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UPC Reports Q2

Pan European operator reports revenue growth of 23% to €478M

August 10, 2006

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AMSTERDAM -- UPC Holding B.V. ("UPC Holding") is providing today selected, preliminary financial information for the three and six months ended June 30, 2006. UPC Holding is a subsidiary of Liberty Global, Inc. ("Liberty Global") (Nasdaq: LBTYA - News, LBTYB - News, LBTYK - News). A copy of this press release will be posted to the Liberty Global website (www.lgi.com). In addition, the full financial statements with the accompanying notes are expected to be posted prior to the end of August.

Highlights for the period compared to UPC Holding's results for the same period last year, except where specifically noted, include(1):

  • An organic(2) increase of approximately 110,000 RGUs(3) in the second quarter of 2006

  • Revenue growth of 23% to EURO478 million

  • Operating cash flow (OCF)(4) growth of 23% to EURO182 million

  • Operating income decrease of 26% to EURO25 million



Operating Results

We had 9.7 million total RGUs from continuing operations as of June 30, 2006, including an increase of over 123,000 from March 31, 2006. Total organic RGUs additions were approximately 110,000 from March 31, 2006, which represent an approximate 22% increase over the prior year period's organic additions. In terms of organic RGU additions by product, during the second quarter 2006 we added 88,000 broadband Internet subscribers, 63,000 telephony subscribers and had a decrease of 41,000 video subscribers.

Our organic subscriber additions for broadband Internet and telephony increased by 41% and 53% respectively from the same period last year. The increase in organic subscriber additions for broadband Internet was driven by strong results in both Western as well as Central and Eastern Europe, while the increase in telephony was primarily due to the expansion of VoIP into new markets in Central and Eastern European countries such as Poland, Romania, and the Czech Republic. Later this year, we intend to launch VoIP in several additional countries. As a consequence of the new markets in which we have introduced VoIP, our total telephone marketable homes were 6.7 million as of June 30, 2006 and our total subscribers were 712,000 for a penetration of telephone marketable homes of approximately 11%. Our Internet broadband subscriber penetration of Internet marketable homes as of June 30, 2006 was 20%.

In terms of video subscribers, we added approximately 148,000 digital and DTH video subscribers (including conversions from analog) in the quarter, with the majority coming from the Netherlands and Ireland. In terms of total video subscribers, we experienced a decrease as a result of anticipated competitive developments in analog video and DTH. Our "digital for all" (D4A)(5) initiative in the Netherlands continues largely on track, and we continue to be encouraged by the consumer acceptance of our video product. In that market, we added 136,600 digital subscribers in Q2'06, an increase of 11% from our digital additions of 123,600 in Q1. At June 30, 2006, we had 345,500 digital RGUs which represents a penetration rate of 16% as compared to digital video penetration of only 4% at year end 2005. In addition, approximately 50% of our digital customers are taking an extra channel package and/or another pay TV product from us. As we look to the second half of 2006, we are excited about the upcoming new product introductions of high definition (HD) programming, digital video recorders (DVRs) and video-on-demand (VOD) services, all of which we expect to launch soon and which should positively impact consumer acceptance.

Customer relationships totaled approximately 7.8 million as of June 30, 2006. We continue to see an increase in the number of double and triple play customers. Of our total customer relationships, nearly 18% subscribed to either two or more products versus approximately 16% for the comparable period last year.

Finally, we have made significant progress in the rebalancing of our cable operations by completing the sale of UPC Sweden, which occurred in the second quarter, and the sale of UPC France, which occurred subsequent to quarter end, for total gross proceeds of approximately EURO1.6 billion. In each case, we sold our operations at attractive multiples. Additionally, we have completed small acquisitions in Romania and Slovenia of approximately 13,000 RGUs, expanding our footprint within each of those markets.

Financial Results

Total consolidated revenue for the three months ended June 30, 2006 increased to EURO478 million, a 23% increase as compared to the same period last year. The increase in revenue was primarily due to acquisitions in Austria, Romania, and Ireland as well as the continued growth in our Central and Eastern European businesses. Revenue growth was approximately 10%, as rebased for acquisitions and foreign currency effects (rebased)(6).

Operating cash flow for the three months ended June 30, 2006 increased to EURO182 million, a 23% increase as compared to the same period last year. The increase was principally driven by the impact of acquisitions and the continued growth in our Central and Eastern European businesses. Our total rebased OCF growth for the period was approximately 12%, driven by Central and Eastern Europe, which grew 23% on a rebased basis.

Excluding the results of the Netherlands, where we have our D4A initiative underway, our total rebased OCF growth rate for the quarter would improve to 26%. As expected, the Netherlands' OCF results reflect higher operating, marketing and customer care costs associated with our D4A initiative, which was launched in the fourth quarter last year, as we invest in the roll-out of digital boxes to drive future growth in that market. We expect to continue experiencing pressure on total OCF from our operations in the Netherlands, whose results are affected by the pace of the roll-out of our D4A initiative.

Total OCF margin(7) was 38% for both of the three month periods ended June 30, 2006 and 2005. Margin decline in Western Europe was partially offset by margin improvement in Central and Eastern Europe, as well as a decrease in the percentage of revenue represented by central and corporate costs, versus the same period last year.

2006 Guidance Update

With respect to the full year 2006 targets for UPC Holding, we believe that we are tracking to achieve our previously issued guidance provided on March 15, 2006, after adjusting for acquisitions and divestitures that have been completed, including the divestitures of UPC Sweden and UPC France.

United Pan-Europe Communications NV (UPC) (Nasdaq: UPCOY)

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