Liberty Global Reports Q2 and H1 2016 Results

Liberty Global Reports Q2 and H1 2016 Results

277,000 Subscriber Adds, Double Prior Year & Up 78% Sequentially

H1 Rebased Revenue Growth of 3% Reaching ~$10 billion

Aggressive Equity Repurchases Totaling ~$700 million in Q2

Closing of Strategic Cable & Wireless Deal Transforms LiLAC

Received Conditional Regulatory Clearance for Dutch Joint Venture

Updating 2016 Guidance to Include BASE and CWC

Liberty Global plc ("Liberty Global") (NASDAQ: LBTYA, LBTYB, LBTYK, LILA and LILAK), today announces financial and operating results for the three months ("Q2") and six months ("YTD" or "H1") ended June 30, 2016 for the Liberty Global Group¹ and the LiLAC Group¹.

Key highlights for the consolidated operations of Liberty Global plc

• Q2 Organic RGU² additions of 277,000, a two-fold increase versus 138,000 in Q2 2015
  • Driven by well-balanced improvements across all three products, aided by new build
  • Substantial year-over-year improvement driven by the U.K., the Netherlands & Germany
  • YTD RGU additions total 433,000, powered by 369,000 broadband internet additions

• Over 500,000 homes built or upgraded YTD, program on track for 1.5 million homes in 2016
• Rebased³ revenue growth of 3% YTD, reaching $9.7 billion
  • Q2 rebased revenue growth of 2.5% adversely impacted by the Netherlands
  • Germany at 7%, Chile at 4.5%, and Belgium at 3.5% key Q2 contributors

• Operating income of $1.1 billion YTD down 9% YoY, including $488 million in Q2 down 22%
• YTD OCF⁴ of $4.4 billion, reflecting rebased growth of 2%
  • Q2 rebased OCF growth of 1%, expect significant H2 acceleration
  • Liberty Global Group 2016 rebased OCF guidance, now including BASE⁵: 4-5%
  • LiLAC Group 2016 rebased OCF guidance, now including CWC⁶: remains 5-7%

• YTD net cash provided by operating activities, net cash used by investing activities and netcash provided by financing activities of $2.7 billion, $2.6 billion and $168 million, respectively
• Q2 Free Cash Flow ("FCF")⁷ of $481 million, including $516 million attributed to Europe
  • Liberty Global Group 2016 FCF guidance, now including BASE: $1.8 billion⁸
  • LiLAC Group FCF still expected to be limited in 2016, now including CWC⁸
• Repurchased nearly $700 million of equity in Q2, including ~$300 million in late June

Operating and financial highlights for Liberty Global Group, our European business

• Organic Q2 RGU additions of 231,000, ~140% improvement versus Q2 2015
  • YoY Q2 increase driven by improvements in all three cable products
• Added 109,000 organic postpaid mobile subscribers in Q2 2016
  • Solid Q2 mobile postpaid adds in the U.K. of 40,000 and 28,000 in Belgium
• Next-generation⁹ video base surpassed seven million subscribers in Q2
  • Added 184,000 Horizon TV and 66,000 TiVo subscribers
• Rebased revenue growth of 3% in Q2, supported by B2B (including SOHO) growth of 11%
• Operating income contraction of 9% to $509 million in Q2
• Q2 rebased OCF growth of 1%, increasing to 2% when excluding Ziggo as per guidance
  • Q2 growth adversely impacted by certain nonrecurring and nonoperational items
• Active capital management creates balance sheet strength, seven year average debt tenor
  • Net leverage¹⁰ of 4.9x in Q2, down from 5.3x at March 31, 2016
  • Blended cost of debt¹¹ at 4.7% and total liquidity¹² of $4.6 billion

Operating and financial highlights for LiLAC Group, our Latin American & Caribbean business

• Gained 46,000 RGU additions and 18,000 organic customer¹³ additions in Q2 2016
  • Continued traction in Chile with 37,000 new RGUs, best quarterly result in three years
  • Cable & Wireless ("CWC") added 7,000 RGUs post the mid-May acquisition

• Ended Q2 2016 with 3.8 million mobile subscribers following the CWC acquisition
• CWC integration well underway, expect to provide synergy update later this year
• Rebased revenue growth of 3% YTD, led by VTR's 6% growth in Chile
  • Q2 rebased revenue growth of 1%, impacted by CWC revenue contraction of 1%
• Operating loss of $21 million in Q2 2016 as compared to $66 million operating gain in Q2 2015
• Rebased OCF grew 6% YTD, supported by all three operations
  • 3% rebased OCF growth in Q2 with 5% growth in Puerto Rico and 4% at CWC
• Finished Q2 with net leverage of 4.1x, including over $500 million in cash

CEO Mike Fries stated, "As we continue to put the building blocks of Liberty Go in place, we are starting to see the first evidence of success with the acceleration of our subscriber additions in the first half of 2016. We substantially outperformed our prior-year Q2 and our sequential Q1 results with the addition of 277,000 RGUs in Q2 this year. Unitymedia in Germany added 109,000 RGUs, representing our best quarterly result in eighteen months, while Virgin Media in the U.K. posted 66,000 RGU additions, our best Q2 performance in the U.K. in eight years. Over the first six months of 2016, we doubled our subscriber additions compared to last year with improvements across all three cable products, while at the same time adding over 200,000 new postpaid mobile subscribers. Looking ahead, we expect our new build activity to continue providing a tailwind to our subscriber volumes, further supported by our investments to innovate around superior broadband speeds and next-generation video platforms, along with the development of the most advanced fixed-mobile converged products in our markets.”

"In Europe we reported 4.0% rebased revenue and 2.4% rebased OCF growth for Q2 (excluding Ziggo and BASE), with solid performances in Germany, Belgium and, to a lesser extent, our U.K. business. In that market, our OCF growth in Q2 was adversely impacted by certain nonrecurring and nonoperational items. In the second half of 2016, we expect that our rebased OCF growth in the U.K. and overall will significantly improve, driven by the impacts of new build and the related acceleration in subscriber additions, as well as the first efficiencies from our Liberty Go initiative. And we remain committed to delivering 7-9%¹⁴ rebased OCF growth through the end of 2018."

"On the M&A front, we received conditional Phase 1 clearance from the European Commission for our proposed joint venture with Vodafone in the Netherlands. The approval is great news for all Dutch consumers and businesses, as well as for our shareholders, as the combination will create a truly converged company with compelling organic growth prospects and substantial synergies. In May, we closed the Cable & Wireless transaction, transforming our LiLAC business into a regional powerhouse with over five million fixed and nearly four million mobile subscribers across Latin America and the Caribbean. In addition, the recent distribution of LiLAC shares has significantly enhanced the trading liquidity of that security."

"In late June, British voters decided to leave the EU. Fortunately, the debt on our balance sheet remains hedged against currency and interest rate exposures, while our average tenor currently stands at seven years. As a side note, we have not seen a slowdown of demand in the U.K., sales are actually up year-over-year. Finally, while we were restricted on share buybacks in the early part of Q2 due to the pending Cable & Wireless transaction, we have been aggressive buyers since closing. In total, we repurchased $700 million of stock in Q2, including $300 million in the days post-Brexit. We remain fully committed to repurchasing at least $3.0 billion of additional equity by the end of next year."

Subscriber Statistics - Liberty Global Group (Europe)

At June 30, 2016, Liberty Global Group provided a total of 53.9 million subscription services ("RGUs") across its footprint of 49.8 million homes passed¹⁵ in Europe. These services consisted of 22.5 million video, 17.1 million broadband internet and 14.3 million telephony RGUs. As compared to March 31, 2016, we increased our total RGUs by 231,000 on an organic basis. This was more than double the 97,000 organic RGU additions that we delivered in Q2 2015, driven by well-balanced improvements across all three fixed-line products and aided by the ongoing network expansion across our footprint. On a sequential basis, net additions increased by 70% or 97,000 RGUs, mainly driven by an improved video performance. Supported by record Q2 growth in the U.K. with 31,000 customers and strong customer additions in Germany of 11,000, our base in Europe expanded by 4,000 on an organic basis in Q2 to 25.7 million unique customers. We ended the quarter with a bundling ratio of 2.1 RGUs per customer, as 46% of our customers subscribed to a triple-play (11.8 million), 17% subscribed to a double-play (4.5 million) and 37% subscribed to a single-play product (9.4 million).

From a geographical perspective, our Q2 2016 organic RGU additions were led by our Western European performance, where we delivered 140,000 net additions. This result was a substantial improvement from the 45,000 RGUs that we added in the second quarter of 2015. Meanwhile, our Central and Eastern Europe ("CEE") region also showed a strong year-over-year improvement, adding 92,000 organic additions in Q2 2016, nearly double our result from the prior-year quarter. From an individual country performance, our Western European result was fueled by Virgin Media in the U.K., which reported 66,000 subscriber additions. This result, which was Virgin Media's best Q2 performance in the U.K. in eight years, was supported by strong marketing campaigns, new Project Lightning homes and record low churn. Another notable performer in Q2 was Germany, where Unitymedia delivered RGU additions of 109,000, its best quarterly performance in the last 18 months. This success was partly credited to our "Highspeed Weeks" campaign, which resulted in increased uptake of our high speed broadband bundles, as 80% of new subscribers were signing up for packages with broadband speeds of 120 Mbps or higher. In Belgium, Telenet added 18,000 subscribers in Q2, nearly a 25% year-over-year improvement that was bolstered by the attractiveness of its superior entertainment bundles and new WIGO campaign, which features Telenet's first all-in-one converged offering.

Elsewhere in Europe, UPC in Switzerland experienced RGU attrition of 20,000 in Q2, due in part to our higher-priced product portfolio in an intensified competitive environment. The Swiss Q2 performance, which was similar to our Q1 RGU loss in Switzerland, was driven by lower sales that more than offset improved sequential churn levels across all products. Rounding out our key Western European operations, Ziggo in the Netherlands posted RGU attrition of 28,000 in Q2 2016, which reflects an improvement of 12,000 RGUs sequentially and 59,000 RGUs year-over-year. Our Dutch performance was attributable to lower churn and higher sales, as the investments in our customer service and entertainment platform are beginning to yield results.

Turning to our product performance, our organic subscriber growth was powered again by our broadband internet results, as we added 160,000 RGUs in Q2 2016, a 46% acceleration as compared to the 110,000 RGUs gained in Q2 2015. This was mainly driven by year-over-year improvements in the U.K. (36,000) and the Netherlands (20,000). Similarly, our Q2 fixed-line telephony RGU additions of 143,000 improved 45% year-over-year, led by the U.K. and Germany with 23,000 and 18,000 improvements, respectively.

Looking at our video performance, we lost 72,000 subscribers in Q2 2016, a significant improvement versus the 111,000 video attrition that we posted in Q2 2015. In total, nine out of our 12 European countries reported better year-over-year video results, of which Ziggo delivered the most material improvement, as video attrition in the Netherlands decreased by 24,000 RGUs. At the end of Q2, we had 14.2 million enhanced video subscribers¹⁶, representing enhanced video penetration¹⁷ of 66%, and 7.5 million basic video subscribers¹⁸. With regard to our next-generation video subscriber base, which includes TiVo, Horizon TV (including Horizon-Lite) and Yelo TV, we added 304,000 subscribers in Q2 2016, while surpassing two milestones. In the U.K., Virgin Media delivered 66,000 new TiVo subscribers and crossed the three million subscriber threshold, representing 82% of our U.K. video base. Also, our next-generation TV subscriber count at the end of Q2 2016 surpassed seven million subscribers for the first time. With respect to our Horizon product suite, we added 184,000 subscribers to Horizon TV and 45,000 to Horizon-Lite in Q2 2016. The markets with the biggest Horizon TV gains in the quarter were at Ziggo with 91,000, Unitymedia with 42,000 and Poland with 35,000. Furthermore, we rolled out our Horizon-Lite product, which provides a Horizon-like user interface on legacy boxes and thereby improves the customer experience, in Slovakia (38,000) and Hungary (7,000) during Q2. Finally, we expanded our popular Replay TV functionality to Horizon-Lite (Czech, Slovakia and Hungary) and Horizon Go in three additional countries (Switzerland, Czech and Slovakia) during Q2. Currently, 36% of our total video base (in countries that offer next-generation TV services) subscribed to one of our innovative next-generation TV platforms at June 30, 2016, as compared to 29% one year ago.

With respect to our wireless business in Europe, we finished Q2 2016 with 6.7 million mobile subscribers¹⁹. During the second quarter of 2016, we added 105,000 postpaid subscribers, partially offset by a loss of 53,000 lower-ARPU²⁰ prepaid subscribers. This net growth of 52,000 mobile subscribers was primarily driven by our Western European operations, which added 47,000 subscribers, while our CEE countries contributed 6,000 additions. From a country perspective, the U.K. and Switzerland gained 24,000 and 15,000 mobile subscribers, respectively. The results in the U.K. were led by our continued focus on gaining postpaid subscribers, adding 40,000 in Q2 2016 and 181,000 subscribers over the last twelve months, on the back of the continued success of our split-contracts²¹ Freestyle proposition. The growth of 15,000 mobile subscribers in Switzerland in Q2 marks a material step-up, both sequentially and year-over-year, helped by the success in our larger retail shop presence, as well as our "Mega Deal" campaign, which promotes our mid-tier mobile offering to our fixed-line customers. Meanwhile in Belgium, Telenet added 28,000 postpaid mobile subscribers organically in Q2, but this was more than offset by the loss of 36,000 prepaid subscribers from the former BASE business. The growth in postpaid was partly driven by attractive "Family Deal" offers, early success of Telenet's new WIGO offering and the continued success of split-contracts,²¹ which were introduced in Q3 2015. We also had modest additions in Austria, Ireland, Germany and CEE. On the product innovation front, we successfully launched our 4G mobile services in Austria and Ireland in July, and we also extended our split-contract Freestyle proposition to Ireland.

Revenue - Liberty Global Group (Europe)

For the three and six months ended June 30, 2016, revenue attributed to the Liberty Global Group increased 5% to $4.5 billion and 3% to $8.8 billion, respectively, as compared to the corresponding 2015 periods. For both periods, our reported revenue growth was driven primarily by the inclusion of BASE in Belgium and our organic revenue growth, partially offset by negative foreign currency ("FX") movements, mainly related to the strengthening of the U.S. dollar against the British pound. When adjusting to neutralize the impact of acquisitions, dispositions and FX, our operations attributed to the Liberty Global Group achieved year-over-year rebased revenue growth of 3% during both the three and six months ended June 30, 2016.

Our rebased revenue performance during the YTD period included the net effect of certain nonrecurring and non-operational items, the most significant of which was the $21 million net positive impact of the upfront recognition of mobile handset revenue, largely in connection with our split-contract²¹ programs in the U.K., Belgium and Switzerland. In addition, the favorable $9 million impact of the YTD higher amortization of deferred upfront fees on B2B contracts²² in the U.K. was more than offset by a $10 million reduction in cable subscription revenue resulting from a change in the regulations governing certain fees Virgin Media charges to its customers in the U.K. The net effect of nonrecurring and non-operational items in Q2 was not material.

From a geographic perspective, we delivered 3% rebased revenue growth in Western Europe in Q2, consistent with the results that we posted in the prior-year period and in Q1 2016. Our Central and Eastern European operations also delivered 3% rebased revenue growth, an improvement from 1% growth in Q2 2015 and in-line with Q1 2016. The year-over-year improved performance in CEE was primarily the result of improvement in our DTH operation, as well as in our businesses in the Czech Republic and Poland.

Turning back to Western Europe, which represents nearly 95% of Liberty Global Group's revenue, our second quarter 2016 top-line performance was highlighted by our results in Germany, where we posted 7% rebased revenue growth, an improved result as compared to the 6% rebased growth that we reported in Q2 2015. Our German performance was primarily attributable to higher cable subscription revenue, driven by an increase in both ARPU per RGU and subscribers. In Belgium, Telenet posted 3.5% rebased revenue growth in Q2, as higher top-line growth in Telenet's legacy business was partly offset by revenue headwinds in the recently acquired BASE mobile business. Meanwhile, at Virgin Media, we reported 3% rebased revenue growth in Q2, mainly driven by accelerated RGU growth. In addition, Virgin Media's top-line continued to be supported by higher business revenue, partly driven by increases in underlying data volumes, and our mobile business. Looking ahead, we anticipate Virgin Media's revenue growth in the second half of 2016 to be higher than the first half of the year as we expect to benefit from continued volume growth, increasingly driven by Project Lightning, and ARPU improvements. In Switzerland/Austria, our rebased revenue growth was 2% in Q2 2016, where improvements in mobile revenue and higher ARPU per RGU more than offset the effects of the aforementioned subscriber attrition.

Finally, in the Netherlands, Ziggo reported a rebased revenue decline of 3% in Q2, consistent with the past three quarters, as RGU losses over the last twelve months and lower ARPU per RGU more than offset revenue gains in mobile. Looking ahead, we expect to benefit from the July 1, 2016 price increase, but due to subscriber losses over the last twelve months and the current competitive environment, we foresee continued top-line pressure throughout 2016.

Our B2B (including SOHO)²² and mobile operations (including interconnect and handset sales) posted Q2 rebased revenue growth rates of 11% and 2%²³, respectively, as compared to Q2 2015. Of note, the mobile rebased revenue growth was negatively impacted by the aforementioned BASE revenue headwinds.

Operating Income - Liberty Global Group (Europe)

For the three and six months ended June 30, 2016, Liberty Global Group's operating income was $509 million and $1.0 billion, respectively, representing declines of 9% and 3%, respectively, when compared to the prior-year periods. These declines were primarily due to the net effect of (i) increases in impairment, restructuring and other operating items, net, (ii) increases in OCF, as described below, and (iii) for the three-month comparison, an increase in share-based compensation expense.

Operating Cash Flow - Liberty Global Group (Europe)

For the three and six months ended June 30, 2016, OCF for the operations attributed to the Liberty Global Group was $2.1 billion and $4.1 billion, respectively, representing 1% growth year-over-year in each period. The result for the three-month period was driven primarily by the aforementioned inclusion of BASE and our organic OCF growth, while the six-month period result was primarily driven by organic OCF growth, and, to a lesser extent, the inclusion of BASE. Both periods were negatively affected by FX movements, mainly related to the appreciation of the U.S. dollar relative to the British pound. On a rebased basis, the operations attributed to the Liberty Global Group reported OCF growth for the three and six months ended June 30, 2016 of 1% and 2%, respectively.

The Liberty Global Group rebased OCF performance for Q2 2016 was partially impacted by the nonrecurring and non-operational revenue items mentioned above and the fact that our Q2 2015 costs benefited from the favorable net impact of nonrecurring or non-operational items to a greater extent than did our Q2 2016 costs. The most significant of these items was the $11 million negative impact of reduced network infrastructure charges in the U.K. in Q2 2015, the $8 million positive impact of lower year-over-year Ziggo integration expenses in the Netherlands, the negative impact of an $8 million nonrecurring favorable settlement of an operational contingency at Telenet in Q2 2015 and the positive impact of a similar nonrecurring favorable settlement of $7 million at Telenet in Q2 2016. For the YTD 2016 period, a benefit related to the H1 2015 Ziggo integration costs of $23 million was partly offset by various nonrecurring and non-operational items in the first half of 2015, mainly in the U.K. As a result, the impact of nonrecurring and non-operational items on our costs in the YTD period was limited.

From a regional standpoint, our Western European operations delivered 2% rebased OCF growth in the second quarter of 2016, while our CEE operations reported a 2% rebased OCF contraction. The CEE performance was partially related to revenue growth that was more than offset by higher costs largely related to increased programming costs and staff-related and sales and marketing costs related to new build activities.

Looking at Liberty Global Group's markets in Western Europe, our second quarter performance was led by Unitymedia in Germany, which posted 7% rebased OCF growth in Q2 2016, mainly due to the previously mentioned revenue drivers. With respect to our operations in Switzerland/Austria, we delivered 4% rebased OCF growth in Q2 2016, mainly due to the previously mentioned revenue drivers and lower staff and network related expenses that were partly attributable to the integration of our Swiss and Austrian organizations.

Moving to our largest operation, Virgin Media posted 1% rebased OCF growth in Q2, as the aforementioned revenue growth drivers were partially offset by higher programming costs and the negative impact of favorable nonrecurring items in the prior year. Telenet in Belgium reported 1% rebased OCF growth, supported by the previously-mentioned revenue drivers of our legacy fixed business, partly offset by BASE's OCF contraction. Rounding out our Western European operations, Ziggo posted a 4% rebased OCF contraction, as lower revenue and higher programming costs were only partially offset by lower indirect expenses.

The Liberty Global Group reported OCF margins²⁴ of 46.4% and 46.5% for the three and six months ended June 30, 2016, respectively, as compared to the 48.4% and 47.7% margins that were reported for the corresponding prior-year periods. The year-over-year declines were affected by the inclusion of the lower OCF margins of BASE and the revenue and OCF trends noted above.

Property and Equipment Additions - Liberty Global Group (Europe)

For the three months ended June 30, 2016, the Liberty Global Group reported property and equipment ("P&E") additions²⁵ of $1.1 billion or 24.6% of revenue, as compared to $971 million or 22.8% of revenue in Q2 2015. In terms of our YTD performance, we incurred P&E additions of $2.0 billion or 23.1% of revenue in the 2016 period versus $1.8 billion or 21.7% of revenue in the prior-year period.

The increase in absolute P&E additions for the Q2 and YTD 2016 periods is principally due to increased line extension and scalable infrastructure spend related to new build and upgrade activities across our footprint. In addition, the absolute increase in the YTD period includes higher customer premises equipment ("CPE") spend as a result of higher subscriber volumes. The higher absolute local currency P&E spend for both periods was partially offset by the strengthening of the U.S. dollar against the British pound.

In terms of the breakdown of our Q2 2016 P&E additions by category, 48% pertained to line extensions, upgrade/rebuild and scalable infrastructure, 27% was related to CPE and 25% was related to support capital.

Condensed Consolidated Statements of Cash Flows - Liberty Global Group (Europe)

For the six months ended June 30, 2016, the Liberty Global Group's net cash provided by operating activities was $2,561 million, as compared to $2,552 million during the prior-year period. This increase in cash provided is primarily attributable to the net effect of (i) lower cash payments related to derivative instruments, (ii) higher payments for interest, (iii) an increase in cash provided by OCF and related working capital items and (iv) higher payments for taxes.

For the six months ended June 30, 2016, the Liberty Global Group's net cash used by investing activities was $2,403 million, as compared to $1,419 million during the prior-year period. This increase in cash used is primarily attributable to the net effect of (i) an increase in cash used of $1,336 million associated with higher cash paid in connection with acquisitions, (ii) a decrease in cash used of $117 million associated with lower cash paid related to investments in and loans to affiliates and others, (iii) an increase in cash of $111 million related to net inter-group cash payments and receipts and (iv) a decrease in cash used of $70 million as a result of cash proceeds received in connection with the settlement of certain litigation.

For the six months ended June 30, 2016, the Liberty Global Group's net cash used by financing activities was $109 million, as compared to $1,602 million during the prior-year period. This decrease in cash used is primarily attributable to (i) $432 million related to higher net borrowings of debt, (ii) $292 million due to lower payments for financing costs and debt premiums, (iii) $260 million due to lower payments related to derivative instruments, (iv) $191 million due to lower repurchases of Liberty Global ordinary shares, (v) $142 million related to purchases of additional shares of our subsidiaries during the 2015 period and (vi) $130 million associated with an increase in cash received from call option contracts on Liberty Global ordinary shares.

Free Cash Flow - Liberty Global Group (Europe)

For the three and six months ended June 30, 2016, our operations attributed to the Liberty Global Group generated free cash flow of $516 million and $412 million, respectively, as compared to $539 million and $894 million, respectively, in the prior-year periods.

The decline in our FCF in Q2 2016, as compared to Q2 2015, was attributable to the net effect of (i) lower benefits from vendor financing activities, (ii) improvements in cash provided from OCF and related working capital items and (iii) lower interest payments (including related derivative instruments). The year-over-year decrease in the YTD period was primarily due to lower benefits from vendor financing activities and a decrease in cash provided from OCF and related working capital items.

Looking ahead, we are updating our Liberty Global Group guidance for FCF⁸ in 2016. Including the Netherlands for the full-year and BASE from February 12, 2016, we expect to deliver $1.8 billion of FCF in 2016 based on the FX rates as of August 2, 2016.

Leverage, Liquidity & Shares Outstanding - Liberty Global Group (Europe)

At June 30, 2016, we had attributed total third-party debt²⁶ of $46.0 billion and cash and cash equivalents of $786 million for the Liberty Global Group. As compared to Q1 2016, our third-party debt decreased by $1.1 billion on a sequential basis, primarily due to the weakening of most of our borrowing currencies against the U.S. dollar.

After excluding $2.3 billion of debt backed by shares we hold in ITV plc, Sumitomo Corporation and Lions Gate Entertainment Corp., Liberty Global Group's consolidated adjusted gross and net leverage ratios were 5.0x and 4.9x, respectively, at June 30, 2016. Both of these ratios decreased as compared to March 31, 2016. The declines of 0.4x for both adjusted gross and net leverage ratios were mainly the result of a sequential increase in the reported quarterly OCF and the aforementioned lower debt balance due to the weakening of all of our borrowing currencies against the U.S. dollar.

At the end of the of Q2 2016, Liberty Global Group's average tenor of third-party debt was seven years, 91% of which comes due in 2021 and after. Our blended fully-swapped borrowing cost of such debt was 4.7% as of June 30, 2016. Our consolidated liquidity position on June 30, 2016 was approximately $4.6 billion, including $786 million of cash, and the aggregate unused borrowing capacity under our credit facilities²⁷ totaled $3.8 billion.

At July 29, 2016, we had 920 million Liberty Global Group shares outstanding, including 264 million Class A ordinary shares, 11 million Class B ordinary shares and 645 million Class C ordinary shares.

Subscriber Statistics - LiLAC Group

At June 30, 2016, the LiLAC Group provided a total of 5.4 million subscription services to our 3.0 million unique fixed-line customers across our footprint of 6.0 million homes passed predominantly located within Latin America and the Caribbean. These services consisted of 1.7 million video, 2.0 million broadband internet and 1.7 million telephony subscriptions. As a result of the closing of the CWC acquisition on May 16, 2016, our total customers and RGUs increased by 1.3 million and 1.9 million, respectively. In terms of our Q2 2016 quarterly organic additions, including CWC's results for the stub period, we delivered 18,000 customer and 46,000 RGU additions. We ended Q2 2016 with a bundling ratio of 1.8 RGUs per customer, providing ample headroom for growth, as 29% of our customers subscribed to triple-play (0.8 million), 27% to double-play (0.8 million) and 44% to single-play products (1.3 million).

Looking at product performance, our organic subscriber growth was fueled by 31,000 broadband additions in Q2 2016, driven by superior speeds in markets like Chile and Puerto Rico. We also added 10,000 video subscribers and 5,000 telephony subscribers during Q2 2016.

Geographically, in Chile, we added 37,000 RGUs in Q2 2016, in-line with our performance in the prior-year period. Of note, VTR delivered record quarterly customer additions of 24,000 during the quarter. Subscriber growth was led by 30,000 broadband additions, up over 30% year-over-year, driven by the continued success of our “Vive Más” bundles. Further, we added 10,000 video subscribers, supported by our offers that feature the most HD channels in the market, while losing 3,000 fixed-line telephony subscribers.

Turning to our newly acquired CWC business, which spans a number of markets, we gained 7,000 RGUs during the last six weeks of Q2, consisting of 5,000 fixed-line telephony additions, 1,000 broadband internet gains and 1,000 video additions. More specifically, in Panama we added 4,000 RGUs during the period, consisting primarily of 3,000 video and 1,000 broadband RGU subscribers. This growth resulted in part from strong take-up of our DTH product and capitalization of our improved and expanding fixed network. Continued network investments also supported our gain of 8,000 RGU additions in Jamaica, with growth across each of our three fixed-line services. In the Bahamas, we experienced relatively flat broadband and fixed-line voice performance during the stub period, but plan to launch a video product in Q3 that we expect will strengthen our competitive position. Meanwhile, we lost 6,000 subscribers across our other markets, including 2,000 and 1,000 RGUs in Trinidad & Tobago and Barbados, respectively, which were characterized by challenging competitive and macroeconomic environments.

Finally, in Puerto Rico we gained 2,000 RGUs during the quarter, consisting of 4,000 fixed-line voice additions, flat broadband results and 2,000 video losses. Early in Q2, the former Choice footprint was re-branded under the Liberty Puerto Rico moniker, and our Q2 result included bundling success in the legacy Choice footprint. We continue to operate in a very difficult macroeconomic environment, but continue to benefit from our market-leading broadband speeds.

On the mobile front, we ended the quarter with 3.8 million subscribers, the vast majority of which were attributed to CWC (3.7 million). The highlight of the quarter in mobile was our performance in Chile, in which we added 7,000 mobile subscribers, composed of 8,000 postpaid additions and 1,000 low-ARPU prepaid losses. Additionally in Chile, we implemented several operational improvements associated with our mobile strategy that contributed to the positive results for the quarter. Moving to CWC, our mobile subscribers decreased by 1,000 organically during the stub period, driven primarily by a loss of 4,000 prepaid subscribers. More specifically, we continued to gain market share in Jamaica, which is one of the largest telecommunications markets in the region, as we added 3,000 mobile subscribers for the Q2 stub period. We also added a modest 1,000 subscribers in Panama, where competition remains intense in a prepaid market characterized by aggressive promotional activity. Offsetting our performance in Jamaica and Panama, we experienced a decline of 5,000 subscribers across the remainder of the CWC footprint, including 2,000 in Barbados.

Acquisition of Cable & Wireless - LiLAC Group

On May 16, 2016, a subsidiary of Liberty Global acquired CWC. Accordingly, CWC is included in Liberty Global's and LiLAC's financial information under Liberty Global's U.S. GAAP accounting policies effective May 16, 2016.

Revenue - LiLAC Group

For the operations attributed to the LiLAC Group, our reported revenue increased 94% to $603 million and 51% to $907 million for the three and six months ended June 30, 2016, as compared to the corresponding 2015 periods. For both periods, our reported growth was primarily driven by the acquisitions of CWC and Choice and, to a lesser extent, our organic revenue growth, partially offset by adverse FX movements. During the 45-day stub period from May 16 to June 30, 2016, CWC contributed $286 million of revenue. When adjusting to neutralize the impact of acquisitions and FX, our operations attributed to the LiLAC Group achieved year-over-year rebased revenue growth of 1% and 3% for the three and six months ended June 30, 2016, respectively.

From a geographic perspective, our Chilean operation reported year-over-year rebased revenue growth of 4.5% in Q2 2016, primarily attributable to higher cable subscription revenue, driven by an increase in both subscribers and ARPU per RGU, and growth in our mobile subscription revenue. This growth was partially offset by a decrease associated with the application of tariff decree reductions on ancillary services to former customers. In Puerto Rico, we posted 1% year-over-year rebased growth during the second quarter, as growth in B2B was partially offset by volume and ARPU per RGU declines in cable subscription revenue.

CWC experienced a 1% rebased revenue contraction for the period from May 16, 2016 through June 30, 2016, as compared to the corresponding prior-year period, as our revenue growth in Jamaica and Panama was more than offset by declines in Barbados, the Bahamas and Trinidad & Tobago.

Operating Income - LiLAC Group

For the three and six months ended June 30, 2016, operations attributed to the LiLAC Group reported operating income (loss) of ($21 million) and $39 million, respectively, representing declines of 132% and 67% when compared to the prior-year periods. These declines were primarily due to the net effect of (i) increases in OCF, as described below, (ii) increases in impairment, restructuring and other operating items, net and (iii) increases in depreciation and amortization. The changes in these factors were primarily due to the inclusion of CWC for the stub period.

Operating Cash Flow - LiLAC Group

Reported OCF for the LiLAC Group increased 81% to $231 million and 50% to $353 million for the three and six months ended June 30, 2016, respectively, as compared to the corresponding prior-year periods. The underlying reasons for our reported OCF growth were consistent with the aforementioned revenue drivers, including the contribution from CWC and Choice and negative FX movements. During the 45-day stub period from May 16 to June 30, 2016, CWC contributed $101 million of OCF. From a rebased perspective, LiLAC delivered 3% and 6% growth for the three and six months ended June 30, 2016, respectively.

On a regional basis, our CWC operation reported 4% year-over-year rebased OCF growth for the stub period in Q2. This growth includes the realization of staff and network-related synergies from CWC's integration with Columbus. During the third quarter of 2016, CWC will begin to broadcast live Premier League games in a number of its markets pursuant to a new multi-year agreement. The cost of the rights to broadcast these games is expected to result in a significant increase to CWC’s programming costs beginning in August 2016.

In Puerto Rico, we posted 5% rebased OCF growth during the second quarter, due to the aforementioned revenue drivers along with tight cost controls. Rounding out our operations, in Chile we reported 2% rebased OCF growth in Q2, as the previously mentioned revenue drivers, were partially offset by increases in programming and copyright costs, including the impact of non-functional currency spend due to the significant year-over-year decline in the Chilean peso relative to the U.S. dollar, and other costs.

From an OCF margin perspective, the LiLAC Group reported OCF margins of 38.3% and 38.9%, respectively, for the three and six months ended June 30, 2016. This compared to 41.0% and 39.4% margins that we reported for the corresponding prior-year periods. The year-over-year decline was primarily related to the inclusion of CWC's lower OCF margin for the stub period.

Property and Equipment Additions - LiLAC Group

For the three months ended June 30, 2016, operations attributed to the LiLAC Group reported P&E additions of $133 million or 22.1% of revenue, as compared to $70 million or 22.4% of revenue in Q2 2015. For the YTD period, the LiLAC Group incurred $205 million or 22.6% of revenue as compared to $126 million or 21.0% of revenue in the prior-year period.

The increase in absolute P&E additions for both periods was mainly related to the acquisitions of CWC and, to a lesser extent, Choice, along with higher spend for line extensions driven by our new build and upgrade program in Chile and Puerto Rico. These increases were partially offset by the depreciation of the Chilean peso against the U.S. dollar. Excluding CWC, our capital was allocated as follows during Q2 2016: 49% to CPE, 33% to scalable infrastructure, line extensions and upgrade/rebuild activity and 18% to support capital.

Condensed Consolidated Statements of Cash Flows - LiLAC Group

For the six months ended June 30, 2016, the LiLAC Group's net cash provided by operating activities was $106 million, as compared to $134 million during the prior-year period. This decrease in cash provided is primarily attributable to the net effect of (i) higher payments for taxes, (ii) higher payments for interest, (iii) an increase in cash provided by OCF and related working capital items and (iv) higher cash receipts related to derivative instruments.

For the six months ended June 30, 2016, the LiLAC Group's net cash used by investing activities was $171 million, as compared to $381 million during the prior-year period. This decrease in cash used is primarily attributable to the net effect of (i) an increase in cash received of $290 million in connection with acquisitions and (ii) an increase in cash used of $70 million related to higher payments for capital expenditures.

For the six months ended June 30, 2016, the LiLAC Group's net cash provided by financing activities was $283 million, as compared to $376 million during the prior-year period. This decrease in cash provided is primarily attributable to the net effect of (i) a decrease in cash of $111 million related to net inter-group payments and receipts, (ii) an increase in cash provided of $80 million due to higher net borrowings of debt and (iii) a decrease in cash provided of $25 million due to higher payments for financing costs and debt premiums.

Free Cash Flow - LiLAC Group

For the three and six months ended June 30, 2016, our operations attributed to the LiLAC Group posted negative FCF of $35 million and $15 million, respectively, as compared to positive FCF of $54 million and $28 million, respectively, in the prior-year periods.

The year-over-year declines for both Q2 and H1, as compared to the prior-year periods, were primarily the result of the negative impacts of increases in income tax payments in Chile and the inclusion of negative free cash flow from CWC's business that were only partially offset by increased benefits from vendor financing activities. In addition, the H1 decline reflects the positive impacts of organic OCF growth and the related working capital movements. For the period between May 16, 2016 and June 30, 2016, Cable and Wireless had a $22 million FCF deficit.

Including the impact of CWC, we continue to expect limited FCF⁸ for full-year 2016.

Leverage, Liquidity & Shares Outstanding - LiLAC Group

At June 30, 2016, we had attributed total third-party debt of $5.9 billion and cash and cash equivalents of $501 million for the LiLAC Group. As compared to March 31, 2016, the carrying value of our debt and cash balance attributed to the LiLAC Group increased by $3.6 billion and $205 million, respectively, primarily due to our acquisition of CWC.

Giving pro forma effect to include CWC's OCF for all of Q2, the LiLAC Group ended Q2 2016 with adjusted gross and net leverage ratios associated with the debt attributed to the LiLAC Group of 4.5x and 4.1x, respectively.

At the end of Q2 2016, the LiLAC Group's average tenor of third-party debt was just under six years, with less than 10% of our debt due prior to 2022, and the blended fully-swapped borrowing cost for our debt was 6.5%. With respect to our consolidated liquidity position, we finished Q2 2016 with approximately $1.0 billion, including $501 million of cash and $543 million of aggregate borrowing capacity under our credit facilities²⁷.

At July 29, 2016, we had 174 million LiLAC shares outstanding, including 51 million Class A ordinary shares, 2 million Class B ordinary shares and 121 million Class C ordinary shares.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements with respect to our strategies, future growth prospects and opportunities; expected RGU additions; expected future revenue and OCF growth, as well as FCF; expectations with respect to the development, enhancement and expansion of our superior networks and innovative and advanced products and services, including higher broadband speeds, launches of next-generation video services, new programming and fixed-mobile converged products; plans and expectations relating to new build and network extension opportunities, including estimated number of homes to be built out; expectations with respect to Liberty Go; the strength of our balance sheet and tenor of our third-party debt; continued pressures and offsetting factors relating to our operations in the Netherlands; the recent acquisition of CWC and the pending joint venture in the Netherlands and the anticipated benefits, costs and synergies in connection therewith; expectations regarding our share buyback program; and other information and statements that are not historical fact. These forward-looking statements involve certain risks and uncertainties that could cause actual results to differ materially from those expressed or implied by these statements. These risks and uncertainties include the continued use by subscribers and potential subscribers of our services and their willingness to upgrade to our more advanced offerings; our ability to meet challenges from competition, to manage rapid technological change or to maintain or increase rates to our subscribers or to pass through increased costs to our subscribers; the effects of changes in laws or regulation; our ability to maintain certain accreditations; general economic factors; our ability to obtain regulatory approval and satisfy regulatory conditions associated with acquisitions and dispositions; our ability to successfully acquire and integrate new businesses and realize anticipated efficiencies from businesses we acquire; the availability of attractive programming for our video services and the costs associated with such programming; our ability to achieve forecasted financial and operating targets; the outcome of any pending or threatened litigation; the ability of our operating companies to access cash of their respective subsidiaries; the impact of our operating companies' future financial performance, or market conditions generally, on the availability, terms and deployment of capital; fluctuations in currency exchange and interest rates; the ability of suppliers and vendors (including our third-party wireless network providers under our MVNO arrangements) to timely deliver quality products, equipment, software, services and access; our ability to adequately forecast and plan future network requirements including the costs and benefits associated with network expansions; and other factors detailed from time to time in our filings with the Securities and Exchange Commission, including Liberty Global's most recently filed Form 10-K and Form 10-Q. These forward-looking statements speak only as of the date of this release. We expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

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. We invest in the infrastructure that empowers our customers to make the most of the digital revolution. Our 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 over 59 million television, broadband internet and telephony services. We also serve 11 million mobile subscribers and offer 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 our European operations, and the LiLAC Group (NASDAQ: LILA and LILAK, OTC Link: LILAB), which consists of our operations in Latin America and the Caribbean.

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, Mas Movil and BTC. In addition, the LiLAC Group operates a sub-sea fiber network throughout the region in over 30 markets.

For more information, please visit www.libertyglobal.com.

Footnotes

Balance Sheets, Statements of Operations and Statements of Cash Flows

The condensed consolidated balance sheets, statements of operations and statements of cash flows of Liberty Global are included in our 10-Q. For attributed financial information of the Liberty Global Group and the LiLAC Group, see Exhibit 99.1 to our 10-Q.

Revenue and Operating Cash Flow

In the following tables, we present revenue and operating cash flow by reportable segment for the three and six months ended June 30, 2016, as compared to the corresponding prior-year periods. All of our reportable segments derive their revenue primarily from consumer and B2B services, including video, broadband internet and fixed-line telephony services and, with the exception of Puerto Rico, mobile services. For detailed information regarding the composition of our reportable segments, see note 14 to our condensed consolidated financial statements included in our 10-Q.

For purposes of calculating rebased growth rates on a comparable basis for all businesses that we owned during 2016, we have adjusted our historical revenue and OCF for the three and six months ended June 30, 2015 to (i) include the pre-acquisition revenue and OCF of certain entities acquired during 2015 and 2016 in our rebased amounts for the three and six months ended June 30, 2015 to the same extent that the revenue and OCF of such entities are included in our results for the three and six months ended June 30, 2016, (ii) exclude the pre-disposition revenue and OCF of "offnet" subscribers in the U.K. that were disposed in the fourth quarter of 2014 and the first half of 2015 from our rebased amounts for the three and six months ended June 30, 2015 to the same extent that the revenue and OCF of these disposed subscribers is excluded from our results for the three and six months ended June 30, 2016, (iii) exclude the revenue and OCF related to a partner network agreement that was terminated shortly after the Ziggo acquisition from our rebased amounts for the six months ended June 30, 2015 to the same extent that the revenue and OCF from this partner network is excluded from our results for the six months ended June 30, 2016, (iv) exclude the pre-disposition revenue, OCF and associated intercompany eliminations of Film1, which was disposed in the third quarter of 2015, from our rebased amounts for the three and six months ended June 30, 2015 to the same extent that the revenue, OCF and associated intercompany eliminations are excluded from our results for the three and six months ended June 30, 2016, (v) exclude the revenue and OCF of multi-channel multi-point (microwave) distribution system subscribers in Ireland that have disconnected since we announced the switch-off of this service effective April 2016 for the three and six months ended June 30, 2015 to the same extent that the revenue and OCF of these subscribers is excluded from our results for the three and six months ended June 30, 2016 and (vi) reflect the translation of our rebased amounts for the three and six months ended June 30, 2015 at the applicable average foreign currency exchange rates that were used to translate our results for the three and six months ended June 30, 2016. We have included CWC, BASE, Choice and two small entities in whole or in part in the determination of our rebased revenue and OCF for the three and six months ended June 30, 2015. We have reflected the revenue and OCF of the acquired entities in our 2015 rebased amounts based on what we believe to be the most reliable information that is currently available to us (generally pre-acquisition financial statements), as adjusted for the estimated effects of (a) any significant differences between Generally Accepted Accounting Principles in the United States (“GAAP”) and local generally accepted accounting principles, (b) any significant effects of acquisition accounting adjustments, (c) any significant differences between our accounting policies and those of the acquired entities and (d) other items we deem appropriate. We do not adjust pre-acquisition periods to eliminate non-recurring items or to give retroactive effect to any changes in estimates that might be implemented during post-acquisition periods. As we did not own or operate the acquired businesses during the pre-acquisition periods, no assurance can be given that we have identified all adjustments necessary to present the revenue and OCF of these entities on a basis that is comparable to the corresponding post-acquisition amounts that are included in our historical results or that the pre-acquisition financial statements we have relied upon do not contain undetected errors. The adjustments reflected in our rebased amounts have not been prepared with a view towards complying with Article 11 of Regulation S-X. In addition, the rebased growth percentages are not necessarily indicative of the revenue and OCF that would have occurred if these transactions had occurred on the dates assumed for purposes of calculating our rebased amounts or the revenue and OCF that will occur in the future. The rebased growth percentages have been presented as a basis for assessing growth rates on a comparable basis, and are not presented as a measure of our pro forma financial performance. Therefore, we believe our rebased growth rates are not a non-GAAP financial measure as contemplated by Regulation G or Item 10 of Regulation S-K.

In each case, the following tables present (i) the amounts reported by each of our reportable segments for the comparative periods, (ii) the U.S. dollar change and percentage change from period to period and (iii) the percentage change from period to period on a rebased basis:

OCF Definition and Reconciliation

As used herein, OCF has the same meaning as the term "Adjusted OIBDA" that is referenced in our 10-Q. OCF is the primary measure used by our chief operating decision maker to evaluate segment operating performance. OCF is also a key factor that is used by our internal decision makers to (i) determine how to allocate resources to segments and (ii) evaluate the effectiveness of our management for purposes of annual and other incentive compensation plans. As we use the term, OCF is defined as operating income before depreciation and amortization, share-based compensation, provisions and provision releases related to significant litigation and impairment, restructuring and other operating items. Other operating items include (a) gains and losses on the disposition of long-lived assets, (b) third-party costs directly associated with successful and unsuccessful acquisitions and dispositions, including legal, advisory and due diligence fees, as applicable, and (c) other acquisition-related items, such as gains and losses on the settlement of contingent consideration. Our internal decision makers believe OCF is a meaningful measure because it represents a transparent view of our recurring operating performance that is unaffected by our capital structure and allows management to (1) readily view operating trends, (2) perform analytical comparisons and benchmarking between segments and (3) identify strategies to improve operating performance in the different countries in which we operate. We believe our OCF measure is useful to investors because it is one of the bases for comparing our performance with the performance of other companies in the same or similar industries, although our measure may not be directly comparable to similar measures used by other public companies. 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 GAAP measures of income or cash flows. A reconciliation of total segment OCF to our operating income is presented below.

Summary of Debt, Capital Lease Obligations and Cash and Cash Equivalents

The following table¹ details the U.S. dollar equivalent balances of our third-party consolidated debt, capital lease obligations and cash and cash equivalents at June 30, 2016:

Property and Equipment Additions and Capital Expenditures

The tables below highlight the categories of the property and equipment additions attributed to the Liberty Global Group and the LiLAC Group for the indicated periods and reconciles those additions to the capital expenditures that are presented in the attributed statement of cash flows information included in Exhibit 99.1 to our 10-Q:

Liberty Global Group

LiLAC Group

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Free Cash Flow Definition and Reconciliation

We define free cash flow as net cash provided by our operating activities, plus (i) excess tax benefits related to the exercise of share-based incentive awards, (ii) cash payments for third-party costs directly associated with successful and unsuccessful acquisitions and dispositions and (iii) expenses financed by an intermediary, less (a) capital expenditures, as reported in our condensed consolidated statements of cash flows, (b) principal payments on amounts financed by vendors and intermediaries and (c) principal payments on capital leases (exclusive of the portions of the network lease in Belgium and the duct leases in Germany that we assumed in connection with certain acquisitions), with each item excluding any cash provided or used by our discontinued operations. We believe that our presentation of free cash flow provides useful information to our investors because this measure can be used to gauge our ability to service debt and fund new investment opportunities. Free cash flow should not be understood to represent our ability to fund discretionary amounts, as we have various mandatory and contractual obligations, including debt repayments, which are not deducted to arrive at this amount. Investors should view free cash flow as a supplement to, and not a substitute for, GAAP measures of liquidity included in our condensed consolidated statements of cash flows. The following table provides the reconciliation of our net cash provided by operating activities to FCF for the indicated periods:

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ARPU per Customer Relationship⁸

The following table provides ARPU per customer relationship for the indicated periods:

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Mobile Statistics

The following tables provide ARPU per mobile subscriber¹¹ and mobile subscribers¹² for the indicated periods:

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RGUs, Customers and Bundling¹³

The following table provides information on the breakdown of our RGUs and customer base and highlights our customer bundling metrics at June 30, 2016, March 31, 2016, and June 30, 2015:

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