. So there's no net use of capital, but I do agree that it's hard to put a value on it, and we tried very hard, and Michael does a terrific job with disclosure. The other thing we've used ventures for is to invest in what we felt were areas where we had insight and had the opportunity to create marginal economics to grow businesses. And increasingly, we've been looking a lot at infrastructure, and I'll give you an example. We have a 50-50 joint venture with Digital Bridge, pretty successful digital infrastructure investors. You will notice that cable companies have a lot of technical sites, a little bit like tower companies. A technical site is essentially Edge data center. And the thesis that Digital Bridge have put capital in is we injected our sites. We've got a value of 20x the active tenancy that we were paying anyway. So essentially, we took money out of the deal. Digital Bridge put cash in at 20x. We're using that cash to invest in building out our edge cloud computing platform. We were lucky to hire some really good management. We've got Giuliano who came out of Digital Realty, was #3 or 4 in that company, which is one of the big hyperscalers. And so far, that's gone very well. And the thesis is, look, as the cloud moves to the edge, as people need to have edge cloud computing, and you're hearing a lot of this from Meta and I'm sure you've had all these names, these sites should be in a very good position to create incremental revenue streams. And the plan is to triple the revenues over the next 3 or 4 years. If we end up executing that plan, we would have created hundreds of millions, if not billions of value for our shareholders with very little capital investment. We've been able to do marginal economics. And that, to me, feels much more what our shareholders would like us to do, develop these new business opportunities, leveraging our scale, don't commit big numbers. And we're very hopeful we have a number of these, I won't go into all of them now. And then the question is how best to get that valuation. What we try and disclose around these assets, but I do -- really, it's hard to really put a hard value on that if you're an analyst, ultimately, these may be assets you spend. They don't necessarily get valued the same way as cable mobile assets. And maybe the answer is these become distributions rather that we distributed LiLAC back in the day because we've got a different capital profile. So that's sort of the strategy around our ventures approach.

Maybe it's an asset for that big InfraCo that Liberty is planning to build, Charlie, I think.

Well, that is the question, is it? I mean at what point do you spend -- I mean that's the complexity point. But I do think there's a big difference between some of our ventures in terms of the profile of those businesses as compared, for example, to the core FMC business.

And I guess one of the sort of, I don't want to say mantras at Liberty Global, but perhaps so is that you've always focused on levered free cash flow growth. And leverage has been, I don't know whether we could call it a tailwind for the last 10 to 15 years, it's basically the cost of which has come down. So that's supported this strategy of yours. But we're at a very, very obvious inflection point now where rates are going back up. And I'm not going to be smart enough to put a time line on that or how long that lasts, but we're clearly in a rate rise cycle now. So the question is, is there a debate in the boardroom now you've had 10, 15 great years of this strategy? But is there a case now for a wider deleverage strategy as we go into this environment? And I guess, if I may sort of challenge you a little bit, one of the good examples was we had VMO2 recapitalizing recently, possibly a little bit earlier than certainly analysts might have expected, 12, 18 months or so. And the performance of that bond has been very observable. Is there a debate that you guys are having now as to, we've had a great run here, but the tide is turning and maybe there's a case that didn't [ quite improve then ]?

Well, I agree. I think to make returns on capital for your shareholders in the telco sector, you need to use leverage. And a reasonable man or woman can disagree about what the appropriate level of leverage is, but we've been pretty consistent at this 4 to 5x EBITDA for the 20 years I've been the CFO. And there are times the cycle gives it too high, sometimes it's too low. And so we try to be very consistent. And because we're lucky enough to have long-term shareholders, we obviously think through the cycle, they'll work better for us. And obviously, I think it's pretty self-evident. If you could sustain leverage, higher levels of leverage at tax deductible debt, it obviously gives you a higher return on equity through the cycle unless you get into distress. There is no sign that our debt is trading at distress. I do accept that these bonds have traded down. But to be fair, the market as a whole has traded down. So there's no dislocation. So I wouldn't suggest at least that the debt market's view are our leverage is too much. And I would observe that the debt we've locked in, and there is a debt that grew there, it's at very attractive rates. If you stand back and think about it, we've locked in, let's take -- I think Holland is at 3.2% fixed for 7 years, fully hedged in currency, et cetera. So look, we've got some pretty attractive asset to our shareholders. I think the question is what is the return on capital for recap? And I think that we've traditionally been very comfortable recapping as a way of returning capital to our shareholders through buybacks or we did that for many years and continue to do that. So I think the question for us is much more about, will we continue to recap and at what price? I would still observe, it's relatively cheap. In the 20 years I've been at it, it's still pretty cheap debt. And I think we will take each decision as it may, but there's absolutely no interest in deleveraging per se in paying down existing attractive debt. And the exam question will be, how much do we recap and continue to target that 5x leverage? And the evidence at least today, and there'll be some bumps in the credit markets in recent times, is that looks pretty good. And again, if you look at the underlying credit analysis, pretty strong free cash flow of all these businesses underneath that debt stack. So you've got quite a lot of cushion in [ inverted commas ]. So I think we're pretty relaxed.

And I guess, just finishing on that sort of wider buyback dynamic. If we look at the progression of free cash flow, certainly in my model, I think probably broadly on consensus modeling as the synergies accrue in the U.K., Switzerland and, obviously, you've got very cash-generative assets in the Benelux, then the cash yield that you can buy back is obviously significantly higher than your current cost of debt and probably where debt could be for some time. You guys have run -- have been running ahead of, let's say, run rate for this year on free cash flow -- I'm sorry, on buyback. I did notice in the comp analysis we did that there's a slight element of kind of doubling down on the current share price with some of the options. You've traditionally kind of implied that the buyback could sort of match the free cash flow generation. Are you willing to just exceed that over the next 12, 18 months with these prospects ahead?

Yes. I think, well, first of all, you're quite right, we are -- if we think the highest return on capital is to buy back our stock and it looks pretty attractive to us, we're very happy to put our money where our mouth is. And our growth is stable, but I think there's very few companies that have retired as much stock as we have over the last 5 years. We've been averaging at least 10% a year for the last 5 years, and we've put an underlying floor for the upcoming years that we're going to put it at a 10% buyback, at least 10%. So I think you can assume that we are aggressive buyers of our stock. And exceptionally, as we close this valuation gap at the end of the day, there'll be a very strong free cash flow generating asset and very few shareholders. So the guys who come in that journey, we all hope will do very, very well. And the dislocation, as we would see between price and value, presents a major opportunity. And that won't be a big surprise to you having followed John for all these years. We do sit with $4 billion of cash. I think we were a little bit scarred after the German deal when we did that big tender. I think it was [ $2.8 billion ] at [ '28, '29 ] because, obviously, markets move up and down. I think we just talked about debt prices moving up and down and same with equity prices. So I think we think our open market purchasing is the way to go. There's good liquidity in our stock. And we're able to retire debt, in the interest of the long-term shareholders, at the most attractive prices. So I think we will continue with our strategy. And I think we're not in a rush to spend the $4 billion. I mean, obviously, let's see what opportunities emerge over the next few months and few years as we find out what's happening as the market is reset. But we will probably be at the highest return on capital and the most secure return on capital, looks like a buyback, and you should expect us to continue to pursue that strategy.

Okay. Super. Well, listen, we've got a tight schedule today. I know you're going into other meetings, Charlie. So it goes for me to say thank you very much for attending. Thank you, investors, for attending too, and we look forward to speaking to you soon. Thanks, Charlie.

Thanks a lot, guys. Cheers.