Michael Fries; Chief Executive Officer; Liberty Global Ltd
Charles Bracken; Chief Financial Officer, Executive Vice President; Liberty Global Ltd
Lutz Schüler; Chief Executive Officer, Virgin Media O2; Liberty Global Ltd
Steve Malcolm; Analyst; Redburn Atlantic
Joshua Mills; Analyst; BNP Paribas Exane
Carl Murdock-Smith; Analyst; Citigroup, Inc.
Matthew Harrigan; Analyst; The Benchmark Company
Ulrich Rathe; Analyst; Sanford C. Bernstein & Co.
David Wright; Analyst; BofA Securities
James Ratzer; Analyst; New Street Research LLP
Operator
Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Liberty Global's fourth quarter 2024 investor call. This call and the associated webcast are the property of Liberty Global, and any redistribution, retransmission, or rebroadcast of this call or webcast in any form without the expressed written consent of Liberty Global is strictly prohibited.
(Operator Instructions) Today's formal presentation materials can be found under the Investor Relations section of Liberty Global's website at libertyglobal.com.
After today's formal presentation, instructions will be given for a question-and-answer session. Page 2 of the slides details the company's safe harbor statement regarding forward-looking statements. Today's presentation may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including the company's expectations with respect to its outlook and future growth prospects and other information and statements that are not historical facts.
These forward-looking statements involve certain risks that could cause actual results to differ materially from those expressed or implied by these statements. These risks include those detailed in Liberty Global's filings with the Securities and Exchange Commission, including its most recently filed Forms 10-Q and 10-K as amended. Liberty Global disclaims any obligation to update any of these forward-looking statements to reflect any change in its expectations or any conditions on which any such statement is based.
I would now like to turn the call over to Mr. Mike Fries.
Michael Fries
All right, thank you, and welcome everyone to our year-end investor call. It's great to have you join us today.
I've got the core team on the line as usual, so after prepared remarks, we'll get right to your questions. And as a reminder, we always post a slide deck which has really good data and follows the narrative that Charlie and I will deliver right now. So I'm going to start on slide 3.
Most of you know who we are, and you know what we do. But it's always good, I think, to start with the big picture, especially now. 12 months ago, on this call we presented a plan to generate and importantly deliver value to our shareholders. That's exactly what we did in 2024 with over $4 billion in shareholder remuneration delivered on a market cap of $7 billion just 12 months ago.
And as we'll talk about today, this remains our primary focus. So to kick us off, I think the chart here on this slide is the simplest, least complex way to understand the business of Liberty Global today.
We consider ourselves to be a dynamic team of veteran operators and investors, committed to generating and delivering shareholder value through the strategic management of three platforms.
Liberty Telecom consists of our four remaining European telcos, you know these well, in the UK, Ireland, Belgium, and the Netherlands, serving $80 million fixed and mobile connections and generating $22 billion of aggregate revenue and around $8 billion of aggregate EBITDA. I'll talk about our strategic plans for growing and ultimately crystallizing the value of these fixed mobile champions in just a moment.
Liberty Growth represents our $3.1 billion portfolio of investments in technology, media, sports, and infrastructure, and we've grown this business substantially over the last five years. We've also been really disciplined about exiting positions at good returns and then repurposing that capital both into Liberty Telecom and additional growth investments. And then Liberty Services on the right is a hidden gem.
Over the last several years we have successfully transitioned over two-thirds of our central employee base into profitable revenue generating activities in tech and financial services. These are valuable operating divisions with long-term contracts, nearly $600 million of annual revenue, third party partnerships, and really viable strategies to continue growing and ultimately, monetizing these businesses for the benefit of shareholders.
So why make a big deal of this, you might ask? Well, when your stock is $11 and you have 350 million shares outstanding, we become hyper aware of the fact that even small opportunities like this can move the needle.
Which is a great segue to the next slide, and as I just mentioned on our year-end call last February, we renounced a clear strategic pivot, right? We outlined a game plan and at that time focused on maximizing the intrinsic value of our assets and delivering that value to shareholders. Not surprisingly, the most important initiatives, which were summarized here on slide 4, revolved around Liberty Telecom, where the GAAP in value and the upside to shareholders was and remains the largest.
The big headline was of course our commitment to spin off 100% of Sunrise, our Swiss subsidiary to Liberty Global shareholders before year end. The logic and timing of that transaction was compelling. Sunrise operates in a rational market. The company had been delivering solid operating performance driven principally by strong free cash flow and the potential for sizable dividends.
And we saw strong local investor demand to own the number one challenger to Swisscom. Now trust me, this was a complex transaction, but these are the things that this management team really excels at in fact, and the spinoff was completed on time and effectively delivered to our shareholders a $9 per share tax-free dividend and was at the time an $18 stock, and we did that by spinning off 20% of our proportionate EBITDA.
Let that sink in. Now, by all accounts, this was a success. Sunrise stock is trading well with 70% of the ADS is now converted into local Swiss shares, and we've learned a really valuable lesson on how to unlock value.
We also announced last year our intention to create a fixed Netco in the UK market to accelerate and fund a portion of our fiber build out and to provide a vehicle for what we expect will be a rapidly consolidating infrastructure market. I'm happy to report that we are making significant progress on this front. The operational and financial perimeters of the UK Netco have been established. They represent around 16 million homes and over GBP1 billion of EBITDA.
But more importantly, as of last week, we are in receipt of proposals from a handful of the strongest infrastructure investors in the business who have indicated an interest in participating with us in what will be, I think, the only viable long-term competitor to BT Openreach. So more on that to come.
And then finally we discussed the opportunity to focus our attention and resources on the Benelux region. And while the prospect of a combined Dutch and Belgian operation is intriguing, we spent most of our time last year ensuring that each business is achieving its strategic and financial potential individually, and this included hiring a new CEO for VodafoneZiggo, Stephen van Rooyen, who hit the ground running in September.
And in Belgium, where we've already separated the network from Telenet, we've made substantial progress with the Belgian government to rationalize the fiber market through a network sharing and collaboration agreement between Wyre, that's our Netco, Telenet, and Proximus. Even prior to the conclusion of that transaction, our Treasury team just closed on a EUR500 million standalone facility for Wyre's fiber rollout. That just supports the attractiveness of this market opportunity.
Now, in addition to our objectives for Liberty Telecom, we also announced a series of other key goals last year, and those are listed on slide 5 that we knew would anchor our value creation strategies.
At the Liberty Global level, we committed to buying back up to 10% of our shares outstanding, and we spent approximately $700 million doing that. As a reminder, we have now spent roughly $15 billion over the last eight years to acquire over 60% of our shares. Now, obviously, we believe in the multiplier effect of stock buybacks. For example, if you owned 1% of Liberty Global in 2017, you ended up with 2.5% of Sunrise at the spinoff date.
We also committed to refinance all of our 2027 maturities in the Liberty Telecom debt silos, and we did that with over $3 billion in re-fis at Vodafone and VMO2. Now Charlie will get into more detail, but our balance sheet remains rock solid.
And we achieved all14 of our financial guidance metrics with the exception of one, which is related to VodafoneZiggo revenue, where we had guided to growth but came in flat due to slower mobile net ads and a lower mobile handset sale number.
To implement our strategic goals, we also committed to sell assets amounting to $500 million to $1billion dollars in 2024. That number came in at $900 million and together with free cash flow, helped fund the buyback and deleveraging at Sunrise to maximize the equity value of the spin for shareholders.
And we articulated a clear preference to prioritize future investments in Liberty Growth around scale-based platforms with tailwinds, and of course the best example here is the acquisition of our controlling interest in Formula E, which I'll talk about in just a moment.
Now, here's the kicker. Despite hitting the mark on the strategic goals in 2024, Liberty Global shares proforma for the spinoff of Sunrise, remain significantly undervalued. I'll walk you through how we see it on slide 6, which lays out a pretty simple sum of the parts analysis. Some investors like it when we just get down to the brass tacks, as they say, and this is how we run the business. So here you go.
The first key point to make on this chart is that we think our stock today assigns zero equity value to Liberty Telecom. How do we get to that conclusion? Well, the first three columns here show our cash balance and the combined fair market value of our Liberty Growth portfolio.
And that adds up to about $15 per share. And then we assume an appropriate reduction for corporate of $4 per share, which we'll dive into later. But with that you essentially get to a market price of $11 per share. So what is the right value for Liberty Telecom? The blue bar there. There are many ways to approach this, as you know all too well, but the Sunrise spin demonstrated the potential uplift in trading multiples when you find the right transaction or market opportunity.
Case in point, as part of Liberty Global, Sunrise traded essentially at our combined and current multiple of 5.5 times EBITDA. As a listed company in Switzerland, Sunrise trades at 8 times EBITDA or a 78% dividend yield.
Now assuming every operating company, should be worth 8 times, that might be ambitious, right? But if you assume a conservative one multiple uplift in the value of Liberty Telecom, say from 5.5 to 6.5 times EBITDA, by the way, which is the EU telco sector average and where most analysts have us, then you arrive at $14 per share for Liberty Telecom alone.
Now we've certainly shown you higher numbers for Liberty Telecom in the past, but given what we're trading, today we're happy to be conservative. Adding all that up gets you to $25 per share for Liberty Global, and that's before signing any equity value for Liberty Services. We're not putting a number on that today, but I can tell you it's greater than $0. Then lastly, this compares to average analysts price targets of around $14.60.
Now one of the big differences is, is the deduction of corporate, which is typically twice the number we're using but completely neglects the fact that these net central costs are nearly 100% variable OpEx and should be valued on an EBITDA multiple. More on that from Charlie. At this point, the question you should be asking is how do we intend to continue bridging this gap.
We try to address that on slide 7 with a summary of our strategic plan for 2025 and beyond, and as you just saw, there is significant upside to improving the real or perceived value of Liberty Telecom. Just one additional EBITDA multiple, more than doubles our stocks. So not surprisingly, we believe there will be opportunities to crystallize or monetize the value of Liberty Telecom's businesses over time.
Like summarize, this could include spinoffs, although, as many of this decision is dependent on several tax, legal, and financial factors. We could also consider tracking stocks, IPOs, and of course, we always remain open to M&A options. To achieve any of these though, we need to pursue three tactical steps.
Number one, we have to continue to drive commercial momentum at the operating level. This is the primary objective of every local management team. They are all focused on expanding loyalty programs to reduce churn, promoting robust flanker brands to drive market share, realizing the benefits of digital and AI accelerating, B2B, and rolling out new revenue streams.
Second, we'll continue to creatively finance our fixed network infrastructure, particularly in the UK, Belgium, and Ireland, where our fiber plans are well underway. These infrastructure assets trade at higher multiples, attract a unique type of investor, and can absorb more leverage than what we are typically seeing on ServeCos. So we want to take advantage of these factors, and we will.
And third, our ability to achieve greater value recognition at Liberty Telecom will to a large extent be dependent on generating free cash flow, especially free cash flow that can be used for dividends. So the Sunrise model demonstrated this clearly. As a result, we're squarely focused on achieving this goal over the next 24 to 36 months.
Now moving to Liberty Growth, our plans take two forms. On the one hand, we recognize that many of the assets we own today are non-core, and as we demonstrated in 2024, can be highly accretive sources of cash for more strategic opportunities.
So as a result, we will continue to rotate capital into higher return Liberty Growth assets, prioritizing infrastructure, sports, and media, as well as into strategic Liberty Telecom transactions. Towards that end, we are committing today to sell between $500 million and $750 million of non-core assets in 2025.
And then finally, our cash balance of $2.2 billion is a significant strategic asset. Our primary use here will be for buybacks, the leveraging, and the investments described above. Specifically, we're committing to buying up to 10% of our shares outstanding in 2025 as we did last year, and we anticipate that our cash balance will be replenished with free cash flow and dividends from Liberty Telecom, asset sales, and infrastructure financing.
And to round it off, Charlie will talk about our Liberty Services platform and corporate spending in a moment. I'll just say watch this space. Both of these are expected to be meaningful contributors to our value creation narrative.
Now turning to the next slide, I'll just spend a minute on our Q4 operating results. You would have reviewed these already, and we do have the OpCo leads on the call. The punch line here is that we're seeing steady or improved broadband results with continued fixed ARPU uplifts in most of our markets, and we also saw a small pickup and postpaid mobile, particularly in the UK.
Sticking with VMO2, the UK saw another strong broadband quarter of 12,000 net ads that was supported by new homes in the nexfibre territory and really good base management. All of this despite aggressive alt-net pricing and what looks like a flat broadband market overall. It was also the third straight quarter of fixed ARPU growth in the UK, reflecting materially better retention as a result of our digital and AI tools.
And VMO2 also saw a significant turnaround in postpaid mobile throughout the year. We lost nearly 200,000 subs in the first half of the year and we're essentially flat in the second half with a positive net add quarter in Q4. We contribute this to two things, I think strong results from Giffgaff, our flanker brand, and success in underpinning the premium position of O2.
Now some quick remarks in Ireland. This is a small operation with largely stable results, but we want to start adding this to the narrative here. Virgin Media Ireland is the farthest along on the fiber transformation, with around half of our 1 million premises already upgraded, almost 50,000 fiber customers on our network, including Vodafone and Sky wholesale customers.
Now while CapEx will remain elevated in 2025, we should be largely done with the bill by the end of this year, early next year, and like many European telcos, the decline in CapEx should drive meaningful free cashflow over the long run.
Turning to the Netherlands, we saw intense competition in the Dutch broadband market continue where loss was mostly price led in Q4. Now VodafoneZiggo remains focused on value over volume with largely flat ARPU in the quarter.
On the positive front, UEFA rights are driving uptake across different channels, including through Ziggo Sport. The Dutch mobile market is more rational but has seen lots of price competition in the no frills segment. Nonetheless, we have delivered stable net ads as the impact from B2B port out stabilized and FMC Sims penetration continued to increase.
And then lastly on Telenet, they returned to positive broadband net ads for the first time in two years in the fourth quarter, and that was underpinned by successful fixed mobile convergence campaigns, including the new base proposition, which is exceeding expectations. The fixed ARPU growth continue to be supported by the price rise earlier this year in mobile postpaid to decrease modestly in the quarter driven by challenging market dynamics.
So two more slides on Liberty Growth before I turn it over to Charlie. Understandably, we get a lot of questions about the portfolio and hopefully our disclosures this quarter and in future quarters will demonstrate that we are committed to providing greater transparency and information to you, especially as this becomes a bigger part of our evaluation story. Towards that end, slide 9 provides two important pieces of data.
First, on the left, you'll see our investment activity over the last five years in the aggregate. At the end of 2019, so five years ago, our investment assets to around $900 million in what we now call Liberty Growth. Between 2019 and the end of 2024, we invested an additional $2.4 billion in our tech media and infrastructure verticals, plus some strategic holdings.
During that same period, however, we also exited investments that returned $1.2 billion to us, including dividends, with a weighted average IRR of 25%. Now this includes the good and the bad deals, so this is a true measure of those disposals. That left us with net invested capital in the portfolio at the end of last year 2024 of $2.1 billion compared to a fair market value on our 10-K of $3.1 billion. That valuation, by the way, is independently reviewed by Deloitte and breaks down between tech, media, infrastructure, et cetera as shown in the color legend at the bottom.
So we're sitting on a billion dollars of unrealized gains in the portfolio today. I already mentioned that we intend to generate between $500 million and $750 million in sale proceeds this year, a significant portion of which will likely come from Liberty Growth. Now Liberty Growth is a diversified portfolio with investments in upwards of 70 different companies. I get that that creates some complexity for you, but on the right-hand side, we make the important point that 75% of our portfolio resides in just seven investments. And we list those here.
This includes three media holdings: Formula E, ITV, and Televisa Univision; three infrastructure investments: AtlasEdge, EdgeConnex, and nexfibre, and our stake in Vodafone. Now we're not discouraging you from focusing on the balance of our investments, but I do think it makes it simpler when we present it like this, and these are the assets that you'll be hearing about, we'll be talking about, and that more often than not will be driving our returns.
Now I'll end on a super high note. I think everyone knows we increased our stake in Formula E to 66% last year when we bought out Warner Brothers Discovery, and I have to say I couldn't be more excited about that transaction and where this championship is going. Slide 10 just hits a few of the key points, the key highlights, beginning on the top left with the car itself.
When we first invested in Formula E, we made a bet on technology innovation, and that bet is paying off. The first-generation car topped out at 140 mph and really couldn't drive very far. We are now in what we call the Gen 3 EVO car, and it is a rocket ship.
It has speeds capable of 200 mph, and the car accelerates 30% faster than an F1 car 0 to 60 in just 1.82 seconds.
And we have the Gen 4 car coming out in just 18 months' time, which aims to double the power. I think the point is that these cars are lightning fast, no pun intended, and the racing is more and more exciting every year.
As you can see on the top right, we already raced in some of the most iconic cities in the world, places like Sao Paulo, Mexico City, Jeddah, Miami, Monaco, Tokyo, Shanghai, Jakarta, Berlin, and London. And with a faster car and longer races, we expect to gain access to even more tracks and venues.
And even though we've been net zero since day zero, this is all about the racing, right? It's no surprise to me, it shouldn't be to you that we've attracted some of the world's greatest racing brands including Porsche, Jaguar, McLaren, Maserati, Nissan, Penske, Andretti, and others.
They're part of this global championship because they see the future and the potential. By 2035, nearly 70% of global car sales are expected to be electric vehicles, and we have an exclusive on this racing series with the FAA, who, by the way, are great partners of ours for many years to come.
Then finally, word is getting out. We're now at roughly 400 million fans globally, and that's growing 23%. You'll also see on the bottom left that while there are two championships with bigger audiences today, F1 and MotoGP, neither is growing as fast.
Remember, we're a very young championship, at least compared to Formula 1, which is 75 years old, but the ceiling feels -- seems unlimited. So stay tuned for more updates on what is now a consolidated asset, Formula E, and Charlie, with that, I'll send it over to you.
Charles Bracken
Thanks, Mike. The next slide sets out a summary of the quarterly revenue and EBITDA performance in our key markets. Telenet reported a revenue decline of 0.4% year-on-year in Q4 primarily driven by a decline in customers, which was partially offset by the 3.5% price rise in June and the continued shift towards higher-tier broadband plans. Virgin Media O2 reported a revenue decline of 2.8%, excluding the impact of nexfibre construction, driven by decreases in mobile revenue due to lower handset sales and B2B revenue.
Encouragingly, underlying mobile service revenues was stable and residential fixed revenues increased in the year. VodafoneZiggo reported a revenue decline of 2.5% in Q4 primarily due to a decline in the consumer fixed customer base, lower out-of-bundle revenue and a decrease in low-margin handset sales. This was partially offset by growth in Ziggo Sport Total subscribers and continued growth in B2B revenue.
Moving on to our Q4 adjusted EBITDA performance. Telenet's adjusted EBITDA decreased 3.9% in Q4 driven by wage increases and higher programming costs. And VMO2's adjusted EBITDA in Q4 decreased 5.9%, excluding the impact of nexfibre construction. In addition to the revenue impacts, the decrease was impacted by increased marketing investments on the nexfibre footprint and reduced year-on-year growth in the B2B segment.
VodafoneZiggo reported an adjusted EBITDA decrease of 4.8% driven by the decrease in revenue, higher programming costs related to the UEFA broadcast, wage increases relating to the collective labor agreement and an $8 million one-off impact following the sale of certain handset receivables during the quarter.
Turning to our next slide. We continue to remain committed with a strong capital allocation model. In terms of cash generation, we surpassed free cash flow guidance at Telenet and achieved our target for Liberty Services and Corporate adjusted EBITDA less P&E additions. At Virgin Media O2, we successfully delivered GBP850 million of cash distribution to shareholders in 2024 with full year free cash flow of GBP500 million, supported by a working capital benefit of approximately GBP200 million.
VodafoneZiggo delivered EUR228 million total cash distributions, which were modestly lower than the full year 2024 free cash flow after allowing for spectrum payments during the year. The majority of cash distributions from VMO2 and VodafoneZiggo were received in Q4 as in previous years.
We ended Q4 with a substantial cash balance of $2.2 billion even after the $1.6 billion capital injection to Sunrise before its Q4 spin. Total cash inflow from operations and JV dividends was around $500 million. We executed a further $200 million in buybacks this quarter, bringing the total to $700 million for the year and resulting in approximately 350 million shares remaining at the end of 2024.
Looking to our CapEx trends. We continue to invest in our fixed and mobile networks in line with our capital intensity targets. As a reminder, last year at VMO2, we highlighted over GBP500 million of spend in 2023 on 5G capacity of Fiber Up, which has continued in 2024 and will continue in 2025.
At Telenet, the step-up in CapEx will support an additional 375,000 homes passed by year-end 2025 at Wyre, and we'll also ramp in 5G digital CapEx at ServCo. We expect capital intensity in the Telenet ServCo to decline in 2026 as the major investments in the mobile network will be completed in 2025, while CapEx will also be fully debt financed through an agreed CapEx facility, meaning no equity requirement from Liberty Global or terminal.
And lastly, our investment in the AI initiatives are anticipated to drive $200 million to $300 million of annual benefits across Liberty Telecom over the next 3 years. Initial focus areas are using AI to better manage customer, for example, Agent Assist to provide real-time support; networks, for example, improved in-house customer experience through preventative care and diagnostics; and in customer workplace experience, for example, in our entertainment and connectivity programs. This is equivalent to approximately 2% of Telecom OpEx with roughly 70% of the benefits focused on cost savings and 30% helping to drive revenue through customer acquisition and retention initiatives.
Moving to our balance sheet. Our siloed debt stacks have an average tenor of approximately five years with no material maturities until 2028. Our aggregate debt is split equally between bank debt and bonds with the bonds typically issued with a longer duration of 10 years as compared to the bank debt of 8 to 10 years. Our variable bank debt is fixed using swaps, which are independent of the underlying debt. This allows us to refinance near-term maturities and extend the tenor, but also benefit from the underlying swaps.
Now in general, we look to manage our debt maturities so that there are no material refinancing commitments over the next three years. In 2024, we successfully refinanced all debt maturities due before 2028 and in Q4 completed a green bond issuance for VodafoneZiggo as well as a $500 million term loan extension in VMO2. Now all of these refinancings were secured in line with our historic credit spreads, and we continue to see strong appetite for our debt securities.
We also use the bank market to finance large CapEx builds. We just agreed a EUR500 million stand-alone CapEx facility for Wyre. And during 2024, we also secured similar bank financings for our growth assets, for example, EUR273 million of project and land banking from this facility for AtlasEdge.
On the next page, we lay out the key financials for Liberty Services and Corporate. Our Corporate group provides management and advisory services, focusing on financial and human capital as well as technology expertise. But we also have two other revenue-generating units, Liberty Blume and Liberty Tech, which I'll talk about more in the next slide.
Now on the right-hand side, we've deconstructed Services and Corporate to illustrate how we think about this pillar internally. We see our two services companies, Liberty Blume and Liberty Tech, as leveraging our group scale and expertise to develop third-party opportunities and cost-effective solutions to our internal and external customers. We believe both these divisions have significant equity value and should grow over time. 1,300 of the 1,900 employees in Central work for these two services companies. The 600 people in our corporate group provides strategic and operating management and advisory services.
Now this covers a number of areas, including key organic and inorganic capital allocation decisions for our Telecom, Growth and Services companies; developing and executing key strategic acquisitions and disposals; financing and legal support to our public and private debt and equity providers and fundraisings; developing senior and junior talent and culture to support our companies; and providing specialist technology advice, particularly in fixed and mobile network strategies such as cyber and AI services.
We believe that these services add significant value to our portfolio of companies. And in many cases, we receive market-tested management fees, for example, from Sunrise following its spin. Going forward, we will look to secure appropriate management fees from our companies, where there are currently none, particularly in our growth assets as well as other fully owned companies. And over time, we expect the negative EBITDA associated with this segment to be significantly reduced through this as well as ongoing operating efficiencies.
Turning to a deep dive on Liberty Services. We've highlighted the value propositions for Blume and Tech, both of which capitalize on long-term contracts and talent that we already have at Liberty Global. Liberty Blume is the newest addition to Liberty Services, leveraging our scale and in-house expertise to deliver back-office solution enhance efficiency primarily by leveraging technology and scale to reduce cost for customers, notably in financial solutions, particularly around working capital, insurance, device financing and energy management products; procurement solutions, including category sourcing management and tech platforms; and business solutions, including finance, HR, legal, tax and construction shared services.
We're already generating over $100 million of revenue here and breaking even on an adjusted EBITDA basis, which includes approximately $15 million of growth investments. Beyond the Liberty-level Federation, key clients include Tesco Mobile and Zayo Europe with further building of the customer pipeline to come in 2025. We see an opportunity to grow revenues in Liberty Global's existing $1 billion-plus back-office spend as well as with third parties. We also see accretive incremental acquisition opportunities to build out our portfolio, for example, in insurance services.
At Liberty Tech, we are transforming a cost center to marginal profitability by commercializing our best-in-class entertainment and connectivity platforms, which already serve over 12 million households across five European markets. This is underpinned by multiyear tech services agreements and commercial agreements already in place across Liberty Telecom.
While Liberty Tech is generating approximately $450 million of annual revenue and making a positive EBITDA contribution, we are proactively making investments in new areas such as AI, cybersecurity and strategic partnerships to drive further valuation.
Turning to guidance for 2025. We're providing guidance by operating company, including free cash flow. For Virgin Media O2, we expect growing revenues, excluding handsets and nexfibre construction revenues, driven by continued pricing benefits and further nexfibre penetration; growing adjusted EBITDA, excluding nexfibre construction, supported by revenue growth and a step-down in the impact of one-off OpEx investments that occurred in 2024; stable property and equipment additions of around GBP2 billion to GBP2.2 billion, excluding our OU additions, due to continued elevated 5G and fiber-to-the-home spend, notably at Fiber Up; adjusted free cash flow of GBP350 million to GBP400 million for the year, which will support cash distributions to shareholders of GBP350 million to GBP400 million.
Now this is lower year-on-year despite EBITDA growth expectations as we do not expect the same working capital benefit in 2025 as we experienced in 2024. For VodifoZigo, we expect broadly stable revenue growth supported by price indexation in both fixed and mobile; low single-digit decline in adjusted EBITDA growth, impacted by strategic customer initiatives, new wafer rights and continued impact from collective labor agreements; property and equipment additions to sales of between 20% and 22% as 5G and CPE investment continues; adjusted free cash flow of around EUR300 million again in 2025, which will support cash distributions to shareholders of around EUR300 million.
For Telenet, we expect broadly stable revenues with FMC revenue offsetting the pressure from the stand-alone mobile segment; a low to mid-single-digit rebased adjusted EBITDA decline impacted by deferred revenue in 2024 of EUR17 million, which creates a challenging comparison; commercial investment and mandated wage indexations; property and equipment additions of around 38% of revenue driven by accelerated investments in 5G and digital, which peaks in 2025, whilst Wyre is ramping up fiber-to-the-home build, where we expect 350,000-home premises to be passed in 2025. Adjusted free cash flow will be negative EUR150 million to EUR180 million given the heavy network CapEx with while being debt financed through the new committed CapEx facility.
And at Corporate, we're introducing new guidance. Now as you know, historically, we've guided to over the past 5 years on an operating free cash flow basis. However, we feel it's time to update this guidance to an EBITDA basis primarily as we now expect very limited Central CapEx going forward. This is because the fact that all our corporate expenses are basically operating expenses. And this is not least because if you look at the services companies like Liberty Tech, we've converted CapEx into OpEx through things like the Infosys deal.
Going forward, we're targeting EBITDA for Liberty Services and Corporate to be no more than negative $200 million under our new disclosure. This will be driven by the telecom MSAs, such as when we agree with Sunrise, as well as increased revenue from third parties for services delivered by Liberty Tech and Liberty Blume. We'll be investing in the growth of our services companies, in particular, in AI initiatives by Liberty Tech on behalf of the broader Liberty Telecom assets. We're targeting up to a 10% buyback of shares outstanding for 2025 to further deliver value back to shareholders, supported by noncore asset disposals during the year.
Finally, you will note that our new disclosure now shows Liberty Growth Liberty Ventures split out separately for growth assets, we fully consolidate such as Formula E, Slovakia and Ag, our home EV charging and energy storage business. It's worth noting we pick up the equity value for these investments within our Liberty Growth fair market value.
And that concludes our prepared remarks for Q4, and I'd like to hand over to the operator for Q&A.
Operator
(Operator Instructions) Steve Malcolm, Redburn.
Steve Malcolm
I hope you can hear me guys. Yes, one question, quickly. I just wanted to sort of a general free cash flow question beyond 2025. I don't want you to guide on EBITDA as the obvious year. I know you can't group-wise, but it feels like it's another transition year for Liberty. You've had a few this year feels particularly transitional. But as you look into sort of '26 and beyond, maybe just give us a flavor of your outlook for CapEx across the major regions.
You talked about Belgium that's going to be down. I guess, Ireland will be done as well, where we are on 5G CapEx in the UK, some quite big moving parts on tax as well. Obviously, demand repatriation tax when that ends. You've done a lot of refinancing or the interest cost outlook beyond 2026. It would be very helpful to get a sort of sense of direction of free cash flow beyond this year below the EBITDA line. If you can sort of throw a bit of light on that, that'd be very helpful.
Michael Fries
Yeah. Thanks, Steve. Listen, as I said in my remarks -- and by the way, we appreciate you being so patient this morning. But at year-end, we have a lot to say. I mentioned that free cash flow, as you're indicating, is the key metric here that we're driving towards in every market. I'm not going to go one by one, but obviously, Charlie showed you in his guidance that we're generating free cash at VMO2 and VodafoneZiggo as we have in the past and as we expect to in the future. So I think in those two instances, clearly, with -- and especially with the NetCo separation in the UK, we expect that free cash flow is a critical metric for us and one that we anticipate growing.
In the case of Belgium and Ireland, I mentioned that Ireland is coming through its CapEx funnel, if you will, and ought to be finished largely in early part of next year with its fiber build. And I can't give you the numbers, but obviously, we expect that a marginally negative free cash flow figure this year becomes a meaningful free cash flow figure over time.
So that trajectory mirrors more of what you're seeing more broadly in the European telco sector, which is reduce CapEx over time, and that should generate free cash flow. So those three assets, I think, are pretty clear or should be pretty clear.
Now Belgium, a little more complicated because there, we're still consolidating the NetCo, and that NetCo has at least EUR2 billion in front of it, some of which we finance, some of which are partner-financed, some of which will be debt-financed. And what we haven't yet done there is really engage the market or sell estate, to be more blunt about it, in the Wyre asset.
There may come a time, will come a time where that is the right move. Wyre is arguably going to be the most interesting, attractive infrastructure asset in Europe given what we're trying to do there with utilization rates at 80% or more in a big chunk of the network. So we fully anticipate that, that asset could either be deconsolidated or certainly reflect the value contribution to our value-creation narrative that's substantial and over time, reduce the focus on CapEx and really put the attention back on ServCo.
And the ServCo in Belgium has some 5G CapEx, which we've discussed and others, but that trajectory also looks positive. So I think I'm answering your question more indirectly than directly. But I would say market by market, we absolutely believe the free cash flow trajectory of these businesses looks good. That's why we're investing in CapEx, that's why we're being creative as to how we invest the CapEx, why we're establishing NetCos in two instances. I think you're going to like what you see longer term.
Operator
Joshua Mills, BNP Paribas.
Joshua Mills
I'll use my one question to go into a bit more detail on slide 14, please. If I understand this right, I think what you're saying to us is, going forward, you want to illustrate the value of the Central services business. And part of the way you're going to do that is by increasing the MSA fees and trying to get more money from the OpCo levels. I guess my question is, how do you think about the balance there?
Because on the one hand, yes, you'll potentially neutralize this negative cash drag, which is clearly a headwind from a valuation perspective. But it's also going to reduce the EBITDA and the free cash flow out of those businesses, which in some cases, are already under pressure. And you're talking about spinning off or doing IPOs within the next few years.
So maybe just a couple of commentaries on how you get that balance right so that you can still get what you deem to be fair value for those businesses when they come to market whilst upstreaming cash in an appropriate way to Liberty would be helpful.
And then maybe just a part B to that question, are we talking here mainly about the businesses within your 100% ownership? Or have you have the conversations with Telefonica, VMO2 and Vodafone or VodafoneZiggo that they should be paying you more effectively from the JV level up to Liberty because of the services you provide?
Charles Bracken
Mike, are you there?
Michael Fries
Yes. Sorry, I was on mute. That was a great question, Josh. I'm going to let Charlie address most of that. I just want to say quickly upfront that while we definitely mentioned MSAs at the outset to a source of net corporate spend reduction, there is an additional source, which is, of course, just simply reducing costs. And I would not be surprised if we take a good hard look at the operating model and the expenses and size and scale of the Corporate group at the same time.
So it's not simply laying off costs to OpCos, as you point out, who are already having their own issues, and quite frankly, which we want to maximize the value of. It's also rethinking the operating model as we move forward. So you should expect both things to occur.
Charlie, you want to address the MSA question?
Charles Bracken
Yeah. So I think some is it's a good test case. What services makes sense to scale and where we have expertise that is expensive to replicate at the OpCos and what doesn't, and I'm not going to go through each of the key levers. I tried in my remarks to do that. But I'll give you an example, treasury will be a good example. Right or wrong, we think we have a very, very good treasury who are well experienced on managing debt facilities and bank balance sheets.
And they just, for example, did actually a very good refinancing for Sunrise since its spin, which materially reduced the cost of its capital and extended its average life. Now it doesn't make sense for Sunrise to build its own treasury for less regular transactions. And also, they find it hard to replicate the level of expertise we have. So in getting that balance right, that is the kind of thing we're trying to get right.
I think it's also worth pointing out that we have obviously charged these companies for many years MSAs, but they've always been below the EBITDA line. So there's nothing new going on here. What we're now -- when we spin them is making specific what proportion of that should be above the line.
And just to confirm, what I'm talking about here is specifically related to those corporate advisory services. Liberty Tech, and indeed, Liberty Blume are genuine arm's length businesses, where they win or lose according to third-party contracts. And in the case, for example, of Zayo, we were competitive enough to win from a third party, and the same thing applies with each of these OpCos.
Michael Fries
On your question around JVs, we do collect management fees, MSA fees from VMO2 that was established at the outset along with TEF. And Charlie is working very hard at -- on our growth portfolio where we are providing meaningful services to control and minority-owned positions there.
So this isn't an extraction exercise. This is a value-creation exercise, but it's also ensuring that the extraordinary value we think we provide is being properly recognized. But also, as I'll repeat, we'll look at the operating model as well. This is not just offsetting. This is going to be rethinking the operating model as the shape of business changes.
Operator
Carl Murdock-Smith, Citigroup.
Carl Murdock-Smith
I'll ask the A shares versus C shares question, please, regarding the buyback. Just an update on how you're thinking around that? All of the buyback last year, I think, was done on the fee line despite it being more expensive and now having lower liquidity than the A shares. So I was just wondering on what your thoughts are around the buyback going forward and in terms of which line to do it.
Michael Fries
Yeah. Thanks, Carl. Listen, I think we are -- we do this on a relatively dynamic basis. So I don't know that we have at this very moment a grid we're willing to disclose. I will say we haven't been buying any stock through the course of this year. We did not have a 10b5-1 plan in place at year-end. So through February 19, we haven't bought a simple share, but we anticipate obviously doing that. And as -- you'll see what we do as time goes by as we disclose it, but I'm not going to give you the expectation at this point.
Operator
Matthew Harrigan, The Benchmark Company.
Matthew Harrigan
There is a sense at CES this year and some other forums that you'd get an acceleration in the handset replacement cycle. Right now, it's about four years. It's been the longest it's ever been. Some of that could be prompted by AI functionality in the phones beyond the facial recognition and transcription, maybe it's better integrated. So you don't have to fumble around with an app.
How do you think an increase in switching activity on the high end of the market could affect your mobile operations in the UK and Benelux? What are the opportunities there? And would you expect to gain share if that finally happened? Obviously, everyone on this call is well aware that 5G in Europe has substantially lagged that in the US, but it does feel like it could be an interesting propellant for your business.
Michael Fries
Thanks, Matt. Lutz, do you want to address that in the UK?
Lutz Schüler
Yes.
Michael Fries
You might be on mute.
Lutz Schüler
Can you hear me?
Michael Fries
Yes.
Lutz Schüler
Yes? Okay. So as you rightly point out, Matt, right, O2 has really the majority of premium customers. So we are the home of iPhone. And also, we have recently launched the flagship innovation from Samsung. But with all of it, we don't see any acceleration based on AI on these -- demand for these kind of phones yet. So therefore, we are very cautious factoring this in, in the future. I mean, if your forecast is right, it's upside, but it's not really in our guidance. So we don't see that. But I agree with your question, and hopefully, you're right.
Operator
Ulrich Rathe, Bernstein Societe Generale Group.
Ulrich Rathe
I have clarification questions on the UK. What was the nature of the working capital benefit in the fourth quarter that's now weighing in a way sort of on the year-on-year trends for free cash flow? And also, what is the nature of these postpaid matters in terms of the acquisition ARPU? I think you mentioned giffgaff as a particular driver, which suggests that this could be ARPU-dilutive, this recovery of the net adds.
And if I may, just to clarify, one thing that was left open in the guidance was the nexfibre impact, which has been either way in the past? I mean, how do you actually expect that to unfold in 2025 in the UK?
Michael Fries
Thanks. Charlie, you want to take the working capital question and maybe the nexfibre question? And then, Lutz, you can handle the postpaid ARPU.
Charles Bracken
Yes. So on the working capital, just to remind you, we try -- we believe telecom companies run their working capital broadly flat because our customer cycle, broadly the customer pays us real time. And to the extent to which your costs stay flat, you broadly have a payable cycle that doesn't really finance.
Now within that, there are obviously seasonal variations. Q4 variation, there's a big difference. And we do do some optimization of it, for example, around realizing a much lower cost of capital by what they call factoring receivables. We do handset receivables as many people do. And in the case of payables, we try and take the pressure of our suppliers by doing what's called vendor financing, which I think we've talked about over the years.
I would characterize the 2024 swing as within broadly flat because it's a big company, $10 billion of revenue. But it was slightly positive there. And I think what we've suggested in 2025 is that we are just reverting back to a pure flat number. And to be honest with you, the only certainty is it will be plus or minus around that. It could be a bit more positive, it could be slightly negative. And it will depend a lot on seasonal nature and also at the timing of certain CapEx, et cetera. Lutz, do you want to take the other one?
Michael Fries
The nexfibre on guidance, Charlie?
Charles Bracken
Sorry, what was the question on nexfibre? I beg your pardon.
Lutz Schüler
I can do this. I mean on -- we are not guiding nexfibre.
Michael Fries
Yes, go ahead.
Lutz Schüler
Yeah. So maybe then I'll start with the nexfibre question. I mean, as you know, we are not publicly differentiating in our net add growth between our existing coverage and nexfibre. So therefore, you get the blended number. I think underlying -- of course, it shouldn't be a surprise for you that in the BAU coverage, we are losing customers, a small amount, but we are losing it. And in nexfibre, we are growing because we are penetrating a new network.
Now what I can tell you is that our losses in our existing coverage are significant less to other big market players. This is what we believe. But aggressive augment with very aggressive prices are getting some customers also away from us. The question is, for your models, what do you factor and how long will this last? How sustainable is this?
On the postpaid question, so first, I think it's very important to understand that we've taken a conscious decision to approach the market in postpaid, so in pay monthly with two brands, O2 and giffgaff. So therefore, deliberately, we are not lowering prices or not too much because this is our premium brand. And if we are going in acquisition too aggressive, we also would offer that to our existing base. So therefore, there are two markets we are playing in, the classical MNO market, this is O2. And here we look clearly more after ARPU than after volume.
Giffgaff is the volume brand. Here we look more after volume and less after ARPU. And if you added both up, you can see on page 8 of the deck that the postpaid ARPU in Q4 has been shrinking minus 6%. But for -- a year ago, it was a tough comparator. And as you know, we are doing the price rise in Q1.
And I think you know the level of price rise, we are doing. So we have a much less tough previous year comparator out of price rise last year. And the price rises are quite interesting for us. So therefore, going forward, we are pretty confident that, right, ultimately, what we are interested in is to grow mobile service revenue out of P times Q out of both brands, and we are confident in that.
Operator
David Wright, Bank of America.
David Wright
I'm just going to come back to slide 6, your sum-of-the-parts walk, which I think there's an element of -- there's a lot of debate around this, of course, if only the fact that, obviously, the market is not agreeing, and thus, your derivation of the undervalued assets. I guess my question is UK-related but is a derivative of the, which is you talk about there being zero equity value for the telecom assets. But obviously, what we are observing in telecom, I think we know very clearly is that the equity infrastructure assets are valued at a much higher multiple than the ServCo assets.
So if you do go down the route in the UK or in Belgium or selling of infrastructure within the NetCos or Wyre or whoever it may be, is it not the case that the value of the mix of the telecom asset will be on a lower EBITDA multiple because you've got less infrastructure and more ServCo? And that's coming to, I guess, my key question here is what potential equity --?
Michael Fries
David, did we lose you? Well, sorry, we lost the last little bit of your question, David, but I'll try to riff off of what I think you were getting at. Look it, there's lots of ways of answering that. I would say, number one, whether it's 1 turn on the integrated EBITDA or it's 3 turns on the NetCo and 0.5 turn on the ServCo, there's no question that we're trading at the value of our debt. And that's where Sunrise was trading as well as an integrated operator.
If you look at the telco average across Europe, which is a mix of NetCos, ServeCos integrated companies at 6.5, does it seem extraordinary to us to think that getting people to appreciate the value of our infrastructure, the value of our free cash flow potential over time is worthy of a higher multiple?
And by the way, I'm not going to wait around for you to get there, meaning if the market doesn't appreciate it, we'll just have to prove it. And that's really the difference. The strategic pivot 12 months ago was we ain't waiting around anymore for you to figure it out. We're just going to prove it. And we did that with Sunrise.
So to me, it's not a question of will it, won't it. We'll demonstrate that it's there. We'll show you with transactions, with strategic opportunities that it's there. And people who stick around will get the benefit of it. I mean we certainly want research analysts, yourself included, to see the value in what we're doing. We want you to appreciate the free cash flow potential of our businesses.
We want you to understand the network infrastructure strategies. That's no question. But we know that over time, a combination of these things will absolutely be reflected in the value of these telecom businesses and that if I went to my partners, if I went to an investment bank to list something, if I went to a private equity shop to sell it, they're not giving me 0, all right, just -- they're not giving me 0.
So the fact that we think it's 0, I think, is the starting point. And we can debate whether it's 1 turn, 2 turns, 3 turns, whether it's free cash flow dividend yield strategy or network infrastructure, premium multiple strategy or a combination of the -- of all of those. But we're convinced that over this 24- to 36-month time frame, we're going to demonstrate that. And that is what your -- you have to believe to buy the stock. That's the bottom line.
Whether you get there or another analyst get there, I don't really care. We're going to get there, and it will be delivered through external independent transactions or opportunities as opposed to analytical research. David, we didn't get the end part of your question, but I hope that's responsive.
Operator
James Ratzer, New Street Research.
James Ratzer
So the areas I was interested in focusing on today, please, was just a spectrum position that you have in the UK asset with Virgin Media. So obviously, with the Vodafone 3 transaction, they build a pretty dominant spectrum position. But to offset that, you will be buying some spectrum from them to strengthen your own position. So I was wondering if you can give us some more insight into the moving parts here.
Can you let us know, for example, how much spectrum you will be purchasing? Can you give us some steer on what the cost of that will be? Will we see the cost of that in 2025? Or is it going to be phased in over a few years. And with this new spectrum position, how secured do you feel about, for example, the Sky MVNO on your network and whether they could be learned across with a stronger spectrum position at Vodafone 3? When does that contract with Sky next come up for renewal?
Michael Fries
Yes. Lots of really good questions there. I'll let Lutz dig in. I don't believe we disclose much in the way of detail, Lutz, on price and the megahertz spectrum and the bands we're buying, but I'll let you address that as well as the Sky contract length.
Lutz Schüler
Yeah. Thank you. Yes, James, as Mike said, right, we can't really disclose neither the concrete spectrum nor the price. The deal is also not closed on Vodafone 3 yet. I think the spectrum will be disclosed by Ofcom, if I'm not mistaken, after the deal has been closed. And also to share with you the price, we need agreement from our partners there. So unfortunately, we cannot say that.
I think what I can say is you know that our market share is significantly higher today compared to the spectrum we hold, and we fix that with this kind of deal. So we put ourselves in healthy position. I also don't want and I'm not allowed to disclose with you the term of the deal with Sky.
But what I can tell you is that the spectrum we are sitting on, the investments we are doing in our mobile network, we have done, especially in '24, which was significantly higher, and we will do going forward, puts us in the position to really say a long-term relationship with Sky.
Michael Fries
Thanks, Lutz. I think that's time. Operator, do -- was there one more?
Operator
No, sir. That concludes today's question-and-answer session. I would now like to pass the call back to Mr. Fries.
Michael Fries
Yeah, Fries. Yes, thanks, everybody. And David, sorry to get animated on your question. I didn't get the end part of it. So I hope we were responsive. But listen, I appreciate you joining us, a little longer remarks today, but I think appropriate given year-end. And look, as far as we're concerned, we think 2024 was a standout year.
We hit 13 to 14 guidance metrics off Sunrise and more or less achieved all the strategic goals. And we're setting ourselves up for an equally ambitious 2025 and beyond. So we feel like this is nothing but upside here. And of course, the buyback will help us benefit from that and you, hopefully, over time. So we're excited about where we're heading, and we always appreciate your questions and your support, and you know where to find us.
So thanks, everybody.
Operator
Ladies and gentlemen, this concludes Liberty Global's fourth quarter 2024 investor call. As a reminder, a replay of the call will be available in the Investor Relations section of Liberty Global's website. You can also find a copy of today's presentation materials. Thank you and have a wonderful day.
