VodafoneZiggo established on last day of 2016 with EUR 10 billion gross debt

The Vodafone Group and Liberty Global closed the creation of their 50/50 JV on the last day of 2016, calling it VodafoneZiggo. Here are the details:

• 7.1m HP, nationwide 4G, 9.6m fixed (4.0m video, 3.1m BB, 2.5m fixed voice) + 5.2m mobile RGUs at 160930
• rev -12 mo EUR 4b, gross debt EUR 10b at 160930
• synergies NPV EUR 3.5b (unchanged; capex/opex run-rate savings EUR 210m by 2021 (reduced from 280m), Vodafone Thuis sold (FCF -73m), integration costs 280m (down from 350m due to Vodafone Thuis sale), rev synergies >= 1b)
• shareholder charges for services provided increased (EUR 182m in 2015, EUR 211m in 2017E (97 for Liberty, 114 for Vodafone))
• Vodafone to receive EUR 0.6b cash, Liberty Global to receive EUR 2.2b cash, based on recapitalisation & equalisation payment Liberty to Vodafone (EUR 0.8b, original estimate EUR 1b; down due to increased net debt at Ziggo)
• plans predictable dividend, recapitalisations, minimum cash balance, leverage 4.5-5.0
• brands Vodafone & Ziggo
• plans converged propositions
• partners retained cash from subsidiaries since 160215 (JV announcement): EUR 500m from Ziggo, EUR 300m from Vodafone NL
• not to be consolidated by parents (equity affiliate or associate)

Gross debt EUR 10 billion compares to KPN's EUR 8 billion.

Vodafone Thuis (sold to T-Mobile NL) for the 12 months to 160930:

• rev EUR 53m
• EBITDA EUR -29m
• capex EUR 44m

Analysts and arbitrariness

Certain recommendations appear questionable (whether sell-side or buy-side), due to arbitrariness. The reasoning is in three steps:

1. The analyst sums up an arbitrary number of positives. This is a very selective process, which includes downplaying the negatives.
2. All these issues are based on public information and hence discounted into the share price.
3. The analyst could argue that his views are superior to those of the rest of the investment community, and hence these issues are either under-discounted or over-discounted. What follows, is a buy or a sell recommendation.
4. His superiority could be determined by looking at his past recommendations.

Analysts use arbitrariness to help them achieve their own business goals.

What makes an internet company?

The ECJ recently raised the question: is Uber a transport company or a digital service? Apart from the legal and regulatory consequences, the question is interesting on a conceptual level.

Having a side job in the vacation home business, we have some thoughts to share.

At first sight, these companies appear to be genuine internet companies. Booking & customer support, advertising & marketing, administration & accounting support - all goes through the internet, after all. However, as all of the economy is moving onto the internet, every company would soon appear to be a 'digital' service.

I would propose that Uber, Airbnb and my vacation home are, at heart, still 'analogue' services: taxi and home rental.

Media are an interesting sector since the heart of the business is immaterial. Or, from a different perspective: there is little to distinguish the service from the distribution. We have come to see a book, a track and a film as a file, rather than as a story in words, a piece of music or a story in sound and audio.

More 'packetisation' needs to be done before Uber and Airbnb can be seen as internet services. For Uber, it will take something to the order of teleportation. For Airbnb the future may be closer than it seems. VR is just around the corner.