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

Thank you, everyone, for attending. I'm delighted to welcome Charlie Bracken, Liberty Global CFO. We've also got Mike Bishop from IR with us today. Thank you. You got your breath back?

Yes, yes. I'm good. Humongous day, so we went by taxi. I should have gone by tube. Shouldn't [indiscernible].

Yes, it's -- the weather has not been friendly to anyone today. I'm going to start a little high level because I feel like we actually spoke on this stage a couple of years back. And it felt like the strategy at the time was reasonably clear. You had these regional champions, I think, was the definition. And the idea was always potentially to realize value at the regional champion level, whether that might be an IPO or any kind of asset sale. And it feels like that strategy has changed. Is that fair to say?

No, I don't think that is fair to say. But let me -- look, I think, probably like all of us here, we're a bit frustrated by the telecoms industry. And we are, in our mind, at least talking from a holding company discount, probably to do with complexity, which I think I can understand, joint ventures, et cetera, et cetera. And also a portfolio that it is really hard to position in one equity story. Clearly, we acknowledge that we've been taking advantage of it by buying back our stock very aggressively, and we continue to buy our stock very, very aggressively to lock in that discount to some of the parts. but ultimately, closing the gap, I think, probably does require some simplification. Now is it now the right time to do simplification? We're in the middle of an investment cycle, I'm sure we'll get into that. We've had a listing that probably wasn't working as well as it should do with this minority stakes in the case of Telenet. But the long-term strategy, I think, still remains to look to ways to simplify and rationalize the equity story. And as a management team, I think we've hopefully demonstrated this. But it has been 5 tough years, at least for us and the sector as a whole. We're not interested in empires. We're interested in creating value and getting that value priced. And it seems to us that having the flexibility to consider spins, IPOs, trackers, listed [ government wars], has to be in our toolkit to think about that.

Okay. So let me challenge that, and I would put it to you that maybe the flexibility has reduced a little, and that's a function of 2 things, the first being that I think the migration from cable to fiber or the growth of fiber has probably been a little bit faster than we might have thought. And there is a sense that in some markets, you're maybe a little more under pressure to migrate the cable infrastructure. And I would certainly put it to you that I think cable is not a solution long term. We can come back to that one. I suspect there might be a debate. But there is that dynamic working where, arguably, there is a call on cash to start migrating that cable over to fiber. And then secondly, the cash is more expensive, and you're coming into the equation with relatively high leverage, which has been an extremely successful strategy in the past, but we're in a different place now.

So I think there's a lot to unpack there. Look, I agree -- and again, this is why I think you have to look at on a country-by-country basis. So if I can, I'm going to just focus -- well, we've got 5 big countries. Remember, we sold broadly half the company, used the proceeds to buy back the stock. We have achieved. If you look at our countries, I would say that the network strategy varies country by country. So in the case of the U.K., where we were broadly speaking, in just over half the country, we've got off balance sheet to build out fiber for the rest of the country, and this company called nexfibre, which we'll probably talk about. In the case of the existing HFC network, because we have DUCs, it's relatively inexpensive to go all fiber. So in the U.K., we will have a fiber network. So to the extent to which you do believe fiber is necessary to compete, we are going to be all fiber for what it's worth in the U.K. Similarly, in Switzerland, we are essentially renting somebody else's fiber, which is Swisscom. It's very attractively priced. We actually think that our network strategy is pretty good there. And I probably should have said that it's hard to see fiber going in a lot of these countries into the truly rural areas. So HFC, where we have HFC in the rurals, I think that's also fine. In Belgium, as we know, they've created a fiber JV with Fluvius, which was partly to do with our rationalizing that ownership structure. So they've got a fiber strategy. And as you've probably seen from the financials of Ireland, we are all in. We should be done in a couple of years. So in 4 of the 5 markets, I think we're pretty clearly, to the extent to which fiber is necessary to compete, and I agree with you, we can -- reasonable men can argue with you, I think we're all -- we're making moves there. Holland is, of course, the big outstanding, and the question mark is what's the right strategy in Holland. There are 2 fiber operators with no customers. We're the market leader with 50% network utilization. How do we resolve that conundrum? And that's a strategic conundrum, and our partner are highly focused on. I think the other observation I'd make is that about half our revenues aren't fixed. I mean, they're actually mobile, and a lot of it is also in B2B. So yes, we are the historic consumer business, to the extent to which you believe that the fiber has such a speed advantage that makes it absolutely inevitable, then we are perhaps more vulnerable only in one market. And there is evidence to say we've been competing with fiber for a very long time. And there is evidence. If you look at Holland and Switzerland, we've been competing a long time. Yes, you do lose some market share, but it's not disastrous. And I think we're talking at most 5%, 6%, 7%. And one of the debates, I think, around this higher interest rates, and I'm sort of jumping to your second question, does that cut off access to capital of these other builders? If you stand up and think about it, I don't want to pick on people. But if you had a business plan, which essentially assumed 40%, 50% penetration, let's say, in the U.K., your economics, I know what their economics are, because I'm doing my own and I've got marginal economics. So they've got to be assumed 40 to 50 percentage rates. You must believe -- penetration, sorry. You must believe that the IRR is generated on cost of capital. You rightly point out cost of capital is reset, and they're not hitting 40%, 50%. And how can they? I mean, I'm half -- well, me and BT are half the market. Sky has a 25% at some point. So I just think that the network position for us is not necessarily there's sort of boom or bust. It's much more subtle than that. And I also think that as we think about where we evolve, we get through the investment cycle from a Liberty Global point of view, and we do have the benefit of long-term shareholders. We're very appreciative for that. We are looking at a position where we're actually laying the foundation for future growth. There's a lot to unpack there.

All right. And there's a lot to unpack, yes, indeed. And first of all, I think the position that we always made was that cable versus fiber -- fiber versus cable is not about speed. It's about economics, cable being a much more expensive infrastructure to operate.

Remember, it's marginal economics because you've already spent a lot of the money on cable. I do accept that. I mean, a cable network is more expensive than a fiber network. No dispute. Not even in them. Maybe we'll get lucky with DOCSIS 7 or 8. I agree with that, but it's marginal economics.

It's glowing red, that one.

Yes. I don't think you will be -- well, you might be, but I won't be around for that.

No, no, no. Okay. So why don't we start with the Netherlands then because one of the challenges there, of course, is also it's your most levered OpCo? I think it is.

Yes, yes.

And where we nearly 6x now, I guess, is the leverage on that, which is probably looking...

It's higher than the 3 to 5 that we would have liked.

Right. So what is the road map out of that situation?

Well, look, I think, ultimately, the road map in cable has always been growth, right? And the exam question is how do you generate growth? And the truth of the matter is the all our companies in the telecom sector as a whole, despite this burst of inflation, hasn't been achieving above inflationary growth. And that's led the Netherlands to come. I agree with you. I will admit it now. We don't believe in 6x. We believe in 4 to 5x leverage. And whilst one of our other companies is over 5, which is in Switzerland, they have obviously a road map to do that through synergies. In the case of the Netherlands, we've got to figure out how we get the growth going and what are the strategic moves that we can make. And I think, very much with our partner, we are working and evaluating all that. Now we do start with some advantages. I mean, 1 in 2 homes in the Netherlands takes a broadband product from VodafoneZiggo. Pretty good. They're also the market leader in mobile. So they start. If you're going to have any kind of network strategy and unique customers, we are the market leader. We also have, I wouldn't say the best because that sounds we're pleased with ourselves, but they're the most differentiated service offering, which I think is pretty hard to argue. They've got the best content. They've offered the best customer service, et cetera. So there is a lot of reasons to believe we're in a very strong position. Very much similar actually to Telenet. But I agree with you, I think that we need to find a pathway to delever. But we have a long time. I mean, the debt in Holland, I think, is 6 years. And we don't have to do anything in inverted commerce on the repricing of that debt until '29, '30, which I do not in any way dismiss that, but I'm not staring it at '24. '25.

Yes, exactly. Okay. Let's jump on to the U.K. So it's your biggest asset, so you have to speak. You have put in a plan. You've obviously got the additional 7 million homes that you're building through the joint venture, and then you've got the 15 million or so HFC that you might converting over time. Now I think on the recent call, I'm not sure whether it was Andrea who mentioned or whoever it was, but there was an acknowledgment that, that migration was not maybe moving as fast as you might have hoped.

I don't think that's -- no, I'm sorry. I don't think we've said that. I'm surprised we think we've said that. But we wouldn't say that. We're on track for -- it was a 7-year program to essentially convert the existing 16 million to fiber. We're definitely on schedule. I think I'm going to get the numbers wrong here, 3 years in. Prices is coming in at sub GBP 100 a home.

But you're 3 years in. You've done 2 million homes.

Yes, but that was the original phasing.

Right. But to balance it, to achieve that full run rate, you need to be doing 3 million to 4 million a year.

Yes. No, I've said that. But we're definitely moving. But -- well, I mean, based on what we've seen and based on the management's position, they're on the plan they set us.

So you're saying you can make that one. And the only reason I challenge that...

It does, but it is a long program. The original program was 7 years. So we're talking terminal values here, not near-term cash flow.

Yes. I'm just thinking like if I took a parallel, BT is maybe going to make 4 million a year at maximum [ number ], and that's the fastest fiber network that's ever been built. I find it hard to believe that you guys are going to achieve that level. Maybe you will.

Well, the answer is, look, I'm not sure -- I'm the CFO. I mean, at a certain point, you have to trust your management. We have -- look, we're quite -- not quite -- we're very happy with our management in the U.K. Lutz is one of our franchise players. And he has a credibility. When he says he'll do something, he has the credibility. But look, I think it's fair to say, like, judge us on what we achieved rather than what we promised.

Okay. Because I guess my challenge was to present another alternative, and it comes back to a point you've made, which is there is a lot of -- or there are a lot of arguably stressed fiber builders out there who've built fiber in these small regional towns, cities, whatever it may be. I think your point about penetration is absolutely correct. You need 40% plus, and you can't have 3 players with 40%. So is there an inorganic route? Or could there be an inorganic option to build forward?

Yes. But I think if we did that, again, never say never, but that's one of the reasons why having nexfibre, which, just for everybody's benefit, is this off-balance sheet vehicle with InfraVia, obviously ourselves and Telefonica. That's one of the reasons why you'd have a separate capital structure. By the way, we may do no acquisitions. But clearly, we recognize, as do the Telefónica and InfraVia, there is an M&A optionality. And we should be remiss not to look at it.

I agree. And was there ever an option? I mean, we've discussed this sort of rollout of fiber for VMO2 for some time. There was a lot of press reports about whether you guys could actually find anchor tenants with the likes of Sky, et cetera. I don't know whether there's anything you can comment on that or whether is the wholesale opportunity something incremental.

Well, the other opportunity is there, and it's incremental. But I think rather than promise it, we've got to deliver it. You should assume that we are discussing it with everybody because as custodians of our shareholders' capital, you would expect us to do that. Having said that, we've obviously got nothing to announce as such. We actually -- I mean, I don't want to sort of paint a portrait, but we did something in Ireland, as you probably should. We did do. So it's not beyond the wit of man to get wholesale agreements, but as yet, no news in the U.K. But it's all I was saying religiously never. We're just saying we have managed to put something off here.

Okay. And just staying on the infrastructure briefly before we maybe dive into some sort of more operational issues. What the likes of InfraVia does allow and what these off-balance sheet ventures do allow is an alternative path to monetization, right? So the question is, could there be an opportunity to almost -- and I think I asked you about this on this call, start to move down the sort of ServCo, NetCo split where you start to say, "Okay, maybe we're going to establish off-balance sheet for VODZiggo. Maybe we'll establish off balance sheet for another part of VMO2. But we create this off-balance sheet monster, so to speak. And at some point, that's the route to monetization. And we'll get it back."

I think all options, David, are on the table. I mean, I wouldn't say it's definitely going to be NetCo, it's definitely going to be ServCo. I couldn't agree more than you. There's limited models. There's one in Italy. There's a couple, I think, in Northern Europe. But we'll see how that model plays out. But I go back to where we started. I don't know about everybody else. I'm really frustrated by the fact that we can't get the value that we've created priced. I recognize that's because of a conglomerate discount. I recognize that's because of complexity, and NetCo already had complexity. I also recognize that it's to do with the fact that we can't get the capital structures on line. I mean, NetCo capital structure is right into a ServCo. I think we're both clear with that. And so I think one of the things that we're trying to figure out is preparing ourselves to have the optionality. There's no promises here. But the optionality to rejig the way these assets are presented to the public markets, so they could be better priced.

So I said, I guess, conceptually, if I ask you that question, do you think that the telco works as a combined ServCo, NetCo?

I think it can work as a combined ServCo and NetCo, and it might work as a NetCo, ServCo. I think the answer is we are pragmatic, but we're in the business of trying to create value or price value. I think we've created value, we say it arrogantly, price value for our shareholders. And the exam question is how best to do that. And I suspect the answer is probably not in one conglomerate listed stock, at least the evidence would be. That's quite hard. It does create value because it gives us an opportunity to buy stock cheap. We are monetizing the delta. And I appreciate -- what's bit frustrating is having bought back, what, nearly 60% of the company. That's quite a lot of shares. We have 1.1 billion. Now we're at 400 million, and we're buying hard. We are committed to 10% a year. And last year, we did a lot more. So you can probably surmise at these prices. We are shrinking the equity pretty hard. So if and when we can unlock this discount, there's a lot of value there to be created. And the question is how do you best create that or price that by your position at value.

Yes. I mean, I guess, because it's quite interesting. I think I asked Mike on the Q2 2021 call -- 2022 call. I just sat on you a little -- aren't you getting a little tried to this? Why don't you bring the whole lot in?

Well, we are bringing it in. We're taking a -- we're buying back a ton of the stock on cheap. I mean, I wouldn't say it's a slow go private. But I mean, the logic of our position, the logic is they'll be about you, me and Mike will own the whole company, which when you get through this investment cycle is going to be chucking up a lot of cash flow, HFC or fiber notwithstanding, and the optionality to spin and break this thing up into more priceable list. Yes, there's a long-term very, very attractive story here. But listen, is Mike frustrated? Of course, he's frustrated. He and I have been at this -- I've been at it 25 years. He's been at it 30 years. He is absolutely as frustrated as anybody. On the other hand, what I like about Mike is he doesn't panic, and he's doing the right thing. These are the right long-term moves. If you want us to goose the free cash flow, we'll just stop all the investments. Really easy. I know how to do it. I can cut the spending on marketing. And so if you want the free cash flow in a pop, you want us to try and pop the stock price, of course, we can do a tender. I'll let $3 billion of cash and drive the thing up to $35 million to what you come down again. But maybe we can all price our options out, but we're not doing that. We're trying to do the right thing for the long-term shareholder, and I think that's our -- that's always been our commitment.

Do you think if you stop the cost and CapEx investment today, the NPV of cash flows were actually higher?

I think the NPV of the near-term cash flow is higher. I mean, I'm with you. I'm in the business with a long-term asset. I know we're talking about some of our competitors, but we've seen people over the years.

We have. So all of these options, you're moving to Bermuda. Not sure whether to ask you personally.

Well, we're not necessary moving to Bermuda. We need the shareholders to vote for it. I maybe give you the pitch. I mean, look, it's American governments, and it allows a much easier for us to make these corporate maneuvers. And you might go, "Well, why can't you do it in the U.K?" The way U.K. law works, it's much harder to get the votes. And I know that because we had a trial run with Latin America, and we tried to get Latin America spun. And by the end, we were ringing up moms and pops in whatever to try and get the -- because it's in a different form of governance in the U.K. The benefit of Bermuda is that it makes it much easier for us to break and spin.

As a 22 million line potential owner in the U.K., 22 million fiber, do you ever have any sort of interactions with the U.K. government? Because you are essentially -- BT is one of them, but you are the other obvious fixed infrastructure provider.

Yes, we do. I mean, again, we have a regulatory -- we have a corporate regulatory group, and we have obviously OpCo regulatory groups. And look, let's be honest, the big issue in the European telecom industry is competition and regulation, and competition is a derivative of regulation. Clearly, I'm an operator who's been in the market a long time. I would observe, I think it's 150 telcos in Europe, and let's call it around #6 to 10 in America. 4 to 5 in China, I mean, it's not -- you don't have to be a genius to spot that there's too many players, and that is driving down returns, but it's also providing -- and I would say, as well regulators, providing lower investment and lower quality products than you will get in the other markets.

So let's dive into the U.K. I would assume that you are -- as long as the field is kept fairly clean, you are in support of the proposed Vodafone 3 merger.

Yes. I mean, we believe that market rationalization makes sense. Clearly, not on any [indiscernible] spectrum only a big one there.

Yes. Okay. And then in the U.K., so what we're observing at the moment that's very interesting is because of inflation -- because of the inflation ladders in the contracts, we're seeing some of the highest price rises in the U.K. that I think we've ever seen. And what's curious is to watch the reaction of the service revenues, how much of it you can actually monetize. And I think there was a sense that, maybe over the last 12 months since the big BT, the original 9.3% in the 1st of April 2022, is that they've maybe monetized a little bit more than VMO2 did. Now I know there's moving parts with lots of video, et cetera. But why is VMO2 not been able to take those price rises and put it on to service revenue?

Well, it's a complex story, and I apologize if I go on to a slight discourse here. Remember that the problem with -- first of all, mobile price rises. I think we're broadly in line with everybody else, and we're doing just fine, right? It's about the fixed business. And if you look at the fixed business, the fixed business is essentially 3 businesses. It's a fixed telephony business, voice telephony, a bit of word, is in decline. It's a video business declining probably about 5% volume of subscribers a year, and that's intuitively around this table, and a high-growth broadband connectivity business. And to make it more complicated, when we tell you that the GBP 50 worth of ARPU for that triple play, we could allocate -- I could allocate anything I'd like to go to the buckets. And I'm telling a about a story in Ireland about 10 years ago and say, "Well, we think it's GBP 20 worth of value out of the GBP 50 in voice telephony." And my CEO the other day say, "No, no, no. It's about GB 5." So anyway, so the answer is I can't really quantify. I can make any number if I like, but I can't really qquantify it. But I think we all get it. So it is hard to see ARPU grow at these absolute rates because there's that contrasting trend. I think the second observation is that Virgin was the high-price provider. And therefore -- and we have this front book, back book where there's discount offers. And therefore, there's always been this propensity when you're the high-price operator to see the spin down for the savvy consumer. And there was a proportion of the U.K. that is very savvy like that. And I think the third thing is from a contract structure point of view, we hadn't had the formal index, which will come next year. So it's a long way of saying it doesn't surprise me. I mean, I'm with you. I couldn't be happier if we had 10% ARPU increase, but we were never going to get that. On the other hand, I think the underlying trend is actually better than you think because broadband connectivity, at least the way I look at it, is the custodian of capital. That has still got good pricing path. And notwithstanding your comments about fiber, people still seem to put a high price on the value of the Virgin network. So that is attractive.

And yes, that's interesting. So I guess, one of the sort of observations we always consider is the classic front versus back book. And again, dissecting what forms the back book...

The first observation as a CFO and as we go, why the f*** you did that? I mean, that makes no sense. Why would you keep offering this lower offer that comes up after 12 months? Are you encouraging? Unfortunately, that does seem to be the market structure. And it does seem to be the market structure accentuated by these over-builders. I don't know if you've been -- I've got -- I live in Kensington, which is very nice. But there's G.Network. He's now marketing it 4x over 2 years. I think its penetration is about 4% or 5%, but it started off by going GBP 30, then it went to GBP 20, then it went to GBP 10. Now it's free for 2 years.

Free fiber for 2 years.

For 2 years. I don't know free fiber. I said 2 years free and then they have to -- and Mrs. Bracken is going around this, I mean, not because she likes Lutz. It's not fine. Thank you. But I think -- I do think that these are -- to try and drive penetration, we've got nothing else to differentiate. Why does Louise [indiscernible] likes all the value-added services, the content?

Okay. So let's assume then that there's a little bit of back book to front book that still needs to sort of balance.

Well, that will mean we'll be around for a long time. I think the more likely narrative is that once we get through the voice telephony, let's be honest, and reasonable men can argue what it is today, there's not a lot to go. The video will continue to migrate. Remember, the video was never our most profitable business. But many won't say it was a marginal business. Although the economics are getting better with the new setup about technology, et cetera, et cetera. I would argue that actually, what we -- you could see flattish ARPUs, but accelerating free cash flows over time. But we have to demonstrate that [ numbers ] over the last couple of years.

So I guess, the actual EBITDA growth that we're expecting from VMO2 this year is still primarily driven by the integration...

Yes. Look, I think if Lutz were here, he would say -- and we're very appreciative of all the hard work our employees do and what they do for us. But there's a lot of complexity that can be rationalized and sorted out. And just like everybody else, technology offers us as it offers all telecoms, by the way, opportunities to simplify and reduce cost. So a big part of what he's doing is classical synergies. We, as a shareholder, put pretty low risk on that, but we'll see how it goes. But I'd be very surprised if it doesn't overperform. But on top of that, he's got a big opportunity for simplification and rationalization. He's got a real focus on digitization. That of our portfolio, we would argue he's the most advanced. [indiscernible] is now going to call me up and say, "S**** you."

Yes, he might. Okay, so we've got this -- okay, so that's quite interesting. But obviously, from a financial dynamic, we've got this EBITDA coming through from the synergies. I mean, that will probably start to roll off a little bit, I guess, in 2023, '24, more like.

No. Maybe '24, '25.

Okay. And then perhaps...

Don't forget, IT systems took a long time to upgrade. Remember, we had that in VODZiggo and Telenet. I mean, that's not a 5-minute. I think we're about 50%, 60% through it. There's a bunch of near-term stuff, but the longer-term stuff...

Got it. Okay. So that's -- then let's assume that we start to find some -- that the voice revenue start to bottom out. Maybe the TV finds its base, and we start to get some of that price growth starts to come through on the top line. But you've still got a relatively high leverage of VMO2 as well, and that was used to redistribute the capital, of course, to the...

That's the 4 to 5x.

Now how should we be thinking about that?

Well, I think we are still comfortable with the 4 to 5x. I've now been around quite a long time in the telecom sector. There are times in the cycle when leverage -- everybody wants to be levered 8x. There are times when we're levered 2x. I've spent a lot of time with the guy who knows more than I do, John Malone. And we're pretty comfortable in that 4 to 5x. We have given ourselves a long runway in all our markets, U.K. being another example, 6-, 7-year average life. We're fully fixed, totally swapped, blah, blah, blah. But we will assess it. I mean, if rates resettle out, let's make a number out there, 6%, 7%. And you're right, pricing doesn't settle out with any kind of pricing power. We might have to evaluate. But we've got plenty of time to make that determination. And the 2 are somewhat linked. Inflation should be linked ultimately to interest rates.

It should be. And okay. And -- both for the foreseeable future, we should imagine that you're happy distributing cash with the existing...

At least Virgin level because I'm so confident in these synergies that are coming through. I don't think you should expect me to recap materially in the other businesses. .

Understood. Okay. Clear. Let's go on to something -- and now for something a little different, Ventures. So Ventures looks very, very exciting. Obviously, we've -- there's always a question about sort of nonlisted asset values, et cetera, and maybe they're had... .

That would be -- we're talking about spends and things.

So what do we do with Ventures?

Look, I think we are -- we like to think that we have a tried record of growing and developing businesses. We took analogue cable systems in the 1990s, invested a lot of capital, turn them into broadband businesses, merge them into mobile businesses. We've created what we thought were FMC businesses. So I mean, it's not unusual for us to keep reinventing ourselves. It would seem to us there are 2 forms of growth. One form of growth is to try and take your existing platforms and grow from within that. We talked about some of the levers. But you could imagine some of these FMC companies going into adjacent areas. I call telcos. We're trying to figure out what those are, eHealth, home security, blah, blah, blah. You could also imagine that there are opportunities to leverage the adjacencies that you've got, whether it be inside, scale, whether it be the fact you've got anchor tenancy, can you leverage that into driving new growth businesses? And to that end, we believe there are broadly 3 spaces that we -- 3 areas that we think we have that opportunity. One is in technology, which we perhaps talked about. One is in content because we have insight into what content can actually create value. And the third thing is in infrastructure, which has a different capital structure and pricing. And so to that end, we have tried to identify a portfolio of assets that we'd invest against that. And to that end, the plan will be to grow quasi unicorns at very low marginal cost, which I'm happy to give some examples of. And then the question is how do you monetize that. Do you sell it for cash, like we do with Chello, for those to remember that? In the content space, we built multichannel television business over 10 years and sold it when we thought most channel television was peaking out. Or do you create it by spinning it off to your shareholders? Malone started at Liberty Media. Another reason why we were quite keen on this idea of corporate governance and corporate flexibility. And so that's where we are in the journey. In terms of the progress so far, I mean, that's why you wanted to ask me a question, but I hope to give you some progress so far. So in the case of technology, we traditionally had a fund that was really investing against in our R&D. We are better off renting entrepreneurs to create -- Casa was the famous one. CMTS, which is a bit of kit in the network. We were able to get in a discounted value because we got them on our anchor tenancy. It drove 250 million of, we think, reduced spend versus Motorola and the others, [ rising interests ] over time. Plus, we ended up making 300 million, 400 million on it, which has been a 10 bagger. So broadly speaking, what they've got is about 50 companies like all these tech portfolios, the values -- 80% of the values are the 5 of them. We're in from about 400 market value, 900, at least we're being discrete, about 900. We think it's not a bad bet. We're not going to put any more money in that. They live off -- Mike says they live off what they kill of what it has been, the [indiscernible]. Albeit, there could be ways to get that price better. Should we merge them? Spend them? Again, we go back to that famous debate around Bermuda. The second bucket is content. When we sold Chello, we took some of the capital of Chello for $1 billion. We were in for 0 because we recapped a way out of it. We took some of the $1 billion and we invested, broadly speaking, in 2 big assets. We thought high-end TV production will be a growth business and be easier to finance because it was all becoming a cost-plus business. Because the streamer were prepared to buy it for perpetuity, so you're getting a sort of in the 20%, 30% markup. So you can financially engineer it more, and we financially engineered it in due course. We thought it was a consolidation play because we felt that a lot of these mom and pop operators. And so together with Warner Bros. Discovery, who knew lot more about content and that covered content than we do, we've got involved in all 3, made a series of acquisitions. I'm not going to comment on whether it is, but we have, we believe, created quite significant value there and an attractive asset that many people would like to own. And then the other bit in content was we have been on receiving end of sports rights. Renting sports rights, thought it was a good idea to invest in underlying sports rights. And the big play there was this company, Formula E, where, effectively, we had the monopoly on electric vehicle motor racing. We worked again with Warner Bros. Discovery. I mean, as Malone constantly reminds me, Formula 1 is a $16 billion equity value business. The exam question is, what is the value of the electric vehicle. And then the third bucket really was infrastructure, which was to say, look, if you stand back and think about it, we're in the business, as you rightly point out, with NetCos, with infrastructure. There were 3 buckets. Today, we're looking at -- one is last mile companies, Next One would be an example, which I would say was a bit more infill of the existing core assets. But the 2 that we're really looking at in a very small way, I would say, smart energy. I believe telcos have a right to play in that, so we've invested sub 10 million, but managed to leverage partners. We have partners called Zouk, for example, in destination charging, leveraging on our building expertise. We're also, because of our marginal economics, breakeven already on our smart energy installation business called Egg. But I mean, these are tiny businesses. It's going to be a big space. And the one that we're perhaps most interested in is digital infrastructure. And we created a joint venture with a company called Digital Bridge, which is really all about edge cloud computing data centers. So if you believe that the cloud is going to get bigger, not less, where the cloud is going to go to the edge, you believe AI, metaverse, all these buzzwords means you will need more computing capacity closer to the customer, then you should be buying into AtlasEdge. And that's a business that's gone pretty well actually. I mean, they're already about 35 million, 40 million of EBITDA. Their revenues are around 30% organic growth. And it could become a multibillion dollar business, and our capital commitment is relatively little given the way we structured it. That was a long answer, so I apologize.

No. Some interesting assets for sure. Okay. I'm going to pick out one of those buzzwords, actually, AI. We've obviously written quite a lot about this, and it feels like that the telco industry is one which has a significant customer service level layer, I should say, that maybe, and we can debate, this hasn't been the best managed overtime.

I think that's probably fair.

You also consume a ton of electricity arguably, inefficiently, over time with full powered networks at 2:00 in the morning. And you are -- you have significant up and downtime in the networks, network faults, et cetera, that could arguably be improved. So the question is, how are you guys thinking about AI? Do you have like a work group? Do you have a think tank? I'm sure AI sort of predictive algorithms are already out there running. But could generative AI find its way into customer services? Could you bring down the number of retail stores? Is that an end game here? How are you guys looking at AI a little bit global?

Well, I think, look, as a macro trend, it offers great opportunities. And we're going to coordinate it through, at least from a limit point of view, our Chief Technology Officer, Enrique and, his team. How we implemented it however isn't going to be a sort of centralized from the -- we will tell you what to do. Every individual OpCo and every bit of function, we're just talking about functions as well, is approaching it to try to figure out where we can provide scale. So a good example is finance. We've got Mike and -- we just had our finance conference, which the whole thing was on AI and technology and ability to transform the end-to-end France costs. Now France isn't the biggest cost.

You replaced the CFO, is it?

Well, how would you replace the CFO? Because I haven't gone to the beach. But no, he sees things. Like clearly, it's not lost on anybody, accounts payable, back office, but even stuff that you haven't thought about, keeping track of where all the new homes are when you build nexfibre. Who's running that database? How does that all get worked? And I mean, this is a small business, about $100 million turnover business. But we actually provide services to all our companies on an arm's length basis, and pretty good business. I mean, they've got 300, 400 robots. They're pretty advanced. They've got good working relationships with Google and Microsoft. Because to me, the big issue here is the implementation. We've got to avoid this becoming the IT priesthood, who's looking to rationale how this AI is rolled into the businesses. Similarly, each of the OpCos, and we pick on Lutz who have done exactly the same. So Lutz has a group. I think it's 300, 400 people working on digitization initiatives. I'm not sure publicly what he said about it, but Lutz has got some very optimistic, very positive views on how much he can save through the numbers that are out there, which is one of the reasons why he's very comfortable with his growth rate profile, not just through the synergies, but beyond. But we have to -- let's prove that out, rather than just promising. So the answer is we're approaching it on that decentralized basis, but we're trying it within an overall narrative.

Okay. So I guess, as ever, you prefer full autonomy on the OpCos basically.

Look, I think -- and goodness, we've tried this. You can go full centralization, full local [indiscernible] I know John Porter, but I agree with John Porter. I think that the customer is at the local level, and we should be driving what suits the customer. And I agree with you a bit, actually. I think the big opportunity in telco is to get even better, let's use it even better, customer service and customer management. I think if you can really crack that, and we've seen pockets of that. We have equivocal [indiscernible], which we didn't build, which O2 built. That's very successful. Very impressive, the way that they run their business in that mobile space.

It still feels like the challenges, and especially with things like retail stores, I constantly challenge management teams as to why you need so many.

Well, they are reducing. I mean, the narrative is clearly coming down slowly. But I think it's also -- well, listen, first of all, I'm with you. You should be in our meetings, but I don't see any resistance to that. Often, the argument is you need to showcase your products and a place to -- for a certain proportion of the customer base to go in and get your iPhone repaired. And my 12-year-old kept dropping his iPad, which, as you know, it's not good news when you're a father trying to be left in peace. But I was able to go to the store and get it fixed. I should have gone to the Apple store, but there's an element of that as well. They aren't just sales and marketing channels. They're also customer care.

I think that's a good answer is because one of the answers that I've actually had twice this morning that disappoints me more is almost because the other guy is still there.

Closing in.

Okay. So okay, so we've got this...

There don't hold me to this, but in 5 years' time, we'll have virtually no stores, I think is what I'm hearing from my OpCos. We might figure out different ways to do the care and maintenance thing.

Yes, sure. No, I think that makes a lot of sense. Okay. So we've got this digitalization that's accelerating.

It will take time, but it will be an underlying narrative. I'll let Margrethe's narrative. No, OpEx should be flat to down because of these kind of opportunities. And when you've got big complicated acquisition-built stories, you should have the opportunity to double that with simplification and the like. . But it's not big bang. I don't think -- I can look in there and say, "We're going to take 30% of the cost base out next year because of AI." It's going to take time. And the big opportunity, I look at it very narrowly from the finance experience. You've got to make sure you do an evolution is the word I keep using, not revolution. Otherwise, you could lose control and I think it will fall apart.

Is this not an industry that needs revolution?

I think it needs revolution, but we have to do it in evolutionary way. I mean, I've seen companies over the years. .

I'm not going to let you get over that one.

Well, if you do this big dramatic 20% head count reduction, my experience has been that very dispiriting and that creates almost more complex. I've seen that movie. You should assume that our local capital allocations are pushing us hard. But I was in a meeting yesterday, reviewing the long-range plan for our central corporate costs, which were about 200 million a year in the next few years. And I kept asking the question to the capital allocators who rolled and said, "What are you doing? Where is the AI plans? What's the AI plan here?" What's the -- so -- but it is to keep pushing away and knocking off processes is the key.

And how about just a very final question. At the regulatory level in Europe, I'm not sure to what extent you guys like to be part of that debate.

Well, you asked about a debate. Fair share.

Yes. And how do you feel that you're not talking about the fair share with the tech companies there, are you?

Well, I'm not talking about the fair share of tech. Look, I think -- look, I would say, to quote John Malone when I saw him at our off-site in March, "The wind has been in our face [ regulatory ] for quite a while now." It feels like the wind is tacking around. But I mean, you have been as educated on this as I do, but so -- but my sense is that there's more wind in our back because I think the regulators would recognize they have driven this industry to a very low return on capital. They've driven this industry into the lack of capital to innovate and invest in what the customer needs. And there was a danger that we will fall behind, at least in terms of this key digital infrastructure, to the others. Now how that translates? Maybe this [ 3 ] Vodafone is hopefully a first step on that journey, but that can only be welcomed compared to what we've been experiencing over the last.

So the -- but the winds are changing.

We believe they are changing. But I mean, again, there's no monopoly on wisdom here. I mean, you're very educated observer. What do you think? I think they are changing there.

I think the proof is in the pudding, so to speak. Let's see when they fail.

I agree. Yes, it's not all these things. You shouldn't just promise that. I think -- let's just deliver stuff and see what happens. But I think -- I do think 3 Vodafone under the right conditions is a good thing.

I think we've got some good examples globally of where 4 to 3s have actually created better businesses that have challenged, the U.S. being the best example. Giving you 1 minute late, we're going to finish 1 minute late.because I'm aware that everyone's got tight schedules.

So well, thank you very much. And again, I'm sorry I was a little bit late.

Thank you, everyone. Thank you so much.

Thanks.

Thanks, Charlie.