8-K: Liberty Global Provides Preliminary Q1 2024 Financials for Sunrise Holding and VM Ireland

Liberty Global released preliminary, unaudited financial and operating results for its Sunrise Holding Group and VM Ireland for the first quarter of 2024, showing mixed performance across both segments.

Summary

• Liberty Global has released preliminary Q1 2024 results for its Sunrise Holding Group, which includes operations in Switzerland and Slovakia, and VM Ireland, which operates in Ireland.
• VM Ireland reported a 1.2% year-over-year decrease in revenue to 113.3 million, with a 4.9% decrease in Adjusted EBITDA to 36.8 million.
• VM Ireland experienced a 4.2% YoY decrease in residential fixed revenue, but a 3.9% increase in mobile subscription revenue.
• VM Ireland's net earnings increased by 257.1% YoY to 5.5 million, primarily due to gains on derivative instruments.
• VM Ireland's property and equipment additions increased by 17.5% YoY to 36.3 million, driven by fiber upgrades and off-net programs.
• Sunrise Holding reported a 4.4% YoY increase in revenue to 797.9 million, but a 0.1% decrease on a rebased basis.
• Sunrise Holding's Adjusted EBITDA increased by 4.7% YoY to 261.4 million, or 0.2% on a rebased basis.
• Sunrise Holding's net loss decreased by 90.8% YoY to 130.1 million, mainly due to foreign currency losses and gains on derivatives.
• Sunrise Holding's property and equipment additions were 17.5% of revenue.
• Sunrise Holding's Adjusted EBITDA less P&E Additions increased by 11.7% YoY to 122.1 million, or 7.4% on a rebased basis.
• Both groups have significant debt, with VM Ireland's Net Total Debt to Annualized EBITDA at 5.23x and Sunrise Holding's at 5.13x, both excluding certain credit facility amounts.
• VM Ireland had 100 million of undrawn commitments available, while Sunrise Holding had 707 million available.

Sentiment

Score: 5

Explanation: The sentiment is neutral to slightly negative due to mixed results. While there are some positive aspects like growth in mobile subscribers and fiber upgrades, the overall revenue and EBITDA performance is concerning, especially for VM Ireland. The high debt levels also add a layer of caution.

Positives

• VM Ireland's net earnings saw a significant increase of 257.1% year-over-year, reaching 5.5 million.
• VM Ireland's mobile subscription revenue increased by 3.9% year-over-year.
• VM Ireland made progress on its full fiber upgrade project, with over a third of the network upgraded.
• Sunrise Holding's revenue increased by 4.4% year-over-year.
• Sunrise Holding's Adjusted EBITDA increased by 4.7% year-over-year.
• Sunrise Holding's net loss decreased significantly by 90.8% year-over-year.
• Sunrise Holding achieved strong net growth in broadband driven by increased customer loyalty.
• Sunrise Holding's mobile postpaid net additions were 26,000 in Q1.
• Sunrise Holding's Adjusted EBITDA less P&E Additions increased by 11.7% year-over-year.

Negatives

• VM Ireland's revenue decreased by 1.2% year-over-year.
• VM Ireland's Adjusted EBITDA decreased by 4.9% year-over-year.
• VM Ireland experienced a 4.2% year-over-year decrease in residential fixed revenue.
• VM Ireland's fixed customer net losses were 1,300 in Q1.
• VM Ireland's Adjusted EBITDA less P&E Additions decreased by 93.6% year-over-year.
• Sunrise Holding's revenue decreased by 0.1% year-over-year on a rebased basis.
• Sunrise Holding's Adjusted EBITDA increased by only 0.2% year-over-year on a rebased basis.
• Sunrise Holding's fixed customer relationships decreased by 800 in Q1 2024.
• Sunrise Holding's customer ARPU decreased by 1.0% year-over-year.

Risks

• VM Ireland's elevated capital expenditure spend is impacting financial performance in the short term.
• VM Ireland's revenue is being negatively impacted by lower fixed and handset revenues.
• Sunrise Holding's revenue and Adjusted EBITDA growth is being impacted by a competitive environment and lower handset revenues.
• Both VM Ireland and Sunrise Holding have significant debt levels, with Net Total Debt to Annualized EBITDA ratios above 5x.
• The competitive environment is impacting Sunrise's customer ARPU.
• The spin-off of Sunrise is subject to risks and uncertainties.

Future Outlook

Sunrise Holding confirms its 2024 financial guidance, expecting broadly stable revenue, stable to low-single-digit growth in Segment Adjusted EBITDA, and Adjusted FCF of CHF 360-400 million. VM Ireland's elevated capex spend is expected to continue impacting financial performance through 2024 as they invest in future growth.

Management Comments

• Tony Hanway, CEO of VM Ireland, stated that they continued to make good progress on key growth initiatives and saw improvements across both fixed and mobile acquisition channels.
• Tony Hanway also noted the launch of wholesale network access to Vodafone customers and the upgrade of more than a third of their network to full fiber.
• Andr Krause, CEO of Sunrise, commented that they started 2024 with a strong operational and solid financial result and are well on track to meet their 2024 guidance.
• Andr Krause also mentioned the expectation of positive effects from operational cost optimization in the following quarters and the upcoming listing on the Swiss stock exchange.

Industry Context

The results reflect the ongoing investments in fiber upgrades and network expansion across the telecommunications industry. The competitive environment is impacting pricing and customer acquisition, requiring companies to focus on customer loyalty and cost optimization. The move towards converged services (fixed and mobile) is also evident in both VM Ireland and Sunrise Holding's strategies.

Comparison to Industry Standards

• VM Ireland's revenue decline of 1.2% is not uncommon in the competitive European telecom market, where companies like Vodafone and Telefonica are also facing challenges in fixed-line revenue.
• VM Ireland's fiber upgrade progress is comparable to other European operators investing in next-generation networks, such as Deutsche Telekom and Orange.
• Sunrise Holding's 4.4% revenue growth is solid compared to some of its European peers, but the rebased flat growth indicates underlying challenges.
• Sunrise Holding's mobile postpaid net additions of 26,000 are a positive sign, but the overall fixed customer losses highlight the need for improved customer retention strategies.
• The debt levels of both VM Ireland and Sunrise Holding are relatively high, which is typical for capital-intensive telecom businesses, but the leverage ratios are something to monitor closely compared to peers like Swisscom and Salt.

Stakeholder Impact

• Shareholders may be concerned about the revenue and EBITDA declines at VM Ireland and the high debt levels of both groups.
• Employees at VM Ireland may be impacted by the ongoing cost optimization efforts.
• Customers of VM Ireland will benefit from the fiber upgrades and new service offerings.
• Customers of Sunrise Holding will benefit from improved customer service and new product offerings.
• Suppliers and vendors may be impacted by the capital expenditure plans of both groups.

Next Steps

• VM Ireland will continue its full fiber upgrade project and off-net expansion.
• VM Ireland will launch the Backing Business Community campaign.
• Sunrise Holding will continue to focus on customer loyalty and cost optimization.
• Sunrise Holding is planning for a spin-off and listing on the Swiss stock exchange in Q4.
• Both groups will complete their Q1 compliance reporting requirements.

Key Dates

Keywords

Liberty Global, Sunrise Holding, VM Ireland, Financial Results, Q1 2024, Broadband, Mobile, Fiber Upgrade, EBITDA, Revenue, Net Debt, ARPU