v3.10.0.1
Dispositions and the VodafoneZiggo JV Transaction
 12 Months Ended
Dec. 31, 2018
Discontinued Operations and Disposal Groups [Abstract]  
Dispositions and the VodafoneZiggo JV Transaction Dispositions and the VodafoneZiggo JV Transaction

Pending and Completed Dispositions

Vodafone Disposal Group

On May 9, 2018, we reached an agreement (the Vodafone Agreement) to sell our operations in Germany, Hungary, the Czech Republic and Romania to Vodafone Group plc (Vodafone). The cash proceeds that we receive from the transaction will be calculated on the basis of the agreed enterprise value adjusted for the net debt and working capital of such businesses as of the closing date of the transaction, as well as other post-closing adjustments. Based on the net debt and working capital of such businesses as of December 31, 2017, the cash proceeds would be approximately €10.6 billion ($12.1 billion). The operations of Germany, Romania, Hungary and the Czech Republic are collectively referred to herein as the “Vodafone Disposal Group.”

Closing of the transaction is subject to various conditions, including regulatory approval, which we expect will be obtained in mid-2019. The Vodafone Agreement contains certain termination rights for both our company and Vodafone, including if closing has not occurred by November 9, 2019, or May 9, 2020 in certain limited circumstances. If the Vodafone Agreement terminates because the condition to obtain antitrust approval is not met, Vodafone has agreed to pay us a compensatory payment of €250.0 million ($286.3 million). Pursuant to the Vodafone Agreement, our company will retain all cash generated from the Vodafone Disposal Group through the closing of the transaction.

In connection with the sale of the Vodafone Disposal Group, we have agreed to provide certain transitional services for a period of up to four years. These services principally comprise network and information technology-related functions. The annual charges will depend on the actual level of services required by Vodafone.

UPC Austria

On July 31, 2018, we completed the sale of our Austrian operations, “UPC Austria,” to Deutsche Telekom AG (Deutsche Telekom). After considering debt, working capital and noncontrolling interest adjustments and $35.5 million (equivalent at the transaction date) of cash paid by our company to settle centrally-held vendor financing obligations associated with UPC Austria, we received net cash proceeds of $2,058.2 million (equivalent at the applicable rates). A portion of the net proceeds were used to repay or redeem an aggregate $1.5 billion (equivalent at the applicable dates) principal amount of our outstanding debt, including (i) the repayment of $913.4 million (equivalent at the repayment date) principal amount under the UPC Holding Bank Facility, (ii) the redemption of $69.6 million (equivalent at the redemption date) principal amount of the UPCB SPE Notes and (iii) the redemption of $515.5 million (equivalent at the redemption date) principal amount of the VM Notes. The remaining net proceeds from the sale of UPC Austria were made available for general corporate purposes, including an additional $500.0 million of share repurchases, as further described in note 13.

In connection with the sale of UPC Austria, we recognized a gain of $1,098.1 million that includes cumulative foreign currency translation gains of $79.5 million. No income taxes were required to be provided on this gain, which is included in gain on disposal of discontinued operations, net of taxes, in our consolidated statement of operations.

In connection with the sale of UPC Austria, we have agreed to provide certain transitional services to Deutsche Telekom for a period of up to four years. These services principally comprise network and information technology-related functions. The annual charges will depend on the actual level of services required by Deutsche Telekom. During 2018, we recorded revenue of $17.9 million associated with these transitional services.

UPC DTH

On December 21, 2018, we reached an agreement (the UPC DTH Agreement) to sell the operations of UPC DTH to M7 Group (M7) for an enterprise value of approximately €180 million ($206 million), subject to customary debt and working capital adjustments at completion. Closing of the transaction is subject to regulatory approval, which is expected in the first half of 2019. The proceeds from the sale of UPC DTH are expected to be used for general corporate purposes, which may include leverage reduction for the remaining UPC Holding borrowing group, re-investment into our business and support for our share repurchase program.

In connection with the sale of UPC DTH, we have agreed to provide certain transitional services to M7 for a period of up to two years. These services principally comprise network and information technology-related functions. The annual charges will depend on the actual level of services required by the purchaser.

Subsequent event

Subsequent to December 31, 2018, we entered into an agreement to sell our operations in Switzerland. For additional information, see note 21.

Split-off Transaction

On December 29, 2017, in order to effect the split-off of the LiLAC Group (the Split-off Transaction), we distributed 100% of the common shares (the Distribution) of Liberty Latin America Ltd. (Liberty Latin America) to the holders of our then outstanding LiLAC Shares. Just prior to the completion of the Split-off Transaction, all of the businesses, assets and liabilities of the LiLAC Group were transferred to Liberty Latin America, which was then a wholly-owned subsidiary of Liberty Global. Following the Distribution, the LiLAC Shares were redesignated as deferred shares (which had virtually no economic rights) and Liberty Latin America became an independent publicly-traded company that is no longer consolidated by Liberty Global. No gain or loss was recognized in connection with the Split-off Transaction.

In connection with the Split-off Transaction, we entered into several agreements that govern certain transactions and other matters between our company and Liberty Latin America (the Split-off Agreements). The following summarizes the material agreements:

•
a reorganization agreement (the Reorganization Agreement), which provides for, among other things, the principal corporate transactions (including the internal restructuring) required to effect the Split-off Transaction, certain conditions to the Split-off Transaction and provisions governing the relationship between Liberty Global and Liberty Latin America with respect to and resulting from the Split-off Transaction;

•
a tax sharing agreement (the Tax Sharing Agreement), which governs the parties’ respective rights, responsibilities and obligations with respect to taxes and tax benefits, the filing of tax returns, the control of audits and other tax matters;

•
a services agreement (the Services Agreement), pursuant to which, for up to two years following the Split-off Transaction, with the option to renew for a one-year period, Liberty Global will provide Liberty Latin America with specified services, including access to Liberty Global’s procurement team and tools to leverage scale and take advantage of joint purchasing opportunities, certain management services, other services to support Liberty Latin America’s legal, tax, accounting and finance departments, and certain technical and information technology services (including software development services associated with Horizon TV, our next generation multimedia home gateway, management information systems, computer, data storage, and network and telecommunications services);

•
a sublease agreement (the Sublease Agreement), pursuant to which Liberty Latin America will sublease office space from Liberty Global in Denver, Colorado until May 31, 2031, subject to customary termination and notice provisions; and

•
a facilities sharing agreement (the Facilities Sharing Agreement), pursuant to which, for as long as the Sublease Agreement remains in effect, Liberty Latin America will pay a fee for the usage of certain facilities at the office space in Denver, Colorado.

During 2018, the impacts of the Split-off Agreements and other normal recurring transactions between our company and Liberty Latin America were not material.

Presentation of Discontinued Operations

The operations of the Vodafone Disposal Group, UPC Austria and UPC DTH are presented as discontinued operations in our consolidated financial statements for all periods. In connection with the signing of each respective sale agreement, we ceased to depreciate or amortize the long-lived assets of (i) UPC Austria on December 22, 2017, (ii) the Vodafone Disposal Group on May
9, 2018 and (iii) UPC DTH on December 21, 2018. Our operations in Romania, Hungary and the Czech Republic and the operations of UPC DTH are held through UPC Holding, as was UPC Austria prior to its sale on July 31, 2018. No debt, interest expense or derivative instruments of the UPC Holding borrowing group, other than with respect to certain borrowings that are direct obligations of the entities to be disposed, has been allocated to discontinued operations. Conversely, all of Unitymedia’s debt, interest expense and derivative instruments are included in discontinued operations as its debt and derivative instruments are direct obligations of entities within the Vodafone Disposal Group. As discussed above, a portion of the proceeds from the disposition of UPC Austria was used to reduce the outstanding debt of the UPC Holding borrowing group, and we expect that a portion of the proceeds from the pending disposition of the Vodafone Disposal Group will be used to further reduce the outstanding debt of the UPC Holding borrowing group.

In addition, the entities comprising the LiLAC Group are reflected as discontinued operations in our consolidated statements of operations and cash flows for the years ended December 31, 2017 and 2016.

The carrying amounts of the major classes of assets and liabilities of the Vodafone Disposal Group and UPC DTH as of December 31, 2018 are summarized below. These amounts exclude intercompany assets and liabilities that are eliminated within our consolidated balance sheet.
 
Vodafone Disposal Group
 
UPC DTH
 
Total
 
in millions
Assets:
 
 
 
 
 
Current assets other than cash
$
348.0

 
$
8.5

 
$
356.5

Property and equipment, net
5,591.4

 
79.7

 
5,671.1

Goodwill
3,986.7

 
—

 
3,986.7

Other assets, net
509.4

 
7.4

 
516.8

Total assets
$
10,435.5

 
$
95.6

 
$
10,531.1

 
 
 
 
 
 
Liabilities:
 
 
 
 
 
Current portion of debt and capital lease obligations
$
809.0

 
$
11.2

 
$
820.2

Other accrued and current liabilities
1,114.8

 
32.5

 
1,147.3

Long-term debt and capital lease obligations
9,037.1

 
37.5

 
9,074.6

Other long-term liabilities
997.5

 
0.3

 
997.8

Total liabilities
$
11,958.4

 
$
81.5

 
$
12,039.9


The carrying amounts of the major classes of assets and liabilities of UPC Austria, the Vodafone Disposal Group and UPC DTH as of December 31, 2017 are summarized below. These amounts exclude intercompany assets and liabilities that are eliminated within our consolidated balance sheet.
 
UPC Austria
 
Vodafone Disposal Group
 
UPC DTH
 
Total
 
in millions
Assets:
 
 
 
 
 
 
 
Current assets other than cash
$
29.2

 
$
238.9

 
$
7.9

 
$
276.0

Property and equipment, net
451.9

 
5,290.1

 
96.3

 
5,838.3

Goodwill
732.2

 
4,181.0

 
—

 
4,913.2

Other assets, net
3.2

 
482.7

 
—

 
485.9

Total assets
$
1,216.5

 
$
10,192.7

 
$
104.2

 
$
11,513.4

 
 
 
 
 
 
 
 
Liabilities:
 
 
 
 
 
 
 
Current portion of debt and capital lease obligations
$
0.8

 
$
486.9

 
$
12.6

 
$
500.3

Other accrued and current liabilities
77.7

 
1,022.3

 
35.6

 
1,135.6

Long-term debt and capital lease obligations
1.5

 
9,026.1

 
46.4

 
9,074.0

Other long-term liabilities
76.3

 
863.7

 
0.4

 
940.4

Total liabilities
$
156.3

 
$
11,399.0

 
$
95.0

 
$
11,650.3


The operating results of UPC Austria, the Vodafone Disposal Group, UPC DTH and the LiLAC Group for the periods indicated are summarized in the following tables. These amounts exclude intercompany revenue and expenses that are eliminated within our consolidated statements of operations.
 
UPC Austria (a)
 
Vodafone Disposal Group
 
UPC DTH
 
Total
 
in millions
Year ended December 31, 2018
 
 
 
 
 
 
 
Revenue
$
252.4

 
$
3,584.2

 
$
117.0

 
$
3,953.6

Operating income
$
139.0

 
$
1,787.0

 
$
11.7

 
$
1,937.7

 
 
 
 
 
 
 
 
Earnings before income taxes
$
138.7

 
$
1,396.3

 
$
9.6

 
$
1,544.6

Income tax benefit (expense)
(23.3
)
 
(365.2
)
 
7.3

 
(381.2
)
Net earnings
115.4

 
1,031.1

 
16.9

 
1,163.4

Net earnings attributable to noncontrolling interests
(4.2
)
 
—

 
—

 
(4.2
)
Net earnings attributable to Liberty Global shareholders
$
111.2

 
$
1,031.1

 
$
16.9

 
$
1,159.2

_______________

(a)
Includes the operating results of UPC Austria from January 1, 2018 through July 31, 2018, the date UPC Austria was sold.

 
UPC Austria
 
Vodafone Disposal Group
 
UPC DTH
 
LiLAC Group
 
Total
 
in millions
Year ended December 31, 2017
 
 
 
 
 
 
 
 
 
Revenue
$
394.9

 
$
3,263.0

 
$
114.6

 
$
3,590.0

 
$
7,362.5

Operating income (loss)
$
150.0

 
$
976.0

 
$
11.7

 
$
(162.9
)
 
$
974.8

 
 
 
 
 
 
 
 
 
 
Earnings (loss) before income taxes
$
150.0

 
$
395.4

 
$
9.7

 
$
(651.1
)
 
$
(96.0
)
Income tax expense
(4.5
)
 
(66.1
)
 
—

 
(204.0
)
 
(274.6
)
Net earnings (loss)
145.5

 
329.3

 
9.7

 
(855.1
)
 
(370.6
)
Net loss (earnings) attributable to noncontrolling interests
(6.8
)
 
—

 
—

 
20.6

 
13.8

Net earnings (loss) attributable to Liberty Global shareholders
$
138.7

 
$
329.3

 
$
9.7

 
$
(834.5
)
 
$
(356.8
)

 
UPC Austria
 
Vodafone Disposal Group
 
UPC DTH
 
LiLAC Group
 
Total
 
in millions
Year ended December 31, 2016
 
 
 
 
 
 
 
 
 
Revenue
$
378.3

 
$
3,068.2

 
$
107.4

 
$
2,723.8

 
$
6,277.7

Operating income
$
143.0

 
$
748.4

 
$
7.3

 
$
315.3

 
$
1,214.0

 
 
 
 
 
 
 
 
 
 
Earnings (loss) before income taxes
$
142.6

 
$
256.2

 
$
5.4

 
$
(98.1
)
 
$
306.1

Income tax expense
(18.3
)
 
(41.7
)
 
—

 
(129.1
)
 
(189.1
)
Net earnings (loss)
124.3

 
214.5

 
5.4

 
(227.2
)
 
117.0

Net earnings attributable to noncontrolling interests
(7.9
)
 
—

 
—

 
(28.3
)
 
(36.2
)
Net earnings (loss) attributable to Liberty Global shareholders
$
116.4

 
$
214.5

 
$
5.4

 
$
(255.5
)
 
$
80.8


Our basic and diluted earnings from discontinued operations attributable to Liberty Global shareholders per Liberty Global Share (as defined in note 13) for 2018, 2017 and 2016 is presented below. These amounts relate to the operations of UPC Austria, the Vodafone Disposal Group and UPC DTH. For information regarding the calculation of our weighted average shares outstanding with respect to Liberty Global Shares, see note 3.
 
Year ended December 31,
 
2018
 
2017
 
2016
 
 
 
 
 
 
Basic earnings from discontinued operations attributable to Liberty Global shareholders per Liberty Global share
$
1.49

 
$
0.56

 
$
0.38

 
 
 
 
 
 
Diluted earnings from discontinued operations attributable to Liberty Global shareholders per share
$
1.49

 
$
0.56

 
$
0.37

Our basic and diluted loss from discontinued operations attributable to Liberty Global shareholders per LiLAC Share (as defined in note 13) for 2017 and 2016 is presented below. These amounts relate to the operations of the LiLAC Group.
 
Year ended December 31,
 
2017
 
2016
 
 
 
 
Basic and diluted loss from discontinued operations attributable to Liberty Global shareholders per LiLAC share
$
(4.86
)
 
$
(2.30
)
 
 
 
 
Weighted average ordinary shares outstanding (LiLAC Shares) - basic and diluted
171,846,133

 
110,868,650



VodafoneZiggo JV Transaction

On December 31, 2016, pursuant to a Contribution and Transfer Agreement with Vodafone and one of its wholly-owned subsidiaries, we and Liberty Global Europe Holding B.V., our wholly-owned subsidiary, contributed VodafoneZiggo Holding and its subsidiaries (including Liberty Global Netherlands Content B.V., referred to herein as “Ziggo Sport”) to VodafoneZiggo Group Holding B.V., a 50:50 joint venture (referred to herein as the “VodafoneZiggo JV”). Ziggo Sport, which became a subsidiary of VodafoneZiggo Holding during the fourth quarter of 2016, operates premium sports channels in the Netherlands. The VodafoneZiggo JV combined VodafoneZiggo Holding with Vodafone’s mobile businesses in the Netherlands to create a national unified communications provider in the Netherlands with complementary strengths across video, broadband internet, fixed-line telephony, mobile and B2B services (the VodafoneZiggo JV Transaction). As a result of the VodafoneZiggo JV Transaction, effective December 31, 2016, we no longer consolidate VodafoneZiggo Holding. For additional information regarding our investment in the VodafoneZiggo JV, see note 7.

On January 4, 2017, in connection with the completion of the VodafoneZiggo JV Transaction, our company received cash of €2.2 billion ($2.4 billion at the transaction date) comprising (i) our 50% share of the €2.8 billion ($2.9 billion at the transaction date) of net proceeds from the various debt financing arrangements entered into by certain subsidiaries of VodafoneZiggo Holding during the third quarter of 2016, which proceeds were held in escrow through December 31, 2016, and (ii) an equalization payment from Vodafone of €802.9 million ($840.8 million at the transaction date) that was subject to post-closing adjustments. During the second quarter of 2017, the equalization payment amount was finalized, resulting in the receipt of an additional €3.9 million ($4.5 million at the transaction date) from Vodafone.
In connection with the VodafoneZiggo JV Transaction, we recognized a pre-tax gain during 2016 of $520.8 million, net of the recognition of a cumulative foreign currency translation loss of $714.5 million. This gain, which was calculated by deducting the carrying value of VodafoneZiggo Holding (including the related foreign currency translation loss) from the sum of (i) the fair value assigned to our 50% interest in the VodafoneZiggo JV and (ii) the cash received pursuant to the equalization payment, includes $260.4 million related to the remeasurement of our retained investment in VodafoneZiggo Holding. In connection with the aforementioned finalization of the equalization payment, we recognized an additional pre-tax gain of $4.5 million during the second quarter of 2017. For information regarding our approach to the valuation of our interest in the VodafoneZiggo JV, see note 9.

Our consolidated statement of operations for 2016 includes an aggregate loss before income taxes attributable to VodafoneZiggo Holding and Ziggo Sport of $276.4 million.