8-K: Liberty Global Provides Preliminary Q2 Results for Sunrise and VM Ireland

Liberty Global released preliminary unaudited financial and operating results for its Sunrise Holding Group and VM Ireland for the quarter ended June 30, 2024.

Summary

• Liberty Global has released preliminary Q2 2024 results for Sunrise Holding Group and VM Ireland.
• VM Ireland saw a 1.9% year-over-year decrease in revenue to 111.5 million, with a 32.3% decrease in net earnings to 10.9 million.
• VM Ireland's Adjusted EBITDA decreased by 2.1% year-over-year to 42.5 million.
• VM Ireland's B2B revenue increased by 15.4% year-over-year to 10.5 million, driven by entry into wholesale access.
• VM Ireland added 254,000 premises through an off-net program with National Broadband Ireland (NBI).
• VM Ireland upgraded nearly 40% of its premises to full fiber by the end of Q2.
• Sunrise Holding Group's revenue increased by 1.1% year-over-year to 769.5 million, while net loss increased by 12.3% to 75.0 million.
• Sunrise Holding Group's Adjusted EBITDA increased by 1.3% year-over-year to 271.8 million.
• Sunrise Holding Group achieved 5,000 net broadband customer additions and 32,900 mobile postpaid net additions in Q2.
• Sunrise Holding Group's fixed-mobile convergence penetration reached 59%, an increase of 0.9% year-over-year.
• Sunrise Holding Group is on track for a spin-off in Q4, with a Capital Markets Day scheduled for September 9 in Zurich.
• Sunrise Holding Group's 2024 financial guidance includes broadly stable revenue and stable to low-single-digit growth in Adjusted EBITDA.

Sentiment

Score: 5

Explanation: The sentiment is neutral to slightly negative due to mixed results. While there are positive aspects like B2B growth and fiber upgrades, the significant decreases in net earnings and increased net losses raise concerns. The forward guidance is stable, but not overly optimistic.

Positives

• VM Ireland's B2B revenue saw a significant increase of 15.4% year-over-year.
• VM Ireland expanded its market reach by adding 254,000 premises through the NBI partnership.
• VM Ireland made substantial progress in its fiber upgrade program, reaching nearly 40% of premises.
• Sunrise Holding Group achieved positive broadband net adds for the second consecutive quarter.
• Sunrise Holding Group experienced an acceleration in mobile postpaid growth, with 32,900 net additions.
• Sunrise Holding Group's fixed-mobile convergence penetration continues to grow, reaching 59%.

Negatives

• VM Ireland's overall revenue decreased by 1.9% year-over-year.
• VM Ireland's net earnings decreased significantly by 32.3% year-over-year.
• VM Ireland's Adjusted EBITDA decreased by 2.1% year-over-year.
• VM Ireland experienced fixed customer net losses of 4,100 in Q2.
• Sunrise Holding Group's net loss increased by 12.3% year-over-year.
• Sunrise Holding Group's Adjusted EBITDA less P&E Additions decreased by 8.8% year-over-year.

Risks

• VM Ireland's financial performance is being impacted by growth investments.
• VM Ireland's fixed customer net losses were impacted by elevated churn and a fixed price rise.
• Sunrise Holding Group's net loss increased due to lower realized and unrealized losses on derivative instruments, a decrease in foreign currency gains, and an increase in income tax expense.
• Sunrise Holding Group's customer ARPU decreased by 0.8% year-over-year due to the competitive environment.
• The price increase effect for Sunrise will no longer be visible in the second half of the year.

Future Outlook

Liberty Global anticipates the full 100.0 million of borrowing capacity will continue to be available for VM Ireland. Sunrise Holding Group expects broadly stable revenue and stable to low-single-digit growth in Adjusted EBITDA for 2024. Sunrise is on track for a spin-off in Q4.

Management Comments

• Tony Hanway, CEO of VM Ireland, stated they made significant progress on strategic priorities during the second quarter.
• Tony Hanway highlighted the partnership with National Broadband Ireland (NBI) and the fiber upgrade program.
• Tony Hanway noted that overall financial performance continues to be impacted by growth investments.
• Andr Krause, CEO of Sunrise, commented that they strengthened commercial momentum and reduced the churn rate significantly.
• Andr Krause stated that they achieved net customer growth in broadband for the second quarter in a row.
• Andr Krause confirmed that they remain on track with their financial results and fully confirm their 2024 guidance.
• Andr Krause mentioned that preparations for the spin-off are progressing according to plan.

Industry Context

The results reflect the ongoing trends in the telecommunications industry, including the push for fiber upgrades, the importance of B2B revenue streams, and the competitive pressures on customer acquisition and retention. The partnership between VM Ireland and NBI is an example of strategic collaborations to expand network reach. The planned spin-off of Sunrise is a strategic move to unlock value and focus on core operations.

Comparison to Industry Standards

• VM Ireland's revenue decline of 1.9% is not uncommon in the competitive telecom market, but the 32.3% drop in net earnings is a concern and may be worse than some peers.
• VM Ireland's B2B growth of 15.4% is a positive sign, indicating a successful diversification strategy, which is in line with industry trends.
• The fiber upgrade program at VM Ireland, with nearly 40% of premises upgraded, is a significant achievement, comparable to other European operators investing in next-generation networks.
• Sunrise Holding Group's 1.1% revenue growth is modest, but the 1.3% increase in Adjusted EBITDA is a positive indicator of operational efficiency, although the net loss increase is a concern.
• Sunrise Holding Group's broadband net adds of 5,000 and mobile postpaid net adds of 32,900 are solid results, showing a positive trend in customer acquisition, which is better than some competitors in the Swiss market.
• The fixed-mobile convergence penetration of 59% at Sunrise is a strong indicator of successful bundling strategies, which is a key focus for many telecom operators globally.
• The planned spin-off of Sunrise is a strategic move similar to other telecom companies that have divested non-core assets to focus on core operations and unlock shareholder value.

Stakeholder Impact

• Shareholders may be concerned about the decrease in net earnings and increased net losses.
• Customers of VM Ireland will benefit from the expanded network reach and fiber upgrades.
• Customers of Sunrise Holding Group will benefit from increased broadband speeds and improved mobile services.
• Employees of both groups may be affected by the ongoing strategic changes and cost optimization efforts.

Next Steps

• VM Ireland will continue to focus on its fiber upgrade program and the NBI partnership.
• Sunrise Holding Group will proceed with preparations for its spin-off in Q4.
• Sunrise Holding Group will hold a Capital Markets Day on September 9 in Zurich.
• Both groups will continue to focus on customer acquisition and retention.

Key Dates

Keywords

Liberty Global, Sunrise Holding Group, VM Ireland, broadband, fiber, mobile, EBITDA, revenue, net earnings, customer growth, fixed-mobile convergence, B2B, wholesale access