Liberty Global marked many achievements in 2008, despite the growing economic headwinds that we faced in several countries and the decline in our stock price amidst turbulent financial markets. We made considerable progress on all three of our core strategies to drive value creation – industry-leading organic growth, opportunistic and accretive M&A activity, and active capital structure management to enhance equity returns. Since our Company’s formation in 2005, these three core elements of our strategy remain unchanged, and we continue to deliver strong results with this focus.
In terms of our operating performance, we delivered record growth of 2.8 million new subscribers to our advanced digital products and services, led by more than 1.4 million digital cable additions. This result was a key factor driving revenue growth of 17% to $10.6 billion and operating cash flow (OCF) growth of 27% to $4.5 billion for the full year. Leveraging our scale efficiencies drove an OCF margin increase of 330 basis points to a record 42.9% for the full year. Adjusting to neutralize the impact of acquisitions and foreign currency movements, rebased OCF growth was 14% and consistent with our guidance to Wall Street. Perhaps most importantly, we generated free cash flow of
$763 million in 2008, an 82% improvement compared to the prior year. We believe that our operating performance on nearly all of these key metrics was significantly better than our cable peer group.
On the M&A front, LGI had a busy 2008 even though credit markets were effectively closed for most of the year, as we acquired over 1.4 million subscribers and completed over 20 transactions. Of particular note, our subsidiaries J:COM in Japan and Telenet in Belgium each completed important transactions. J:COM improved its market position in the Tokyo area with the acquisition of Mediatti, and Telenet completed the Interkabel acquisition, providing 100% network coverage of the Dutch-speaking Flanders region. Those two transactions alone added over one million subscribers to LGI’s roster in two of our most important markets. In addition, we always look to consolidate smaller cable systems in key markets,
and in 2008 we were able to acquire systems in Japan, the
Czech Republic and Austria, among other countries, that added another 340,000 subscribers in total to our global footprint.
Turning to capital structure management, our balance sheet and liquidity position remain strong as a result of minimal near-term debt amortizations, a low cost of capital, and the fact that we are well hedged on interest rates and foreign currencies. We entered 2009 strongly positioned with ample liquidity, including cash and unused borrowing capacity of over $2.0 billion, and we remain committed to driving shareholder value; in fact we have reduced our shares outstanding by over 40% since June 2005. During that time, we have repurchased $6.0 billion of equity in total, including over $2.2 billion in 2008 alone. We believe that the continuation of our buyback program, particularly in light of our equity’s attractive valuation, is an important step in maximizing shareholder value over the long term.
As we look ahead to the rest of 2009, we remain confident in our ability to deliver real value to our customers and enhance their digital lives. Despite challenging economic conditions that persist in many of our markets, we benefit greatly from the diversity of a global distribution platform that spans 15 different markets on four continents. By leveraging that scale and the many talents of our 22,000 employees worldwide, we expect 2009 will once again be a solid growth year for Liberty Global.
We appreciate your continued support.
Sincerely,
President and Chief Executive Officer
