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Article by DailyStocks_admin    (06-30-08 06:26 AM)

Liberty Global Inc. CEO MICHAEL T FRIES bought 6525 shares on 6-26-2008 at $30.56

BUSINESS OVERVIEW

General Development of Business

Liberty Global, Inc. (LGI) is an international provider of video, voice and broadband Internet services, with consolidated broadband communications and/or direct-to-home (DTH) satellite operations at December 31, 2007, in 15 countries, primarily in Europe, Japan and Chile. Through our indirect wholly owned subsidiary, UPC Holding BV (UPC Holding), we provide video, voice and broadband Internet services in 10 European countries and in Chile. UPC Holding’s European broadband communications operations are collectively referred to as the UPC Broadband Division. Through our 51.1% indirect controlling ownership interest in Telenet Group Holding NV (Telenet), we provide broadband communications services in Belgium. Through our indirect 37.9% controlling ownership interest in Jupiter Telecommunications Co., Ltd. (J:COM), we provide broadband communications services in Japan. Through our indirect 53.4% owned subsidiary Austar United Communications Limited (Austar), we provide DTH satellite services in Australia. We also have (i) consolidated broadband communications operations in Puerto Rico and (ii) consolidated interests in certain programming businesses in Europe, Japan (through J:COM) and Argentina. Our consolidated programming interests in Europe are primarily held through Chellomedia BV (Chellomedia), which also provides interactive digital products and services and owns or manages investments in various businesses in Europe. Certain of Chellomedia’s subsidiaries and affiliates provide programming and interactive digital services to our broadband communications operations, primarily in Europe.

LGI was formed on January 13, 2005, for the purpose of effecting the combination of LGI International, Inc., formerly known as Liberty Media International, Inc. (LGI International), and UnitedGlobalCom, Inc. (UGC). LGI International is the predecessor to LGI and was formed on March 16, 2004, in contemplation of the spin-off of certain international cable television and programming subsidiaries and assets of Liberty Media Corporation (Liberty Media), including a majority interest in UGC, an international broadband communications provider. On June 15, 2005, we completed certain mergers whereby LGI acquired all of the capital stock of UGC that LGI International did not already own and LGI International and UGC each became wholly owned subsidiaries of LGI (the LGI Combination). In the following text, the terms “we”, “our”, “our company”, and “us” may refer, as the context requires, to LGI and its predecessors and subsidiaries.

Unless indicated otherwise, convenience translations into U.S. dollars are calculated as of December 31, 2007, and operational data, including subscriber statistics and ownership percentages, are as of December 31, 2007.

Recent Developments

Acquisitions

Telenet. At the end of 2006, Chellomedia indirectly owned 28.8% of the then outstanding ordinary shares of Telenet, including shares held through its then majority owned subsidiary Belgian Cable Investors. These shares represented a majority ownership interest in the Telenet shares owned by a syndicate (the Telenet Syndicate) that controls Telenet by virtue of its collective ownership of a majority of the outstanding Telenet shares. Subject to our obtaining competition approval from the European Commission (EU Commission), our majority ownership interest in the Telenet Syndicate shares gave us certain governance rights under the agreement among the Telenet Syndicate shareholders (the Syndicate Agreement) that provided us with the ability to exercise voting control over Telenet.

Competition approval was obtained on February 26, 2007, and we began accounting for Telenet as a consolidated subsidiary effective January 1, 2007. Pursuant to the rights provided us under the Syndicate Agreement, on May 31, 2007, we nominated seven additional members to the Telenet Board, bringing our total number of representatives to nine of the 17 total members.

During 2007, we acquired an aggregate of 26,769,047 additional Telenet ordinary shares through transactions with third parties, the conversion of warrants and the exercise of options to acquire Telenet shares from certain of the Telenet Syndicate shareholders. We also purchased from a third party the remaining 10.5% interest in Belgian Cable Investors that we did not already own. For these acquisitions, we paid aggregate cash consideration, before direct acquisitions costs, of $930.8 million and exercised options and converted warrants with an aggregate fair value of $65.2 million. See note 4 to our consolidated financial statements.

After giving effect to these transactions, as well as the issuance of shares by Telenet to third parties upon conversion of their warrants, we indirectly own 55,861,521 shares or 51.1% of Telenet’s outstanding ordinary shares. Only one third-party shareholder remains within the Telenet Syndicate and our governance rights under the Syndicate Agreement and the Telenet Articles of Association allow the Telenet directors nominated by us to control all Telenet Board decisions, other than certain minority-protective decisions that must receive the affirmative vote of specified directors in order to be effective. These decisions include selling certain cable assets or terminating cable service.

JTV Thematics. On July 2, 2007, Jupiter TV Co., Ltd. (Jupiter TV), our Japanese programming joint venture with Sumitomo Corporation (Sumitomo), was split into two separate companies through the spin-off of the thematics channel business (JTV Thematics). The business of JTV Thematics consists of the operations that invest in, develop, manage and distribute fee-based television programming through cable, satellite and broadband platform systems in Japan. Following the spin-off of JTV Thematics, Jupiter TV was renamed SC Media & Commerce Inc. (SC Media). SC Media’s business primarily focuses on the operation of Jupiter Shop Channel Co., Ltd., through which a wide variety of consumer products and accessories are marketed and sold. We exchanged our interest in SC Media for shares of Sumitomo common stock on July 3, 2007. See “— Dispositions” below.

On September 1, 2007, JTV Thematics and J:COM executed a merger agreement under which JTV Thematics was merged with J:COM, with Liberty Global Japan II, LLC, our wholly owned indirect subsidiary, and Sumitomo receiving 253,675 and 253,676 J:COM shares, respectively. Sumitomo owns a minority interest in LGI/Sumisho Super Media LLC (Super Media), our indirect majority owned subsidiary that owns a controlling interest in J:COM. The J:COM shares issued in the merger of JTV Thematics into J:COM are to be voted by us and Sumitomo in the same way that Super Media votes its shares of J:COM and are subject to restrictions on transfer. See “Operations — Asia/Pacific — Jupiter Telecommunications Co., Ltd.” below, and notes 4 and 5 to our consolidated financial statements.

Telesystems Tirol. On October 2, 2007, our operating subsidiary in Austria acquired Telesystems Tirol GmbH & Co KG, a broadband communications operator in Austria, for cash consideration of €84.3 million ($119.3 million at the transaction date), including working capital adjustments and direct acquisition costs.

For additional information on the foregoing acquisitions, see note 4 to our consolidated financial statements. In addition, during 2007, we completed various other smaller acquisitions in the normal course of business.

Dispositions

SC Media. On July 3, 2007, pursuant to a share-for-share exchange agreement with Sumitomo, we exchanged all of our shares in SC Media for 45,652,043 shares of Sumitomo common stock with a transaction date market value of ÂĄ104.5 billion ($854.7 million at the transaction date). During the second quarter of 2007, we executed a zero cost collar transaction with respect to the Sumitomo shares. See note 8 to our consolidated financial statements.

Melita Cable Plc (Melita). On July 26, 2007, an indirect wholly owned subsidiary of Chellomedia sold its 50% interest in Melita to an unrelated third party for cash consideration of €73.6 million ($101.1 million at the transaction date).

Redemption of ABC Family Preferred Stock. Prior to August 2, 2007, we owned a 99.9% beneficial interest in the 9% Series A preferred stock of ABC Family Worldwide, Inc. (ABC Family). Our ABC Family preferred stock was pledged as security for $345.0 million principal amount of the outstanding borrowings of one of our subsidiaries. On August 2, 2007, the ABC Family preferred stock was redeemed and we used the resulting proceeds to repay in full the related secured borrowings.

For additional information on the foregoing dispositions, see note 5 to our consolidated financial statements. In addition, during 2007, we completed other smaller dispositions in the normal course of business.

Financings

LGI Revolving Credit Facility. In June 2007, LGI entered into a $215.0 million unsecured senior revolving facility agreement (the LGI Credit Facility). The LGI Credit Facility is available to be used to fund the general corporate and working capital requirements of LGI and its subsidiaries. The final maturity date of June 25, 2009 may be extended, at LGI’s option, to June 25, 2010. Amounts that are repaid by LGI under the LGI Credit Facility may be re-borrowed. At December 31, 2007, the full amount of the LGI Credit Facility was available to be drawn.

UPC Broadband Holding Bank Facility Refinancing Transactions. In April and May 2007, UPC Holding’s subsidiaries, UPC Financing Partnership and UPC Broadband Holding BV (UPC Broadband Holding), as the Borrowers, entered into six additional facility accession agreements (collectively, the 2007 Accession Agreements) pursuant to UPC Broadband Holding’s senior secured credit agreement (as amended and restated, the UPC Broadband Holding Bank Facility). The 2007 Accession Agreements each provided for an additional term loan under new Facilities M and N of the UPC Broadband Holding Bank Facility. In connection with the 2007 Accession Agreements, we transferred our 100% ownership interest in Cablecom Holdings GmbH (Cablecom), a broadband communications operator in Switzerland, and our 80% ownership interest in VTR GlobalCom, S.A. (VTR), a broadband communications operator in Chile, to members of the Borrower Group (as defined in the UPC Broadband Holding Bank Facility).

At December 31, 2007, the amounts outstanding under Facilities M and N aggregated €3,640.0 million ($5,308.2 million) and $1,900.0 million, respectively. The amounts borrowed under the 2007 Accession Agreements (together with available cash) were used as follows: (i) to refinance outstanding borrowings under the UPC Broadband Holding Bank Facility; (ii) to refinance certain outstanding indebtedness of affiliates of Cablecom; (iii) to fund the cash collateral account securing the senior secured credit facility for VTR; and (iv) for general corporate and working capital purposes. Amounts outstanding under each of Facilities M and N mature on the earlier of (i) December 31, 2014 and (ii) the date (the Relevant Date) falling 90 days prior to the date on which UPC Holding’s existing Senior Notes due 2014 fall due if such Senior Notes have not been repaid, refinanced or redeemed prior to such Relevant Date. Any voluntary prepayment of all or part of the principal amount of Facility M (other than Tranche 4) or Facility N made on or before May 16, 2008, will include a premium of 1% such that the prepaid amount will equal 101% of such principal amount plus accrued interest. Any voluntary prepayment of all or part of the principal amount of Tranche 4 made within 12 months of the date of the last drawing under this Tranche will include a premium of 1% such that the prepaid amount will equal 101% of such principal amount plus accrued interest.

UPC Holding Facility. In June 2007, UPC Holding entered into a €250.0 million ($364.6 million) secured term loan facility (the UPC Holding Facility). The UPC Holding Facility was fully drawn on June 19, 2007. UPC Holding may, at its option, on or before May 31, 2008, require each lender under the UPC Holding Facility to become an additional facility lender under the UPC Broadband Holding Bank Facility and the outstanding commitments of the lenders under the UPC Holding Facility will be rolled over into Facility M under the UPC Broadband Holding Bank Facility (the Conversion). The terms and conditions of the UPC Holding Facility are similar to the terms of the indenture for UPC Holding’s existing Senior Notes due 2014; however, in the event UPC Holding elects to effect the Conversion, the UPC Holding Facility will be part of Facility M and will be subject to the terms and conditions of the UPC Broadband Holding Bank Facility. The final maturity date of the UPC Holding Facility is December 31, 2014, unless the Conversion does not occur, in which case, it will be May 31, 2008. Any voluntary prepayment of all or part of the principal amount of the UPC Holding Facility made on or prior to May 16, 2008, will include a premium of 1% such that the prepaid amount will equal 101% of such principal amount plus accrued interest.

Redemption of Cablecom Luxembourg Old Fixed Rate Notes. On April 16, 2007, Cablecom’s subsidiary, Cablecom Luxembourg S.C.A. (Cablecom Luxembourg), redeemed in full its 9.375% Senior Notes due 2014 (the Cablecom Luxembourg Old Fixed Rate Notes) at a redemption price of 109.375% of the principal amount plus accrued interest through the redemption date. The total amount of the redemption of €330.7 million ($448.1 million at the transaction date) was funded by the Cablecom Luxembourg Defeasance Account, an escrow account created in October 2006 for the benefit of the holders of the Cablecom Luxembourg Old Fixed Rate Notes in connection with the covenant defeasance of such Notes.

Assumption of Cablecom Luxembourg Senior Notes by UPC Holding. On April 17, 2007, Cablecom Luxembourg’s €300.0 million ($437.5 million) 8.0% Senior Notes due 2016 became a direct obligation of UPC Holding on terms substantially identical (other than as to interest, maturity and redemption) to those governing UPC Holding’s existing Senior Notes due 2014.

Telenet Refinancing and Capital Distribution. On August 1, 2007 (the Signing Date), Telenet BidCo NV, an indirect subsidiary of Telenet, executed a new senior secured credit facility agreement, as amended and restated by supplemental agreements dated August 22, 2007, September 11, 2007 and October 8, 2007 (the 2007 Telenet Credit Facility). The 2007 Telenet Credit Facility provides for (i) a €530.0 million ($772.9 million) Term Loan A Facility (the Telenet TLA Facility) maturing five years from the Signing Date, (ii) a €307.5 million ($448.4 million) Term Loan B1 Facility (the Telenet TLB1 Facility) maturing 78 months from the Signing Date, (iii) a €225.0 million ($328.1 million) Term Loan B2 Facility (the Telenet TLB2 Facility) maturing 78 months from the Signing Date, (iv) a €1,062.5 million ($1,549.5 million) Term Loan C Facility (the Telenet TLC Facility) maturing eight years from the Signing Date, and (v) a €175.0 million ($255.2 million) Revolving Facility (the Telenet Revolving Facility) maturing seven years from the Signing Date.

On October 10, 2007, the Telenet TLA Facility, the Telenet TLB1 Facility and the Telenet TLC Facility were drawn in full. The proceeds of the Telenet TLA Facility, the Telenet TLB1 Facility and the first €462.5 million ($654.8 million at the transaction date) drawn under the Telenet TLC Facility have been used primarily to (i) redeem in full Telenet’s Senior Discount Notes and the 9% Senior Notes issued by one of its subsidiaries, and (ii) repay in full the outstanding borrowings under the senior credit facility of certain of its subsidiaries.

On November 19, 2007, Telenet commenced the distribution of €655.9 million ($961.6 million at the transaction date) to its shareholders. This capital distribution was funded with available borrowings under the 2007 Telenet Credit Facility. Our share of this capital distribution was €335.2 million ($491.4 million at the transaction date).

The Telenet TLB2 Facility, which was undrawn at December 31, 2007, is available to be drawn up to and including July 31, 2008. The Telenet Revolving Facility is available to be drawn through June 2014. Borrowings under these Facilities may be used for general corporate purposes (including permitted acquisitions).

The Telenet TLA Facility and the Telenet TLC Facility are payable in full at maturity. The Telenet TLB1 Facility and the Telenet TLB2 Facility are payable in three equal installments, the first installment on the date falling 66 months after the Signing Date, the second installment on the date falling 72 months after the Signing Date and the final installment payable at maturity. Advances under the Telenet Revolving Facility are permitted to be paid at the end of the applicable interest period and in full at maturity.

Refinancing of Austar Bank Facility. On August 28, 2007, a subsidiary of Austar refinanced, amended and restated its existing bank facility to, among other things, provide for increased borrowing capacity. The amended and restated senior secured bank facility (the 2007 Austar Bank Facility) provides for (i) a term loan for AUD 225.0 million ($197.3 million), which matures in August 2011, (ii) a term loan for AUD 500.0 million ($438.4 million), which matures in August 2013, and (iii) a revolving facility for AUD 100.0 million ($87.7 million), which matures in August 2012. The 2007 Austar Bank Facility also provides for an agreement with a single bank for a AUD 25.0 million ($21.9 million) working capital facility that matures in August 2012. The 2007 Austar Bank Facility is guaranteed by Austar and certain of its subsidiaries. Borrowings under the 2007 Austar Bank Facility were advanced to Austar to fund (i) the October 31, 2007 redemption of Austar’s subordinated transferable adjustable redeemable securities, and (ii) Austar’s November 1, 2007 capital distribution to its shareholders, of which our share was AUD 160.1 million ($146.7 million at the transaction date). Borrowings under the 2007 Austar Bank Facility may also be used to fund Austar’s capital expenditures or for general corporate purposes. At December 31, 2007, AUD 75.1 million ($65.8 million) of the 2007 Austar Bank Facility was available to be drawn.

LGJ Holdings Credit Facility. On October 31, 2007, LGJ Holdings LLC, our wholly owned indirect subsidiary, entered into a senior secured credit facility agreement with a syndicate of banks (the LGJ Holdings Credit Facility). The LGJ Holdings Credit Facility provides for an initial term loan of ÂĄ75.0 billion ($655.0 million at the transaction date), which was fully drawn on November 5, 2007 (the Closing Date). The proceeds were used to make a distribution to the sole member of LGJ Holdings LLC and to pay fees, costs and expenses incurred in connection with the term loan. This term loan is to be repaid in two installments: (i) 2.5% of the outstanding principal amount four and one-half years from the Closing Date and (ii) 97.5% of the outstanding principal amount five years from the Closing Date. The LGJ Holdings Credit Facility is guaranteed by our subsidiaries that are members of Super Media (J:COM Holdcos). In addition, the LGJ Holdings Credit Facility is secured by pledges over shares of the J:COM Holdcos and the membership interests in LGJ Holdings LLC. In connection with the LGJ Holdings Credit Facility, we entered into a limited recourse guarantee, which guarantees the payment of interest, certain costs and expenses and, under certain limited circumstances, the payment of principal and other obligations under the LGJ Holdings Credit Facility.

For a further description of the terms of the above financings and certain other transactions affecting our consolidated debt in 2007, see note 10 to our consolidated financial statements.

Stock Repurchases

Pursuant to our stock repurchase programs and our January 2007, April 2007 and September 2007 self-tender offers, during the year ended December 31, 2007, we repurchased a total of 24,119,005 shares of LGI Series A common stock at a weighted average price of $36.66 per share and 26,843,180 shares of LGI Series C common stock at a weighted average price of $36.39 per share, for an aggregate cash purchase price of $1,861.0 million, including direct acquisition costs. As of December 31, 2007, we were authorized under the November 2007 stock repurchase program to acquire an additional $60.6 million of LGI Series A and Series C common stock, which was fully utilized in January 2008.

On January 7, 2008, we announced the authorization of a new stock repurchase program under which we may acquire an additional $500.0 million of our LGI Series A and LGI Series C common stock through open market transactions or privately negotiated transactions, which may include derivative transactions. The timing of the repurchase of shares pursuant to this program is dependent on a variety of factors, including market conditions. This program may be suspended or discontinued at any time. At February 21, 2008, the remaining amount authorized under this program was $170.7 million.

* * * *

Certain statements in this Annual Report on Form 10-K constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. To the extent that statements in this Annual Report are not recitations of historical fact, such statements constitute forward-looking statements, which, by definition, involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. In particular, statements under Item 1. Business, Item 2. Properties, Item 3. Legal Proceedings, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and Item 7A. Quantitative and Qualitative Disclosures About Market Risk contain forward-looking statements, including statements regarding business, product, acquisition, disposition and finance strategies, our capital expenditure priorities, subscriber growth and retention rates, competition, the maturity of our markets, anticipated cost increases and target leverage levels. Where, in any forward-looking statement, we express an expectation or belief as to future results or events, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the expectation or belief will result or be achieved or accomplished. In evaluating these statements, you should consider the risks and uncertainties discussed under Item 1A. Risk Factors and Item 7A. Quantitative and Qualitative Disclosures About Market Risk, as well as the following list of some but not all of the factors that could cause actual results or events to differ materially from anticipated results or events:


• economic and business conditions and industry trends in the countries in which we, and the entities in which we have interests, operate;

• the competitive environment in the broadband communications and programming industries in the countries in which we, and the entities in which we have interests, operate;

• competitor responses to our products and services, and the products and services of the entities in which we have interests;

• fluctuations in currency exchange rates and interest rates;

• consumer disposable income and spending levels, including the availability and amount of individual consumer debt;

• changes in consumer television viewing preferences and habits;

• consumer acceptance of existing service offerings, including our digital video, voice and broadband Internet services;

• consumer acceptance of new technology, programming alternatives and broadband services that we may offer;

• our ability to manage rapid technological changes;

• our ability to increase the number of subscriptions to our digital video, voice and broadband Internet services and our average revenue per household;

• the outcome of any pending or threatened litigation;

• Telenet’s ability to favorably resolve negotiations and litigation with four associations of municipalities in Belgium, which we refer to as the pure intercommunales (the PICs), with respect to the broadband network owned by the PICs;

• continued consolidation of the foreign broadband distribution industry;

• changes in, or failure or inability to comply with, government regulations in the countries in which we, and the entities in which we have interests, operate and adverse outcomes from regulatory proceedings;

• our ability to obtain regulatory approval and satisfy other conditions necessary to close acquisitions, as well as our ability to satisfy conditions imposed by competition and other regulatory authorities in connection with acquisitions;

• government intervention that opens our broadband distribution networks to competitors;

• our ability to successfully negotiate rate increases with local authorities;

• changes in laws or treaties relating to taxation, or the interpretation thereof, in countries in which we, or the entities in which we have interests, operate;

• uncertainties inherent in the development and integration of new business lines and business strategies;

• capital spending for the acquisition and/or development of telecommunications networks and services;

• our ability to successfully integrate and recognize anticipated efficiencies from the businesses we acquire;

• problems we may discover post-closing with the operations, including the internal controls and financial reporting process, of businesses we acquire;

• the impact of our future financial performance, or market conditions generally, on the availability, terms and deployment of capital;

• the ability of suppliers and vendors to timely deliver products, equipment, software and services;

• the availability of attractive programming for our digital video services at reasonable costs;

• the loss of key employees and the availability of qualified personnel;

• changes in the nature of key strategic relationships with partners and joint ventures; and

• events that are outside of our control, such as political unrest in international markets, terrorist attacks, natural disasters, pandemics and other similar events.

The broadband communications services industries are changing rapidly and, therefore, the forward-looking statements of expectations, plans and intent in this Annual Report are subject to a significant degree of risk.

These forward-looking statements and such risks, uncertainties and other factors speak only as of the date of this Annual Report, and we expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein, to reflect any change in our expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based.

CEO BACKGROUND

Michael T. Fries: Born February 6, 1963. President and a director of LGI since April 2005 and Chief Executive Officer of LGI since June 2005. Mr. Fries served as Chief Executive Officer of UGC from January 2004 to June 2005. Mr. Fries has served as a director of UGC and its predecessors since November 1999 and as President of UGC and its predecessors since September 1998. He also served as Chief Operating Officer of UGC and its predecessors from September 1998 to January 2004. Mr. Fries joined UGC’s predecessors in 1990. Mr. Fries is a director and non-executive Chairman of our subsidiary Austar United Communications Ltd. (Austar) , an Australian public company.

Paul A. Gould: Born September 27, 1945. A director of LGI since June 2005. Mr. Gould served as a director of UGC from January 2004 to June 2005. Mr. Gould has served as Managing Director of Allen & Company L.L.C., an investment banking services company, for more than the last five years. Mr. Gould is a director of Ampco-Pittsburgh Corporation, LMC and Discovery Holding Company.

John C. Malone: Born March 7, 1941. Chairman of the Board and a director of LGI since its formation for the LGI Combination in January 2005. Mr. Malone served as President, Chief Executive Officer and Chairman of the Board of LGI International from March 2004 to June 2005, and as a director thereof since March 2004. Mr. Malone has served as a director of UGC and its predecessors since November 1999. Mr. Malone has served as Chairman of the Board and a director of LMC, including its predecessors, since 1990 and Chief Executive Officer of the predecessor of LMC from August 2005 to February 2006. Mr. Malone is Chairman of the Board and Chief Executive Officer of Discovery Holding Company and a director of IAC/InterActiveCorp, Expedia, Inc. and DirecTV Group, Inc.

Larry E. Romrell: Born December 30, 1939. A director of LGI since June 2005. Mr. Romrell served as a director of LGI International from May 2004 to June 2005. Mr. Romrell served as an Executive Vice President of Tele-Communications, Inc., at the time one of the largest multiple cable system operators in the United States, from January 1994 to March 1999. Mr. Romrell is a director of LMC.

John P. Cole, Jr.: Born January 12, 1930. A director of LGI since June 2005. Mr. Cole served as a director of UGC and its predecessors from March 1998 to June 2005. Mr. Cole is a founder and retired partner of the Washington, D.C. law firm Cole, Raywid and Braverman L.L.P., which specialized in all aspects of telecommunications and media law, and which in 2007 merged into the law firm of Davis Wright Tremaine LLP.

David E. Rapley: Born June 22, 1941. A director of LGI since June 2005. Mr. Rapley served as a director of LGI International from May 2004 to June 2005. Currently, Mr. Rapley is a director and Vice Chairman of Merrick & Co., and chairman of the board of Merrick Canada ULC, both private engineering firms. Mr. Rapley served as Executive Vice President, Engineering of VECO Corp.—Alaska, a provider of project management, engineering, procurement, construction and other services to the energy resource and process industries, from January 1998 to December 2001. Mr. Rapley is a director of LMC.

Gene W. Schneider: Born September 8, 1926. A director of LGI since June 2005. Until June 2005, Mr. Schneider served as Chairman of the Board of UGC and its predecessors for more than five years. Mr. Schneider also served as Chief Executive Officer of UGC and its predecessors from 1995 to January 2004. Mr. Schneider is a director of Austar.

John W. Dick: Born January 9, 1938. A director of LGI since June 2005. Mr. Dick served as a director of UGC from March 2003 to June 2005. He has served as a director and executive officer of various development and manufacturing companies. Until December 2007, he was the non-executive Chairman and a director of Hooper Industries Group, a privately held United Kingdom (U.K.) group consisting of: Hooper and Co (Coachbuilders) Ltd. (building special/bodied Rolls Royce and Bentley motorcars) and Hooper Industries (China) (providing industrial products and components to Europe and the United States). Mr. Dick held his positions with Hooper Industries Group for more than five years. In addition, Mr. Dick was a director and non-executive Chairman of Terracom Broadband, a Rwandan fiber optic company, and a director and non-executive chairman of Rwandatel, a telecommunications company in Rwanda, until the sales of those companies in 2007. Mr. Dick is a director of Austar.

J.C. Sparkman: Born September 12, 1932. A director of LGI since June 2005. Mr. Sparkman served as a director of LGI International from November 2004 to June 2005. Mr. Sparkman served as the Chairman of the Board of Broadband Services, Inc., a provider of telecommunications equipment services, including procurement, forecasting, warehousing, installation and repair, to domestic and institutional customers, from September 1999 through December 2003. Mr. Sparkman is a director of Shaw Communications Inc. and Universal Electronics, Inc.

J. David Wargo: Born October 1, 1953. A director of LGI since June 2005. Mr. Wargo served as a director of LGI International from May 2004 to June 2005. Mr. Wargo has served as the President of Wargo & Company, Inc., a private investment company specializing in the communications industry, for more than the last five years. Mr. Wargo is a director of Strayer Education, Inc. and Discovery Holding Company.

MANAGEMENT DISCUSSION FROM LATEST 10K

Overview

We are an international provider of video, voice and broadband Internet services with consolidated broadband communications and/or DTH satellite operations at December 31, 2007 in 15 countries, primarily in Europe, Japan and Chile. Through our indirect wholly-owned subsidiary UPC Holding, we provide video, voice and broadband Internet services in 10 European countries and in Chile. As further described in note 10 to our consolidated financial statements, (i) our 100% ownership interest in Cablecom, a broadband communications operator in Switzerland, and (ii) our 80% ownership interest in VTR, a broadband communications operator in Chile, were transferred from certain of our other indirect subsidiaries to UPC Broadband Holding during the second quarter of 2007. UPC Broadband Holding’s European broadband communications operations, including Cablecom, are collectively referred to as the UPC Broadband Division. Through our indirect controlling ownership interest in Telenet (51.1% at December 31, 2007), which we began accounting for as a consolidated subsidiary effective January 1, 2007 (as further described in note 4 to our consolidated financial statements), we provide broadband communications services in Belgium. Through our indirect controlling ownership interest in J:COM (37.9% at December 31, 2007), we provide broadband communications services in Japan. Through our indirect majority ownership interest in Austar (53.4% at December 31, 2007), we provide DTH satellite services in Australia. We also have (i) consolidated broadband communications operations in Puerto Rico and (ii) consolidated interests in certain programming businesses in Europe, Japan (through J:COM) and Argentina. Our consolidated programming interests in Europe are primarily held through Chellomedia, which also provides interactive digital services and owns or manages investments in various businesses in Europe. Certain of Chellomedia’s subsidiaries and affiliates provide programming and other services to certain of our broadband communications operations, primarily in Europe.

As further described in note 4 to our consolidated financial statements, we have completed a number of transactions that impact the comparability of our 2007, 2006 and 2005 results of operations. Certain of the more significant of these transactions are listed below:


(i) the acquisition of JTV Thematics, the thematics channel business of SC Media, through the September 1, 2007 merger of JTV Thematics with J:COM;

(ii) the consolidation of Telenet, a broadband communications provider in Belgium, effective January 1, 2007 for financial reporting purposes;

(iii) J:COM’s acquisition of a controlling interest in Cable West, a broadband communications provider in Japan, on September 28, 2006;

(iv) the consolidation of Karneval, a broadband communications provider in the Czech Republic, effective September 18, 2006;

(v) the acquisition of a controlling interest in Austar, a DTH satellite provider in Australia, on December 14, 2005;

(vi) the acquisition of Cablecom, a broadband communications provider in Switzerland, on October 24, 2005;

(vii) the acquisition of Astral, a broadband communications provider in Romania, on October 14, 2005;

(viii) the acquisition of the remaining 46.6% interest in UGC that we did not already own through the consummation of the LGI Combination on June 15, 2005;

(ix) the consolidation of NTL Ireland, a broadband communications provider in Ireland, effective May 9, 2005; and

(x) VTR’s acquisition of Metrópolis, a broadband communications provider in Chile, on April 13, 2005.

In addition to the transactions listed above, we have also completed a number of less significant acquisitions in Europe and Japan during 2007, 2006 and 2005.

As further discussed in note 5 to our consolidated financial statements, our consolidated financial statements have been reclassified to present UPC Norway, UPC Sweden, UPC France and PT Norway as discontinued operations. Accordingly, in the following discussion and analysis, the operating statistics, results of operations and cash flows that we present and discuss are those of our continuing operations.

From a strategic perspective, we are seeking to build broadband communications and video programming businesses that have strong prospects for future growth in revenue and operating cash flow (as defined in note 21 to our consolidated financial statements). We also seek to leverage the reach of our broadband distribution systems to create new content opportunities in order to increase our distribution presence and maximize operating efficiencies. As discussed further under Liquidity and Capital Resources — Capitalization below, we also seek to maintain our debt at levels that provide for attractive equity returns without assuming undue risk.

From an operational perspective, we focus on achieving organic revenue growth in our broadband communications operations by developing and marketing bundled entertainment, information and communications services, and extending and upgrading the quality of our networks where appropriate. As we use the term, organic growth excludes the effects of foreign currency exchange rate fluctuations, acquisitions and dispositions. While we seek to obtain new customers, we also seek to maximize the average revenue we receive from each household by increasing the penetration of our digital cable, broadband Internet and telephony services with existing customers through product bundling and upselling, or by migrating analog cable customers to digital cable services that include various incremental service offerings, such as video on demand, digital video recorders and high definition programming. We plan to continue to employ this strategy to achieve organic revenue and customer growth.

Through our subsidiaries and affiliates, we are the largest international broadband communications operator in terms of subscribers. At December 31, 2007, our consolidated subsidiaries owned and operated networks that passed 30,210,100 homes and served 24,034,700 revenue generating units (RGUs), consisting of 14,741,100 video subscribers, 5,377,600 broadband Internet subscribers and 3,916,000 telephony subscribers.

Including the effects of acquisitions, we added a total of 4,602,500 RGUs during 2007. Excluding the effects of acquisitions (RGUs added on the acquisition date), but including post-acquisition RGU additions, we added 1,445,800 RGUs on an organic basis during 2007 (including 163,100 added by Telenet), as compared to 1,631,000 RGUs that were added on an organic basis during 2006. Our organic RGU growth during 2007 is attributable to the growth of our broadband Internet services, which added 782,100 RGUs, and our digital telephony services, which added 741,100 RGUs. We experienced a net organic decline of 77,400 video RGUs during 2007, as decreases in our analog cable RGUs of 1,110,700 and our multi-channel multi-point (microwave) distribution system (MMDS) video RGUs of 24,400 were not fully offset by increases in our digital cable RGUs of 926,600 and our DTH video RGUs of 131,100. We expect that competitive and other factors will continue to adversely impact our ability to maintain or increase our video RGUs, particularly in Europe.

As discussed under Discussion and Analysis of our Consolidated Operating Results below, our consolidated revenue increased 9.3% on an organic basis during 2007, as compared to a 12.4% organic increase during 2006. The decline in our organic revenue growth rate is due primarily to increasing competition and the continuing maturation of certain of our broadband communications markets. In particular, increasing competition in the Netherlands, Austria, Romania, the Czech Republic and other parts of Europe has contributed to a lower number of organic RGU additions in our European broadband communications markets in 2007, as compared to 2006. In Romania, where we are seeing significant competition from several alternate providers, we experienced an organic decline of 26,900 RGUs during 2007, as significant declines in Romania’s video RGUs were only partially offset by increases in broadband Internet and telephony RGUs. Competition also negatively impacted our ability to maintain or increase our monthly subscription fees for our service offerings during 2007, as we increasingly used bundling and promotional discounts to maintain or increase our RGUs. In this regard, we experienced declines from 2006 to 2007 in the average monthly subscription revenue earned per average RGU (ARPU) from broadband Internet and telephony services in most of our broadband communications markets. The negative impact of these declines was somewhat offset by improvements in (i) the mix of services provided in most of our markets, and (ii) video ARPU in certain of our markets, particularly those where we are offering digital cable services, as the ARPU from digital cable services is significantly higher than the ARPU we receive for analog cable services. Although we monitor and respond to competition in each of our markets, no assurance can be given that our efforts to improve our competitive position will be successful, and accordingly, that we will be able to reverse negative trends such as those described above. For additional information concerning the revenue trends of our reportable segments, see Discussion and Analysis of our Reportable Segments — Revenue — 2007 compared to 2006 below.

Despite the competitive pressures that we experienced during 2007, we were able to manage our operating and SG&A expenses such that we experienced expansion in the operating cash flow margins (operating cash flow divided by revenue) of each of our reportable segments (except for our Telenet (Belgium) segment, which reflects the consolidation of Telenet effective January 1, 2007). For additional information, see the discussion of the operating and SG&A expenses and the operating cash flow margins of our reportable segments under Discussion and Analysis of our Reportable Segments below.

Over the next few years, we believe that we will continue to be challenged to maintain recent historical organic revenue and RGU growth rates as we expect that competition will continue to grow and that the markets for certain of our service offerings will continue to mature. During this time frame, we expect that (i) increases in our digital cable, telephony, broadband Internet and DTH RGUs will more than offset decreases in our analog cable RGUs and (ii) the ARPU of our reportable segments will remain relatively unchanged, as the negative impact of competitive factors, particularly with respect to our broadband Internet and telephony services, is expected to offset the positive impacts of (a) the continued migration of video subscribers from analog to digital cable services and (b) other improvements in the mix of services provided to our subscriber base. We also believe that during this time frame we will see (i) modest improvements in our operating cash flow margins and (ii) declines in our aggregate capital expenditures and capital lease additions, as a percentage of revenue. Notwithstanding the above, we expect that we will be challenged to maintain or improve our current subscriber retention rates as competition grows. To the extent that we experience higher subscriber disconnect rates, we expect that it will be more difficult to control certain components of our operating, marketing and capital costs. Our expectations with respect to the items discussed in this paragraph are subject to competitive developments and other factors outside of our control, and no assurance can be given that actual results in future periods will not differ materially from our expectations.

The video, broadband Internet and telephony businesses in which we operate are capital intensive. Significant capital expenditures are required to add customers to our networks, including expenditures for equipment and labor costs. As noted above, we expect that the percentage of revenue represented by our aggregate capital expenditures and capital lease additions will decline over the next few years, due primarily to our belief that the capital required to upgrade our broadband communications networks will decline over this time frame. No assurance can be given that actual results will not differ materially from our expectations as factors outside of our control, such as significant increases in competition or the introduction of new technologies, could cause us to decide to undertake previously unplanned upgrades of our broadband communications networks in the impacted markets. In addition, no assurance can be given that our future upgrades will generate a positive return or that we will have adequate capital available to finance such future upgrades. If we are unable to, or elect not to, pay for costs associated with adding new customers, expanding or upgrading our networks or making our other planned or unplanned capital expenditures, our growth could be limited and our competitive position could be harmed.

Our analog video service offerings include basic programming and expanded basic programming in some markets. We tailor both our basic channel line-up and our additional channel offerings to each system according to culture, demographics, programming preferences and local regulation. Our digital video service offerings include basic and premium programming and, in some markets, incremental product and service offerings such as enhanced pay-per-view programming (including video-on-demand and near video-on-demand), digital video recorders and high definition television services.

We offer broadband Internet services in all of our broadband communications markets. Our residential subscribers generally access the Internet via cable modems connected to their personal computers at various speeds depending on the tier of service selected. We determine pricing for each different tier of broadband Internet service through analysis of speed, data limits, market conditions and other factors.

We offer telephony services in all of our broadband communications markets. In Austria, Belgium, Chile, Hungary, Ireland, Japan and the Netherlands, we provide circuit switched telephony services and voice-over-Internet-proto col, or “VoIP” telephony services. Telephony services in the remaining markets are provided using VoIP technology. In select markets, including Australia, we also offer mobile telephony services using third-party networks.

Results of Operations

As noted under Overview above, the comparability of our operating results during 2007, 2006 and 2005 is affected by acquisitions. In the following discussion, we quantify the impact of acquisitions on our operating results. The acquisition impact represents our estimate of the difference between the operating results of the periods under comparison that is attributable to the timing of an acquisition. In general, we base our estimate of the acquisition impact on an acquired entity’s operating results during the first three months following the acquisition date such that changes from those operating results in subsequent periods are considered to be organic changes.

Changes in foreign currency exchange rates have a significant impact on our operating results as all of our operating segments, except for Puerto Rico, have functional currencies other than the U.S. dollar. Our primary exposure is currently to the euro and the Japanese yen. In this regard, 38.8% and 25.0% of our U.S. dollar revenue during 2007 was derived from subsidiaries whose functional currency is the euro and the Japanese yen, respectively. In addition, our operating results are impacted by changes in the exchange rates for the Swiss franc, the Chilean peso, the Hungarian forint, the Australian dollar and other local currencies in Europe.

The amounts presented and discussed below represent 100% of each business’s revenue and operating cash flow. As we have the ability to control Telenet, J:COM, VTR and Austar, GAAP requires that we consolidate 100% of the revenue and expenses of these entities in our consolidated statements of operations despite the fact that third parties own significant interests in these entities. The third-party owners’ interests in the operating results of Telenet, J:COM, VTR, Austar and other less significant majority owned subsidiaries are reflected in minority interests in earnings of subsidiaries, net, in our consolidated statements of operations. Our ability to consolidate J:COM is dependent on our ability to continue to control Super Media, which will be dissolved in February 2010 unless we and Sumitomo mutually agree to extend the term. If Super Media is dissolved and we do not otherwise control J:COM at the time of any such dissolution, we will no longer be in a position to consolidate J:COM. When reviewing and analyzing our operating results, it is important to note that other third-party entities own significant interests in Telenet, J:COM, VTR and Austar and that Sumitomo effectively has the ability to prevent our company from consolidating J:COM after February 2010.

Discussion and Analysis of our Reportable Segments

All of the reportable segments set forth below derive their revenue primarily from broadband communications services, including video, voice and broadband Internet services. Certain segments also provide CLEC and other B2B services. At December 31, 2007, our operating segments in the UPC Broadband Division provided services in 10 European countries. Our Other Central and Eastern Europe segment includes our operating segments in Czech Republic, Poland, Romania, Slovak Republic and Slovenia. Telenet, J:COM and VTR provide broadband communications services in Belgium, Japan and Chile, respectively. Our corporate and other category includes (i) Austar and other less significant operating segments that provide broadband communications services in Puerto Rico and video programming and other services in Europe and Argentina and (ii) our corporate category. Intersegment eliminations primarily represent the elimination of intercompany transactions between our broadband communications and programming operations, primarily in Europe.

As further discussed in notes 4 and 5 to our consolidated financial statements, we sold UPC Belgium to Telenet on December 31, 2006, and we began accounting for Telenet as a consolidated subsidiary effective January 1, 2007. As a result, we began reporting a new segment as of January 1, 2007 that includes Telenet from the January 1, 2007 consolidation date and UPC Belgium for all periods presented. The new reportable segment is not a part of the UPC Broadband Division. Segment information for all periods presented has been restated to reflect the transfer of UPC Belgium to the Telenet segment. We present only the reportable segments of our continuing operations in the following tables.

For additional information concerning our reportable segments, including a discussion of our performance measures and a reconciliation of total segment operating cash flow to our consolidated earnings (loss) before income taxes, minority interests and discontinued operations, see note 21 to our consolidated financial statements.

The tables presented below in this section provide a separate analysis of each of the line items that comprise operating cash flow (revenue, operating expenses and SG&A expenses, excluding allocable stock-based compensation expense in accordance with our definition of operating cash flow) as well as an analysis of operating cash flow by reportable segment for (i) 2007 as compared to 2006, and (ii) 2006 as compared to 2005. In each case, the tables present (i) the amounts reported by each of our reportable segments for the comparative periods, (ii) the U.S. dollar change and percentage change from period to period and (iii) the percentage change from period to period, after removing foreign currency effects (FX). The comparisons that exclude FX assume that exchange rates remained constant during the periods that are included in each table. As discussed under Quantitative and Qualitative Disclosures about Market Risk below, we have significant exposure to movements in foreign currency rates. We also provide a table showing the operating cash flow margins of our reportable segments for 2007, 2006 and 2005 at the end of this section.

Substantially all of the significant increases during 2007, as compared to 2006, in our revenue, operating expenses and SG&A expenses for our Telenet (Belgium) segment are attributable to the effects of our January 1, 2007 consolidation of Telenet, and accordingly, we do not separately discuss the results of our Telenet (Belgium) segment below. Telenet provides services over broadband networks owned by Telenet and the Telenet Partner Network owned by the PICs (as further described in note 10 to our consolidated financial statements), with the networks owned by Telenet accounting for approximately 70% of the aggregate homes passed by the combined networks and the Telenet Partner Network accounting for the remaining 30%. For information concerning Telenet’s ongoing negotiations and litigation with the PICs with respect to the Telenet Partner Network, see note 20 to our consolidated financial statements. Telenet’s organic revenue growth rate in 2008 is expected to fall within a range of 5% to 6%. This growth rate reflects, among other factors, the effects of anticipated declines in Telenet’s revenue from set top box sales and interconnect fees in 2008, as compared to 2007. No assurance can be given that actual results in future periods will not differ materially from our expectations.

Revenue derived by our broadband communications operating segments includes amounts received from subscribers for ongoing services, installation fees, advertising revenue, mobile telephony revenue, channel carriage fees, telephony interconnect fees and amounts received for CLEC and other B2B services. In the following discussion, we use the term “subscription revenue” to refer to amounts received from subscribers for ongoing services, excluding installation fees and mobile telephony revenue.

The rates charged for certain video services offered by our broadband communications operations in Europe and Chile are subject to rate regulation. Additionally, in Europe, our ability to bundle or discount our services may be constrained if we are held to be dominant with respect to any product we offer. The amounts we charge and incur with respect to telephony interconnection fees are also subject to regulatory oversight in many of our markets. Adverse outcomes from rate regulation or other regulatory initiatives could have a significant negative impact on our ability to maintain or increase our revenue.

The Netherlands. The Netherlands’ revenue increased $136.7 million or 14.8% during 2007, as compared to 2006. Excluding the effects of foreign exchange rate fluctuations, the Netherlands’ revenue increased $48.0 million or 5.2%. This increase is attributable to an increase in subscription revenue, primarily due to higher average RGUs, as increases in average telephony and broadband Internet RGUs were only partially offset by a decline in average video RGUs. The decline in average video RGUs includes a decline in average analog cable RGUs that was not fully offset by a gain in average digital cable RGUs. The decline in average video RGUs is largely due to the effects of competition from KPN, the incumbent telecommunications operator in the Netherlands. We believe that most of the declines in the Netherlands’ analog cable RGUs during 2007 were attributable to competition from KPN. We expect that we will continue to face significant competition from KPN in future periods.

ARPU was relatively unchanged during 2007, as the positive impacts of (i) an improvement in the Netherlands’ RGU mix, attributable to a higher proportion of digital cable, telephony and broadband Internet RGUs, and (ii) an increase in ARPU from video services were offset by decreases in ARPU from broadband Internet and telephony services. The increase in ARPU from video services primarily is attributable to (i) the positive impact of growth in the Netherlands’ digital cable services, and (ii) a January 2007 price increase for certain analog cable services. The decrease in ARPU from broadband Internet services primarily is attributable to a higher proportion of broadband Internet customers selecting lower-priced tiers of service and higher bundling discounts. The decrease in ARPU from telephony services during 2007 is due primarily to higher promotional and bundling discounts.

Subscription revenue for the 2006 period includes $9.6 million related to the release of deferred revenue (including $4.8 million that was released during the fourth quarter of 2006) in connection with rate settlements with certain municipalities. There were no such releases during 2007.

As compared to 2006, the net number of digital cable RGUs added by the Netherlands during 2007 declined substantially. This decline is due in part to the continued emphasis on more selective marketing strategies. Although the Netherlands’ emphasis on more selective marketing strategies has resulted in a more gradual pacing of the Netherlands digital migration efforts, we have seen the positive impact of these strategies in 2007 in the form of reductions in certain marketing, operating and capital costs and improved subscriber retention rates.

Switzerland. Switzerland’s revenue increased $102.1 million or 13.2% during 2007, as compared to 2006. Excluding the effects of foreign exchange rate fluctuations, Switzerland’s revenue increased $64.3 million or 8.3%. Most of this increase is attributable to an increase in subscription revenue, as the number of average broadband Internet, telephony and video RGUs was higher during 2007, as compared to 2006. ARPU remained relatively constant during 2007, as the positive impact of an improvement in Switzerland’s RGU mix, attributable to a higher proportion of telephony, broadband Internet and digital cable RGUs, was offset by a decrease in ARPU from telephony and broadband Internet services. ARPU from video services remained relatively unchanged during 2007 as the positive impact of Switzerland’s digital migration efforts was offset by the negative impact of Switzerland’s adoption of certain provisions of the regulatory framework established by the Swiss Price Regulator in November 2006. In order to comply with this regulatory framework, Switzerland began offering a lower-priced tier of digital cable services and decreased the rental price charged for digital cable set top boxes during the second quarter of 2007. ARPU from telephony services decreased during 2007 primarily due to the impact of lower call volumes and competitive factors. The decrease in ARPU from broadband Internet services primarily is attributable to customers selecting lower-priced tiers of service and competitive factors. An increase in revenue from B2B services and other non-subscription revenue also contributed to the increase in Switzerland’s revenue.

Austria. Austria’s revenue increased $83.1 million or 19.8% during 2007, as compared to 2006. This increase includes a $21.4 million increase that is attributable to the impacts of the March 2006 INODE acquisition and the October 2007 Tirol acquisition. Excluding the effects of the INODE and Tirol acquisitions and foreign exchange rate fluctuations, Austria’s revenue increased $20.2 million or 4.8%. The majority of this increase is attributable to an increase in subscription revenue, as the number of average broadband Internet RGUs and, to a lesser extent, telephony and video RGUs, was higher during 2007, as compared to 2006. ARPU remained relatively unchanged during 2007, as the positive impacts of (i) an improvement in Austria’s RGU mix, primarily attributable to a higher proportion of broadband Internet RGUs, and (ii) a January 2007 rate increase for analog cable services were offset by the negative impacts of lower ARPU from broadband Internet and telephony services. The decrease in ARPU from broadband Internet services is attributable to higher discounting in response to increased competition and a higher proportion of customers selecting lower-priced tiers of service. The decrease in ARPU from telephony services primarily is due to (i) lower call volumes, (ii) an increase in the proportion of subscribers selecting VoIP telephony service, which generally is priced lower than Austria’s circuit switched telephony service, and (iii) higher discounting. Telephony revenue in Austria decreased slightly on an organic basis during 2007, as the negative effect of the decrease in telephony ARPU was only partially offset by the positive impact of higher average telephony RGUs. An increase in revenue from B2B services also contributed to the increase in Austria’s revenue during 2007.

Ireland. Ireland’s revenue increased $44.6 million or 17.0% during 2007 as compared to 2006. Excluding the effects of foreign exchange rate fluctuations, Ireland’s revenue increased $19.1 million or 7.3%. This increase is attributable to an increase in subscription revenue as a result of higher average RGUs and slightly higher ARPU during 2007, as compared to 2006. The increase in average RGUs primarily is attributable to an increase in the average number of broadband Internet RGUs. The increase in ARPU during 2007 primarily is due to the positive effects of (i) an improvement in Ireland’s RGU mix, primarily attributable to a higher proportion of digital cable RGUs, (ii) a November 2006 price increase for certain broadband Internet and MMDS video services and (iii) lower promotional discounts for broadband Internet services.

Hungary. Hungary’s revenue increased $70.0 million or 22.8% during 2007, as compared to 2006. This increase includes $1.9 million attributable to the impact of a January 2007 acquisition. Excluding the effects of the acquisition and foreign exchange rate fluctuations, Hungary’s revenue increased $20.9 million or 6.8%. The majority of this increase is attributable to higher subscription revenue, as higher average numbers of broadband Internet and telephony RGUs were only partially offset by lower average numbers of analog cable and DTH RGUs. ARPU declined slightly during 2007, as the positive effects of (i) improvements in Hungary’s RGU mix, primarily attributable to a higher proportion of broadband Internet RGUs, and (ii) a January 2007 rate increase for analog cable services were more than offset by the negative impacts of (a) increases in discounting due to competitive factors, (b) a higher proportion of customers selecting lower-priced broadband Internet tiers, (c) growth in Hungary’s VoIP telephony service, which generally is priced slightly lower than Hungary’s circuit switched telephony services, and (d) lower telephony call volume. Due primarily to the decline in ARPU from telephony services, Hungary also experienced a slight organic decline in revenue from telephony services during 2007, as compare to 2006. Hungary is continuing to experience organic declines in analog cable RGUs, primarily due to the effects of competition from an alternative DTH provider. The majority of Hungary’s analog cable subscriber losses during 2007 have occurred in certain municipalities where the technology of our networks limits our ability to create a less expensive tier of service that would more effectively compete with the alternative DTH provider. Due to a decrease in the average number of DTH and analog cable RGUs and lower ARPU from DTH video services as a result of competitive and other factors, Hungary experienced a slight decline in revenue from video services during 2007, as compared to 2006. An increase in revenue from B2B services, which more than offset decreases in certain other categories of non-subscription revenue, also contributed to the increase in Hungary’s revenue during 2007.

Other Central and Eastern Europe. Other Central and Eastern Europe’s revenue increased $232.1 million or 40.4% during 2007, as compared to 2006. This increase includes $69.2 million attributable to the aggregate impact of the September 2006 consolidation of Karneval and other less significant acquisitions. Excluding the effects of these acquisitions and foreign exchange rate fluctuations, Other Central and Eastern Europe’s revenue increased $68.6 million or 11.9%. This increase primarily is attributable to an increase in subscription revenue as a result of higher average RGUs during 2007, as compared to 2006. The increase in average RGUs during 2007 is attributable to higher average numbers of (i) broadband Internet RGUs (mostly in Poland, Romania and the Czech Republic), (ii) telephony RGUs (mostly related to the expansion of VoIP telephony services in Poland, the Czech Republic and Romania) and, (iii) to a much lesser extent, video RGUs as increases in average video RGUs in Slovenia, the Czech Republic and Poland were partially offset by decreases in Romania. ARPU in our Other Central and Eastern Europe segment increased slightly during 2007 as the positive effects of (i) an improvement in RGU mix, primarily attributable to a higher proportion of broadband Internet RGUs, (ii) January 2007 rate increases for video services in certain countries and (iii) somewhat higher ARPU from telephony services due to increased call volumes (primarily in Poland and Romania) were offset by the negative effects of higher discounting related to increased competition and a higher proportion of broadband Internet subscribers selecting lower-priced tiers.

We continue to experience increased competition in Romania, the Czech Republic and other parts of Central and Eastern Europe, due largely to the effects of competition from alternative providers. In Romania, where we are facing intense competition from multiple alternative providers (two of which are also offering telephony and broadband Internet services), we experienced significant organic declines in video RGUs during 2007. In response to the elevated level of competition in Romania, we are implementing aggressive pricing and marketing strategies in order to mitigate or reverse organic analog cable RGU declines. These strategies, which are expected to adversely impact Romania’s organic revenue growth rates and result in increased capital expenditures in the near term, are being implemented with the objective of maintaining our market share in Romania and enhancing our prospects for continued revenue growth in future periods. In light of the foregoing discussion, we expect Romania’s organic revenue growth rate in 2008 to be significantly lower than Romania’s organic revenue growth rate during 2007, and that the overall organic revenue growth rate for our Other Central and Eastern Europe segment will be somewhat impacted by the lower growth rate in Romania. No assurance can be given that actual results in future periods will not differ materially from our expectations.

J:COM (Japan). J:COM’s revenue increased $346.8 million or 18.2% during 2007, as compared to 2006. This increase includes a $194.0 million increase that is attributable to the aggregate impact of (i) the September 2007 acquisition of JTV Thematics, (ii) the September 2006 acquisition of Cable West and (iii) other less significant acquisitions. Excluding the effects of these acquisitions and foreign exchange rate fluctuations, J:COM’s revenue increased $175.6 million or 9.2%. Most of this increase is attributable to an increase in subscription revenue, due primarily to a higher average number of video, telephony and broadband Internet RGUs during 2007. ARPU remained relatively unchanged during 2007, as the positive effects of (i) a higher proportion of digital cable RGUs and (ii) a higher proportion of broadband Internet subscribers selecting higher-priced tiers of service were largely offset by the negative effects of bundling discounts and lower telephony ARPU due to decreases in customer call volumes.

VTR (Chile). VTR’s revenue increased $76.0 million or 13.6% during 2007, as compared to 2006. Excluding the effects of foreign exchange rate fluctuations, VTR’s revenue increased $65.1 million or 11.7%. Most of this increase is attributable to an increase in subscription revenue, due primarily to a higher average number of broadband Internet, telephony and video RGUs during 2007. ARPU decreased somewhat during 2007, as the positive impacts of (i) inflation adjustments to certain rates for analog cable and broadband Internet services, (ii) increases in the proportion of subscribers selecting higher-speed broadband Internet services over the lower-speed alternatives and digital cable over analog cable services, and (iii) the migration of a significant number of telephony subscribers to a fixed-rate plan were more than offset by the negative effects of (a) higher bundling discounts, (b) an increase in the proportion of subscribers selecting lower-priced tiers of analog video services and (c) lower call volumes for telephony subscribers that remain on a usage-based plan.

MANAGEMENT DISCUSSION FOR LATEST QUARTER

Discussion and Analysis of our Consolidated Operating Results

General

For more detailed explanations of the changes in our revenue, operating expenses and SG&A expenses, see the Discussion and Analysis of Reportable Segments that appears above.

Revenue

Our total consolidated revenue increased $505.0 million during the three months ended March 31, 2008, as compared to the corresponding prior year period. This increase includes a $46.9 million increase that is attributable to the impact of acquisitions. Excluding the effects of acquisitions and foreign exchange rate fluctuations, total consolidated revenue increased $127.0 million or 6.0% during the 2008 period, as compared to the corresponding period in 2007. As discussed in greater detail under Discussion and Analysis of Reportable Segments — Revenue above, this increase is primarily attributable to RGU growth. For information regarding the competitive environment in certain of our markets, see Overview and Discussion and Analysis of our Reportable Segments — Revenue above.

Operating expenses

Our total consolidated operating expenses increased $151.3 million during the three months ended March 31, 2008, as compared to the corresponding prior year period. This increase includes an $18.1 million increase that is attributable to the impact of acquisitions. Our operating expenses include stock-based compensation expense, which decreased $0.3 million during the first quarter of 2008. For additional information, see discussion following SG&A expenses below. Excluding the effects of acquisitions, foreign exchange rate fluctuations and stock-based compensation expense, total consolidated operating expenses increased $5.2 million or 0.6% during the 2008 period, as compared to the corresponding period in 2007. As discussed in more detail under Discussion and Analysis of Reportable Segments — Operating Expenses above, this increase generally reflects increases in programming costs that were only partially offset by (i) decreases in interconnect costs and (ii) less significant net decreases in other expense categories.

SG&A expenses

Our total consolidated SG&A expenses increased $74.4 million during the three months ended March 31, 2008, as compared to the corresponding prior year period. This increase includes a $13.0 million increase that is attributable to the impact of acquisitions. Our SG&A expenses include stock-based compensation expense, which decreased $2.9 million during the first quarter of 2008. For additional information, see discussion in the following paragraph. Excluding the effects of acquisitions, foreign exchange rate fluctuations and stock-based compensation expense, total consolidated SG&A expenses increased $5.4 million or 1.3% during the 2008 period, as compared to the corresponding period in 2007. As discussed in more detail under Discussion and Analysis of Reportable Segments — SG&A Expenses above, this increase generally reflects (i) net increases in labor costs, (ii) increases in marketing and advertising costs and (iii) less significant net increases in other expense categories.

Stock-based compensation expense (included in operating and SG&A expenses)

We record stock-based compensation that is associated with LGI shares and the shares of certain of our subsidiaries.

Depreciation and amortization

Our total consolidated depreciation and amortization expense increased $110.1 million during the three months ended March 31, 2008, as compared to the corresponding prior year period. Excluding the effect of foreign exchange rate fluctuations, depreciation and amortization expense increased $21.9 million or 3.7% during the 2008 period, as compared to the corresponding prior year period. This increase is due primarily to the net effect of (i) increases associated with capital expenditures related to the installation of customer premise equipment, the expansion and upgrade of our networks and other capital initiatives, (ii) increases associated with acquisitions, and (iii) decreases associated with certain of VTR’s network assets becoming fully depreciated.

Impairment, restructuring and other operating charges (credits), net

We recognized net impairment, restructuring and other operating credits of $1.5 million during the three months ended March 31, 2008, compared to net impairment, restructuring and other operating charges of $5.3 million during the corresponding prior year period. The 2008 amount includes a $9.2 million gain on the sale of our interests in certain aircraft.

Interest expense

Our total consolidated interest expense increased $46.6 million during the three months ended March 31, 2008, as compared to the corresponding prior year period. Excluding the effects of foreign exchange rate fluctuations, interest expense increased $11.7 million or 5.0% during the 2008 period, as compared to the corresponding period in 2007. This increase reflects the net effect of increased borrowings and a decrease in our weighted average interest rate. Our weighted average interest rate decreased during the 2008 period, as compared to the corresponding prior year period, primarily due to (i) a decrease in the weighted average interest rate of our UPC Broadband Holding Bank Facility and (ii) a decrease associated with the refinancing of the LG Switzerland PIK Loan Facility in April 2007. Amortization of deferred financing costs was relatively unchanged during the 2008 and 2007 periods. For additional information, see note 9 to our condensed consolidated financial statements.

Interest and dividend income

Our total consolidated interest and dividend income increased $10.4 million during the three months ended March 31, 2008, as compared to the corresponding prior year period. This increase is primarily attributable to higher average interest rates earned on our cash and cash equivalent and restricted cash balances. Dividend income increased slightly during the 2008 period, as dividend income on the Sumitomo common stock that we acquired on July 3, 2007 more than offset the loss of dividend income on the ABC Family preferred stock that was redeemed on August 2, 2007. Our interest and dividend income for the 2007 period includes $7.6 million of dividends earned on our investment in ABC Family preferred stock. The terms of the Sumitomo Collar effectively fix the dividends that we will receive on the Sumitomo common stock during the term of the Sumitomo Collar. We report the full amount of dividends received from Sumitomo as dividend income and the dividend adjustment that is payable to, or receivable from, the counterparty to the Sumitomo Collar is reported as a component of realized and unrealized losses on derivative instruments, net, in our condensed consolidated statements of operations.

CONF CALL

Michael T. Fries - President and Chief Executive Officer

Great. And welcome everybody to our first quarter call. Let me just take a moment to introduce who's on here with us. We have Bernard Dvorak and Charlie Bracken, our Co-CFOs, of course; Gene Musselman, President of our UPC Division; I've got Miranda Curtis and Graham Hollis, who will oversee Japan and Mauricio Ramos, President of VTR in Chile.

We also have on the call, folks, you might hear from Rick Westerman, you all know, Balan Nair our CTO and Shane O'Neill, our Chief Strategist. So with that, I think I'll turn it back to operator.

But first let me remind you that the slides will speak from today are online and hopefully easily accessible to you. So, while we're going through the lengthy Safe Harbor statement, you might want to track those down.

Operator?

Operator

Thank you so much, sir. Page two of the slide 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 with respect to Liberty Global's outlook, future growth prospects and rollout of advanced services, its expectations regarding competition and M&A activity and other statements that are not historical fact.

These forward-looking statements involve certain risks and uncertainties that could cause actual results to differ materially from those expressed or implied by these statements. These risks and uncertainties included those detailed from time to time in Liberty Global's filings with the Securities and Exchange Commission, including its most recently filed Form 10-K and Form 10-Q. Liberty Global disclaims any obligation to update or revise any of these forward-looking statements to reflect any change in its expectations or in the conditions on which any such statement is based.

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

Michael T. Fries - President and Chief Executive Officer

Thanks. We are big fans of consistency here. So, the agenda will be that I'll make some opening remarks and then we'll hear from Gene who will spent a couple of minutes on Europe, Miranda will take us through a slide on Japan, Mauricio will take us through a slide on Chile and then Bernie will walk through the financials and then we'll get your questions, hoping this will take about an hour.

So, I'm on slide 4, which provide some highlights and I think as you walk through results here, you'll find that this was a pretty strong operating quarter for us across most of our global footprint with a few markets, which we will discuss impacting more heavily, some of the headline figures in particular revenues and we'll talk a lot about that today. What should jump out to you, of course, is our operating cash flow performance, which exceeded $1.1 billion for the quarter or about $4.4 billion on an annualized basis and this represents 14% rebased growth as we typically calculate and 34% reported growth. And it might be worth pointing out that we do continue the benefit from strong local currencies versus the dollar here with most of our main currencies up 10% to 15% over last 12 months.

OCF margins are now over 42%, that's up nearly 300 basis points over last year. So, we are achieving on our profitability goals or I might even say overachieving on our profitability goals. And let me just assure that's not coming from marketing and sales. It's mostly efficiencies and smart management of our cost, which we continue to, I think, do a very good job of. There's really not much to report on the M&A front. But we did close in a few small tuck-in acquisitions in Japan and Europe, totaling about $62,000 RGUs. I'm not going to dwell on it today. I would be take questions I suppose. But there are small signs that the second half of the year could be more active for us both in the capital markets and in the consolidation pipeline.

In the meantime, we're mostly focused on our own stock and, not surprisingly. We've already purchased about 7% of the stock year-to-date over $900 million in the first four months and you've seen I'm sure that we announced another $500 million top-up to your prior authorization, which brings our current buyback availability to $650 million.

And if you've been keeping track, which perhaps some of you have, our running total is now over 30% of our equity repurchase since we started or about $4.5 billion. In my opinion that should tell you really all you need to know about how we view our business and growth opportunity and the confidence we have in the broader strategic and financial plan that we're executing.

Please turn to slide 5. It's going to show you some headline numbers for the first quarter compared to last year. I'll just pick out a few here since you probably run through these in the press release already. But RGUs at $24.4 million representing over $16.1 million in unique customer relationships. Just a quick historical handle [ph] when we started life as LGI almost three years ago, those numbers stood at $12.2 million and $9.2 million. So through organic growth and some accretive acquisitions, we've doubled the subscribers and I definitely scale this platform.

Net adds were 302,000, that's down a bit from last year but really not far off of our average growth over the last five quarters and there are some positive operational news in those numbers, which I will touch on in a second.

I have already talked about cash flow margins. I'll make just a couple of comments on revenue which was $2.6 billion in the quarter, up 24% on a reported basis and again that's driven largely by currencies. And unlike in perhaps many of our multinational peers, we do step out currency for you and show fee-based growth, which was 6% in the quarter.

If you turn to the next slide, slide 6, I think you will see a breakdown of that revenue growth by region. I need to clear that it's here is that most of our operations Japan, Chile, Austria and even Telenet are largely in line with our full year guidance of 7% to 9%. The exception this quarter is UPC in Europe. I will dig into that a bit in a slide or two as will Gene in his remarks. I think with respect to guidance we would simply say that we feel very good about operating cash flow. But perhaps it's prudent to flag some risk at the top end of our revenue range. However, I will tell you that we, on this call, have not conceded that point internally.

One of the reasons is illustrated well on slide 6, subscriber growth trend, which shows those trends over last five quarters. And you can see there are net adds of 302,000 in the top left chart there and how that compares to prior periods to get not far off our average actually and there is obviously more to the story. If you start at the bottom of the page for a second with voice and data net adds laid out for five quarters, I think you will see that our results with these core products taking into consideration seasonality have been pretty consistent. We added 170,000 to RGU. That's actually higher than the same period last year. And 182,000 broadband subs, which is close to the average for prior quarters.

The punch line is that we continue to realize very strong volume growth on our high margin Voice and Data services. At the top right, you'll see a Video results and that's perhaps the story line here. Despite adding nearly 50% more digital subs in the quarter over the last year which is just turn to 290,000, we continue to experience incremental video churn in certain European markets, really primarily among our low-end TV subscribers. We'll provide some color on that in a second. But I will say if you work for those video losses obviously, total net adds would have matched last year.

And I'll recap on slide 8 before handing it over to Gene here. The goal on this slide is just to give you I think some very good context and background to our operating results. On the positive side, we're adding advanced services so digital Voice and Data at a faster clip. 652,000 advanced services were added this quarter. That's up 10% from last year and above our average over the last five quarters. And as a result and you would expect the ARPU we are pulling out of each household is growing around 6%, which is round about what we had estimated.

Second, digital cable, which is now launched everywhere as of this month, is really started to make a difference. With 3.7 million subscribers, we're only penetrated 27%. And that reflects a range of 70% in Japan, which is our most material market and zero in Poland where we just launched this week. So from our point of view, there is lots of growth here. And I think encouragingly, in the killer applications in DVR's and VoD and even HD are gaining traction faster than we anticipated, helping to drive digital video ARPUs up typically 25% to 50% and I'll tell you even higher in many cases.

On the flip side, our challenges continue to fall in two main areas. First of all, voice and data ARPUs, especially in Europe remain under pressure as we penetrate more mature markets and defend competition from DSL, but this should not be a surprise to anyone. We flagged this for years now.

Our plan here is to continue to simplify and refine our bundles, and Gene might speak to that, but I think also importantly to accelerate [inaudible] which we think is a gain changer for us in this market. Especially in Europe where our competitors are bandwidth constrained with ADSL2+ or even VDSL.

Second, as I indicated previously despite video growth in Chile and Australia and Japan, we're seeing higher churn among some of our more vulnerable low-end analog customers in Europe. And again, this was not unforeseen. We've been transparent about this for some time. But when you shift to the numbers, you'll find that nearly all of those 57,000 sub losses could be attributed to three markets; Austria, Holland and Czech Republic and of course we operate in 15 countries, each of which encounters some unique challenges in the quarter.

So the game plan for us across Europe which response to these two point, I think is very clear. We're going to let digital do its things, simplify the bundles and employ some retention strategies on a market-by-market basis. And while it's still early days, I will simply say as a case in point, if you look at Rumania we have positive video growth there but the first time in five quarters. So these strategies work, that can do work and we are implementing them where we need to.

With that I will turn it over to Gene for some comments in Europe. Gene?

W. Gene Musselman - President and Chief Operating Officer, UPC Broadband

All right. Thank you, Mike. For the next few minutes I would like to specifically focus on UPC and our results for Q1. I think as you all are aware our growth is about selling advanced services, what we call triple-play, broadband voice and digital TV. And if you take a look at the chart on the right, it indicates that we had a good quarter on that front with 319,000 net adds. This was above our average as Mike pointed out for the last five quarters and up 12% year-on-year. Digital, was a major contributor to this growth and I'll talk about it on the next slide. Also voice and data subscribers continued to grow with 205,000 net adds in the quarter, largely driven by improved triple-play bundling.

On the broadband front, we continue to battle DSL but we still have the speed and bandwidth advantage in nearly all of our markets with over 20 megabit to 25 megabit products. This is a key strength noting that speed remains the key driver in the splits for broadband market share in Europe. In order to maintain this lead we're on a fast track for deployment of year-old DOCSIS 3.0.

In the Netherlands we just completed a 120 megabits data trial using 3.0 infrastructure with very positive results and we plan to introduce 3.0 based mega speed products, starting [inaudible] by the middle of July followed selected cities throughout the balance of the year.

Following the Netherlands, we will expand our 3.0 deployments across all markets in '09 targeting the hotspots first. These deployments are expected to be within our CapEx framework and our current long-range plan. Finally, we feel there is a window of opportunity to exploit due to the limited VDSL or fiber competition that we have in our market at present.

With deployment of year-old DOCSIS 3.0 we should be able to maintain our speed leadership as well as capture additional market share going forward.

Now let me turn for a minute to OCF, which as you can see was up 32% this quarter and 13% rebased. In addition OCF margins remain strong increasing to 46%.

Here I think it's worth echoing Mike's comments that we are not sacrificing marketing spend and growth opportunities for cost savings. The best evidence of this are our total growth sales figures. Q1 '08 results were more than $80,000 above Q1 '07 and actually about $60,000 above our current budget.

Despite these developments analog churn remains an issue in a few markets like Netherlands, Austria and Czech where competitors are principally bottom fishing for price sensitive customers. In addition, we are experiencing voice and data ARPU compressions across a number of our markets, particularly those markets due to the competition.

Research suggests that the majority of the analog churners are single-play customers and as such we have put into place active retention programs to reduce the churns along with new triple play offers including Digital TV.

These programs, as Mike pointed out, are working in Romania and we have added... and as he also indicated, we added RGUs in the first quarter compared to a loss last year.

To sum things up, we maintained solid operating cash flow growth in Q1, despite a very highly competitive environment and I feel confident about the tactics and tools that we have in place to meet the competition going forward.

Turning to the next slide, digital cable update. Here you'll note that digital cable has become one of our key growth engines with revenue up 35% year-on-year. As of this week, we launched Poland, which is our last market to launch and this is a key milestones for UPC. At the top right of the chart you can see evidence of our digital ARPU growth, which totaled nearly 1.4 million digital subs at the end of the March. Stimulating this growth has been the rollout of the advanced futures such as DVR, VoD and HDTV in seven out of ten of our markets.

For example, in Switzerland, roughly 50% of all of our sales included DVR at this point and nearly 40% of digital subs in Netherlands have used VoD at least once and better here we're starting to see high definition TV pickup in our markets as a result of better content. These features really derive demands in ARPU perhaps as much or more as increased content offerings and offer a meaningful competitive advantage to us.

NL was a good case and point of what can be accomplished with the digital platform. Today, approximately two-thirds of all digital customers take an expanded tier or service above the basic package. This is driving digital ARPU growth, which at $10 or 10 euros, I should say, is two-and-a-half times the amount generated just 15 month ago. Also, NL has been successful in significantly reducing digital churn and driving penetration to 27%.

To further increase penetration and retain customers, NL continues to launch new services with the first HD DVR rolling out in this market this week to be followed with four new HDTV packs and HD content for VoD this summer. The HD DVR launch is in corporation with Philips who will sell HD, standard HD box and the HD DVR boxes at retail alongside the UPC HDTV monthly subscription. We think it's key to be in the retail market and for the first time, when someone buys a new HD flat screen, we'll be there. Also important is the upcoming HD TV broadcast of the European Soccer Championships and the Beijing Olympics. These events should add momentum and drive continued up tick of our digital offerings.

Overall, NL demonstrates the strength of digital cable as an enabler to sell advanced services and to build incremental ARPU. Our plan going forward is to leverage what we have learnt in the Netherlands across all of our markets. We think digital is truly a significant growth opportunity for UPC.

With that said, I will turn over to Mauricio for an update on Chile.

Mauricio Ramos - President, Liberty Global Latin America and Chief Executive Officer, VTR Global Com S.A.

Thank you, Gene. Q1 was another good quarter for us at VTR with good results across all our key metrics. We added 68,000 value-added services, sustained rebased revenue growth of 10% and 19% rebased OCF growth against the first quarter of 2007.

As in prior quarters, RGU gains and top line growth in addition to our sustained cost controls continued to provide benefits of scale to the VTR, OCF line. This has lead to an OCF conversion ratio of 7.1% for the first quarter. That's roughly the same level on the conversion ratio we obtained for our 2007. And we think it's a good ratio as revenue grows, we contain rather than cut back on SG&A expenses. And that's basically how we are driving OCF margins in north of 40% with that 200 basis points gain over the first quarter of 2007 in this quarter.

As in prior calls, I would also like to briefly provide an update on the status of key strategic initiatives that are driving these results. Our binding strategy as you know remains a key engine of our RGU growth. During the first quarter, we reached a million customers and sometime in May, we expect to reach 2 million RGUs with 40% of our customer base now taking free services from us. All of these are of course important milestones.

With regards to our bundling strategy, however it is important to note that we also continue to market our flagship triple play product of course but are now placing emphasis on the bundle of Internet on telephony, as that is where the highest growth resides today.

Our digital strategy seems to be working well as well in particularly the decision we took at the end of last year to include digital box with all new triple play sales. As a result, digital penetration of our video subscriber base is now 26% and we expect that number to continue to grow steadily.

In March, as some of you may be aware; we increased broadband speeds to our entire subscriber base forcing our competitors to follow. As a result, we gained further brand and customer recognition and of course, the first-mover advantage. During the quarter, in fact, we continued to grow strongly in Internet subscribers where as our main competitors gain remained flat for the quarter. So, it was overall a very good quarter for VTR and we're of course proud that year particularly in what is an increasingly competitive marketplace.

Our strategy for the rest of the year will continue to be focused on digital migration, targeted bundling and reaping the benefits of scale. That drives high cash conversion ratios on our revenue growth and as a result sustains this high OCF growth.

And with that, I'll turn it over to Miranda for an update on Japan.

Miranda Curtis - President, Liberty Global Japan

Thank you, Mauricio. J:COM is having a strong and steady first quarter with all line items above or very close to our expectations that are ahead of last year and churn continues to decline. As Mike mentioned, digital penetration is now at 70% and J:COM continues to move steadily towards full digitalization with an additional boost expected this summer from the Beijing Olympics.

Meantime, 160 meg is now proven growth engine for J:COM and they are preparing to roll it out nationwide. Growth also demonstrably stronger in areas where 160 meg has been rolled out with almost 30,000 160 meg subscribers by the end of first quarter.

What's also interesting to note is that approximately 40% of the new 160 meg customers in the Kansai area are churning off fiber to the home and on to cable. The growth thus far has been achieved on the basis of the pre-DOCSIS modems but the full national rollout of DOCSIS 3.0 modems began in the last few weeks. There'd be no technical problems whatsoever and several thousand orders have already been taken. And in parallel with that process, J:COM management is working on refining the pricing of their middle level data peers in bundles to prevent competition in that area.

On the video competition front, overall growth in Japanese market channel television remains relatively flat. While J:COM continues to deliver steady growth, DTH showed a net decline. IPTV remains anemic and growth in fiber to the home appears to have peaked.

On M&A, J:COM continues the steady process of rolling out smaller operators, particularly in the Kansai region where this quarter, the acquisition of Kyoto & Kobe added almost 40,000 subscribers. J:COM management is highly focused on cost controls and has delivered a 30% increase in OCF against first quarter of '07, that's 11% rebased.

Integration of the JTV operation is not complete with further streamlining the channel line-ups still to come. The JimJam channel in partnership with NHK launched successfully last month and discussions continue about other content transactions to reinforce the J:COM line up. It's worth noting that J:COM now carries 24 high definition channels, which accounts for 26% of their total line up.

On the sales side, new sales channels such as J:COM branded kiosks and shops are helping to sustain the renewed growth. The sales and marketing team remains focused on high ARPU value-added services in bundles, particularly in the 160 meg, the high-definition channels and the high-definition DVR. Meantime, J:COM's recent announcement that it will pay dividend to the first time, that 500 yen in semi-annual installments plus a special dividend of a 250 yen, has helped to sustain the J:COM share price.

And with that, I'll hand you over to Bernard Dvorak to take you through the financial results.

Bernard G. Dvorak - Senior Vice President, Co-Chief Financial Officer

Great. Thanks, Miranda. If you turn to slide 14 it shows our financial highlights for the quarter and you can see revenue for the quarter was $2.6 billion, an increase of 24% over Q1 '07 on a reported basis. The increase was driven in large part due to the strengthening of the local currencies that we operate in against the U.S. dollar. In fact, the FX impact accounted for 16% of the 24% overall increase in revenues. The balance of the revenue growth was mostly organic representing rebased revenue growth of 6% for the minor boost from fill-in acquisitions that Mike mentioned earlier. OCF increased to $1.1 billion, an increase of 34% over the prior year and more than half of that growth or approximately 18% came from currency moments and organic growth of rebased OCF increased 14% in the first quarter.

Turning to the next slide we will get into more revenue in OCF detailed by region. Side 15 highlights our reported results by region and our rebased revenue in OCF growth rates. Rebased growth rates eliminate FX movements and neutralize the impact of acquisitions. On consolidated basis rebased revenue grew 6% overall, principally driven by volume. In terms of specific markets we have good strong performances in Poland, Australia and Chile with rebased revenue growth rates of 19%, 14% and 10%.

In Europe UPC grew revenue to $1.1 billion representing 3% rebased growth. Removing Austria, Hungary and Romania, which were discussed earlier by Gene, the UPC revenue growth rate would have been 5%. On a consolidated basis removing those same three properties would have resulted in revenue growth of 7%. Telenet increased revenue to $374 million, representing rebased growth of 9%. J:COM had a rebased growth of 7%, reaching $675 million in the first quarter and lastly VTR delivered revenue growth of 10%, reaching $187 million of revenue in the first quarter and continues to be a great performer.

OCF grew to $1.1 billion in the quarter reflecting a 14% rebased growth rate. Anchoring this growth was Australia, Chile, Ireland, Netherlands and Poland with each of those markets growing in excess of 15%. Our UPC rebase OCF growth was 13% to $514 million. Again if you remove the three most challenging markets in Europe, would result in 20% OCF growth at UPC and 17% for LGI as a whole. Telenet and J:COM each turned in 11% to 12% rebased OCF growth in the first quarter, while VTR came in at approximately 19%. So overall we are quite pleased with the OCF growth story.

Turn to slide 16, we achieved a 42.2% OCF margin in the quarter. This represents a 300 basis point improvement over both the fourth quarter of '07 and the first quarter of '07. We realized margin improvements in 14 countries of our 15 countries, realizing economies of scale across the board. A regional perspective would show the year-on-year increase of 410 basis points at UPC, bringing OCF margins to almost 46% and a 300 basis point improvement of VTR finishing the quarter at 40.5%. Key drivers of our improved OCF margin were margin improvements in both operating expenses and our G&A including a rigorous focus on controlling corporate costs.

And in the operating expense category we're seeing scale benefits in Europe from network operations and from billing and collections as we continue to roll out our [inaudible] triple-play billing platform. It's also important to recognize that our margin improvement is not coming just from the cost side. We're also realizing margin benefits as we scale our new service deployments particularly in Central and Eastern Europe, where we are still mostly at single digit penetrations of VoIP and digital TV.

Another area where we excel is in our ability to efficiently transfer top line growth into OCF as Mauricio touched on. This can be seen in the conversion ratio, which shows that 89% of incremental revenue growth is dropping down to OCF. We view this as best in class among cable operators and certainly an important factor that's helping to counter balance the slowing revenue growth that we are seeing most of our markets.

Slide 17 shows our free cash flow and CapEx results. First, free cash flow was $128 million in the first quarter. The breakdown of this reflects cash from operations of $648 million, an increase of $85 million from the first quarter of last year, while CapEx was $520 million in Q1 '08 compared to $505 million last year, resulting in a free cash flow increase of $70 million or more than double last year's first quarter free cash flow.

FX of course was a positive contributor to that number. And though $128 million might seem like a small absolute number, it's important to note that our cash interest for bank and bond payments and cash payments for taxes primarily at J:COM, are typically highest in the first and third quarters of the year. For reference, total outflow for cash, interest and taxes was $544 million in Q1 '08, representing $473 million in interest and $71 million in tax compared to a total of $245 million last year in the first quarter.

On the right side of the slide we'll look at capital spend in more detail. CapEx equaled 20% of sales in Q1 compared to 24% last year and in absolute terms, CapEx increased $15 million on a reporter basis. However, adjusting for currency movements it was actually down year-over-year. We would expect CapEx to be modestly higher as a percentage of sales as you look to the rest of year compared to the first quarter ratio of 20%.

Our variable CapEx which we consider to be CPE in scalable infrastructure represented 57% of our total spend in Q1 and of the balance 22% was our network upgrades and line extensions mainly in Eastern Europe and 20% represented support capital.

Slide 18 is a snapshot of the balance sheet at March 31st. Total debt is $19.5 billion, an increase from $18.4 billion at December 31st. The increase is due principally to FX as there were no material financings in the first quarter. Our blended cost of debt after impact of swaps were just 6% at the end of the quarter and as we have previously indicated we are well hedged on currencies and interest rates and we have a very limited debt maturities between now and 2012.

At quarter end, we had cash of $1.85 billion, which includes $485 million of restricted cash. The decrease of $660 million from December 31st is due mainly to stock buybacks that we've talked about a couple of times now.

Our gross leverage was 4.4 at March 31st, a reduction from 4.8 times a quarter ago. This is all due to the OCF growth we generated in the first quarter. I think that reductions displays how dramatically our leverage shrinks in the absence of any new debt financings.

So in summary, we believe that margin growth and expansion is ahead of our plan. We continue to see positive subscriber trends in advanced services. As Mike and Gene discussed, we're facing the competitive challenges head on and we have ample liquidity to continue our stock buybacks and pursue with future M&A.

So with that, operator, I would like to open it up for questions.

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