James Ratzer

James Ratzer from New Street Research requested clarification on the debt movements in the Netomnia Virgin transaction, specifically if Netomnia's debt would transfer to nexfibre or VMO2. He also asked for subscriber volumes within the 2.5 million homes where VMO2 will pay wholesale fees and the 2.1 million homes nexfibre will upgrade, and VMO2's current HFC to FTTH migration numbers.

Answer

CFO Charlie Bracken confirmed no incremental debt for VMO2, with nexfibre fully financed for its 8 million fiber homes. CEO Mike Fries indicated that current penetration rates could be inferred for the 4.6 million homes, but specific customer numbers were not disclosed. CEO of Virgin Media O2, Lutz Schüler, stated that VMO2 has a very low number of fiber customers in its cable coverage, with no current commercial incentive to migrate customers from HFC to fiber. Mike Fries added that the deal includes undisclosed incentives for migration.

James Ratzer sought clarification on debt movements in the Netomnia Virgin transaction, specifically if Netomnia's debt goes to Nexfibre or VMO2. He also asked for subscriber numbers in the 2.5 million committed wholesale homes and the 2.1 million homes Nexfibre will upgrade, and VMO2's HFC to FTTH migration numbers.

Answer

Charlie Bracken, CFO of Liberty Global, stated that no incremental debt goes to VMO2, and Nexfibre will be fully financed to reach 8 million fiber homes. Mike Fries, CEO of Liberty Global, indicated that subscriber numbers in the committed wholesale homes would roughly equal current penetration rates. Lutz Schüler, CEO of Virgin Media O2, noted a very low number of fiber customers in existing VMO2 cable coverage, as there's no commercial incentive to migrate customers from HFC to fiber currently, though the new deal will introduce some incentives.

James Ratzer of New Street Research asked if the significant broadband losses in the U.K. might necessitate a strategic pricing shift similar to the one just implemented at VodafoneZiggo in the Netherlands.

Answer

Executive Chairman Michael Fries described such a move in the U.K. as 'premature.' He expressed confidence that growth from the nexfibre footprint and more effective churn management would stabilize the situation. He contrasted this with the Dutch market, where he said a price reset was 'long overdue.' The current plan for the U.K. is to continue growing fixed ARPU.

James Ratzer from New Street Research highlighted that revenue trends worsened from Q2 to Q3 across all consumer fixed and mobile segments. He asked what the company plans to do to reverse this and specifically about the sharp decline in Virgin Media's consumer mobile service revenue.

Answer

Michael Fries, Executive, attributed the trend partly to smaller price increases compared to the prior year. Lutz Schüler, Executive, clarified the VMO2 mobile figure included a one-off item and the underlying result was better, while noting fixed revenue growth was strong. André Krause, Executive, explained the Swiss decline was due to the annualization of a price rise, migration effects, and higher roaming inclusion in tariffs.

James Ratzer followed up on the TalkTalk situation, asking if there were any scenarios where Liberty Global might be interested in its assets, or if its declining customer base makes it too risky.

Answer

Executive Michael Fries reiterated that he could not comment on TalkTalk specifically. He stated that the company monitors all competitors with interest and would evaluate any opportunities that might arise, but offered no further details.

James Ratzer from New Street Research inquired about Telefónica's current investments in sovereign cloud and data spending, and whether there was a need to increase it. He also asked for a process update on the Spanish FibreCo stake sale and if it was paused.

Answer

COO & Executive Director Emilio Gayo Rodríguez stated that cloud is not a CapEx-heavy business and that while Telefónica has expressed interest in hosting an AI 'Gigafactory,' it is too early for details. He also confirmed that the fiber asset monetization process is ongoing and not paused as part of the strategic review.

James Ratzer highlighted the gap between Telefonica's free cash flow guidance and market consensus, asking for sources of the discrepancy. He also questioned the drivers behind the strong recovery in O2 contract ARPU in Germany and its sustainability.

Answer

Executive Laura de Baquedano addressed the free cash flow gap by pointing to growing organic operating cash flow, effective FX hedging, and a strong track record of managing all financial lines below OCF. Executive Markus Haas explained that Germany's mobile market structure remains intact and that Telefonica Germany has stabilized ARPU by focusing on a profitable mix of high-value customers, despite increased promotional activity in the market.

James Ratzer from New Street Research asked about Vodafone's technology roadmap for its German cable infrastructure, including plans for speed upgrades like DOCSIS 4.0, and requested an update on the OXG fiber joint venture's progress.

Answer

Group CEO Margherita Della Valle explained the German tech roadmap is customer-driven, focusing on delivering gigabit speeds, which meets current demand. The strategy involves combining cable with wholesale fiber and selectively introducing iSplit technology to enhance uplink speeds. For OXG, she reported an accelerating pace, now at 230,000 homes passed with a run rate of 100,000 per quarter, with commercial launch planned for H2.

Asked about the phasing of EBITDA growth, focusing on how the unwinding of energy cost headwinds might be offset by the negative impact from German MDU cable TV losses, and whether overall organic EBITDA growth is expected to improve.

Answer

Luka Mucic stated that H1 had a €300M energy drag, and H2 will see a €200M relief versus H1. This will be partially offset by the initial impact from the German MDU transition and related investments of ~€100M. For FY25, energy is expected to become a tailwind. Margherita Della Valle confirmed that FY24 EBITDA is a base to grow from in FY25, with the energy tailwind helping to offset the MDU impact.