Liberty Global Reports Second Quarter 2006 Results

Liberty Global Reports Second Quarter 2006 Results

Organic RGU Additions of 363,000

Operating Cash Flow Growth to $568 million

$1 billion Self Tender Offers Announced

DENVER, Aug. 9 /PRNewswire-FirstCall/ -- Liberty Global, Inc. ("Liberty Global") (NASDAQ:LBTYA)(NASDAQ:LBTYB)(NASDAQ:and)(NASDAQ:LBTYK), today announces financial and operating results for the second quarter ended June 30, 2006. Highlights for the period, compared to last year's second quarter results, include(1):

* Organic(2) net additions of 363,000 RGUs, a 58% increase from our
subscriber growth in Q2'05
* Revenue growth of 46% to $1.59 billion
* Operating cash flow (OCF) growth of 54% to $568 million(3)
* Loss from continuing operations of $184 million compared to a loss of
$109 million

Discussing the results, Liberty Global's President and CEO Mike Fries stated, "Consistent with our cable peers, we continue to demonstrate strong fundamental trends in our core cable business, as evidenced by our solid second quarter results. Our success in driving bundled products, largely due to recent VoIP launches and strong broadband Internet sales, drove net organic RGU additions of 363,000 in the quarter, and we are carrying excellent operating momentum into the second half of the year."

"Our second quarter financial results were also strong. We generated revenue and OCF of $1.59 billion and $568 million, respectively, which represent growth rates of 46% and 54% over the comparable period last year. More importantly, these figures represent approximately 11% revenue growth and 17% OCF growth, rebased for acquisitions and foreign currency effects(4). We believe our performance provides us with the momentum to achieve or exceed our full year guidance targets. If we exclude the results from our Netherlands operation, where we have an aggressive digital migration program underway, we would have delivered rebased OCF growth of 23% in the quarter. Regionally, both Cablecom (Switzerland) and our Central and Eastern European operation had outstanding quarters with rebased OCF growth rates in excess of 30% and 20%, respectively. In addition, our consolidated OCF margin in the quarter was approximately 35.8%, an improvement of 170 basis points over last year and indicative of our ability to drive scale economies throughout our business."

"Our digital roll out (D4A)(5) in the Netherlands continues largely on track, and we continue to be encouraged by the consumer acceptance of our video product. At June 30, 2006, we had 345,500 digital RGUs which represents a digital penetration rate of 16% as compared to digital penetration of only 4% at year end 2005. In addition, approximately 50% of our digital customers are taking an extra channel package and/or another pay TV product from us. As we look to the second half of 2006, we are excited about the upcoming new product introductions in the Netherlands of high definition (HD) programming, digital video recorders (DVRs) and video-on-demand (VOD) services, all of which we expect to launch soon and which should positively impact consumer acceptance."

"We had a strong second quarter with 363,000 RGU additions during the period, which is traditionally a seasonally soft period for us in Europe. We continue to aggressively market bundled products, as we added over 130,000 triple-play customers during the quarter, and now have over 25% of our customer base taking multi-product bundles. Strategically, we are striving to drive our RGU per customer relationship ratio, which currently is approaching 1.4x, meaningfully higher. In particular, our European business represents an excellent growth opportunity, as we drive UPC Broadband toward the bundling ratios that we have achieved in our Japanese and Chilean markets of 1.75x and 1.70x, respectively."

"On the M&A front, we have made substantial progress, recently closing on the sales of UPC Sweden and UPC France for total gross proceeds of approximately $2.0 billion. Additionally, we completed infill acquisitions in Japan and just recently, we entered into an arrangement to purchase Karneval s.r.o. and Forecable s.r.o. (Karneval), the second largest cable provider in the Czech Republic for an estimated purchase price of EURO322.5 million, subject to regulatory approval. This business is highly complementary with our existing Czech business and highlights our commitment to the region."

"We continue to believe that we are significantly undervalued, particularly in relation to the prices and recent transactions in the European cable sector. As a result, we will continue to shrink our equity base, in conjunction with continued opportunistic acquisitions and divestitures. During the quarter, we repurchased approximately $630 million of our stock through a combination of open market purchases and, in aggregate, $500 million in tender offers, and we still have approximately $120 million remaining under our previously authorized program. More importantly, today we are announcing an aggregate $1 billion in modified dutch auction tender offers for our own stock, which we expect to launch on or shortly after August 11, 2006. Following completion of the tender offers and adjusting for both the sale of UPC France and the purchase of Karneval, we will still have significant liquidity with over $1.4 billion of consolidated cash and cash equivalents."

Specifics on Tender Offers

We intend to purchase up to approximately $500 million each of our Series A (LBTYA) and Series C (LBTYK) common stock at ranges of $22.00 to $25.00 for Series A and $21.43 to $24.35 for Series C. This represents a 1.9% discount to a 11.5% premium to our closing share prices on Wednesday, August 9, 2006.

Second Quarter 2006 Results

At June 30, 2006, Liberty Global operated in 17 countries (excluding France) principally located in Europe, Japan, Chile and Australia. Our consolidated operations in Europe include the UPC Broadband Division, with cable operations in 11 countries (excluding France), and chellomedia -- our media and programming division. In the Asia/Pacific region, our consolidated operations include J:COM, the largest broadband cable operator in Japan, and Austar, a direct-to-home satellite provider in Australia. In the Americas, our primary consolidated operation is VTR, the largest broadband cable operator in Chile. Please refer to the appropriate sections herein for additional segment financial information. It is also important to note that for all periods discussed in this release, UPC France, UPC Norway, UPC Sweden and PT Norway have been sold and accounted for as discontinued operations and, as such, their respective results are excluded from our reported results herein.

Operating Statistics

Our continuing operations had over 17.8 million total RGUs at June 30, 2006, after taking into account our organic increase of 363,000 RGU additions during the quarter. These organic RGU additions represent a 58% improvement from last year's second quarter additions driven by continued strength across all three of our core products. Together with approximately 28,000 RGUs from acquisitions, we added over 390,000 RGUs in the period from continuing operations. It should be noted that the second and third quarters are typically our slowest seasonally in terms of net additions, due to the summer vacation period in Europe.

In terms of RGU additions by product, during the second quarter of 2006 we added 174,000 high-speed Internet subscribers, 156,000 telephony subscribers, and 33,000 net video subscribers. Organic broadband Internet and telephony subscriber growth in the quarter increased 44% and 58%, respectively, from our net additions for these categories in the prior year period. Broadband Internet continued to be our strongest performer in absolute terms, driven by solid performance in Chile, Japan, the Netherlands and Romania. In Europe, our penetration of broadband Internet now exceeds 20% across our operations.

In terms of telephony, our low-cost, high-quality VoIP products continued to be the driving force behind our voice additions, as we added 156,000 organic telephony subscribers in the quarter. As of the end of the second quarter, we offered VoIP in ten markets, with plans to launch in the Slovak Republic and Ireland during the second half of the year. We currently have a total VoIP customer base exceeding 750,000 RGUs and our total VoIP-ready homes serviceable now exceeds 10 million worldwide, a sequential increase of over 1.3 million homes from the first quarter of 2006.

In terms of video, our subscriber base increased organically by approximately 33,000 video subscribers, primarily as a result of 314,000 digital cable (including conversions from analog) and 15,000 DTH additions in the second quarter. Our digital additions for the quarter increased 163% over the same period last year. In particular, we continue to experience strong acceptance of our digital product in Japan and Chile, and we accelerated our D4A initiative in the Netherlands during the second quarter. In the Netherlands, we added 136,600 digital subscribers in Q2'06, an increase of 11% from our digital additions of 123,600 in Q1. In Japan, J:COM added over 78,000 organic digital subscribers during the quarter and improved its digital penetration to 44%, up from 40% in Q1'06 and 26% in Q2'05. The recent increase was driven in part by strong demand for its new HD digital video recorder product.

Revenue

Revenue for the three months ended June 30, 2006 increased 46% to $1.59 billion as compared to the same period last year. Excluding the effects of foreign currency movements (FX), revenue increased 48% for the three months ended June 30, 2006 as compared to the same period last year. Our revenue increase was principally due to the impact of acquisitions, including Cablecom and Austar, as well as to volume effects (subscriber growth) across our core operations. Our rebased revenue growth for the second quarter was approximately 11% compared to the same period last year. This growth was driven primarily by higher average RGUs during the period including solid growth at Cablecom, as well as a strong performance at our Central and Eastern European and Chilean operations, which achieved rebased growth rates of 16% and 17%, respectively.

In terms of average monthly revenue (ARPU)(6) per customer relationship, UPC Broadband, J:COM and VTR experienced growth on a historical basis over the comparable prior year period. For the three months ended June 30, 2006, ARPU per customer relationship for UPC Broadband was EURO22.35, reflecting an increase of 13.5% over 2005's second quarter. The increase was driven by continued improvement in bundling, as well as the inclusion of Cablecom in the 2006 period. Additionally, J:COM generated ARPU per customer relationship of YEN8,473 ($74.02) for the three months ended June 30, 2006, which was an increase of 3.7% over the prior year period. For the same period, ARPU per customer relationship for VTR increased by 10.0% to CLP 26,991 ($51.20), as their RGU per customer relationship ratio increased 12% to 1.70x from 1.52x at June 30, 2005. Please see table on page 18 for additional information.

Operating Cash Flow

Operating cash flow for the three months ended June 30, 2006 increased 54% to $568 million as compared to the same period last year. Excluding FX movements, OCF increased 56% for the three months ended June 30, 2006. This increase was principally due to acquisitions, as noted above, internal growth and margin improvements, which were derived in part through scale and operating leverage. For the three months ended June 30, 2006, our rebased OCF growth was particularly strong at 17% as compared to Q2'05. Excluding results from the Netherlands, where we have our D4A initiative underway, our rebased OCF growth rate for the quarter would have improved to 23%. As expected, the Netherlands' OCF results reflect higher operating, marketing and customer care costs of our D4A initiative as we invest in the roll-out of digital boxes to drive future growth in that market.

Our reported OCF margin(7) for the three months ended June 30, 2006 was 35.8%, which represents a 170 basis point increase as compared to our OCF margin in the same period last year. Margin improvement was primarily driven by UPC Broadband's Central and Eastern European operation, as well as our operations in Japan and Chile. Partially offsetting this improvement, our Western European operation experienced a margin decline, resulting from increased costs related to our D4A project in the Netherlands and the impact of acquisitions.

Loss from Continuing Operations and Net Earnings (Loss)

Our loss from continuing operations for the three months ended June 30, 2006 was $184 million or $0.40 per basic share as compared to our loss of $109 million or $0.30 per basic share for the comparable period in 2005. The increased loss was due to higher interest expense, income tax expense, and realized and unrealized losses on financial derivative instruments, partially offset by higher operating income and foreign exchange gains. Including discontinued operations, we achieved net earnings of $24 million for the three months ending June 30, 2006, as compared to a net loss of $114 million for the comparable period in 2005.

Capital Expenditures and Free Cash Flow

Capital expenditures (including capital lease additions) for the three and six months ended June 30, 2006 were $437 million and $751 million, respectively, representing growth rates of approximately 44% and 39% over the comparable periods last year. As a percentage of revenue, capital expenditures were approximately 28% and 24% for the three and six months ended June 30, 2006, similar to the comparable periods last year. The increase in capital expenditures is related to the impact of acquisitions on our business and higher purchases of customer premise equipment to support our increased unit growth in the current period. For the quarter, we estimate that approximately 80% of our capital expenditures including capital lease additions were revenue generating and 20% pertained to support capital.

In terms of Free Cash Flow (FCF)(8), we generated negative FCF of $83 million and positive FCF of $24 million for the three and six months ended June 30, 2006, respectively. The negative FCF in the quarter was primarily due to higher capital expenditures as compared to the first quarter of 2006 and to changes in working capital.

Balance Sheet, Leverage, and Liquidity

At June 30, 2006, total debt(9) was $10.8 billion and cash and cash equivalents were $1.7 billion, resulting in net debt(10) of $9.1 billion. Adjusting for the sale of UPC France, which we closed on July 19, 2006, and the anticipated application of the proceeds, our net debt at June 30, 2006 would have decreased by approximately $1.6 billion to $7.6 billion, including pro forma cash and cash equivalents of approximately $2.9 billion. For the quarter, our gross and net leverage ratios, defined as total debt and net debt to annualized quarterly operating cash flow, were 4.8x and 4.0x, respectively. Adjusting for the divestiture of UPC France, our gross and net leverage ratios would fall to approximately 4.6x and 3.3x, respectively. As a result, we continue to maintain our total gross leverage within our target range of 4.0 - 5.0x.

Since the first quarter, we have been very active in managing our debt portfolio and believe that we have advantageously taken several steps which have increased our liquidity position, locked in attractive financing rates, reduced near-term amortization payments and/or extended maturities. In May, we refinanced a portion of our existing UPC Broadband Holding bank facility with new borrowings under two term loan tranches due 2013 (Facilities J and K), aggregating EURO1.8 billion and $1.775 billion, with each denomination split evenly between the tranches. The borrowings denominated in Euros bear interest at an initial margin of EURIBOR plus 2.25% and borrowings denominated in dollars bear interest at an initial margin of LIBOR plus 2.00%.

In July, we also completed a new EURO830 million multicurrency repayable and redrawable term loan facility due 2012 (Facility L) to the UPC Broadband Holding bank facility, which replaced a EURO500 million multicurrency revolving credit facility (Facility A) due 2008. Facility L also extended the maturity and lowered the borrowing rate, as compared to Facility A. Additionally, during the quarter, J:COM completed a refinancing of its YEN40 billion in Tranche B Term Loans with a combination of fixed and variable interest rate loans that have bullet maturities in 2013. Also, Austar and VTR are currently undergoing refinancings of their existing credit facilities, which should provide both operations with additional liquidity.

In addition to our cash balances at June 30, 2006, approximately EURO310 million ($396 million) of undrawn commitments under our EURO1.0 billion in revolvers and redrawable term loan facilities at UPC Broadband Holding B.V. (which as discussed above were upsized to EURO1.3 billion subsequent to quarter end) are anticipated to be available for borrowing, upon completion of our second quarter bank reporting requirements, as is the full YEN30 billion ($262 million) of undrawn commitments under J:COM's YEN30 billion revolver. Subject to their terms, the undrawn amounts under those revolvers and redrawable term loan facilities may also be borrowed to finance acquisitions. In addition, our subsidiaries have several other credit facilities which collectively had approximately $236 million of maximum availability at June 30, 2006.

Based on our June 30, 2006 results, and subject to completion of our second quarter bank reporting requirements, the ratio of Senior Debt to Annualized EBITDA (last two quarters annualized) for UPC Broadband Holding B.V., as defined in and calculated in accordance with the UPC Broadband Holding bank facility was 3.64x. The ratio of Total Debt to Annualized EBITDA (last two quarters annualized), as defined and calculated in accordance with the UPC Broadband Holding bank facility was 4.56x.(11)

2006 Guidance Update

Through the first six months of 2006, we believe that we are on track to achieve or exceed our 2006 guidance targets, which we have adjusted to reflect M&A activity. Our new updated guidance targets for 2006 consist of 1.4 million organic RGU additions, revenue of $6.2 billion, OCF of $2.2 billion, and capital expenditures of approximately 27% of revenue. This compares to our previous guidance of 1.6 million organic RGU additions, revenue of $6.8 billion, OCF of $2.4 billion and capital expenditures of approximately 27% of revenue.

The reduction in RGUs, revenue and OCF targets are directly related to our M&A activity, principally the divestitures of UPC Sweden and UPC France. Our new targets continue to be based on our original guidance for full year 2006 average exchange rates of 1.20 dollars per Euro, 115 yen per dollar, 550 Chilean pesos per dollar and 1.28 Swiss Francs per dollar. There is potential upside to our full year reported numbers, as the average exchange rate for the Euro was 1.23 dollars per Euro for the first six months of the year and the current spot rate is approximately 1.28 dollars per Euro, as compared to our guidance target of 1.20 dollars per Euro. Additionally, to the extent that our organic RGU growth ends up exceeding our guidance target, we would expect to report lower OCF due to the associated increase in marketing and subscriber acquisition costs.

About Liberty Global

Liberty Global is the leading international cable operator offering advanced video, voice, and Internet-access services to connect our customers to the world of information, communications and entertainment. As of June 30, 2006, Liberty Global operated state-of-the-art broadband communications networks that served approximately 13 million customers in 17 countries (excluding France) principally located in Europe, Japan, Chile, and Australia. Liberty Global's operations also include significant media and programming businesses such as Jupiter TV in Japan and chellomedia in Europe.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including our anticipated launch of modified dutch auction tender offers, our anticipated acquisition of Karneval, our guidance for 2006, our insights and expectations regarding competition in our markets, the impact of our M&A activity on our operations and financial performance and other information and statements that are not historical fact. These forward-looking statements involve certain risks and uncertainties that could cause actual results to differ materially from those expressed or implied by these statements. These risks and uncertainties include required governmental approvals for the Karneval acquisition, the continued use by subscribers and potential subscribers of the Company's services, changes in technology, regulation and competition, our ability to achieve expected operational efficiencies and economies of scale, the long-term success of our digital migration project, our ability to generate expected revenue and operating cash flow and achieve assumed margins including, to the extent annualized figures imply forward-looking projections, continued performance comparable with the period annualized, as well as other factors detailed from time to time in the Company's filings with the Securities and Exchange Commission including our most recently filed Form 10-K and Form 10-Q. These forward-looking statements speak only as of the date of this release. The Company expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any guidance and other forward- looking statement contained herein to reflect any change in the Company's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

Additional Information

References in this press release to the tender offers are for informational purposes only and do not constitute an offer to buy, or the solicitation of an offer to sell, any shares. The full details of the tender offers, including complete instructions on how to tender shares, along with the letters of transmittal and related materials, are expected to be mailed to stockholders on or about August 11, 2006. Stockholders should carefully read the offer to purchase, the letters of transmittal and other related materials when they are available because they will contain important information. Stockholders may obtain free copies, when available, of the Tender Offer Statement on Schedule TO, the offer to purchase and other documents that will be filed by Liberty Global with the U.S. Securities and Exchange Commission at the commission's website at www.sec.gov. Stockholders also may obtain a copy of these documents, without charge, from D.F. King & Co., Inc., the information agent for the tender offers, by calling toll free 1-800-347-4750. Stockholders are urged to read these materials carefully prior to making any decision with respect to either or both tender offers.

(1) Results from UPC Norway, UPC Sweden, UPC France and Priority Telecom
Norway (PT Norway) are treated as discontinued operations in the
historical financial figures. As a result, their revenue and
operating cash flow for all historical periods are retroactively
removed from such figures. Additionally, we are reporting subscriber
metrics excluding the impact of our discontinued operations.
(2) Organic figures exclude RGUs at the date of acquisition but include
the impact of changes in RGUs from the date of acquisition.
(3) Please see page 16 for an explanation of operating cash flow and the
required reconciliation.

(4) For purposes of calculating rebased growth rates on a comparable
basis for all businesses that we owned during the respective periods
in 2006, we have adjusted our historical 2005 revenue and OCF to
(i) include the pre-acquisition revenue and OCF of certain entities
acquired during 2005 and 2006 in the respective 2005 rebased amounts
to the same extent that the revenue and OCF of such entities are
included in the respective 2006 results and (ii) reflect the
translation of our 2005 rebased amounts at the applicable average
exchange rates that were used to translate our 2006 results. Please
see page 20 for supplemental information.

(5) In our D4A project, we provide a digital interactive television box
and digital service at the analog rate for six months to analog
subscribers who accept the box and agree to accept the service. Upon
acceptance of the box, the subscriber is counted as a digital cable
subscriber rather than an analog cable subscriber. After the six
month promotional period, the subscriber will have the option to
discontinue the digital service or pay an additional amount, on top
of the analog rate, to receive the digital service. An estimated 10%
to 15% of the Netherlands digital cable subscribers at June 30, 2006
have accepted but not installed their digital converter boxes.

(6) Average monthly revenue (ARPU) is calculated as follows: average
total monthly revenue from all sources (including non-subscription
revenue such as installation fees or advertising revenue) for the
period as indicated, divided by the average of the opening and
closing customer relationships, as applicable, for the period.
Customer relationships of entities acquired during the period are
normalized.

(7) OCF margin is calculated by dividing OCF for the respective period by
total revenue.

(8) Free Cash Flow is defined as net cash provided by operating
activities including net cash provided by discontinued operations
less capital expenditures and capital lease additions. Please see
page 17 for more information and the required GAAP reconciliation.

(9) Includes capital lease obligations.

(10) Net debt is defined as total debt less cash and cash equivalents.

(11) Debt in the covenant calculations utilize debt figures which take
into account currency swaps. Thus, the debt used in the calculations
may differ from the debt balances reported within the financial
statements.

For more information, please visit www.lgi.com or contact:

Christopher Noyes Hanne Wolf
Investor Relations - Denver Corporate Communications - Denver
303.220.6693 303.220.6678

Ivan Nash Vila Bert Holtkamp
Investor Relations - Europe Corporate Communications - Europe
+41 44 277 9738 +31 20 778 9447

FIRST AND FINAL ADD -- TABLES -- TO FOLLOW

Source: Liberty Global, Inc.

CONTACT: Christopher Noyes, Investor Relations - Denver,
+1-303-220-6693, or Hanne Wolf, Corporate Communications - Denver,
+1-303-220-6678, or Ivan Nash Vila, Investor Relations - Europe,
+41 44 277 9738, or Bert Holtkamp, Corporate Communications - Europe,
+31 20 778 9447, all of Liberty Global

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