Liberty Global – Virgin Media Merger Analysis Krunal Intwala Samantha Hess Joe Cardoso Anisha Gandhi Michael Schneider May 9th, 2013 Liberty Global & Virgin Media | May 9th , 2013 1

Executive Summary Recommendation Buy Virgin Media The Merger will create world’s leading broadband communications company Liberty Global will gain access to UK market It will add 5 million customers to Liberty Global’s existing 20 million customers Combined synergy $110 million in cost savings $60 million in CapEx savings Terms of Acquisition The deal is $23.3 billion with offering premium of 24% at $47.87 Virgin Media share 36% of Liberty Global’s shares will be owned by Virgin Media Shareholders with approximately 26% of voting rights Company Description Liberty Global: Leading international cable operator in Europe and South America serving 13 countries Virgin Media: Leading provider of entertainment and communication services in the United Kingdom Industry Outlook Industry is expected to grow until 2016 at an average annual rate of 4.55% (exception for telephony industry) Liberty Global & Virgin Media | May 9th , 2013 2

Decision Recommendation: Buy Virgin Media World’s leading broadband communication company Liberty global will gain access to UK market Complementary strengths across video, voice and broadband products Combined synergy $110 million in cost savings 60 million in CapEx savings Combined company will have more leverage over negotiating contents licenses Liberty Global will benefit from tax breaks from past Virgin Media’s capital losses In December 2012, Virgin used the differed tax benefit approximately $4 billion Liberty will be relocated to the United Kingdom by becoming a subsidiary of a new holding company, a UK plc. Liberty Global & Virgin Media | May 9th , 2013 3

Terms of Acquisitions Deal Size = $23.3 billion dollars Deal Price = $47.87 per Virgin Media share 24% Premium Cash & Stocks Offer $17.50 in Cash 25.82% of LG Series A Shares 19.28% of LG Series C Shares LG will issue approximately $86 million LG Class A shares and 65 million LG Class C shares. 36% of Liberty Global’s shares will be owned by Virgin Media Shareholders with approximately 26% of voting rights

Virgin Media DCF Analysis

Virgin Media Implied Enterprise Value

Virgin Media Implied Share Prices

Liberty Global Key Facts Headquarters: Englewood, Colorado Employees: 22,000+ Revenue: $10.3 billion dollars Customers: 19.8 million 34.2 million homes passed 34.8 million RGUs John Malone, Chairman Revenue: $10.3 billion (in millions) Customers: 19.8 million Michael Fries, President & CEO

What is Liberty Global? Liberty Global is a leading international cable operator with operations across 13 countries. Their products/services include… (not a complete list) Cable: Basic and premium programming, HD, DVR, HD-DVR, VoD, an electronic programming guide, etc. (45% of revenue) Chellomedia: Producer and distributor of TV channels. Content: 67 channels, of which 48 are 100% owned. Revenue: 514 million dollars in 2012, 3% of total revenue. Distribution: 390 million TV households. Internet: High speed Internet access ranging from 100 Mbps to 150 Mbps. 24% of revenue Telephony: Various different telephone services, dependent on customer. (International calling, minute packages, telephone rental, etc.) 15% of revenue Business Services: Designed with the customer in mind to meet their specific needs.

The Americas Puerto Rico Largest cable operator 479,000 service subscribers Chile Largest multi-channel television provider

Europe Austria, Belgium, Czech Republic, Hungary, Ireland, Poland, Slovakia and Switzerland. (9) The largest cable operators in their respective markets. Germany, Netherlands and Romania. (3) 2nd largest cable operators in their respective markets. Germany alone accounts for 22% of Liberty’s total revenue.

What is Liberty Global’s Strategy? Liberty’s business strategy has two main components… Organic Growth Innovation Horizon TV Mobile Services Bundling Products & Services Single-Play  54% Double-Play  30% Triple-Play  16% Mergers & Acquisitions For the past seven years, LG has focused on pursuing beneficial acquisitions. Odakyu Telecommunication Services Cablecom IPS Multicanal Austar Telnet Astral NTL Ireland Inode

SWOT Analysis

Virgin Media Key Facts Revenue: $6.5 billion (in millions) 16.3 83.7 Headquarters: New York City, New York Employees: 12,000+ Revenue: $6.5 billion dollars Customers: 5 million 13 million homes passed 12 million RGUs Revenue: $6.5 billion (in millions) Neil Berkett, CEO 16.3 83.7

What About Virgin Media? Virgin Media is a leading provider of entertainment and communication services in the United Kingdom. Virgin operates in two segments... Consumer: This segment includes our cable, internet and telephony services to our residential customers. Accounts for 83.7% of revenue. Business: This segment includes our cable, internet and telephony services to our business customers based upon their required needs. Accounts for 16.3% of revenue.

SWOT Analysis

Deal Highlights 80% of the combined company’s revenue will be coming from just 5 of it’s markets. United Kingdom Germany Belgium Czech Republic The Netherlands

Industry Outlook Forecasted Annual Growth Until the Year 2016 Industry Type of Growth Annual Forecast Broadcasting & Cable TV Accelerating Growth 3.1% Broadband Internet Strong Growth 6.0% Telephony Declining Growth -2.0%

Market Capitalization VM & LG vs. the Industry Virgin Media & Liberty Global Compared to the Industry Company Debt-to-Equity Ratio P/E Ratio Gross-Margin Profit Market Capitalization Cap Size Industry 3.05 20.82 43.89% n/a Virgin Media 1.88 3.69 60.27% $13.25 b Large Cap Liberty Global 12.29 63.30 64.92% $18.68 b

VM & LG Together Combined Results 2012 Results Liberty Global Virgin Media Combined Revenue $10.3 billion $6.5 billion $16.8 billion Adjusted FCF $1.0 billion $0.5 billion $1.5 billion Total Customers 20 million 5 million 25 million

Common Size Balance Sheet

Works Cited Liberty Global 10K Virgin Media 10K Bloomberg Terminal www.WallStreetJournal.com www.OneSource.com www.IBISWorld.com www.MarketLine.com