v3.10.0.1
Investments
 12 Months Ended
Dec. 31, 2018
Investments [Abstract]  
Investments Investments

The details of our investments are set forth below:
 
 
December 31,
Accounting Method
 
2018
 
2017
 
in millions
Equity (a):
 
 
 
VodafoneZiggo JV (b)
$
3,761.5

 
$
4,162.8

Other (c)
185.5

 
161.8

Total — equity
3,947.0

 
4,324.6

Fair value:
 
 
 
ITV plc (ITV) — subject to re-use rights
634.2

 
892.0

ITI Neovision S.A. (ITI Neovision)
125.4

 
161.9

Lions Gate Entertainment Corp (Lionsgate)
77.5

 
163.9

Casa Systems, Inc. (Casa)
39.5

 
76.3

Sumitomo Corporation (Sumitomo) (d)
—

 
776.5

Other
298.2

 
244.7

Total — fair value
1,174.8

 
2,315.3

Cost (e)
—

 
31.5

Total
$
5,121.8

 
$
6,671.4


_______________

(a)
At December 31, 2018, the carrying amount of our equity method investment in the VodafoneZiggo JV exceeded our proportionate share of that entity’s net assets by the amount of the VodafoneZiggo JV Receivable, as defined and described below. The carrying amounts of our other equity method investments did not materially exceed our proportionate share of the respective investee’s net assets at December 31, 2018 and 2017.

(b)
Amounts include a related-party euro-denominated note receivable (the VodafoneZiggo JV Receivable) with a principal amount of $916.1 million and $1,081.9 million, respectively, due from a subsidiary of the VodafoneZiggo JV to a subsidiary of Liberty Global. The VodafoneZiggo JV Receivable bears interest at 5.55% and required €100.0 million ($114.5 million) of principal to be paid annually through December 31, 2019. In this regard, in December 2018, we received a €100.0 million ($114.5 million at the transaction date) principal payment on the VodafoneZiggo JV Receivable. In 2018, the agreement was amended to (i) eliminate the requirement to pay an annual principal payment of €100.0 million in 2019 and (ii) extend the final maturity date from January 16, 2027 to January 16, 2028. The accrued interest on the VodafoneZiggo JV Receivable will be payable in a manner mutually agreed upon by Liberty Global and the VodafoneZiggo JV. During 2018, interest accrued on the VodafoneZiggo JV Receivable was $59.6 million, all of which was cash settled. For information regarding the impact of the adoption of ASU 2014-09 on our accumulated deficit and our investment in the VodafoneZiggo JV, see note 2.

(c)
Amounts include our equity method investment in a media production company that we refer to as “All3Media”, for which summarized financial information has been provided below. All3Media is a joint venture in which we own a 50% interest.

(d)
At December 31, 2017, we owned 45,652,175 shares of Sumitomo common stock, representing less than 5% of the then outstanding common stock. During 2018, we used all of these shares to settle the outstanding amounts under certain related borrowings.

(e)
As a result of the January 1, 2018 adoption of ASU 2016-01, all of our cost investments have been reclassified to fair value investments.


Equity Method Investments

The following table sets forth the details of our share of results of affiliates, net:
 
Year ended December 31,
 
2018
 
2017
 
2016
 
in millions
 
 
 
 
 
 
VodafoneZiggo JV (a)
$
11.4

 
$
(70.1
)
 
$
—

Other
(20.1
)
 
(25.1
)
 
(111.6
)
Total
$
(8.7
)
 
$
(95.2
)
 
$
(111.6
)
_______________

(a)
Amounts include the net effect of (i) 100% of the interest income earned on the VodafoneZiggo JV Receivable, (ii) 100% of the share-based compensation expense associated with Liberty Global awards held by VodafoneZiggo JV employees who were formerly employees of Liberty Global, as these awards remain our responsibility, and (iii) our 50% share of the remaining results of operations of the VodafoneZiggo JV.

VodafoneZiggo JV. Each of Liberty Global and Vodafone (each a “Shareholder”) holds 50% of the issued share capital of the VodafoneZiggo JV. The Shareholders intend for the VodafoneZiggo JV to be funded solely from its net cash flow from operations and third-party financing. We account for our 50% interest in the VodafoneZiggo JV as an equity method investment. We consider the VodafoneZiggo JV to be a related party. For additional information regarding the formation of the VodafoneZiggo JV, see note 6.

In connection with the formation of the VodafoneZiggo JV, the Shareholders entered into a shareholders agreement (the Shareholders Agreement). The Shareholders Agreement contains customary provisions for the governance of a 50:50 joint venture that result in Liberty Global and Vodafone having joint control over decision making with respect to the VodafoneZiggo JV.

The Shareholders Agreement also provides (i) for a dividend policy that requires the VodafoneZiggo JV to distribute all unrestricted cash to the Shareholders every two months (subject to the VodafoneZiggo JV maintaining a minimum amount of cash and complying with the terms of its financing arrangements) and (ii) that the VodafoneZiggo JV will be managed with a leverage ratio of between 4.5 and 5.0 times EBITDA (as calculated pursuant to its existing financing arrangements) with the VodafoneZiggo JV undertaking periodic recapitalizations and/or refinancings accordingly.

Each Shareholder has the right to initiate an initial public offering (IPO) of the VodafoneZiggo JV after December 31, 2019, with the opportunity for the other Shareholder to sell shares in the IPO on a pro rata basis. Subject to certain exceptions, the Shareholders Agreement prohibits transfers of interests in the VodafoneZiggo JV to third parties until December 31, 2020. After December 31, 2020, each Shareholder will be able to initiate a sale of all of its interest in the VodafoneZiggo JV to a third party and, under certain circumstances, initiate a sale of the entire VodafoneZiggo JV, subject, in each case, to a right of first offer in favor of the other Shareholder.

During the first quarter of 2017, we paid $162.6 million of VAT on behalf of the VodafoneZiggo JV associated with the termination of a services agreement with Ziggo Group Holding B.V. that was in effect prior to the closing of the VodafoneZiggo JV Transaction. This advance was repaid during the first quarter of 2017. In addition, during 2018 and 2017, we received dividend distributions from the VodafoneZiggo JV of $232.5 million and $252.8 million, respectively, which were accounted for as returns on capital for purposes of our consolidated statements of cash flows.

Pursuant to an agreement entered into in connection with the formation of the VodafoneZiggo JV, (the Framework Agreement), Liberty Global provides certain services to the VodafoneZiggo JV on a transitional or ongoing basis (collectively, the JV Services). The JV Services provided by Liberty Global consist primarily of (i) technology and other services and (ii) capital-related expenditures for assets that will be used by, or will otherwise benefit, the VodafoneZiggo JV. Liberty Global charges both fixed and usage-based fees to the VodafoneZiggo JV for the JV Services provided during the term of the Framework Agreement. During 2018 and 2017, we recorded revenue from the VodafoneZiggo JV of $189.1 million and $132.4 million, respectively, primarily related to (a) the JV Services and (b) during 2018, sales of customer premises equipment at a mark-up. In addition, during 2018 and 2017, we purchased certain assets on the VodafoneZiggo JV’s behalf with an aggregate cost of $13.1 million and
$144.7 million, respectively. At December 31, 2018 and 2017, $24.4 million and $33.3 million, respectively, were due from the VodafoneZiggo JV, primarily related to the aforementioned and certain other transactions. These amounts due from the VodafoneZiggo JV, which are periodically cash settled, are included in other current assets in our consolidated balance sheets.

The VodafoneZiggo JV is experiencing significant competition. In particular, the mobile operations of the VodafoneZiggo JV continue to experience competitive pressure on pricing, characterized by aggressive promotion campaigns, heavy marketing efforts and increasing or unlimited data bundles. In light of this competition, as well as regulatory and economic factors, we could conclude in future periods that our investment in the VodafoneZiggo JV is impaired or management of the VodafoneZiggo JV could conclude that an impairment of the VodafoneZiggo JV goodwill and, to a lesser extent, long-lived assets, is required. Any such impairment of the VodafoneZiggo JV’s goodwill or our investment in the VodafoneZiggo JV would be reflected as a component of share of results of affiliates, net, in our consolidated statement of operations. Our share of any such impairment charges could be significant.

The summarized results of operations of the VodafoneZiggo JV are set forth below:
 
Year ended December 31,
 
2018
 
2017
 
in millions
 
 
 
 
Revenue
$
4,602.2

 
$
4,512.5

Loss before income taxes
$
(467.8
)
 
$
(362.9
)
Net loss
$
(91.6
)
 
$
(259.3
)

The summarized financial position of the VodafoneZiggo JV is set forth below:
 
December 31,
 
2018
 
2017
 
in millions
 
 
 
 
Current assets
$
1,099.6

 
$
823.4

Long-term assets
22,155.7

 
24,076.8

Total assets
$
23,255.3

 
$
24,900.2

 
 
 
 
Current liabilities
$
2,812.3

 
$
2,631.7

Long-term liabilities
14,751.5

 
16,110.4

Owners’ equity
5,691.5

 
6,158.1

Total liabilities and owners’ equity
$
23,255.3


$
24,900.2



All3Media. The summarized results of operations of All3Media are set forth below:
 
Year ended December 31,
 
2018
 
2017
 
2016
 
in millions
 
 
 
 
 
 
Revenue
$
892.3

 
$
769.8

 
$
649.1

Loss before income taxes
$
(46.8
)
 
$
(49.3
)
 
$
(96.6
)
Net loss
$
(58.6
)
 
$
(51.6
)
 
$
(91.0
)

The summarized financial position of All3Media is set forth below:
 
December 31,
 
2018
 
2017
 
in millions
 
 
 
 
Current assets
$
532.6

 
$
409.4

Long-term assets
681.0

 
748.0

Total assets
$
1,213.6

 
$
1,157.4

 
 
 
 
Current liabilities
$
458.0

 
$
389.1

Long-term liabilities
766.2

 
718.8

Partners’ equity
2.7

 
46.6

Noncontrolling interests
(13.3
)
 
2.9

Total liabilities and equity
$
1,213.6

 
$
1,157.4

    
Fair Value Investments

ITV. At December 31, 2018 and 2017, we owned 398,515,510 shares of ITV, a commercial broadcaster in the U.K. Our ITV shares represented less than 10.0% of the total outstanding shares of ITV as of June 30, 2018, the most current publicly-available information. The aggregate purchase price paid to acquire our investment in ITV was financed through borrowings under secured borrowing agreements (the ITV Collar Loan). All of the ITV shares we hold are subject to a share collar (the ITV Collar) and pledged as collateral under the ITV Collar Loan. Under the terms of the ITV Collar, the counterparty has the right to re-use all of the pledged ITV shares. For additional information regarding the ITV Collar, see note 8.

ITI Neovision. At December 31, 2018 and 2017, we owned a 17.0% interest in ITI Neovision, a privately-held DTH operator in Poland.

Lionsgate. At December 31, 2018 and 2017, we owned 2.5 million voting and 2.5 million non-voting shares of Lionsgate common stock, originally purchased at a price of $39.02 per share, for an investment of $195.1 million. The aggregate purchase price of the Lionsgate shares was financed using working capital, including $70.9 million of cash received pursuant to a variable prepaid forward transaction with respect to 1.25 million of our voting and 1.25 million of our non-voting Lionsgate shares (the Lionsgate Forward). At December 31, 2018, our Lionsgate shares represented less than 5% of the total outstanding shares of Lionsgate. For additional information regarding the Lionsgate Forward, see note 8.

Casa. At December 31, 2018 and 2017, we owned 3,005,307 and 4,432,870 shares, respectively, of Casa common stock. Casa is a U.S.-based provider of fixed, mobile, optical and Wi-Fi network software solutions for ultra-broadband services. Our Casa shares represented less than 5.5% of the total outstanding shares of Casa as of October 31, 2018, the most current publicly-available information.