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Liberty Global PLC  (NASDAQ:LBTY.K) (NASDAQ:LBTY.A) (NASDAQ:LBTY.B)
Q1 2020 Earnings Call
May. 07, 2020, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Liberty Global's First Quarter 2020 Investor Call. This call and the associated webcast are the property of Liberty Global, and any redistribution, retransmission or rebroadcast of the call or webcast in any form without the expressed written consent of Liberty Global is strictly prohibited. At this time, all participants are in a listen-only mode.

Today's formal presentation material 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 fact.

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 recent 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 condition on which any such statement is made.

I would now like to turn the call over to Mr. Mike Fries.

Mike Fries -- Chief Executive Officer

Okay. Thank you, operator, and hello, everyone. I appreciate you joining us on the call today. And clearly, we have a lot to talk about, so I'm not going to waste much time with formalities. I'm going to jump right into what will be the most important topic, which is how we're managing through the COVID-19 pandemic.

First of all, our hearts and prayers go out to everyone, who suffered through this crisis. These are clearly unprecedented times and I am particularly proud of our 27,000 employees across eight countries, who have dedicated themselves to keeping their customers connected, entertained and informed.

You can imagine, our primary focus has been on their safety and well being, and while the policies and requirements vary by country, nearly 90% of our team has been working from home and we are deep in preparation for their return to the office and the field on a gradual basis.

And we appreciate that this is an extraordinary time for our customers as well. So in addition to providing them with the same reliable and robust connectivity services we're known for, we've been improving their experience in a multitude of ways. We're boosting speed and increasing data caps. We're offering additional entertainment services, especially for kids and we're aware that our customers are experiencing economic challenges as well.

So very careful to keep folks connected and help them manage through the crisis, even offering lifeline services where it's necessary. And we're paying special attention to our B2B customers, increasing capacity and providing emergency mobile coverage to hospitals and ensuring quick turnaround on product changes.

As an essential service, we have crews and trucks in the field every day, in maintaining our networks, installing new customers and building plans. Our Lightning Construction crews for example are working as we speak. Of course, with additional precautionary measures, but we're on pace to light up at least 350,000 new homes this year. By the way, we've included a slide on Project Lightning in the appendix to see we'd have those details for the quarter.

Now, at the outset of the crisis, many wondered whether any network could withstand the increase in usage that would inevitably occur under these circumstances and the answer for us is a clear yes.

Our fixed broadband network has seamlessly absorbed 20%-plus increases in the downstream and 50%-plus increases in the upstream bandwidth with no problem at all. So, recent investments in infrastructure and speeds and connectivity products have really proved invaluable for all of us.

From a trading point of view, our sales have been largely stable, but down from pre-crisis levels. And at the same time, as many of our peers have reported, we've seen a considerable drop off in churn.

We're also experiencing softness in some of our premium sports products. That's not surprising. But in markets like the UK and Ireland these are zero-margin packages for us. And we don't make much money and neither impacting cash flow.

On the mobile front, store closures are impacting handset sales and usage has dropped off a bit, as folks offload to Wi-Fi. But in many markets we're on our way to reopening and recovering. For example, two-thirds of the shops in Holland are now open and back in business, and for us, it's just a matter of time we believe.

And Charlie is going to address, what all this means to our financial guidance for the year. On one hand, we're fortunate that we have very little exposure to things like advertising or other sectors that are experiencing disruption right now. As a group, our services have proven to be even more vital for consumers during this crisis. On the other hand, we're realistic about the impact this may have on bad debt and potential price increases and mobile roaming revenue, overall customer activity.

Like our peers, we're assessing the medium-term impact of the pandemic on our business. And we expect to have a more thorough update for you in the second quarter earnings call. There were a lots of uncertainties on the road ahead from lifting of lockdowns to testing a vaccine, but we feel well-positioned to power through this.

In the meantime, we are not suspending or changing guidance. We're actually pretty encouraged by our operating and financial prospects for the balance of the year.

Let me reset the agenda here a bit, just for a minute and hit a couple of additional highlights on Slide 5. By the way, we're talking from slide. If you can get a hold of those it'd be very helpful for you.

Now, despite the impact of the COVID-19 crisis, we delivered a solid first quarter operationally and financially. In fact, the quarter was largely in line or ahead of our internal expectations. I'll talk about this more when we dig into Virgin Media results. But we remain focused on a handful of key performance drivers in our European markets, in particular customer growth, customer ARPU and Fixed-Mobile Convergence.

And we did well on all three of these with largely stable customers versus the prior quarter, solid ARPU growth versus the prior quarter and year-over-year, and good mobile additions. And have pointed that these operating strategies are working, right? We have over 32 million gigabit-ready homes across our European footprint, with 1-gig services launched in nearly 12 million of those homes.

We're widening the distance between us and our competitors, when it comes to broadband speeds. We had a 22,000 broadband service in the quarter as a result. And our Fixed-Mobile Convergence bundles drove nearly 115,000 postpaid mobile addition.

Now finally, a quick update on capital allocation. At the end of February, we authorized a $1 billion share buyback and through the end of April, so in about two months, we've repurchased $500 million of stock at an average price of mid-$16 range. So we're generally buying through 10b5-1 plans according to preset grids or pace accelerated as the stock declined, shouldn't be a surprise to most of you.

Now, let me move to the most important announcement today, that is, of course, our agreement with Telefonica to combine our UK operations, Virgin Media and O2. We are really, really excited about this transaction and the partnership with Telefonica. Over the last several years, we've been successfully executing a very clear plan to create national Fixed Mobile Convergence champions in all of our markets.

Now, in some cases, we've sold our broadband operations to mobile operators like Deutsche Telekom and Vodafone. We share that exact same belief in convergence by the way. And we've closed those transactions at premium multiples, highlighting the big disconnect between public and private valuations.

In markets like Belgium, we acquired MVNO, and are thriving with Fixed Mobile Convergence in that country. And in Holland we joined forces with Vodafone in a 50/50 joint venture to create what is now the fastest growing and most important mobile broadband and entertainment provider in the market.

This deal follows that path. By combining O2, the largest and most reliable and admired mobile operator, together with Virgin Media, the country's fastest broadband network and most complete and innovative video platform is a powerhouse combination.

First, it gives us the scale to invest competently in gigabit broadband and 5G right when it matters most. That's now. And second, with the best network infrastructure, market-leading positions and world-class brands, we'll have the strength to compete aggressively for customers.

And third, of course, the combination delivers significant synergies that will accelerate operating cash flow and free cash flow. Now, we know the playbook well, as we've executed on it many times. It's also a strong statement by both Liberty and Telefonica that we believe in the UK, and are right behind the government's desire to bring next generation connectivity to consumers and businesses as fast as possible.

So let's dig in a bit on the transaction itself on Slide 6. There's plenty of detail here, so I'll try to hit the key points. The main deal points are in the left hand side of the slide. This will be a 50/50 JV in all respects. Obviously, we have experience with this structure in Holland and we know can work well.

It feels like a very good fit with Telefonica. We have similar values, comparable operating goals and strong leadership on the ground. The economics of the deal are derived from relative valuations at the formation of the JV. You've all seen this equation before.

In this case, we value Virgin at a total enterprise value of GBP18.7 billion, resulting in an equity value of GBP7.4 billion, that's assuming, of course, GBP11.3 billion of debt is transferred into the JV. O2 was valued at GBP12.7 billion and will be transferred in debt-free, but with some working capital and debt-like items. So to equalize the ownership, Telefonica need to receive a payment from us of about GBP2.5 billion and that's based on 12 to 131 numbers. That's just math.

And the math could change as debt and debt-like items evolve between now and closing, but we expect it to be largely the same, perhaps maybe even -- the payment could be a bit lower. Just the O2 business is largely unlevered. We do intend to recapitalize the JV with about GBP18 billion of total debt, which means each partner will receive recap proceeds on or before closing of approximately GBP3 billion that covers more than our portion of the equalization payment. And that to recap in Virgin Media, Ireland, which will stay outside of the JV, we should end up with net cash proceeds of about GBP1.4 billion or $1.75 billion.

It's worth pointing out that this is also a delevering event for our business, which will go from 5.5 times to 5 times leverage in UK. Transactions is obviously subject to regulatory approval, which we anticipate will be reviewed at CMA and should be closed hopefully by the middle of next year, if not sooner.

And moving to the right hand side of the chart. The rationale for this combination from our perspective is very compelling. I've covered some of those points already. We're creating a clear convergence champion in our largest market and one of Europe's most attractive. But the transaction also creates real value for shareholders. We've argued for quite some time that our stock doesn't reflect any equity value for Virgin Media. Clearly, this deal changes that debate. And with an implied multiple of 9.3 times in 2019 OCF were 25 times 2019 operating free cash, flow and there is substantial equity value in our UK business, even before net cash proceeds or synergies.

Now, as you've read, the synergies are currently valued at an NPV of GBP6.2 billion as reflecting run rate benefits of around GBP540 million per year. It's worth pointing out that, that compares really favorably the other fixed mobile convergence deals we've been associated with it. In fact, it's on the lower end as a percent of the combined costs. Of course, we have a very strong track record of executing and over delivering on synergies, so hopefully that number should be good.

On the bottom right, we present some financial metrics you can see that the two businesses together generated GBP11 billion in revenue in 2019 and GBP3.7 billion of OCF or EBITDA. That's before intercompany service charges in the JV structure.

And like our Dutch operation, we expected JV to generate significant distributable free cash flow, and then we should benefit from recap and through the dividends down the road. This is, of course, one of many, but a significant driver of the deal for us.

Now, Slide 7, just provide some additional background on the combined group. I've already referenced the JVs best-in-class fixed broadband mobile infrastructure. I think the key point here is that this deal will undoubtedly enhanced our confidence and strategic positioning when it comes to expanding our network leadership in the market. O2 has already rolled out 5G to 30 communities, and Virgin has already rolled out gigabit speeds, 2 million homes with the rest of our footprint ready to roll.

We know that when the power of 5G meet 1-gig broadband, there is no looking back. And both we and Telefonica see eye-to-eye on the infrastructure network opportunity here. On a whole host of levels, O2 is an ideal partner for Virgin Media. They're extremely well placed in the mobile market with the lowest back book, front book exposure, the lowest market churn, and very high NPS. We've done some of our own research, which confirmed what we knew that both brands have strong customer appeal. What we didn't realize was that the appeal grows even stronger, when the brands are considered together. And that's a great starting point of fixed mobile convergence, as are these other data points, 8 out of 10 Virgin customers use someone else's mobile service today, which provides a huge pool for cross selling O2 to mobile service.

Even more compelling research show that 50% of O2 customers that don't have Virgin broadband, are more interested in adopting a converged product, an O2 or Virgin than they would be from another broadband provider. So the fundamentals are here, are very prosperous partnership and we're excited to get started. And after big transaction like this always good to step back and reflect on the composition of our business and assets. And the value creation strategy we're focused on.

You'll see that on Slide 8, which shows our major operating businesses laid out along with other assets. And I'll provide just a few quick observations here. Number 1, we have significant scale across Europe. These operations together will serve 80 million fixed and mobile subs, and what we believe are the best European markets. Together, they represent over GBP24 billion in revenue that's taking the JV revenue plus our consolidated revenue, and over GBP8 billion of operating cash flow calculated on this new basis with significant levered free cash flow generation.

The second big takeaway is that our three largest assets are or will be less than 100% owned. As much as anything that's a function of European market today, which is rapidly consolidating to drive scale and generate the synergies. Sometimes you need partners and we're certainly willing to join forces to create that value. Sometimes it's public shareholders partnering with. Sometimes it's a strategic operator. So long as there's scope for liquidity and transparency on value we're satisfied.

The third point is that the value creation strategy is largely the same across the footprint. We're building national FMC champions, partially because many incumbents are vulnerable underinvested or late to the game, but also because governments and regulators want scale driven challengers. They know that consumers and businesses win when there's infrastructure-based competition. And that's been our mantra for decades, and it's just true today as it ever was.

Going forward, the focus is on free cash flow. It has always been one of the most -- if not the most important metrics of our business. Now with revenue and OCF growth flattening in a more mature telecom landscape, it becomes even more important. And it's particularly coveted among European investors just look at where Telenet trade today, for example. So not surprisingly, we will examine the potential for public market listings where and when that may makes sense.

At the group level, we continue to have significant liquidity in excess of $10 billion, even before this transaction closes. And of course, none of us predicted this crisis. But what we certainly feel now is fortunate to have the capital to both pursue these types of deals and fundamental FMC strategies in core markets tend to be opportunistic, which we will be. That includes our time honored strategy of driving a levered equity capital structure and, of course, share buybacks as and when appropriate.

I'm using this chart as a reference, but there are many ways to look at the valuation of our group. We're not trying to be prescriptive here. But more than a few investors have asked us to put forward a simple sum of the parts analysis that shows the value gap we talked about. This is always a debate with the lawyers and the IR folks, but we've tried to provide a reasonably complete and hopefully simple version of that on Slide 9. I'll try to break this down, and of course, we're happy to take questions.

The first two building blocks of value are our cash balance at Q1 and the value of our publically traded shares in Telenet. Together, those numbers add up to about $16 per share. Again, that's just an objective number. We don't assign a specific value to our interest in Holland and Switzerland on this page. But we do provide the necessary metrics for others to do that pretty easily. You can choose your methodology. There are plenty of comparables to measure against.

But we think if you can get the $5 to $7 per share pretty easily for our interest in these two markets, that's supported by a 14 multiple on OFCF at the low end and 10% free cash flow yield on the high end. And if you were to use Telenet's multiple OCF, you get somewhere in the middle. So again, many will find their own numbers here. What are -- the point, though, is that our current trading levels, around $21 plus my analysts have pointed out that you could arrive at that price. On these three numbers alone cash plus Telenet stock plus our interest in Holland and Switzerland. In other words, the UK was and perhaps still it being assigned zero equity value in our share price.

The left hand side of this chart, we addressed that point, and showing with just one way to look at the implied value of the transaction that we just announced. There are three simple elements here: number 1 is the expected net proceeds of $1.75 billion, which equates to roughly $3 per share; then you have our 50% of the estimated synergies, which adds up to about $6 per share; and finally, there is an implied transaction value for the underlying Virgin Media business when we combine. And we had O2 agreed, as I just mentioned, GBP18.7 billion, which after debt represents an implied value for the equity today of around $14 per share of Liberty Global.

If you add all that up, you get to about $23 per share. And that's just on the UK business. And we understand that everyone will have a different view, a different valuation approach. And in particular, some might argue that the implied value of Virgin in the deal and then the combination is a challenging one or not acceptable. We don't agree with that, of course. But if you want to haircut the deal multiple by 20%, and put it us in the mid-7s. You still get the $16 per share with the entire transaction. It's hard to argue that we don't have a considerable value gap here. And I think, you're all capable of doing the math on your own.

And we just wanted to give you those components and hopefully clarify what we've been talking about for some time. And one more slide here in Virgin Media to help round out the operating update, and then pass it to Charlie.

And as you'll say, there are more operating update slides like this in the back for other assets. But you see that we're trying to focus here on the data that we believe is most important for tracking progress in our core market, namely, winning and retaining customers across our fixed mobile B2B business; secondly, growing ARPU, the up-sell and cross-sell; and third, driving fixed mobile convergence.

We're also focused, of course, on extending our network reach and speed leadership, and driving cost efficiencies. In fact, on the cost efficiency side, we've been forced to accelerate some of the transformation in our care and sales capabilities, to be more digital to operate more efficiently and that's going to pay dividends on the other side. And there are a few good visuals in the middle two columns here. You'll see firstly, that Virgin Media's customer base has been largely stable just under 6 million.

In fact, the number is only moved about 20,000 customers in five quarters. Yes, as we show the customer gains we pick up in lightning or often offset by the customer losses in the BAU footprint, but the numbers are not significant in either direction. You can also see a strong customer ARPU trend in the last five quarters, with 1.2% growth year-over-year in the first quarter. And this has driven larger than price increases and against cross-sell and up-sell, but also underpinned by product innovation, and improved base management.

We are continually seeking to enhance the value for money proposition for customers in this market with things like our next gen V6 set-top box and broadband speed. In fact, in the past quarter we boosted over 1 million customers to 100 megabit broadband speeds bringing our average speed across our base, average speed to 140 megabit. Just by reference for reference purposes. The rest of the UK market is averaging consumer speeds of 30 megabits a second. So we are -- our average Virgin customer is getting broadband speeds 4 to 5 times faster than the rest of the market.

As we pointed out, often 95% of that UK network is already won't get ready. And we've launched those speeds across major towns in the 30% of the footprint. I put us on track for networkwide coverage of 1 gig in 2021 delivering 50% of the government's national gigabit ambition four years early. I think there's an offset there. Now Lutz and the team have also been -- already focusing on cross selling to mobile -- mobile into the fixed base following the launch of convergence bundles about a year ago.

And the Q1 postpaid net ads were good at 72,000. So fixed mobile convergence is already working at Virgin, we're at 22%. Fixed mobile convergence ratio with plenty of runway. Remember, Telenet, VodafoneZiggo are in the mid-40. So, as we all know, fixed mobile convergence drives higher NPS and lower churn as the fundamental rationale for the deal we announced today. So it all knows and good start to the year for Virgin Media even in light of the pandemic. OFCF margins are strong at 23% before lightning and 17% after, our SOHO customer base grow 7%.

And the team is managing through the headwinds we identified at the beginning of the year, the increase in network taxes and the contract notification programming costs, we've been managing through those very, very well. In fact, NPS is up, there's no return is down. I think the group is really well positioned to come out of this COVID period very, very strong. So and that's for me.

I'll pass it over to Charlie, and then we look forward to getting your questions. Charlie?

Charlie Bracken -- Executive Vice President and Chief Financial Officer

Thanks, Mike. And now I'm on Page 12, divisional overview, Mike has given you the key operational highlights of Virgin Media. And in the appendix, we've included similar pages, showing the key operational drivers for our other major fixed mobile convergence businesses. In the interest of time, we're not going to review these pages in our remarks today, but please do contact the IR team if you want to discuss them further.

On this page, we set out the key financial metrics, which we were using to assess the performance of these national FMC champions. Our focus continues to be to drive OFCF or OCF minus accrued capex, and free cash flow as these markets mature in terms of broadband penetration.

Now for reference, we've also included a page in the appendix setting out our view of 2019 free cash flow for each of our divisions after the allocation of interest and the central technology and innovation capex. But for the quarter on this slide, I will focus on the underlying OFCF trends year-on-year, revenue in the UK anonymous slightly down 0.6%, but OCF declined 3.5%, OFCF before Lightning Construction capex increased $18 million to $372 million for the quarter.

We increased our investments in Lightning compared to 2019 Q1 and spent $99 million, with 93,000 homes released during the quarter. Revenue growth in Belgium was slightly down at 0.4%, OCF up 0.6% and year-on-year OFCF down $10 million to $187 million. As John already explained in the Telenet earnings call, there was an acceleration of prepaid sports rights costs, and some front loading capex in Q1, which contributed to this year-on-year OFCF decline.

But for the full year, confirmed that, excluding the effects of the lockdowns in the second half of the year, they expect to deliver full year rebased OFCF growth of 1% to 2% on an IFRS basis and adjusted free cash flow the lower end of the previous GBP415 million to GBP430 million guidance range. This assumes that they will gradually exit the lockdown starting in May, with a gradual economic recovery thereafter.

In Switzerland, UPC was caught up in the continuing price competition in that market, which resulted in an accelerated decline in consumer and SOHO customer ARPU. This contributed to 2.7% decline in revenue. They also had an acceleration in prepaid sports rights cost in the quarter, as well as accelerated spending capex contributing to a lower OFCF of $55 million. However, based on current expectations around the impact of COVID. We expect cash generation to improve and the company remains on track to produce around $170 million of free cash flow for the full year, which includes central opex and capex allocations.

In Holland, VodafoneZiggo had a very strong quarter with revenue growth of 3.3%, OCF growth of 4.9% and OFCF of $258 million, as they outperformed our expectations in virtually every operating metric, showing the strength of these converged national FMC champions.

They're now expecting stable to modest rebased OCF growth for full year. And have maintained their original free cash flow guidance of GDP400 million to GDP500 million and potential cash for shareholders distributions. Now, again, this assumes no further deteriorations as a result of COVID.

On the page entitled Group Overview, we set out the key financial metrics for the group as a whole. Revenue declined 0.3% for the quarter, an improvement over the declines from the previous four quarters, despite the impact of COVID-19. OCF growth also improved compared to the last three quarters of 2019, a minus 3.6% in line with our pre-covered expectations.

OFCF continue to improve and excluding Lightning Construction capex was $593 million for the quarter, up from $569 million a year ago. The continuing reduction in capex intensity contributed this. And capex as a percentage of sales prior to Lightning Construction capex at 19.4%, lower than the previous four quarters.

Liquidity remains extremely strong. Cash, including our $2 billion investments in separately managed accounts was $7.4 billion. Now, as many of you know, our SMAs are invested in low-risk liquid investments. Both our SMAs and money market accounts are now largely invested in government securities, as opposed to AAA funds, which will lead to a reduction in interest income going forward, but ensure maximum security for the cash.

For the available revolving credit facilities in our operating companies, the group as a whole has $10.3 billion of liquidity. Our leverage at the end of the quarter was 5.2 times growth and 3.7 times net EBITDA. The cost of debt continues to decline as we continued our refinancing program during Q1 and now stands at 4.1% with an average life in excess of seven years.

On the page titled adjusted free cash flow, we lay out the key components of free cash flow. Q1 OFCF before Lightning Construction capex was $595 million, and our net interest for the quarter was $579 million. We make virtually all our interest payments in Q1 and Q3. So this phasing is in line with our expectations.

Cash tax was positive for the quarter of $5 million. And we expect the full year 2020 figure to be lower than the full year 2019 figure of $358 million, partly due to reduced U.S. tax payments. The distributions in the JV in Holland were $11 million for the quarter, but we continue to expect full-year distributions of GBP200 million to GBP250 million, in line with VodafoneZiggo's recent guidance.

And as is typically the case in Q1, working capital was negative at $250 million, largely due to the phasing of vendor financing program. And as in 2019, we continue to target broadly flat net working capital flows to the year.

Adjusted free cash flow before Lightning Construction capex was negative $218 million for the quarter and negative $317 million after construction capex, which again was in line with our expectations.

Turning to the outlook for the full year, we're still assessing the medium-term impact from COVID-19. And we'll give investors a further update in Q2. Despite the impact of COVID, we continue to be encouraged by our operating prospects. And unless there's another step change in the macroeconomic environment, we don't see a need to change or suspend our original full-year guidance as detailed on the slide.

And note that our current assumption is that lockdowns are lifted from Q2 followed by a gradual economic recovery. And also that our original $1 billion free cash flow guidance was based on exchange rates of EUR1.13 to $1, and $1.33, GBP1. Although we don't guide on rebased revenue growth, we do expect negative impacts to revenue from reduced handset sales, and premium video, particularly sports.

But both of these are relatively low-margin and have a limited impact on cash flow. We will continue to monitor the impact of the crisis on these forecasts and update you further in Q2. And so with that, I'll turn it back to the operator. And in order to address everyone's questions, we would kindly ask if you would keep to one question each.

Questions and Answers:

Operator

The question-and-answer session will be conducted electronically. [Operator Instructions] And we'll go to our first caller.

Robert Grindle -- Deutsche Bank -- Analyst

Yeah, hi.

Mike Fries -- Chief Executive Officer

Who it is?

Robert Grindle -- Deutsche Bank -- Analyst

Robert Grindle, it's Robert from Deutsche Bank. Hi, there.

Mike Fries -- Chief Executive Officer

Hey, Robert.

Robert Grindle -- Deutsche Bank -- Analyst

Yeah. So one question, so I'd like to ask about the JV structure and why you chose that rather than, say, a majority stake. Is this the only game in town? Or was it as you mentioned about confirming a positive equity value for VMED? Was the JV structure also interesting, given your thinking about an extended fiber builds program? Obviously, chest got a lot of fiber experience. Is that something you are aligned on? Thank you.

Mike Fries -- Chief Executive Officer

Okay, that's three questions. Let me see if I can jump into those. There's always multiple ways to approach a transaction like this or a strategic move like this. But this felt to us like the best outcome and the best partner for all kinds of reasons. And I've talked about those in the remarks I just made, so you've heard that.

And we're comfortable, as I mentioned, with these structures. We have experience with them. It's worked exceedingly well in Holland with Vodafone, who's been a great partner. And so, this was the transaction that was presented to us or that we also went out and sought, and the one we think will be most accretive and most advantageous.

So, sure, there's always a different ways to do it. It had nothing to do with what you're describing. And then the value, the value once you decide how you're going to approach a partnership, then you agree on values, not the other way around. I don't think it was driven by value. It wasn't driven by anything other than that. It wasn't obviously the only game in town.

There are multiple mobile operators in this market without fixed infrastructure. So clearly, there were other options. But again, as I said, we felt this was the best option. And credit to Telefonica for also being quite interested and focused on this. And I think it is the best fit. It doesn't change anything with respect to our -- the level of excitement we have around Project Lightning or network extension in the market. It takes nothing off the table.

In fact, I would argue and I think Telefonica would agree, this increases our confidence level, in looking at a national scope, or extending convergence, best-in-class network. How you achieve that? How we finance that? And how aggressive we are, that is all to be determined. But I think the main takeaway is it doesn't change our level of excitement. It takes nothing off the table. I would say it only enhances our ability to be strategic and financially aggressive, and it makes sense, in terms of looking at our network and the opportunities that we've discussed historically.

Robert Grindle -- Deutsche Bank -- Analyst

Okay. And thanks.

Operator

We'll go next to Jeff Wlodarczak with Pivotal Research.

Jeff Wlodarczak -- Pivotal Research -- Analyst

Good morning. How are we -- hi, how reasonable of comp is your operating strategy, synergy upside, I mean, I think obviously leverage levels at VodafoneZiggo, that JV, so what you sort of expect from this deal? And then, if I could sneak one in about the back-book repricing in UK, and how that's going relative to your expectations? Thanks.

Mike Fries -- Chief Executive Officer

Okay. Lutz, you can prepare for the back-book repricing issue. The Punch-line is, are in line. But there are lots of things that are similar in this transaction to the VodafoneZiggo transaction. Obviously, the structure itself, there are often many -- big differences too, of course, in terms of the size of the market and the competitive landscape that we find ourselves in.

On the other hand, it is a similar playbook for us. And it's one we're quite familiar with. So our approach to synergies, our approach to integration, our approach to strategy to drive revenue and convergence are quite similar. And it wouldn't surprise us if down the road these two companies together are achieving similar outcomes.

It's possible here we might even exceed the convergence levels that we see today. In Holland, which are mid-40s. It could be even higher in this market. A lot of it has to do with what -- how the market evolves generally and how competitors react over time. I don't believe there'll be any reaction that's worthy of discussion in the short term or even in immediate term perhaps. But how the market evolves over the longer term is what's critical.

I'd simply say, when we put the business plan together, at least from our perspective, we were very conservative about the stand-alone mobile business and the challenges that it might face. And we think we were very appropriately conservative about our own business, just to be, thoughtful and not too ambitious.

And I think when you put those two businesses together as you drive synergies through that that business plan. It is very accretive and quite attractive, and that obviously drove the transaction. So I think with very conservative assumptions on either business, with the synergies, which I think, as you point out, are probably conservative.

Certainly, it's one of the lowest, if not, the lowest percentage we've seen in eight countries or seven countries we've been involved in FMC transactions now. But there's good reason for that. This transaction came together relatively quickly. We wanted to be thoughtful and not over promise. We've never missed a synergy budget. You would know that, Jeff, or synergy target, in fact I think almost in every case. We've exceeded our synergy budget and targets. So this should be the same.

Lutz Schuler -- Chief Executive Officer-Virgin Mobile

On end of contract verification, so we have it out in the market since February, the 10th. The churn level is exactly what we have planned for. How many customers are calling in and how many customers decide to leave us. And then, the second lever is how much discount do you offer to keep the customer connected.

And the discount we have offered so far, it's only one-third of what we have planned for. So therefore, it is altogether slightly better than we have expected. But the caveat to that is that we are only six weeks into it in that quarter, and also that was precluded. And that might change, so therefore we stayed cautious. But I have to say, although the market was pretty competitive in March and in February, we are doing slightly better than expected.

Jeff Wlodarczak -- Pivotal Research -- Analyst

Thank you.

Operator

We'll go next to David Wright with Bank of America.

David Wright -- Bank of America -- Analyst

Thank you, guys, for taking the call. And, Mike, if I could maybe express some gratitude, I guess, more generally for the salary sacrifices etc in light of COVID. My question is just on the UK joint venture and spectrum costs. There is a UK spectrum auction forecast, which probably should be this year, could be next year. Should we expect in the event of any delays that, that is cost that Telefonica will bear, or is there a risk that that could drop into the JV? Thank you.

Mike Fries -- Chief Executive Officer

Thanks very much, David. I believe the press release referenced this, but you might not have a chance to review, get through it or seen it. But the basic deal is that Telefonica will bring to the JV the spectrum that we both believe is necessary to achieve the plan at their cost. So that was the arrangement that we reached early on. And that so they'll deliver to the JV at their cost the spectrum when that auction occurs.

Obviously, we have not been able to discuss spectrum with them in any detail. It's a very complicated and has to be quite careful. So we don't know what they're doing. We don't have any real understanding of what they may do. But whatever they end up with it'll be at their cost.

David Wright -- Bank of America -- Analyst

Mike, just maybe extending on your comment on Lightning, and you've been very vocal with perceived on the valuation of Lightning, you stripped it out, etc. It's kind of dropping in at 10 times EBITDA into this deal. How did you kind of think about valuing Lightning independently as the kind of steady-state VMED cable infrastructure?

Mike Fries -- Chief Executive Officer

Yeah, good question. Look, I think we each had some assets on the -- on each side of the deal that we could have argued for different values. But they have their tower interests in UK, which they thought at one point maybe it would be better outside of JV we had the Lightning transaction. But we both agreed that this is going to be a long-term partnership, that we should be doing things inside the partnership that makes perfect strategic sense and operational sense and financial sense.

So let's just say that, the valuation was considered, but we didn't get into that kind of granularity, when it came to -- this is always negotiation, in terms of identifying exactly what Lightning reference includes or doesn't include. Then we didn't do this, we did -- probably approached it similarly on their tower footprint.

David Wright -- Bank of America -- Analyst

Very useful. Thank you.

Operator

We'll go next to Michael Bishop with Goldman Sachs.

Michael Bishop -- Goldman Sachs -- Analyst

Yes. Thanks. Just both two very quick questions. Firstly, you're now effectively sitting on a large cash balance, and given this deal, I guess isn't consuming any of your cash. I'd just love to hear your latest thoughts on how you think about managing that cash balance effectively with this transaction, not consuming cash?

And then super quickly, could I just follow-up on the last question? Clearly, you've been clear that Lightning is going into the JV. But I'm just going to ask as a follow-up on the other fiber company that you've set up, just I noticed that the $10 billion of capex over the next five years commitment doesn't really implicitly assume at least on my numbers that necessarily announcing anything with regards to the 7 million extra homes you've identified and also the fiber joint venture and those discussions. So any update there would be great. Thanks.

Mike Fries -- Chief Executive Officer

Sure. On the second point, yes, anything we pursue or anything they pursue that would normally be considered a JV activity, is likely going to be a JV activity. So Liberty fibers, as you described, it is certainly something we would pursue through the joint venture. And I think, as Jose Maria said on his call, these are the issues that we'll address together in terms of pace, and speed, and financing structure and opportunity.

In the meantime, we'll continue with Lightning. In fact, we think we might exceed our budget on Lightning. We can, of course, choose to spend more or less between now and closing. It just works out in working capital. But I think for the most part, you should assume that the JV will jointly address these strategic opportunities. And capital will come from both parties as a result of that.

On the cash balance, I think we'll remain disciplined as we have remained discipline. As I said, nobody anticipated this environment. We always said you never know what the future is going to bring. And this was not something any of us hoped for. And on the other hand, we're thankful to be liquid and we're thankful to have cash. And we'll remain disciplined on how we deploy the cash.

As I said, and have said, the first order of business is our core markets, and where we know and we already operate, that will remain the case. Secondly, we'll look within the region we operate in, would be look for opportunities for consolidation or other similar convergence strategies, I would say. We have as we've talked many times, it's Ventures portfolio, not big, maybe $1 billion of interest in existing assets that we own in tech and content.

And, so we'll be careful and thoughtful about opportunities to build new revenue streams, new investment portfolios and new business opportunities. But I think we'll do that carefully and with great transparency, and probably wouldn't require the kind of capital that we have. So this is a good problem to have. It's a good question to be focused on for us. But it's not something we can give you any more clarity on that as we sit here today, Michael, but stay tuned.

Michael Bishop -- Goldman Sachs -- Analyst

Thanks a lot.

Mike Fries -- Chief Executive Officer

Now, of course, I didn't mention in that what we have used historically our excess capital for and that is these buybacks. I did mention in my remarks is that -- it's always on the list for our levered equity growth strategy. As we start to drive free cash flow and free cash flow per share, clearly, that's an accelerator of free cash flow per share. But, again, we're not being -- on this call, we're not going to be -- I couldn't give you any details about that. Obviously, we'll let you know.

By the way, I know we've probably got a lot of questions. So just for everybody's benefit, our remarks went a bit longer, we're going to keep the line open. I'm sure you've got plenty of calls to get on to. And but I think we'll probably try to keep the line open for 10 to 15 minutes to be sure we get to a few more questions, since we were a bit longer in our remark today. So go ahead, operator.

Operator

Yes, we'll go next to Benjamin Swinburne with Morgan Stanley.

Benjamin Swinburne -- Morgan Stanley -- Analyst

Thanks. Thanks. Good morning, everybody. Good morning, Mike.

Mike Fries -- Chief Executive Officer

Hi, Ben.

Benjamin Swinburne -- Morgan Stanley -- Analyst

I wanted to -- assuming you are somewhere where -- it's morning, OK, it may not be the case, but wanted to ask about tax implications of all this. I think you guys announced you're moving effectively all the UK tax allowances etc into the JV. You guys, I think originally reincorporated over in the UK at least partly for the tax benefits, and just wondering how that -- what the tax structure and tax leakage if anything of the JV will look like? I'm assuming that will be not much anytime soon and then implications if any for the consolidated operations, Switzerland, Benelux, etc, in terms of cash taxes as a result of this deal.

Mike Fries -- Chief Executive Officer

Okay. There's no implications to other assets. The UK tax losses have always been largely ring fenced within the UK and only usable on a UK entity. So it's no implications at all for the other operations. I'll simply say on a tax structure won't be surprising to you, I think, it's quite efficient. We don't -- without getting into great detail, there shouldn't be any tax implications on formation of the joint venture. The losses that exist will be transferred and, to the best of our ability used by the JV. There are some -- as ever some nuances there. But for the most part, it's a very tax efficient transaction really for both parties and certainly for us, and we're not -- we don't see any leakage of the kind you described.

Benjamin Swinburne -- Morgan Stanley -- Analyst

Okay. And then just a quick follow-up on Virgin, maybe for Lutz, if he's on. What's the pricing environment look like at this point, obviously, you've got a lot of stress in the economy. Just wondering from a competition point of view of things has continued to be as tough as they've been, or if we've seen -- if you've seen any of your -- of the operators you compete with get a little more rational, so to speak, given just the focus on the macro and pressures on things like liquidity, etc?

Mike Fries -- Chief Executive Officer

Lutz, go ahead.

Lutz Schuler -- Chief Executive Officer-Virgin Mobile

So -- yeah, so I think in February and March and maybe because of the start of end-of-contract notification. I would say that the market was even a bit more competitive. So when you compare the deepness of discount to a year ago, discounts were 5% to 10% deeper. And then now after COVID, obviously, right sales are down, and in fact, not so much. So we are still operating on 80% sales level, and churn went down dramatically. But in this environment, obviously, you're less aggressive in terms of promotion. And so I would say it was a bit more aggressive and we kept our strategy right. So you see that we kept our customers flat, we are looking to create a really customer relationship with high value customers. We were not looking for the low end in the broadband. We were not looking for the low end in the video. And so therefore the service revenue out of that was 0.8% and the ARPU grew to 1.2%. And this is exactly on our strategy.

Benjamin Swinburne -- Morgan Stanley -- Analyst

Thank you.

Operator

We'll go next to Vijay Jayant with Evercore.

Vijay Jayant -- Evercore ISI -- Analyst

Hi, Mike. I just wanted to understand, obviously, the structure now that most of your values are in JVs in the UK and Holland pro forma for this transaction. And about $1 billion of EBITDA on the remaining consolidated assets. How -- in terms of transparency and value recognition, obviously, you will make a case for that in today's presentation. How are we going to sort of track the performance of the JVs? And are you -- regarding the risk of getting sort of a discount, because most values are an equity stakes. And have you thought about, tracking stock or any structures that can show the value of those assets that you don't sort of see on a consolidated basis?

Mike Fries -- Chief Executive Officer

Yeah, good question. We did try to address it a bit in the remarks, but it's worth repeating, that this does change, it takes our largest consolidated business and puts it into a JV. And so that does obviously have accounting and consolidation implications. However, because it's our largest business, we will report quite extensively on the business. And so, I don't see any reduction in transparency around the core operating companies. So firstly, I would say you get, you should be able to see through the structures and we will endeavor to report on the businesses in much the same way with arguably as much in more detail.

So I think, we'll be focused on transparency for investors on the actual operating businesses, how they're performing, and we're quite engaged, of course, in all of these, and how they do. So that's point 1.

Point 2, Virgin wasn't a public company when it was 100% owned. Virgin, O2, whatever name it maybe, is -- won't be a public company, when we started JV. But down the roads, there could be opportunities in that said to create public listings are or structures that, that identify and isolate value and I think show value more, more creatively and more effectively. Nothing's off the table, I mean, and we retained -- as we would expect, we did retain the ability to perhaps create trackers or things of that nature.

So in the Liberty tradition, all options are available to us to ensure we're getting transparent value. But we'll be thoughtful about that over time. It is the right point, which is why we spend a few more minutes than we normally would on structure and value creation. And holding company discounts, that's your expertise. I don't think so, I would argue for it, obviously. But we certainly can't -- at this point in time, we would take a holding company discount if somebody valued the stock correctly. So I think it's all relative, and we'll have to see how we go.

Vijay Jayant -- Evercore ISI -- Analyst

Thank you.

Mike Fries -- Chief Executive Officer

You bet.

Operator

We'll go next to Polo Tang with UBS.

Polo Tang -- UBS -- Analyst

Yeah, hi. I just have one question, and that is does the deal with O2 preclude doing a cable wholesale deal, or a fiber JV with Sky? Or is this just not a priority at the moment? Thanks.

Mike Fries -- Chief Executive Officer

Well, thanks, Polo. As I said at the beginning of the Q&A, nothing's off the table. So I think the direct answer is, no. We don't believe that this transaction either as it's pending or when closed, creates any obstacles to smart opportunity. I'm not going to comment on that one specifically, I'll simply say that it doesn't take anything off the table legally, structurally, we don't believe from a regulatory point of view. So there would be -- all the conversations that we were having and all the ideas that we were discussing, I think remain and can be executed on if they make sense. So that goes for the Lightning build out. That goes for strategic partnerships with other operators if they make sense that goes for all the kind of things that we know can be accretive and strategically valuable for the group. We still believe can be evaluated and considered.

Polo Tang -- UBS -- Analyst

And I'll just clarify that on the timing for the deal -- can I just clarify the timing of the deal more now than given COVID-19 situation, something changed on your part, in terms of what spurred the move now to that deal? Or was there a change on this point? Can you maybe give some color?

Mike Fries -- Chief Executive Officer

Yeah, as you would imagine, this didn't come -- I mean, the crisis that we're all facing now and with the pandemic, obviously, is somewhat recent. This is -- these are conversations that go back some time. So, as discussions and negotiations have momentum, you keep the momentum. I would say definitely, that we didn't see anything in the current environment that suggested we shouldn't continue with this opportunity, as opposed to the environment, stimulating the opportunity, it's the other way around. It's an opportunity there was always there. And we didn't do anything that created an obstacle or that should slow it down. So it's really nothing to do with the current environment. It's just the timing is coincidental.

Polo Tang -- UBS -- Analyst

Thanks.

Mike Fries -- Chief Executive Officer

Yeah.

Operator

We'll go next to Nick Lyall with SocGen.

Nick Lyall -- Societe Generale -- Analyst

Good afternoon, Mike, Charlie. And it's just a very quick one, maybe on the Swiss prices, please. They seem pretty -- the ARPU seem pretty weak this quarter. Is that just a COVID impact, maybe with some sports and PayTV items there? Is that something we should expect sort of for the rest of the year, it's in pretty structural pricing pressure points?

Mike Fries -- Chief Executive Officer

I don't know, if Baptiest is on the call.

Baptiest Coopmans -- Chief Executive Officer, UPS Switzerland

Yes, I'm in.

Mike Fries -- Chief Executive Officer

Yeah. You want to address that quickly. Baptiest Coopmans is the current CEO of Swiss business. Do you want to address that?

Baptiest Coopmans -- Chief Executive Officer, UPS Switzerland

Yeah. I am in Switzerland since February 1. So the market stays competitive, and we try to find the right balance between volume and value there. And that's the answer, and I think Charlie was very clear. We think we will have a $170 million cash flow out of this business this year. And the underlying trends are all improving. All-time high customer satisfaction now, company is doing very well through COVIDs. So in that sense, the next quarter you will see that. And on top of that we had a major simplification program launch that will kick in the coming quarters.

Nick Lyall -- Societe Generale -- Analyst

Thanks very much.

Operator

We'll go next to Christian Fangmann with HSBC.

Christian Fangmann -- HSBC -- Analyst

Yeah. Hi, guys. Quick one. I was not reading anything in the press release? Is there actually a break fee agreed, and then how about the brands? What are you planning to use in terms of -- are we seeing something similar like at VodafoneZiggo?

Mike Fries -- Chief Executive Officer

No, no disclosure on the brands. This is -- it's too early to have any discussions about that or even any agreements about that. So the brands will be determined down the road, when companies actually do come together and there's a management team and we can have a thoughtful conversation about it, so business as usual for now and no update on brand. I'll simply say, we think both brands are really strong and complimentary. And that's a good thing going into it. No break fee disclosed, and no break fee agreed.

Christian Fangmann -- HSBC -- Analyst

Okay. That's very clear. Thanks.

Mike Fries -- Chief Executive Officer

Yeah.

Operator

We'll go next to Steve Malcolm with Redburn.

Steve Malcolm -- Redburn -- Analyst

Thanks, guys. Good afternoon and Good morning. I'll go -- give me answer one-to-one, that's fine. Just going back to the contractual situation. Can you just sort of shed me light on any MAC clauses in there? I mean, obviously, you're talking about backward looking leverage and tends to expect UK, yes, down this year. If combined EBITDA were 10%, 20% lower and leverage is in the mid-5.5%. Do you have like surface to go back and look at the overall debt in the JV, when it closes.

And maybe just a quick one on the contractual position of your major content providers in the UK, BT and Sky. I take the point that your sports revenues are zero margin, but that doesn't mean that couldn't be negative margin, if you're not collecting revenues, you have to pay for them. So are you able to get relief on those sports right? While you're not filling your customers? Maybe any help on that, that would be helpful, would be great. Thank you.

Mike Fries -- Chief Executive Officer

Okay. Yeah, these can go to the sports issues, your answer is yes. I think that the agreement or the release, I think, it was clear. The expectation is that we'll have leverage in 4 to 5 times range, which will be closer to the high end of that range. When we close and we expect that to be the case the market, today, it's not necessarily the ideal moment to get all of the financing lined up. Normally, we would announce and conclude all the financing before even signing a transaction. But we felt like to be -- to optimize cost capital in the optimized structure, there's no reason to do it all right now. But the gap of what remains is quite small. I think, Charlie, it's only a couple billion pounds really that isn't yet raised or ready to be transferred over, I think that's the more or less. So at best, the number more or less. So there's not -- the financing condition is not a particularly important on mobile, at this stage.

Lutz, you want to address the sports issue?

Lutz Schuler -- Chief Executive Officer-Virgin Mobile

Yes. On the spot issue, so we have been following exactly what client and BT has offered their customer. So simply pause the sport contract packages if the customer wants you to, and therefore we are also in a position with those not to pay for those customers just decided to pause their packages with us. And therefore, that is not margin neutral to us.

Steve Malcolm -- Redburn -- Analyst

Okay. So you are able to -- yeah, BT and Sky have agree for you not to pay the wholesale cost for that period of time.

Mike Fries -- Chief Executive Officer

Exactly. I mean, we -- obviously, you have to come to an agreement and we are in the middle of that, but that as we understand. We got this 4%. And also when you read our contract, it's pretty much like that.

Steve Malcolm -- Redburn -- Analyst

Okay. I'm sorry. If I just come back to the first question, and if EBITDA were significantly lower, is that $18 billion of debt? Or would you review it at that point?

Mike Fries -- Chief Executive Officer

Well, I think the partners can always agreed to review it. Obviously, we reserve that option. But I think I don't believe in Charlie jump in here, right. We don't see any impediments to achieving that level of debt between now and closing, which is one that would likely occur. It's probably on the shorter end of that. Charlie, do you want to go with that?

Charlie Bracken -- Executive Vice President and Chief Financial Officer

And Steve, we've gone through what's called [Technical Issues] his team and Telefonica. So we're pretty comfortable that we have built into the full cost very significant. Actually with that we were attracted you pursue very kind of resilient businesses, [Technical Issues] have done, it. It's still trading on pretty well. So I'm very, very confident. And this get the remaining couple of billion done, remember, the debt we have today are on created assets, we come across the 11 plus million. So it's already [Technical Issues]

Steve Malcolm -- Redburn -- Analyst

I'm not questioning that you can get the debt. I'm just questioning whether it's the right level of debt as EBITDA was a lot lower?

Charlie Bracken -- Executive Vice President and Chief Financial Officer

Steve, one thing I would say that expenses are very, very [Technical Issues] which is I think as Mike indicated, there might be a little conservative. Like gives a lot more creditworthiness to work as combined than just two standup companies. So we'll see, but I think [Technical Issues] and we have to find out based on what we know today, I think.

Steve Malcolm -- Redburn -- Analyst

Okay. Thanks a lot, guys.

Operator

We'll go next to James Ratzer with New Street Research.

James Ratzer -- New Street Research -- Analyst

Yes. Thank you very much, everybody. And my continued congrats on the deal. I think the question I had today probably more for Lutz, actually, just on the UK performance, which looked pretty encouraging this quarter. I was just interested in kind of two specific areas. I mean, one, with all the extra home working going on, are you seeing signs that customers are actually upgrading their broadband packages as a result, and how supportive is that to your ARPU trend?

And secondly, I mean, to what extent have you been benefiting, we simply from being able to do extra customer installs, as I understand open reach has been more limited in being able to do that. How much of a boost is that providing to the current numbers? Thank you.

Lutz Schuler -- Chief Executive Officer-Virgin Mobile

Yeah. So on the home working, I mean, in general 95% of our customers have 100 MB speed or more, right. As Mike said earlier on our average speed is 140 meg. So therefore, our customers do operate already on a very -- our consumer customers to operate on an already on its very high speed. And so therefore, we don't see additional demand on top of that currency and the consumer space. On the B2B space, we see that we have further demand, higher speed packages, working from home packages for some of our customers. So that is encouraging.

And in terms of net ads, you're right, I would say, currently we are net benefiter. So what do I mean that our sales are still at 80%. And it's only online, but it's remarkable. It's obviously a more connectivity focus. So less demand on video, more on broadband, fixed broadband. And also our churn is restored now. And I think this is because of two things. One, simply you don't want to change the system, while you're so reliant on it. And second, obviously, in the market, you cannot be assured if it's a manual install, with competition that you get actually installed, why we keep on doing the manual install as well. So therefore, you're right, currently, we are growing a bit our customer base because of that.

But as you said also Q1, we kept the customer base platform. So we cannot count our strategy just on the weakness of a competitor. So we can expect from us further initiatives to keep or grow our customer base.

James Ratzer -- New Street Research -- Analyst

Great. Thank you.

Operator

We'll go next to Matthew Harrigan with Benchmark.

Matt Harrigan -- Benchmark Capital -- Analyst

Thank you. I realized that over the top this question is, I think you did the right thing from a derisking and liquidity enhancement advantage point in this environment. But as an extension of the Robert Grindle question. I mean, you and John alone really have the opportunity to kind of be the ultimate, I guess, Angle, Cable Cowboys. If you had turned around and bought all of O2, and equally have the financial wherewithal to do that GBP12.7 billion enterprise value and now get seen GBP6.7 billion in synergies over a 5-year time. And so really wanted to get Machiavelli as this develops over time, he really would have had some opportunities for some very accretive stock buybacks, for obvious reasons. Is that something you ever would have looked at? I mean, you wouldn't have less complexity, I guess, in terms of financial engineering, but probably an inordinate amount of risk in this COVID-19 environment.

And I realized that sort of really over the top question, but I thought I'd run it by you, nonetheless.

Mike Fries -- Chief Executive Officer

Well, Matt, I mean, you would know, we're looking at all options and all alternatives. And generally we land on the one we think is the most accretive and create the most value, and this we believe is the one. So every market is different, every set of opportunities is different. And generally speaking, we're -- we never take anything off the table. We're always looking at what's in front of us. But in this case, we believe this is the right outcome. That's what I'll say.

Matt Harrigan -- Benchmark Capital -- Analyst

Right, I think that's right and congratulations.

Mike Fries -- Chief Executive Officer

Okay, thanks. Now, we're 10 after here. So, I guess, Rick -- operator, we'll take one or two more and then let people get back to their day, if there are one at the moment.

Operator

Okay. We'll go next to Ulrich Rathe with Jefferies.

Ulrich Rathe -- Jefferies -- Analyst

Yeah. Thanks very much. Mike, highlighted on footprint expansion, your and Telefonica share excitement about expanding that. Could you comment on the capacity to pull that off during a period of probably quite large scale merger integration, at the same time embarking on accelerated footprint expansion potentially? I realize even after unplanned, but how do you look at the title capacity to pull all these things together at the same time? Thank you.

Mike Fries -- Chief Executive Officer

Yeah. It's a good question. And it will be something that we factor in. We wouldn't ever make strategic decisions that impact our ability to execute synergies or integrate the businesses. On the other hand, we're already out there today, every day, building, extending plan in the Street. So if we were able to do it or see our way clear to doing it, as a stand-alone company, there's nothing about being a larger, more integrated company that should change that materially.

But it's the right question. It's a process of making sure you're prioritizing where you spend your time and where you have your resources focused, but as we lay that out on the page, we'll make that determination. But I don't see anything off the top in which you can comment that would somehow preclude us from having the wherewithal or the resources or the will to go ahead and continue looking at a broader network expansion if it makes.

And you can always -- there's lots of ways of structuring it and financing it as well. So I think it's the right thing to think about. But on the other hand, there's nothing in my mind, that says, it's not it's not doable. We'll get there when we get there.

Ulrich Rathe -- Jefferies -- Analyst

All right, that's helpful.

Charlie Bracken -- Executive Vice President and Chief Financial Officer

I think that to add to that.

Ulrich Rathe -- Jefferies -- Analyst

How about timing though, is -- oh, sorry. Go ahead.

Charlie Bracken -- Executive Vice President and Chief Financial Officer

Well, I can get some of flavor to that. I think what we have done now is we have put really all network extension, so from consumer from B2B from wholesale into the Lightning unit. And they are accelerating the network extension. I mean, we have just announced the beginning of the week that we will mobile backhaul 3,000 5G sites from 3G. So therefore, we have secured vendors, for an acceleration in rollout, like we've also close a couple of LFSN deal.

So therefore, the machine is growing. And the machine will run also quite independently. So therefore, it's not so much impacted by the complexity of an integration.

Ulrich Rathe -- Jefferies -- Analyst

Got it. Thank you, guys. Thank you.

Operator

And we will take our last question from Sam McHugh from Exane.

Sam McHugh -- Exane -- Analyst

Morning, guys. Morning, guys. Just sticking to fiber in the UK, following BT's announcement today, do you see any kind of strategic need to move a bit faster on your own network expansion be in Project Lightning? I mean, just linked to that, I think by the end of this year, we need to implement gainer-led switching in the UK.

I'm not sure if that has any kind of positive implications or negative implications here. If you have any interesting thoughts, that would be great. Thanks very much.

Mike Fries -- Chief Executive Officer

Well, look, I think, BT will make the decisions that it needs to make in the context of its own financial picture. And I think they will build and we anticipate they will continue to roll out fiber and they should. So I don't know that their announcements or commentary today changes anything really, more or less confirming what they anticipated. And they should be leaning into this element of their business. And I think they'll probably do that.

So I don't believe it changes it materially. And, Lutz, do you want to tackle the second question? I'm not sure I fully understood it or got all the details of it, but maybe you did.

Lutz Schuler -- Chief Executive Officer-Virgin Mobile

I mean, what we are accelerating is fixed-mobile convergence, right, the more customers we have locked in is fixed or mobile, in the better position, we are to protect them from competition, right. So we are doing more speed for our customers now. More fixed-mobile convergence and network extension at the moment, the pace you know. And we are looking for ways to accelerate that.

And with all of that, I think we are operating on our plan. And I agree with Mike, I think we haven't seen anything surprising or any acceleration from BT to a previous announcement.

Mike Fries -- Chief Executive Officer

Okay. And with that, we will let you get back to your day. Always appreciate you participating in these calls and your support. We're excited about this deal that goes without saying, we are creating an FMC champions -- a champion with incredible synergies, and needs great vote of confidence for us and for Telefonica in the UK. So we're excited to get it going. And I would just lastly say, stay well, stay healthy, stay safe, and we'll speak to you soon.

Operator

[Operator Closing Remarks]

Duration: 72 minutes

Call participants:

Mike Fries -- Chief Executive Officer

Charlie Bracken -- Executive Vice President and Chief Financial Officer

Robert Grindle -- Deutsche Bank -- Analyst

Jeff Wlodarczak -- Pivotal Research -- Analyst

Lutz Schuler -- Chief Executive Officer-Virgin Mobile

David Wright -- Bank of America -- Analyst

Michael Bishop -- Goldman Sachs -- Analyst

Benjamin Swinburne -- Morgan Stanley -- Analyst

Vijay Jayant -- Evercore ISI -- Analyst

Polo Tang -- UBS -- Analyst

Nick Lyall -- Societe Generale -- Analyst

Baptiest Coopmans -- Chief Executive Officer, UPS Switzerland

Christian Fangmann -- HSBC -- Analyst

Steve Malcolm -- Redburn -- Analyst

James Ratzer -- New Street Research -- Analyst

Matt Harrigan -- Benchmark Capital -- Analyst

Ulrich Rathe -- Jefferies -- Analyst

Sam McHugh -- Exane -- Analyst

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