Please stand by. Good day, everyone. You are holding for Liberty Global's second quarter 2022 investor call. Thank you for your patience. The investor call will begin in just a moment. Please note today the call is being recorded, Friday, July 29, 2022. Again, we do thank you for your patience and ask that you please remain on the line. Thank you for standing by, and welcome to Liberty Global's Q2 2022 results call. Your conference call will begin momentarily. Please note today's call is being recorded, Friday, July 29, 2022. We thank you for your patience. The investor call will begin momentarily. Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Liberty Global's second quarter 2022 investor call. Christ. My call just dropped.
We can hear you.
Sorry about that. Good morning, ladies and gentlemen. Thank you for standing by, and welcome to Liberty Global's second quarter 2022 investor call. This call and the associated webcast are the property of Liberty Global, and any redistribution, retransmission, or rebroadcast of this call or webcast in any form without the express written consent of Liberty Global is strictly prohibited. At this time, all participants are in listen-only mode. Today's formal presentation materials can be found under the investor relations section of Liberty Global's website at libertyglobal.com. After today's formal presentation, instructions will be given for a question and answer session. Page two of the slides details the company's safe harbor statement regarding forward-looking statements.
Today's presentation may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including the company's expectations with respect to its outlook and future growth prospects and other information and statements that are not historical fact. These forward-looking statements involve certain risks that could cause actual results to differ materially from those expressed or implied by these statements. These risks include those detailed in Liberty Global's filings with the Securities and Exchange Commission, including its most recently filed Forms 10-Q and 10-K, as amended. Liberty Global disclaims any obligation to update any of these forward-looking statements to reflect any change in expectations or in the conditions on which any such statement is based. I would now like to turn the call over to Mr. Mike Fries. Please go ahead.
All right. Hello, everyone. Thanks for joining us on our second quarter results call. We've got a lot of ground to cover today, so we're gonna jump right into it. Charlie and I will handle the prepared remarks using the presentation we posted, and hopefully you've got in front of you, and then we'll get to your questions. I'm starting on slide three, as I usually do, with five key headlines from the quarter. First of all, it goes without saying that these are challenging times for all of us. Every market is grappling with inflation, higher energy costs, supply chain issues, and concerns about recession. Obviously, we're not immune to these macro conditions as such, and to be clear, we are experiencing some headwinds across our business, principally in energy costs and some emerging signs that consumers are growing fatigued and more price conscious.
On the other hand, having operated through several of these moments before and based upon the strong performance we were able to sustain during the pandemic, we think we're really well positioned to manage through the current environment. The demand for connectivity fixed and mobile has never been stronger, and we don't see anything impacting that long-term secular trend. In fact, we see more positive catalysts for consumption going forward, whether that's smart 5G solutions in the B2B space or the continuation of hybrid working or the proliferation of gaming, adoption of streaming services or whatever ultimately flourishes out of the new metaverse. Secondly, on top of these secular drivers, we have some built-in tailwinds that support our operating and financial momentum. As we've reported, in just about every market, we've been able to adjust our prices to reflect rising inflation and the quality of our connectivity services.
We're also right on track with the realization of significant merger synergies in the U.K. and Switzerland, which combined will ultimately generate annual cash flow benefits to us of nearly $1 billion. We continue to support volume growth and ARPU with innovative products and services across our FMC platforms. I'll talk about that in a second. Third, consistent with these plans to innovate and compete, we have prioritized the continued development of both our fixed and mobile networks. Now as you would have seen, we've announced some, we think, really smart and accretive decisions recently that will solidify our position as FMC champions in these core markets. This includes two recent announcements, the formation of a new infrastructure, NetCo, in Belgium that will slowly migrate Telenet's HFC network to fiber with the support of 60% utilization rates day one and some really smart financing.
Just today, the announcement of our new 50/50 NetCo in the U.K. with InfraVia that will build 5 million and possibly as many as 7 million greenfield fiber homes that will extend Virgin Media O2's reach to over 80% of homes and drive new wholesale and strategic opportunities. These investments in network expansion and upgrade will have varying impacts on free cash flow in the medium term. Assuming Telenet retains the full 67% of the Flemish NetCo and doesn't bring in a financial or strategic partner into that deal, which we think they will, it will consolidate the CapEx and see a decline in free cash flow, as they've explained several times this week. In the U.K., the JV with InfraVia will actually deconsolidate all of our current new build CapEx, which will actually enhance Virgin Media O2's reported free cash flow.
Now, as we've highlighted on our last results call, we've been accelerating our stock buyback activity during the first half of the year. As of today, we've already reached our goal of 10% of the shares outstanding. In order to take advantage of what we think, you know, are really a widening value gap in our stock, we're increasing our buyback commitment today by $400 million. For a total for the year of $1.7 billion or roughly 14% of our shares outstanding at January 1. Then finally and importantly, we're confirming our fiscal year 2022 guidance, and Charlie will walk through that. Turning to slide four. This is our standard slide showing recent connectivity results in broadband and postpaid mobile for our four FMC operations.
Beginning with Virgin Media O2, which delivered 16,000 broadband net adds and 13,000 postpaid mobile adds, both of which are up from the first quarter but below prior year. Now there's a lot of color to add here. On broadband, as you'll recall, we landed our 6.5 price rise in the first quarter, largely in line with our expectations, but in the midst of a slowdown in the overall sector. As it turns out, the market remained subdued in the second quarter, with nationwide broadband sales down an estimated 7% sequentially. In that relatively quiet period, our estimated share of broadband net adds reached over 20% nationally.
That's a new high for us, and that translates into roughly 40% share on our footprint, where average speeds across our base are now 250 Mbps or five times the national average. While broadband churn remains low, we are seeing, as I indicated, some pressure on acquisition ARPUs and retention discounts as the market responds to what is a worsening cost of living situation and competition intensifies. We're confident that we have exactly the right products to keep our momentum and to give customers increased value for money when they need it most. Our U.K. mobile growth strategy is driven by value creation through convergence. We are well positioned to take advantage of the market through our Volt bundle, which is doing everything we hoped it would. It's helping us acquire new Virgin Media O2 customers.
It's adding O2 mobile subs to Virgin Broadband customers, and importantly, it's bringing Virgin Mobile customers over to our premium O2 brand. The combination of these movements resulted in 13,000 net postpaid adds, but that understates true organic growth of the O2 base because it includes significant migration and losses in the Virgin Mobile base. Now, in Switzerland, we've achieved a major milestone with the launch of a new single brand under Sunrise with a promise to dream big and do big. I love that phrase. The energy behind this move is really, really exciting, but we did expect some near-term pressure in broadband sales as we sunset the UPC brand and stop marketing around that. We did see that this past quarter with a stable broadband base.
On the flip side, the rebrand and the new portfolio Sunrise Up did drive increased mobile sales, and it drove a better tier mix that led to another strong quarter with a market-leading 47,000 postpaid adds. It's also worth pointing out that our digital-first, no-frills brand, Yallo, is doing terrifically. It contributed meaningfully to growth in the second quarter. We've been in Switzerland all week with the board. I'm still here now, and the progress André and his team have made, I think is just outstanding. The Swiss market is stable. Swiss consumers are in great shape relative to the rest of Europe, and Sunrise is simply getting it done. Now, VodafoneZiggo reported 49,000 postpaid mobile adds and a loss of 2,000 broadband subs. That was despite an average 3.5% price increase in July and churn remaining relatively low.
These results are actually strong. In mobile, Vodafone continues to have the highest NPS in the market and to lead competitors in mobile net adds. While our broadband base was largely flat in the period, that was our best result in eight quarters, which we attribute to the team's aggressive fiber response plan and a new creative campaign. Fixed churn remains low, but in part due to improvements in broadband capacity and quality and the availability of 1 gig services to 90% of homes. Telenet just reported their results yesterday, so I'll be brief here. The market continues to exhibit low flux but also relatively low churn. For the quarter, Telenet had 8,000 postpaid mobile adds and broadly stable broadband base.
Now, on the positive front, all operators have recently introduced price adjustments, with Telenet's at 4.7%, and that's going to help mitigate competitive pressure on ARPUs. I'll discuss in a minute. Telenet recently announced a deal to create a new infrastructure company with Fluvius. I referenced that already. The punchline for us is that this is going to be a game changer for the market and ensures that Telenet continues to offer the best, fastest, and most innovative services. Now, in a world where broadband speed and mobile platforms are harder and harder to differentiate, the pace and quality of innovation is becoming the most important driver of success.
I can tell you, having evolved our business over the last 20 years from 100% video revenue to a diverse mix of mobile, broadband, entertainment, and B2B, we understand the important role that bundles, brands, and new services play in our business. Slide five just summarizes very briefly how we're doing this in each market today. Rather than discuss this, you know, by country, I'll just throw out some headlines from each category. There's no need to repeat the strategic or operating rationale underlying Fixed-Mobile Convergence, right? Putting fixed and mobile platforms together and generating significant OpEx and CapEx synergies is the easy part. The real magic lies in developing the converged services that excite customers, lower churn, and drive ARPU. We've done that in each of these four countries and continue to push FMC penetration to around 50% and above.
In each case, the formula generally includes faster broadband, more mobile data, another connectivity feature like WiFi Pods or security services or new entertainment offers. Now, despite what you might think, entertainment is increasingly a critical part of the bundle. Some have asked, is it necessary to offer a video service? The answer is yes, especially in Europe, where a significant percentage of customers say that's one reason why they subscribe to our broadband service. Fortunately, we've been integrating streaming apps into our platforms for some time, and customers increasingly rely on us to access their favorite providers. In the U.K., we just took that one step further with the rollout of our new IP device called TV Stream.
It's a puck-sized box that costs GBP 35 up front to the customer and has no monthly charge, and it offers seamless and really beautiful access to the best apps, you know, 40 free channels and of course, all the great Virgin Media O2 television services if you want them. With this launch, we're targeting really a new digital-first segment of viewers and ensuring that our best-in-class broadband remains front and center. We're doing a number of things in the rest of our markets, whether that's entertainment upgrades to Netflix or MySports at Sunrise in Switzerland or, offering exclusive Flemish series in Telenet or VodafoneZiggo offering free access to Ziggo Sport. Now, this will also sound straightforward to you, but rewarding customer loyalty is increasingly a key expectation, and we are right there.
For example, the O2 Rewards program has helped O2 maintain the lowest customer churn in the market by offering our best customers opportunities for extra airtime or money off of tickets to shows. Swiss team has just launched Sunrise Moments, which really is very similar to U.K., and VodafoneZiggo is doing something like that as well. Finally, whether it's sponsoring the national rugby team in the U.K. or becoming the brand-new lead sponsor of the Switzerland national alpine ski team or putting your name on the jersey of Ajax, the most iconic football club in Dutch history, we want customers to know we stand for more than just great connectivity. We are FMC champions. We associate our brands with national champions, and we treat them like champions.
Now, I mentioned up front the progress we've made on our fixed network development plans, and the first slide six here summarizes our recently announced deal with InfraVia to initially build 5 million greenfield fiber to the home homes by 2026, with the possibility of taking that to 7 million. The top left of the chart, if you're looking at it, summarizes the structure of the deal, which will see Liberty and Telefónica invest directly in the JV through a new holding company. We and TEF really thought it was cleaner to use a separate vehicle and move the project off balance sheet. It also preserves Virgin Media O2's capital structure and its capital allocation framework. Now Virgin Media O2 will provide construction and managed services to the new NetCo and will of course be an anchor tenant on the wholesale front.
The 50-50 JV is fully financed with equity and debt committed. Our share of the equity for the 5 million homes will be around GBP 350 million invested over the next 4-5 years. A very reasonable amount of capital. As a reminder, we've already built 3 million new homes in the U.K., which gives us confidence in our ability to execute the build-out at cost, penetrate these new markets and generate a good economic return. That's before we add additional ISPs as potential wholesale customers, which only makes the deal more attractive. There are so many good reasons to move forward here. First, we'll be essentially putting the lightning build engine and the lightning CapEx into this off-balance sheet venture, which will improve Virgin Media O2's free cash flow day one, I mentioned that.
Second, we'll be expanding the reach of Virgin Media O2's converged offering to 21-22 million homes or 80% of the market. Of course, together with our announced upgrade of the existing HFC footprint to fiber, we are really cementing our position as the second national fiber network in the U.K. The JV is well-positioned, this is also important to point out. Well-positioned to capitalize on further consolidation in the fixed market if or when that happens. We're really excited to get this done and look forward to a strong partnership with InfraVia. Now while we're on the subject of upgrades, just a quick update on Ireland, where we just upgraded our first 100,000 homes to fiber and everything is now picking up steam.
As a reminder, this is a very cost-effective build, around EUR 200 per home, which made the decision to go fiber over DOCSIS 4.0 pretty easy. To top it off, we're making really good progress on locking in our first wholesale deal in the market. Now slide seven, you've already heard from John on the Telenet team this week on the new NetCo with Fluvius. I'll just add a few things from our perspective. First of all, we think it's important to call out that this is a long-term upgrade plan, which gives management pretty good flexibility to utilize different technologies or even wholesale fiber from third parties. While it's a EUR 2 billion commitment on paper to get to the 78% coverage, that's dependent on generating good returns along the way.
Secondly, the strategic advantages this creates for Telenet were as interesting and important to us as the operating benefits. This NetCo starts out life with 60% utilization and really reasonable build costs for at least the first half of the network. It's highly likely that a financial or strategic investor will take a look at this, and we all know that the current trading multiples for these type of opportunities is really good. Similarly, this gives Telenet the option to work with strategic partners in the market to ensure the optimal use of capital for all of us, and that consumers are the focal point for innovation and investment. Of course, it also puts Telenet in the pole position to both retain and grow its existing wholesale revenue base, which is substantial. Now one last point here.
There is no read across from Belgium to Holland, some have asked that question, either on strategy or costs. Our Dutch management team is currently really leaning into DOCSIS 4, where costs look very reasonable, EUR 150-200 per home. In the meantime, of course, we're offering 1 gig services to 6 million homes or around 86% of the market, and that'll be 100% by year-end. Finally, I'll wrap it up on slide eight. As I mentioned up front, we're increasing our buyback commitment for 2022 from $1.3 billion to $1.7 billion. This is first and foremost a strong statement that the current market price does not come close to reflecting the inherent value of our company and the strategies we're pursuing.
By December, we'll have retired around 14% of the shares just this year and over 50% since 2017. That level of commitment is supported by our strong financial position, including $1.7 billion of distributable cash flow generation this year and a strong balance sheet. As you know, our debt is siloed, it's long-term, it's fixed rate, so we're largely unaffected by current conditions in the capital markets, and we're sitting on a large cash balance of $3.3 billion of corporate cash today, which should be $3.6 billion by year-end after the increased buyback commitment. That cash balance, we think, is a huge asset for us at times like these.
While we continue to prioritize stock repurchases, as today's announcement clearly demonstrates, we also will stay opportunistic and offensive in our core FMC operations, where we remain the fulcrum platform in every market, driving change, forcing innovation, and creating long-term value for shareholders. Charlie, over to you.
Thanks, Mike. The next slide sets out our revenue performance in Q2. Broadly, we've managed to deliver stable revenues despite a tough macroeconomic climate as price rises across our portfolio begin to feed through into increased revenue growth. Because of its price rises, Virgin Media O2 has returned back to overall revenue growth this quarter, showing in particular strong revenue growth in mobile. Although fixed subscription revenues were broadly stable, a decline in install revenues from circuit installations in our B2B division compared to last year meant overall fixed revenues showed a small decline. In Switzerland, stable revenue growth in the quarter was a mix of continued strong mobile growth, driven by strong volumes across our brands, combined with a decline in fixed revenues. Fixed revenues declined due to ARPU pressure, with some softer volumes in part because of the brand migration from UPC to Sunrise in the quarter.
In the Netherlands, we saw a modest revenue decline year-on-year, driven by ongoing declines in the B2C fixed base, partly offset by strong mobile and B2B revenue growth. The business introduced their blended 3.5% price adjustment in fixed this month, which we expect to improve fixed revenue growth in the second half of the year. In Belgium, Telenet's top line growth continued, driven by the 2021 price adjustment on subscription revenue, strong handset sales, and roaming visitor revenues. Given the price adjustment of 4.7%, which landed in June, we expect further support to the top line in half two as it lands across the majority of the base. Moving on to our adjusted EBITDA performance in the quarter. Virgin Media O2 delivered around 4% EBITDA growth in Q2.
This included a $19 million OpEx cost to capture within the quarter. EBITDA performance was driven by the price adjustment and early synergy realization. We continue to expect EBITDA growth to trend upwards in half two as the impact of the price rises continues to land, as well as the realization of further merger synergies. Sunrise saw EBITDA growth moderate after a strong Q1, with Q2 broadly stable. This was due to higher cost to capture operating costs compared to Q1, and a big part of the $19 million of cost to capture in the quarter was due to the Sunrise rebranding. Excluding the cost to capture, the EBITDA growth was supported by the ongoing benefits from the MVNO migration executed last year. VodafoneZiggo witnessed an EBITDA decline of over 2%, driven by the top line decline and cost inflation, including energy.
The business also stepped up promotional activities for the Ziggo Sprinters campaign in the quarter. Finally, Telenet reported a modest decline in EBITDA, driven by the continued impact of energy and labor costs. Overall, in line with guidance, we expect EBITDA growth to be largely H2-weighted, supported by the mid-June price rise. The next slide has an update on the key inflation and macroeconomic challenges that we discussed last quarter. Firstly, on our energy costs, which typically constitute a low single-digit percentage of operating costs. For 2022, we're now around 90% hedged in terms of our exposure across our operating companies. We also continue to hedge opportunistically for 2023. We're looking to be fully hedged for 2023 by the end of this year. Secondly, wage increases have largely been agreed across our businesses in line with the budget.
However, we continue to monitor the impact on our workforces, given the tight labor markets. Thirdly, although we continue to see some macro-driven pressures on our supply chain, we have managed to leverage our scale and long-standing supplier relationships to manage them well. In response to higher inflation generally, we've implemented a number of price adjustments across our markets, which are generally higher than in prior years. Despite these higher increases, our internal trends currently show that our price rises in the U.K. and Holland have landed successfully with limited churn impact. Finally, we continue to see our integration efforts in the U.K. and Switzerland support profitability, which differentiates us from our competitors given the multi-year synergy runway ahead in two of our biggest markets.
Moving to free cash flow and the key drivers, we delivered $564 million of full company free cash flow on an adjusted and distributable basis in half one. The second quarter was a strong quarter for the distributable free cash flow. It was over $400 million and was supported by dividends from Virgin Media O2 and VodafoneZiggo. Turning to our capital allocation slide and starting with capital intensity on the left-hand side, we're on track relative to our CapEx guidance across the four major opcos in the first half of 2022. As you can see, capital intensity varies across the businesses, and Mike's already covered a number of our updated fixed line network investments, which is a major driver depending on the local strategy.
On mobile, we continue to progress well with 5G, with the opcos at different stages, often driven by the release of spectrum. Swiss coverage is the highest at around 95%, the Dutch are at 80%, with the U.K. and Belgium now starting the rollouts. On a consolidated basis, our CapEx split continues to be around half on product enablers and CPE, and the other half on baseline capacity and new build upgrade. On the right-hand side of the slide, we give an overview of our debt complexes. We believe that these are well hedged and provide significant value to our shareholders. The interest expense on all our debt is 100% fixed. For any variable debt that we raise, such as term loans, we swap to fixed rates to maturity.
For any debt not raised in the currency of the local company, the debt is swapped back into local currency. Our debt is siloed across various debt complexes, that means that even if one company gets into distress, it will not affect the other companies. Virtually all of our loans don't have any covenants. We've also locked into a long-term debt structure with an average life of seven years. Our Swiss franc and euro borrowers have all locked in fixed-rate debt below 4%. In the U.K., where there are higher underlying interest rates, we've locked in seven-year debt at 4.6%. Lastly, turning to ventures. The fair value of the portfolio fell slightly to $3.2 billion, driven primarily by the continued decline in the ITV share price during the quarter.
Now you can find additional detail around our portfolio and the key quarterly movements in the appendix. Turning to our guidance, we're now confirming the guidance of each of our key companies set out on the left-hand side of the page. We're also reconfirming our group guidance for $1.7 billion of distributable free cash flow. This is based on guidance FX, and since we guided, there's been a pressure, particularly on the pound-euro relative to the dollar. Despite this, we continue to track well on free cash flow, as highlighted by the strong Q2 free cash flow performance. Now as a reminder, distributable free cash flow was a new metric we introduced in 2022. That includes both our free cash flow as historically defined and additional cash that we received from our joint ventures from any recapitalizations.
Our distributable 2022 free cash flow forecasts include cash that we expect from a debt raising at Virgin Media O2 as part of their GBP 1.6 billion overall shareholder distribution guidance. Now despite their market volatility, we successfully arranged attractively priced financings to fund the distribution, not least as we have pre-hedged interest rate exposures last year before all the rates started rising. We've continued to execute on our buyback commitment, having already almost closed on the 10% buyback floor that we've been publicly targeting and having bought back 50 million shares year to date.
As Mike mentioned, we're looking to execute another $400 million for the remainder of 2022 and take advantage of what we see as a large value gap in our stock. Our balance sheet position remains strong, with total liquidity of $5.6 billion, including $4.2 billion of consolidated cash, which does include a large cash balance at Telenet coming from the tower proceeds that they made. Given the increase in the buyback by $400 million, we now expect to end the year with around $3.6 billion of corporate cash. So that doesn't include the Telenet cash, the corporate cash, which we can obviously use to support returns for our shareholders. With that operator, let's go to Q&A.
Thank you very much. Ladies and gentlemen, the question and answer session will be conducted electronically. If you would like to ask a question, please do so by pressing the one followed by the four on your phone. To withdraw yourself from the queue, please press one followed by three. In order to accommodate everyone, we request that you ask only one question. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. We'll pause for just a moment to give everyone an opportunity to join the queue. Our first question comes from the line of Steve Malcolm of Redburn. Please proceed with your question.
Yeah, good afternoon, guys. Thanks for taking the question. It was just a question on the U.K. joint venture and the decision to relever it, whether you'd given any thought to not doing that. I mean, it doesn't seem to have benefited the shares, particularly, you know, as we go into tougher economic times, there's an argument that the business would be better off being levered a little bit less lightly than has been the case. It gives options for IPO in the future. Just any thoughts on that and how you think about the leverage going forward, and whether you're gonna try and run it up towards that five-times ceiling or whether a lower level might be more appropriate in these somewhat more challenging economic times. Thanks.
Well, I'll take a crack at that, and Charlie, you can fill in the gaps or André. First of all, thanks for the question, Steve. Listen, the margins on these NetCo structures, as you are probably familiar, very, very high. This NetCo in particular is a light NetCo, meaning that many of the activities are being you know, offloaded to Virgin Media O2 themselves. It's our you know, our belief that the funding structure we've put in place is fairly typical and not overly aggressive at all for these types of platforms. That you know, the equity and the debt together provide all the capital we need to get it done, and that it's certainly consistent with the leverage structure we've implemented elsewhere in the organization on businesses with lower cash flow margins.
It seems appropriate to us.
Mike, can I-
Yeah.
Mike, sorry.
Go ahead.
I was more about Virgin Media O2 leverage rather than the NetCo leverage. You know, the
Okay. You mentioned NetCo.
Sorry.
Sorry.
My, my-
Yeah. Yeah, yeah. No problem.
decision to relever Virgin Media O2.
Yeah. No worries. Charlie, you wanna address leverage overall? Go ahead.
Yeah, sure. Look, I think, first of all, as you know, we've always been very comfortable with 4-5x leverage. Secondly, we are, and this is a great testament, by the way, to Nick Marks and the rest of the treasury team. We've been able to secure some very attractively priced financings, at least for this recap. If you can borrow, you know, at sub-5% type numbers, I think it's pretty attractive for shareholders. We can distribute the cash back to you, and we can drive our higher returns. The long-term shareholder would benefit it. You know, thirdly, I think there's a pretty strong free cash flow cushion and an even bigger one if you wanted it because you could obviously scale back the new build CapEx. I don't think these companies are over-levered.
I do hear you that if one were to IPO in Europe, there is a traditional policy of having a lower leverage. I don't think we're looking at an IPO of the Virgin Media O2, at least in the near term, not least because, you know, the story's coming together very, very nicely. I must say this off-balance-sheet JV that André has done, it's really very impressive. In our minds, no, there's no reason to not leverage up if the money's there at an attractive price. You might have seen with Telenet, we at least felt that it was very important given the dislocation in the market and the fact that we hadn't arranged very attractive financings. They've got a terrific debt stack, low 3% fixed rate, 6+ years.
In that market, I didn't think it was sensible to commit to a dividend policy when you are recapping that business, because you know what? You don't know what the price of the debt will be, and you don't know if it'll be there. So, I think there's a distinction between that, at least in the U.K., if that helps.
Can I just ask one quick follow-up on the NetCo and just how the anchor tenancy works? So do you commit to certain volumes, or is it just best efforts?
There's no minimum volume commitment. We shouldn't get into too many details here. Virgin Media O2 will be an exclusive anchor tenant, and we'll use that network.
There will be a minimum volume commitment that you will have to deliver onto the network. Is that right?
There will not be.
There won't be. No minimum volume. Okay.
Correct.
Okay, perfect. Thanks.
Mm-hmm.
Our next question comes from the line of Luis Lecaros. Please proceed with your question.
How quickly do you think you can start rolling out and getting customers on board given the complexity of planning and supply chains in the U.K.?
Lutz, you wanna address that?
Yeah. We use the time. I mean, maybe three answers here. Number one, right, we have built already 3 million homes, so that means we have a strong relationship with a couple of vendors here helping us to run our own network. Second, right now, with Liberty Global, Telefónica, and the joint venture, we can now give a long-term commitment to these partners, suppliers in the market, and we have used exactly that to ensure already additional tier one suppliers. Now we're able to sign these contracts. You will see from us a jump-start going directly into higher gear after closing of the joint venture.
Thank you.
Our next question coming from the line of James Ratzer of Evercore ISI. Please proceed with your question.
Thank you. I'll continue on the topic of NetCos. I mean, you've done one now in Belgium, and for the expanded footprint in the U.K., can certainly understand the benefits of giving investors, you know, the opportunity to target an infrastructure play who might not find an OpCo, you know, particularly attractive. How do you balance that against the fact that this is creating a wholesale NetCo that would certainly ease competitive entry for, you know, for alternative providers rather than, you know, owning the network essentially entirely yourself and, with the OpCo and having, you know, quasi-monopoly status, particularly in those additional areas you build out?
Well, James, I think in the U.K. it's a pretty easy answer. This is all greenfield territory. It just was with Lightning, when we build a network in the new markets that Virgin Media has been expanding into for years, we get between 25%-30% penetration right away, even though there's other operators or everybody's already marketed that territory. We feel very confident in our ability to penetrate this new greenfield network up to, you know, 7 million homes of it and to penetrate it well. We're not necessarily... Most anybody who joins us on this NetCo infrastructure will already have marketed those territories and have other options for entering those territories. We're not giving anything away here.
You know, any other operators already got access to multiple networks probably or at least one for sure in the territories that we're targeting. If they join us on ours, it just reduces our overall cost and increases our overall return on infrastructure we would be building anyway. It's a no-brainer in the U.K. I think in Telenet's case, remember, they're already opened their network. Telenet's already a wholesale provider on HFC. All they'll be doing is becoming a wholesale provider on fiber over time and retaining and growing that wholesale revenue, which already supports their business. I think in Belgium, it's also makes logical sense.
Just to follow up if I could. When you think about the other parts of the footprint, both JV and wholly owned, does it make sense structurally for the NetCo and the OpCo to be separated if you're not talking about, you know, a footprint expansion, or are those two pieces philosophically better together?
Well, there's pros and cons. The pros are what we're leaning on here in both instances. The pros are you're bringing in typically higher leverage outside capital and an infrastructure focus to an asset class, if you will, that's generally highly valued and in recent times, materially higher multiples than our own business. So there's financial reasons, strategic reasons, and, you know, ideally, in the end, operating reasons for those separations. It doesn't mean it works in every case. Certainly it doesn't work in every case. In, for example, in Switzerland, we're not doing this. In Ireland, we're building fiber, but retaining control of the asset because it's a relatively small investment and a relatively inexpensive build. It's unclear we would be able to attract interest in something that small.
I think, yeah, it's horses for courses, and I think that's the smart and agile way to run a business. You don't come at it with, you know, a blocked view. It's only gonna look like this. You look at the market and then the variables in the market, and you make the decision that creates the most value. I think that's exactly what we're doing.
Thank you. Our next question comes from the line of Sam McHugh of BNP Paribas. Please proceed with your question.
Morning, guys. Just sticking on the U.K., sorry. You mentioned a bit more impact from front load dilution and discounting. When we think about ARPU trends through the year, should we think about them as being pretty similar to this quarter and maybe getting a tiny bit worse? I think in that context, we've all seen the headlines around TalkTalk, and I'm pretty sure you can't comment on it. Strategically, do you think it makes sense to get a bit more exposure to a discount market at this juncture in the kind of macro cycle? Thank you very much.
Well, well, answering your second question would be doing just that, commenting on it. No comment. You wanna handle the first question, Lutz?
Yeah, sure. I mean, we have done the price rise in Q1. Our customers had then a 30-day cancellation period, and we have applied 6.5%. Right? I mean, other market participants have used a different mechanic, meaning a higher price rise, no immediate cancellation, right? They have applied the price rise also for customers who are within their existing promotional period. Therefore, you can from our side say price rise has landed in Q1 as planned, and there's more customers coming off the promotion period over time and will therefore get the price rise during the year. The other thing, Mike has mentioned that, we see both in the acquisition market and also in the retention market a bit more pressure. Yeah. We think that is partly coming from the cost of living crisis.
Meaning that when you look at sales, so acquisition, it's more focused around 50 meg products circling around GBP 20-GBP 25. Then obviously, when there's a lot of advertising of these products in the market, the appetite of existing customers to reduce their monthly bill in the cost of living crisis is low. We see it a little bit, and it's hard to predict how this will develop during the course of the year. We are not seeing a destabilization of our queue, if that helps.
Thank you, Lutz.
Thank you. Our next question comes from the line of Robert Grindle of Deutsche Bank. Please proceed with your question.
Yeah, hi there. Hope you can hear me. Sticking with the U.K., how would it work if there was M&A in the fiber JV footprint? Is it that you'd swap CapEx for an acquisition and not build in those areas, or could the footprint grow by more than the 7 million by M&A? If, say, Virgin Media O2 bought more customers onto the JV, you're more successful in getting the penetration up. Do you just get the value of that through the equity stake, or do you get a sort of an earn out as penetration moves up? Thank you.
Yeah, that's a good question, Rob. I'd say in your first question, all the above, you know, in terms of how that would work in the M&A structure. We would and I think we say that I said that in my remarks. This JV could certainly make acquisitions of existing altnets and, if they were interested or if it made sense and there was, you know, regulatory and financial support for the decision. And I think, you know, we're uniquely positioned to do that with three partners who have capital and understand the business very well. Let's see how things unfold. That's one of the interesting upsides here for sure. On the second question, you know, there aren't that many customer bases to buy, so I wouldn't even comment on it.
I mean, most of the altnets don't have retail operations, or if they do, they're quite small. I'm not sure in the case of altnets, that would be material.
Yeah, I was referring to a regular retail ISP, actually.
I know you were.
Thanks.
Yeah. Thank you.
Thank you. Our next question comes from the line of David Wright of Bank of America. Please proceed with your question.
Yeah, thank you very much. Perhaps just a little more top-down, Mike. We've talked about strategy over the last few years. Very clear that you guys executed deals to build the, you know, the FMC champions. Then there was always this potential to consider local listings to open up the, you know, the asset and investment opportunity to guys who maybe can't sort of acquire the U.S. holdco. It does feel like that's maybe that opportunity has perhaps been moved on a little. I know the NetCo, ServCo question earlier, you know, is that perhaps a better route now to sort of unlocking value is to start, you know, bringing some of the infrastructure assets together?
I know you didn't go into this JV with Virgin Media O2. You went with TEF as equity shareholders. Then I guess just a part two on the sort of NetCo concept. You know, the one thing we are noting is that a lot of telcos are doing this. You mentioned it's similar to other deals, but what it is tending to do is bring complexity into the equity case, which is bringing increasing conglomerate discounts. Of course, you are essentially shifting away from NetCo to ServCo 'cause you are selling part of your infrastructure, and that means ultimately a derating of your multiple. I know that you very often talk about the market disconnecting your share price with the value of your company, but is this not compromising that to some extent?
I'd be interested in your thoughts. Thank you.
Yeah, those are really good questions, David. I think on the second one, I don't think it is compromising our goal. Let's just take the U.K. for example. It's an incremental investment on top of a core FMC business that we believe has, you know, immense tailwinds, whether they're synergy-driven, brand-driven or operating driven. You know, we make that argument all day long. You'll put whatever multiple you think it's worth. We'll think it's higher and we know it is. Having said that, this particular expansion of the network is incremental and on top of that, and we believe, as you've already indicated, you could generate potentially higher multiples if we ever brought in additional financial partners or did some sort of roll-up or things of that nature.
I think it's the best of both worlds, where we're actually strengthening the core FMC business, validating what we think value is in that core FMC business by giving it room to expand and grow its footprint in a really cost efficient and we think accretive structure. Now it might be slightly different. I understand your point, perhaps differently in Belgium, where you're taking a business and breaking it in two, if you will. You know, what does that look like and how would that be ultimately valued? I think even in that instance, I mean, Telenet's trading as an integrated company at a pretty low multiple today, you would know. You know, over time, let's see how these strategies unfold. We're pretty bullish on what John's pursuing.
We think the ServCo will be, you know, valued at a particular number based on its ability to retain and grow customers. If I know the Telenet management team, they're gonna kick some butt and ensure that Telenet remains the primary brand for consumers in that market, no matter what network they're using or who owns the network. If I know this, you know, this team like I do, they're gonna make sure this NetCo, together with their financial and strategic partners, is, you know, the fulcrum and most important NetCo network in that marketplace. The only way to pull it together with Fluvius was to do it like this. Fluvius didn't have an interest in public stock or anything else.
Part of it was circumstance in that market, but part of it, I think, is the right strategic outcome. It's not the same in every case. As I said just a moment ago, it's not as if we're gonna pursue this in every instance, but it's our job to look at every market differently, to see what is the right way to create value, to crystallize value and to demonstrate value, but also, most importantly, to sit back and make an argument that this is gonna increase the core business over time. Then how you perceive it or the market perceives it, well, you know, we'll take our chances with that.
We know that both these transactions fundamentally grow the core business that we're invested in, and the structures we're using to do that are, we think, accretive both to today's values or multiples, and that should play out over time, just as we think. In terms of listings, listen, there is. It's not a great market to be talking about IPOs. You know, I don't know that we're saying we won't be doing it ever or in any instance. I just think it's obvious that with the current environment, we're not prioritizing it. Both, you know, our core businesses need time, especially in the U.K. and Switzerland, to mature and demonstrate the core benefits of both synergies and growth that we know they can demonstrate. We'll come back to that question if, you know, if and when it makes sense.
It obviously doesn't make sense now, but we never say never. We're not shutting the door on those ideas. We're just understandably focusing on other strategies. We have a very interesting infrastructure portfolio. Not to go on too long here, but you mentioned infra as really an asset class. You know, we've developed some very interesting investments in infrastructure. You know, Telefónica has their own infra platform. Is it possible that we would look at some point to build or combine the ownership of these infrastructure businesses? Possibly. You know us. I mean, we look at everything. That's what we get paid to do, is to be sure we're always looking out for shareholders and trying to figure out what will create the most value for us together.
That certainly could be an idea down the road we'd investigate.
Thank you. Our next question comes from the line of Polo Tang of UBS. Please proceed with your question.
Yeah, hi. Thanks for taking the question. Maybe just focusing on Switzerland. Can you maybe talk through the competitive dynamics in the market and what has been the reception to the new tariff portfolios from all the operators? You've flagged softening trends in terms of fixed line, but how optimistic are you that this can improve going forward? Thanks.
Sure. André is on the line. André, why don't you take that?
Yeah, thanks for the question, Polo. So firstly, I would say the competitive dynamics in the first half year have been changing a bit, but restoring to recent levels, based on the, I would say, portfolio refresh that we have seen. Why is that? We have seen that in the first quarter throughout the second quarter, up until beginning of May, promotion intensity was reducing and we were following that trend. But then with the new portfolio of Swisscom, we have seen that while the promotion intensity has come down, Swisscom has introduced structured discounts like for example, the online benefit which customers could sign up for, which has increased their competitive position, especially on the front book.
As such, we were forced to also bring up our promotion intensity again a bit in order to keep the pace in the market. I would say that we have been at the beginning of the year, which is not what we have hoped for, but it's the reality and we are not giving up on that. The fixed soft that you are referring to is very much driven by the consolidation of the brands, and that starts with sunsetting of the UPC brand, which obviously we have started to reduce our commercial activities on that brand a bit earlier and are now ramping up again, the full fixed intake on the new portfolio. I can say I'm pretty happy with the performance that we are seeing on the new portfolio. It does exactly what it should.
It drives more bundled sales, and of course it will continue to fine-tune it in order to get back to the initial momentum that we made at the beginning of the year on fixed. On mobile, we are continuing to doing well as you can see from the numbers.
Thank you very much.
I'll just repeat real quickly what I said at the outset in the remarks, which is this market, Switzerland is really unique. It's almost living in a bubble here. Inflation is, you know, low single digits. Interest rates have maintained. I think they're just now at zero. Consumer, you know, confidence is, you know, remains higher than other markets. Switzerland always seems to perform really well in difficult times and, you know, it's a, I think a safe haven and such, but we're certainly glad to have a lot of capital invested here, and I think that's just giving, André and his team a lot of tailwinds to keep managing the business well.
Thank you. Our next question comes from the line of James Ratzer of New Street Research. Please proceed with your question.
Yes, good afternoon, guys. So the question I had was just with regards to the buyback. Obviously, I mean, applaud the decision that you're allocating more capital towards the buyback. When you sat down at the board level and thought about the extra $400 million you were gonna commit, I'd just be interested to understand what other choices you looked at. In particular, did you not feel it was interesting this time to look at buying equity in Telenet, which has come down by more than the Liberty Global share price? If I could just ask for a point of clarity on an earlier question from Steve around, you said no volume commitments from Virgin Media O2. Can I just ask what commitments, if anything, you are making to the new joint venture? Because you say anchor tenant.
I just wanna try understand therefore what anchor actually means in this sense and, you know, what security the debt lenders are therefore getting in the new joint venture. Thank you.
Yeah, on the second question, and André, you step in here if I'm misunderstanding, but on the second question, we're basically agreeing to use this network and nobody else's. Remember, as we've rolled out the 3 million homes that we now have historically called Lightning, you know, we have been exclusive, obviously users of our own network in that context and getting 25%-30% penetration. In a sense, you know, the lenders or partners can, to some extent bank on the fact that we are going to be aggressive marketers on this footprint as we have been on the prior 3 million homes, and they can take comfort that we'll get to a certain level of penetration, and we won't use anyone else's network. I think that's what André means, in that context.
On the buyback, we always look at different options and choices. It's never, you know, a singular decision. We're always allocating capital. Just, you know, in this announcement around the U.K., we will be putting capital into that joint venture. You know, we've got the ventures portfolio. We're always looking at the most, you know, efficient way to put our capital to work, and buybacks is one of many of those ideas, but it's always a fundamental approach that we take to both creating value and a capital allocation. We haven't looked at Telenet as such, but I don't disagree with you. I think, you know, Telenet is poised to improve from here, no question about it.
They've answered all of the outstanding issues for the most part around the JV and then the NetCo they've created. I think they're not stressed about a potential fourth entrant. You know, I think in their capital markets day, they'll clarify many of these things. You know, I think Telenet certainly is undervalued, and for the first time, probably trading at a lower multiple than we are. That's unusual and probably unlikely to remain. Let's hope for all of our sakes. We look at all different types of things. I'm not gonna comment specifically on what we might be looking at vis-à-vis Telenet.
That's all great. Thanks, Mike.
Okay, you got it.
Okay, thank you.
Thank you. Our next question comes from the line of Ulrich Rathe of Jefferies & Company. Please proceed with your question.
Yeah, thank you very much. Question on the U.K., the operational side of things. It sounds like the fixed price rise was about a two percentage point tailwind, whereas the ARPU trend improved by a quarter of that, roughly, painted with very broad brush stroke. Question, can that drop through improve later in the year? What are the mechanics of that relatively minor drop through of the incremental price increase versus last year? Thank you.
Yeah, go ahead, Lutz.
Yeah. I'm not sure if I can add so much color to it and if I understood the question right. I mean, we, as I said before, right? We have landed the price rise in Q1. The customers have had the cancellation, right? And that is gone. Therefore it is implemented. Now customers who used to be on a promotional period, when they come off that, will also get the price rise. During the year, the ARPU will grow out of that effect, right? Then there's another effect that is that if we keep acquiring customers with lower acquisition ARPU, which we have done, yeah, so you can see that. You can see also that the acquisition market as such was under pressure.
If we are forced to give higher retention discount, and we have also done that, then that eats obviously into this ARPU increase. Now therefore, it's a bit dependent on the cost of living crisis, I would say predominantly, not only, but predominantly. Therefore, we are very careful giving a guidance on that going forward. Yeah. I think the good thing is that, right, we have a lot of growth levers besides that, right? We are fully materializing the synergies. 130% end of this year from 540, and we are probably on track to do so. We are digitalizing our business. We have an increased benefit out of that.
Now with the fiber joint venture, obviously, right, we have a faster network expansion, meaning for Virgin Media, we can broadband, we can sell more of it. Because now, right, a possible wholesale partner has immediately a speed advantage getting to one gig speed in 6 million homes and has now the security to have future-proof network with 21 million homes latest 2028. This itself is also another growth wave which will come for sure. Therefore, I think on one hand side, we are a bit affected by the cost of living crisis, and it's hard to predict. I mean, we can show a growing top line in that. Second, we are sitting on three growth waves which are very tangible and solid to serve, and this is what we are doing.
That's helpful. Can I just clarify one aspect of your answer? What you didn't mention was more aggressive retention discounts. Can I just confirm you haven't upped the retention discounts in this price rise here?
No. The retention discounts during the price rise were exactly the same like a year ago. Also, the retention volume was the same. This is year-on-year the same. What we are seeing more starting in Q2 is, irrespective of price rise, a higher appetite to renegotiate the contract down to a higher discount from simply customers coming out of their minimum contract period, right? This is completely irrespective of price rise because they have had the 30 days unexceptional cancellation right, but they haven't used that. That has landed in Q1, as I said before, in the same way than a year ago. What we are seeing now is a bit higher demand for retention discounts. This is now the question, how is that going to progress going forward, right?
That's the question, and therefore, we are a bit careful. Does that help?
Yeah. Thanks. Yeah, I think it does help.
Thank you.
I think, operator. Are we at time, or are we taking one more, guys?
We're at time.
Okay, awesome. Listen, thanks for sticking with us. We know it went a little bit over. Apologize for that. You know, I like Lutz's phrase, growth waves, 'cause we've got those really in all of our businesses. I think, number one, we're, you know, able to power through this macro environment really well in the businesses that we're in. I think you know that. You've seen us do that in the past. We've got tailwinds in many markets around synergies or new brands or new products that I think are gonna benefit us in the second half.
I think just as importantly, we're demonstrating to you again that we're good at optimizing capital and allocating capital, and our fixed network strategies that we've announced in the last couple weeks are right in line with that approach, and I think will be, you know, highly accretive to us operationally and financially, today and down the road. Then lastly, you know, we're all about buying our stock. You know, the increase shouldn't have surprised you 'cause we've been sort of signaling it, and we're, you know, committed, of course, to the 10% next year as well. It gives you some comfort that we're gonna keep this program moving. Thanks for joining us, and we'll speak to you soon. Take care. Have a good summer. Bye-bye.
Thank you, ladies and gentlemen. This concludes Liberty Global's second quarter 2022 investor call. As a reminder, a replay of the call will be available in the investor relations section of Liberty Global's website. There, you can also find a copy of today's presentation materials. We thank you for your participation and ask that you please disconnect your lines. Have a great rest of the day, everyone.