Liberty Global and Vodafone complete Dutch joint venture, creating a fully-converged national communications operator

  • 50:50 joint venture called VodafoneZiggo Group Holding B.V.
    (“VodafoneZiggo” or the “JV”).
  • Combining Ziggo’s fibre-rich broadband network with Vodafone’s
    market-leading mobile operation creates a stronger converged
    competitor in the Dutch market, delivering significant benefits for
    consumers, businesses and the public sector through investment in
    digital infrastructure and customer experience.
  • VodafoneZiggo has combined revenue of over €4 billion with ten million
    fixed and five million mobile Revenue Generating Units (RGUs)1
    and the fastest-growing B2B business in the market.
  • Following the divestment of Vodafone’s consumer fixed business
    “Vodafone Thuis”, the estimated net present value of total synergies
    for the transaction remains around €3.5 billion.
  • Following the recapitalisation of VodafoneZiggo2 and after
    taking into account the €0.8 billion equalisation payment by Vodafone,
    Liberty Global will receive €2.2 billion and Vodafone will receive
    €0.6 billion in cash payments post-closing.

DENVER, Colorado and LONDON, United Kingdom–(BUSINESS WIRE)–Mike Fries, CEO of Liberty Global, comments, “This joint venture is
great news for Dutch consumers and businesses. VodafoneZiggo will be the
most innovative provider of converged communications services in the
Netherlands with a full suite of market-leading TV, broadband,
fixed-line and mobile products on day one of the JV. We are also excited
for our shareholders. This is a highly accretive transaction with
significant synergies and a predictable dividend stream. When including
over €500 million of cash generated and up-streamed since the
announcement of the deal back in February, total proceeds to Liberty
will exceed €2.7 billion. We look forward to deploying that capital to
drive long-term growth and investor returns.”

Vittorio Colao, Vodafone Group Chief Executive, said, “Today marks the
creation of a strong integrated communications provider in the
Netherlands, combining the complementary skills and experience of
Vodafone and Liberty to bring a range of benefits to consumers,
enterprises and the public sector. The merged operation will be a
stronger competitor in the Netherlands – one of our core European
markets – and is a further example of Vodafone’s ability to create value
for its customers and shareholders through an effective market-by-market
convergence strategy.”

New Dutch company to deliver converged consumer services and create a
leading B2B challenger

Liberty Global plc (NASDAQ: LBTYA, LBTYB and LBTYK) and Vodafone Group
Plc (LSE: VOD) today announced that Liberty Global Europe Holding B.V.
and Vodafone International Holdings B.V. have completed the transaction
to combine their Dutch operations to form a 50:50 joint venture.

The JV will operate under both the Vodafone and Ziggo brands and will
create a nationwide integrated communications provider with 7.1 million
homes passed by the fibre-rich broadband network of Ziggo Group Holding
B.V. (“Ziggo”) and the nationwide 4G mobile coverage of Vodafone’s Dutch
operation (“Vodafone Netherlands”). VodafoneZiggo has nearly 15 million
RGUs, of which 4.0 million are video, 3.1 million are high-speed
broadband, 2.5 million are fixed-line telephony and 5.2 million are
mobile. For the twelve months ended September 30, 2016, the JV would
have generated over €4 billion of revenue3.

Financial information for Ziggo, Vodafone Netherlands including Vodafone
Thuis, and Vodafone Thuis (on a standalone basis) is presented below for
the twelve months ended September 30, 2016.

€m; September 30, 2016  






Revenue 2,446 Revenue 1,836 53
Segment OCF 1,341


624 (29)

Estimated 2017

Shareholder Charges6

(97) Estimated Incremental 2017

Shareholder Charges6


Segment OCF After Estimated 2017
Shareholder Charges


EBITDA after Estimated Incremental 2017
Shareholder Charges

Property & Equipment Additions (517) Capital Additions (327) (44)

By combining Ziggo’s market‐leading Horizon TV product suite, including
Replay TV, Ziggo Sport, 300 Mbps nationwide broadband internet and an
extensive Wi‐Fi network, together with Vodafone Netherlands’ data‐rich
4G mobile propositions, Dutch consumers will enjoy the highest quality
customer experience both within and outside the home. In addition, the
JV creates a leading national enterprise business through the
combination of Vodafone Netherlands’ extensive B2B expertise, product
portfolio and distribution footprint with Ziggo’s fast-growing B2B
operation and its high‐capacity nationwide cable network.

The new combined management team will rapidly bring to market converged
propositions for Dutch consumers, enterprises and the public sector.

JV synergy update

The VodafoneZiggo JV is expected to generate significant efficiencies.
As a result of the sale of Vodafone Thuis, the cost and capex run-rate
savings targeted for 2021 have been reduced from €280 million to
approximately €210 million7. However, the sale immediately
improves the cash flow of the JV as Vodafone Thuis had been generating
negative cash flow (€73 million outflow in the 12 months ended September
2016 as shown in the table above). In addition, expected integration
costs will also be reduced from €350 million to €280 million as a result
of the Vodafone Thuis sale8.

Overall, including revenue synergies with a net present value of at
least €1 billion and after taking into account (i) the elimination of
expected losses that would have been incurred by Vodafone Thuis and (ii)
the reduction in integration costs, the estimated net present value of
total synergies for the transaction remains approximately €3.5 billion.

Separately, and following a detailed review, the parties have agreed to
increase the scope of services to be provided by both parent companies
post completion to ensure that VodafoneZiggo will benefit from the full
scale and complementary expertise of each partner. As a result of this
increased scope as well as changes in the assumed underlying activity
levels, the estimated amount of the agreed upon annual shareholder
charges to the JV has increased from the previously reported estimate of
€182 million for calendar 2015 to an estimate of €211 million9
for calendar 2017.

Transaction payment details

In connection with the September 2016 recapitalisation of VodafoneZiggo
and the equalisation payment, Liberty Global will receive approximately
€2.2 billion in cash post-closing and Vodafone will receive
approximately €0.6 billion. These amounts are based on (i) the €2.8
billion of net recapitalisation proceeds from VodafoneZiggo, with each
party receiving a 50% share, and (ii) an equalisation payment from
Vodafone to Liberty Global of €0.8 billion. In addition, both companies
have retained the cash generated by their respective Dutch operations
from the February 15 signing date through December 31, 2016 (over €0.5
billion for Ziggo and approximately €0.3 billion for Vodafone
Netherlands), bringing the total cash proceeds to over €2.7 billion for
Liberty Global and approximately €0.9 billion in net cash for Vodafone.

The equalisation payment to Liberty Global is lower than the initially
announced €1 billion amount due primarily to an increase in Ziggo net
debt from €7.3 billion on September 30, 2015 (the date on which the €1
billion payment was based) to €7.7 billion10 of Ziggo net
debt as of December 31, 2016, prior to the post-closing recapitalisation
dividend payment. This higher debt balance contributed to an increase in
cash distributions from Ziggo to Liberty Global during this period.

Following all post-closing payments, VodafoneZiggo will have gross debt
of €10 billion11. As previously disclosed, the JV will
distribute 100% of its available cash to both shareholders, subject to a
minimum operational cash balance, and is expected to undertake periodic
recapitalisations, subject to market and operating conditions, to
maintain its 4.5x-5.0x target leverage ratio.

Going forward, neither Vodafone nor Liberty Global will consolidate
VodafoneZiggo, which will be reported as an equity affiliate or associate12
by both companies.

About Liberty Global

Liberty Global is the world’s largest international TV and broadband
company, with operations in more than 30 countries across Europe, Latin
America and the Caribbean. Liberty Global invests in the infrastructure
that empowers our customers to make the most of the digital revolution.
Liberty Global’s scale and commitment to innovation enables us to
develop market-leading products delivered through next-generation
networks that connect our 29 million customers who subscribe to 60
million television, broadband internet and telephony services. Liberty
Global also serves over 10 million mobile subscribers and offers WiFi
service across seven million access points.

Liberty Global’s businesses are comprised of two stocks: the Liberty
Global Group (NASDAQ: LBTYA, LBTYB and LBTYK) for its European
operations, and the LiLAC Group (NASDAQ: LILA and LILAK, OTC Link:
LILAB), which consists of its operations in Latin America and the

The Liberty Global Group operates in 12 European countries under the
consumer brands Virgin Media, Ziggo, Unitymedia, Telenet and UPC. The
LiLAC Group operates in over 20 countries in Latin America and the
Caribbean under the consumer brands VTR, Flow, Liberty, Más Móvil and
BTC. In addition, the LiLAC Group operates a subsea fiber network
throughout the region in over 30 markets.

About Vodafone Group

Vodafone is one of the world’s largest telecommunications companies and
provides a range of services including voice, messaging, data and fixed
communications. Vodafone has mobile operations in 26 countries, partners
with mobile networks in 49 more, and fixed broadband operations in 17
markets. As of 30 September 2016, Vodafone had 470 million mobile
customers and 14 million fixed broadband customers. For more
information, please visit:

Statement of Responsibility

Amounts presented in this release with respect to Liberty Global, Ziggo
and the Ziggo Sport premium sports channel service are the
responsibility of Liberty Global. The amounts presented in this release
with respect to Vodafone, Vodafone Netherlands and Vodafone Thuis are
the responsibility of Vodafone.

Important Notice

Certain information contained in this document constitutes
“forward-looking statements”, which can be identified by the use of
terms such as “may”, “will”, “should”, “expect”, “anticipate”,
“project”, “estimate”, “intend”, “continue”, “target” or “believe” (or
the negatives thereof) or other variations thereon or comparable
terminology, or by discussions of strategy, plans, objectives, goals,
future events or intentions. Such statements express the intentions,
opinions, or current expectations of the parties with respect to
possible future events and are based on current plans, estimates and
forecasts, which the parties have made to the best of their respective
knowledge, concerning, among other things, the respective business,
results of operations, financial position, prospects, growth and
strategies of Liberty Global and Vodafone, statements regarding the
transaction and the anticipated consequences and benefits of the
transaction, included but not limited to benefits for consumers and with
respect to the B2B opportunity, as well as synergies, the future growth
prospects of VodafoneZiggo, and the intended future financing for
VodafoneZiggo, including the intended leverage. Due to various risks and
uncertainties, actual events or results or actual performance may differ
materially from those reflected or contemplated in such forward-looking

Such risks and uncertainties include, but are not limited to risk
involving the parties’ respective ability to realize expected benefits
associated with the transaction; the impact of legal or other
proceedings; and continued growth in the market for broadband
communications and mobile services and general economic conditions in
the relevant market(s).

Furthermore, a review of the reasons why actual results and developments
may differ materially from the expectations disclosed or implied within
forward-looking statements can be found:

  • under “Forward-looking statements” and “Principal risk factors and
    uncertainties” in the Vodafone Group Plc’s annual report for the year
    ended March 31, 2016;
  • under “Other Information – Forward-Looking Statements” in Vodafone
    Group Plc’s Half-Year Financial Report for the six months ended
    September 30, 2016; and
  • in Liberty Global’s filings with the U.S. Securities and Exchange
    Commission, including its most recently filed Form 10-K and Forms 10-Q.

No assurances can be given that the forward-looking statements in this
announcement will be realized. As a result, recipients should not rely
on such forward-looking statements. Subject to compliance with
applicable law and regulations, the parties undertake no obligation to
update these forward-looking statements. No representation or warranty
is made as to the reasonableness of such forward-looking statements. No
statement in this document is intended to be nor may be construed as a
profit forecast and no statement in this document should be interpreted
to mean that the earnings per share of Vodafone, as altered by
VodafoneZiggo, will necessarily match or exceed the historical or
published earnings per share of Vodafone or the relevant entities which
form the basis for VodafoneZiggo.

Ziggo – Segment OCF Definition and Reconciliation

Ziggo defines Segment Operating Cash Flow (“Segment OCF”) as operating
income before depreciation and amortization, share-based compensation,
related-party fees and allocations, provisions and provision releases
related to significant litigation and impairment, restructuring and
other operating items. Segment OCF is a non-GAAP measure as contemplated
by the U.S. Securities and Exchange Commission’s Regulation G. Segment
OCF is the primary measure used by Ziggo’s management to evaluate its
performance. Segment OCF is also a key factor that is used by Ziggo’s
internal decision makers to evaluate the effectiveness of its management
for purposes of annual and other incentive compensation plans. Segment
OCF should be viewed as a measure of operating performance that is a
supplement to, and not a substitute for, operating income, net earnings
or loss, cash flow from operating activities and other U.S. GAAP
measures of income or cash flows. A reconciliation of Segment OCF to the
most directly comparable GAAP financial measure is presented below:


12 months ended
September 30,

in millions
Segment OCF


Share-based compensation expense (9)

Related-party fees and allocations13

Depreciation and amortization (926)
Impairment, restructuring and other operating items, net   (48)
Operating income


Vodafone Netherlands – EBITDA Definition and Reconciliation

The description and reconciliation of Vodafone Netherlands’ EBITDA to
its operating profit below is for informational purposes only and not
for the purpose of complying with any law, rule or regulation including
Regulation G under the U.S. securities laws.

EBITDA for Vodafone Netherlands is defined as operating profit excluding
share in results of associates, depreciation and amortisation, certain
intercompany charges, gains/losses on the disposal of fixed assets,
impairment losses, restructuring costs, other operating income and
expense and significant items that are not considered by management to
be reflective of the underlying performance of the Group. Adjusted
operating profit excludes non-operating income of associates, impairment
losses, certain intercompany charges, restructuring costs, amortisation
of customer bases and brand intangible assets, other operating income
and expense and other significant one-off items.


12 months ended
September 30,

in millions


Underlying depreciation and amortisation (D&A) (463)
D&A adjustment for asset held for sale 270
Adjusted operating profit 431

Intercompany charges14

Other   (52)

Operating profit


1. Represents combined RGUs of Ziggo and Vodafone Netherlands
(as defined by each) as at September 30, 2016, excluding Vodafone Thuis.

2. Following the receipt of conditional European Commission
clearance for the JV and in anticipation of the JV transaction closing,
new debt with net proceeds of €2.8 billion was issued in September 2016
to recapitalise the business; these funds were put into escrow pending
the closure of the JV.

3. Ziggo amounts are prepared under United States Generally
Accepted Accounting Principles and Vodafone Netherlands amounts are
prepared under International Financial Reporting Standards as issued by
the International Accounting Standards Board.

4. The historical Ziggo amounts include Liberty Global‘s
cable operations in the Netherlands and the Ziggo Sport premium sports
channel that have been contributed to the JV. Please see the end of this
release for the definition of Segment OCF and related reconciliation.

5. Vodafone Netherlands EBITDA, as customarily defined by
Vodafone, is stated after net charges of €54 million paid to other
Vodafone Group companies.

6. Represents incremental shareholder charges per the
underlying Framework Agreement for 2017. For more information regarding
the Framework Agreement, see footnote 9.

7. The €210 million of cost and capex run-rate savings are
stated before integration costs and include €180 million of operating
cost savings.

8. The majority of integration expenses are expected to be
incurred during the 2017-2019 timeframe.

9. Pursuant to the Framework Agreement, Liberty Global and
Vodafone will receive annual shareholder charges of approximately €97
million and €114 million, respectively, in 2017. Vodafone will therefore
receive incremental charges of around €61 million, in addition to the
€54 million of net charges paid to other Group operating companies
during the LTM ended September 30, 2016, which are captured within
Vodafone Netherlands reported EBITDA. Shareholder charges, which are
generally expected to be accounted for within the OCF or EBITDA of the
JV and the JV owners, include charges that will vary over time based on
the scope and activity levels of the services provided.

10. Ziggo’s €7.7 billion of net debt, which is subject to
post-closing adjustments, is calculated in accordance with the
underlying Contribution Agreement and includes derivative obligations
and other debt-like items.

11. Excludes debt-like items used in calculating the
equalisation payment from Vodafone to Liberty Global.

12. Vodafone will classify its interest in VodafoneZiggo as a
Joint Venture, which will be accounted for under the equity method.

13. Starting in 2017, related-party fees and allocations will
largely be replaced by shareholder charges pursuant to the Framework
Agreement as mentioned in footnote 9.

14. Starting in 2017, intercompany charges will largely be
replaced by shareholder charges pursuant to the Framework Agreement as
mentioned in footnote 9.


Vodafone Group
Investor Relations
+44 7919 990 230
Media Relations

Investor Relations
Nooij +1 303 220 4218
Christian Fangmann +49 221 84 62 5151
Rea +1 303 220 4238
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Matt Beake +44 20 8483 6428
Rebecca Pike
+44 20 8483 6216