10-K 1 lgi201110-k.htm LGI 2011 10-K
 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-K
þ
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the fiscal year ended December 31, 2011
OR 
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from                     to                    
Commission file number 000-51360
Liberty Global, Inc.
(Exact name of Registrant as specified in its charter)
State of Delaware
 
20-2197030
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
 
12300 Liberty Boulevard, Englewood, Colorado
 
80112
(Address of principal executive offices)
 
(Zip Code)
Registrant’s telephone number, including area code: (303) 220-6600
Securities registered pursuant to Section 12(b) of the Act:
 
 
 
Title of Each Class
 
Name of Each Exchange on Which Registered
Series A Common Stock, par value $0.01 per share
 
NASDAQ Global Select Market
Series B Common Stock, par value $0.01 per share
 
NASDAQ Global Select Market
Series C Common Stock, par value $0.01 per share
 
NASDAQ Global Select Market
Securities registered pursuant to Section 12(g) of the Act: none
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  þ        No  ¨
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨        No  þ
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days.    Yes  þ        No  ¨
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months.    Yes  þ        No  ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer, accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Check one:
Large Accelerated Filer  þ
  
Accelerated Filer  ¨
  
Non-Accelerated Filer  ¨
  
Smaller Reporting Company  ¨
Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act. Yes ¨ No þ
State the aggregate market value of the voting and non-voting common equity held by non-affiliates, computed by reference to the price at which the common equity was last sold, or the average bid and ask price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter: $12.0 billion.
The number of outstanding shares of Liberty Global, Inc.’s common stock as of February 16, 2012 was: 145,217,959 shares of Series A common stock; 10,239,144 shares of Series B common stock; and 117,348,039 shares of Series C common stock.

DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive proxy statement for the Registrant’s 2012 Annual Meeting of Stockholders are incorporated by reference in Part III of this Form 10-K.
 



LIBERTY GLOBAL, INC.
2011 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
 
 
 
Page
Number
 
PART I
 
 
 
 
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
 
PART II
 
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
 
PART III
 
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
 
PART IV
 
Item 15.





PART I
Item 1.    BUSINESS
General Development of Business
Liberty Global, Inc. (LGI) is an international provider of video, broadband internet and telephony services, with continuing consolidated broadband communications and/or direct-to-home satellite (DTH) operations at December 31, 2011, serving 19.5 million customers across 13 countries, primarily in Europe and Chile. Our European and Chilean operations are conducted through our 99.6%-owned subsidiary, Liberty Global Europe Holding BV (Liberty Global Europe). Through Liberty Global Europe's wholly-owned subsidiary, UPC Holding BV (UPC Holding), we provide video, broadband internet and telephony services in nine European countries and in Chile. The European broadband communications and DTH operations of UPC Holding and the broadband communications operations in Germany of Unitymedia GmbH (Unitymedia) and Kabel BW GmbH (formerly known as Kabel BW Holding GmbH) (KBW), both of which are wholly-owned subsidiaries of Liberty Global Europe, are collectively referred to as the "UPC Broadband Division." UPC Holding's broadband communications operations in Chile are provided through its 80%-owned subsidiary, VTR Global Com SA (VTR). Through our 80%-owned subsidiary, VTR Wireless SA, we are undertaking the launch of mobile services in Chile through a combination of our own wireless network and certain third-party wireless access arrangements. Through Liberty Global Europe's 50.2%-owned subsidiary, Telenet Group Holding NV (Telenet), a publicly-listed Belgian company, we provide video, broadband internet and telephony services in Belgium. Our continuing operations also include (1) consolidated broadband communications operations in Puerto Rico and (2) consolidated interests in certain programming businesses in Europe and Argentina. Our consolidated programming interests in Europe are primarily held through Chellomedia BV (Chellomedia), another wholly-owned subsidiary of Liberty Global Europe that also owns or manages investments in various other businesses, primarily in Europe. Certain of Chellomedia's subsidiaries and affiliates provide programming services to certain of our broadband communications operations, primarily in Europe.
Our 54.15%-owned subsidiary, Austar United Communications Limited (Austar), a publicly-listed Australian company that provides DTH services in Australia, was held for sale at December 31, 2011. The operations of Austar in 2011 are briefly described under Narrative Description of Business—Discontinued Operations—Australia below.
In the following text, the terms “we,” “our,” “our company,” and “us” may refer, as the context requires, to LGI or collectively to LGI and its subsidiaries.
Unless otherwise indicated, convenience translations into United States (U.S.) dollars are calculated as of December 31, 2011, and operational data, including subscriber statistics and ownership percentages, are as of December 31, 2011.
Recent Developments
Acquisitions
KBW. On December 15, 2011, UPC Germany HoldCo 2 GmbH (UPC Germany HC2), our indirect subsidiary, acquired all of the outstanding shares of Kabel BW Musketeer GmbH (formerly known as Musketeer GmbH) (KBW Musketeer), the indirect parent company of KBW, pursuant to a Sale and Purchase Agreement dated March 21, 2011, with Oskar Rakso S.à.r.l as the seller (the KBW Acquisition). At closing, Oskar Rakso S.á.r.l. transferred its KBW Musketeer shares and assigned the balance of a loan receivable from KBW Musketeer to UPC Germany HC2 in consideration of UPC Germany HC2's payment of the purchase price of €1,062.4 million ($1,381.9 million at the transaction date) in cash. Such purchase price, together with KBW Musketeer's consolidated net debt at December 15, 2011 (aggregate fair value of debt and capital lease obligations outstanding less cash and cash equivalents) of €2,352.9 million ($3,060.7 million at the transaction date) resulted in total consideration of €3,415.3 million ($4,442.6 million at the transaction date), excluding direct acquisition costs. The regulatory authorities in Germany conditioned their approval of the KBW Acquisition upon our agreement with several conditions primarily concerning our contracts and relationships with housing associations and our encryption of our digital free-to-air (FTA) television services. We acquired KBW in order to achieve certain financial, operational and strategic benefits through the integration of KBW with our existing operations in Germany and, to a lesser extent, other parts of Europe.
Aster. On September 16, 2011, a subsidiary of UPC Holding paid total cash consideration equal to PLN 2,445.7 million ($784.7 million at the transaction date) in connection with its acquisition of a 100% equity interest in Aster Sp. z.o.o. (Aster), a broadband communications operator in Poland (the Aster Acquisition).  The total cash consideration, which UPC Holding initially funded with available cash and cash equivalents, included the equivalent of PLN 1,602.3 million ($513.5 million at the transaction date) that was used to repay Aster's debt immediately prior to our acquisition of Aster's equity and excludes direct acquisition costs.  The approval of the Aster Acquisition by the regulatory authorities in Poland

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was conditioned upon our agreement to dispose of certain sections of Aster's network on or before March 5, 2013.  We completed the Aster Acquisition in order to achieve certain financial, operational and strategic benefits through the integration of Aster with our existing operations in Poland.
For additional information on the above acquisitions, including related financings, see notes 3 and 9 to our consolidated financial statements included in Part II of this report. In addition, during 2011, we completed various other smaller acquisitions in the normal course of business.
Disposition and Discontinued Operations
Austar. On July 11, 2011, our company and Austar entered into agreements with certain third parties (collectively, FOXTEL) pursuant to which FOXTEL would acquire 100% of Austar's ordinary shares through a series of transactions (the Austar Transaction), one of which involves our temporary acquisition of the 45.85% of Austar's ordinary shares held by the noncontrolling shareholders (the Austar NCI Acquisition). The sales price under the transaction is AUD 1.52 ($1.56) in cash per share, which represents a total equity sales price of AUD 1,932.7 million ($1,982.1 million) for a 100% interest in Austar (based on Austar ordinary shares outstanding at December 31, 2011) or AUD 1,046.5 million ($1,073.2 million) for our 54.15% interest in Austar. Completion of the Austar Transaction is subject to a number of conditions, including (1) regulatory approvals regarding (a) competition, which approval has not yet been granted, and (b) foreign investment matters, which approval was received in December 2011, (2) an independent expert's determination that the Austar Transaction is in the best interests of Austar's noncontrolling shareholders, which determination was received in December 2011, (3) our receipt of a private letter ruling from the Internal Revenue Service confirming our intended treatment of the transaction, which ruling we received in November 2011, and (4) approval by a majority in number of the voting noncontrolling shareholders who represent at least 75% of the votes cast by noncontrolling shareholders at the Austar shareholder meeting, which is currently scheduled for March 30, 2012. Assuming the remaining conditions precedent are satisfied as required by the Austar Transaction, it is currently expected that the Austar NCI Acquisition will occur in April 2012 and that FOXTEL's acquisition of 100% of Austar from our company for AUD 1.52 per share will occur in May or June of 2012. If the Austar NCI Acquisition does not close by April 17, 2012 or FOXTEL does not acquire 100% of Austar by June 29, 2012, the applicable underlying agreements will expire if not otherwise extended.
Spectrum Licenses. On February 16, 2011, Austar sold a wholly-owned subsidiary that owned certain spectrum licenses. Austar received total sales consideration of AUD 119.4 million ($120.9 million at the transaction date), consisting of cash consideration of AUD 57.4 million ($58.1 million at the transaction date) for the share capital and a cash payment to Austar of AUD 62.0 million ($62.8 million at the transaction date) representing the repayment of the sold subsidiary's intercompany debt.
For additional information on the above transactions, see note 4 to our consolidated financial statements included in Part II of this report. For information on the operations of Austar in 2011, see Narrative Description of Business—Discontinued Operations—Australia below.
Financings
KBW Notes. At December 31, 2011, KBW Musketeer and its subsidiaries had outstanding (1) €680.0 million ($881.3 million) principal amount of 9.5% Senior Notes (the KBW Senior Notes), (2) €800.0 million ($1,036.8 million) principal amount of 7.5% Senior Secured Notes (the KBW Euro Senior Secured Notes), (3) $500.0 million principal amount of 7.5% Senior Secured Notes (the KBW Dollar Senior Secured Notes and together with the KBW Euro Senior Secured Notes, the KBW Senior Secured Fixed Rate Notes), and (4) €420.0 million ($544.3 million) principal amount of Senior Secured Floating Rate Notes (the KBW Senior Secured Floating Rate Notes and together with the KBW Senior Secured Fixed Rate Notes, the KBW Senior Secured Notes). The KBW Senior Notes mature on March 15, 2021, the KBW Senior Secured Fixed Rate Notes mature on March 15, 2019, and the KBW Senior Secured Floating Rate Notes mature on March 15, 2018. The KBW Senior Notes are senior obligations of KBW Musketeer that rank equally with all of the existing and future senior debt of KBW Musketeer and are senior to all existing and future subordinated debt of KBW Musketeer. The KBW Senior Secured Notes are senior obligations of KBW that rank equally with all of the existing and future senior debt of KBW and are senior to all existing and future subordinated debt of KBW. The KBW Senior Notes and KBW Senior Secured Notes have been issued pursuant to two indentures, each dated March 31, 2011.
KBW Revolving Credit Facility. A subsidiary of KBW is the borrower under a €100.0 million ($129.6 million) secured revolving credit facility agreement dated March 31, 2011, with certain lenders (the KBW Revolving Credit Facility), which was undrawn as of December 31, 2011. Borrowings under the KBW Revolving Credit Facility, which mature on March 31, 2017, may be used for general corporate and working capital purposes.

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UPC Broadband Holding Bank Facility Refinancing Transactions. The UPC Broadband Holding Bank Facility is the senior secured credit facility of UPC Broadband Holding BV (UPC Broadband Holding), a wholly-owned subsidiary of UPC Holding. In July and August 2011, UPC Broadband Holding entered into various additional facility accession agreements, resulting in a new redrawable term loan facility (Facility AA) with an aggregate principal amount of €904.0 million ($1,171.5 million). In connection with these transactions, certain lenders under existing Facilities L, M, N, Q and W novated their drawn and undrawn commitments to UPC Broadband Operations BV, a direct subsidiary of UPC Broadband Holding, and entered into the new Facility AA. As a result of these transactions, total commitments of (1) €129.7 million ($168.1 million) under Facility L, (2) €36.8 million ($47.7 million) under Facility M, (3) $30.0 million under Facility N, (4) €392.0 million ($508.0 million) under Facility Q and (5) €125.0 million ($162.0 million) under Facility W were effectively rolled into Facility AA. The final maturity date for Facility AA is July 31, 2016. Facility AA may be increased in the future by entering into one or more additional facility accession agreements.
On October 25, 2011, UPC Broadband Holding entered into a new additional facility accession agreement (the Additional Facility AB Accession Agreement) under the UPC Broadband Holding Bank Facility.  Pursuant to the Additional Facility AB Accession Agreement, certain lenders agreed to make available a term loan facility in an aggregate principal amount of $500.0 million (Facility AB).  On October 28, 2011, we borrowed the total amount of Facility AB, receiving proceeds of $485.0 million on a net basis after payment of original issue discount of 3.0%. UPC Broadband Holding used a portion of the net proceeds to repay €285.0 million ($403.6 million at the transaction date) of outstanding redrawable term loans under Facility AA. The final maturity date for Facility AB is December 31, 2017.  
UPCB SPE Notes. UPCB Finance II Limited (UPCB Finance II), UPCB Finance III Limited (UPCB Finance III), UPCB Finance V Limited (UPCB Finance V) and UPCB Finance VI Limited (UPCB Finance VI and together with UPCB Finance II, UPCB Finance III and UPCB Finance V, the UPCB SPEs) are each special purpose financing companies that are owned 100% by a charitable trust. At various dates during 2011 and in February 2012, the UPCB SPEs issued €750.0 million ($972.0 million) principal amount of 6.375% senior secured notes due July 1, 2020 (the UPCB Finance II Senior Secured Notes), $1.0 billion principal amount of 6.625% senior secured notes due July 1, 2020 (UPCB Finance III Senior Secured Notes), $750.0 million principal amount of 7.25% senior secured notes due November 15, 2021 (UPCB Finance V Senior Secured Notes) and $750.0 million principal amount of 6.875% senior secured notes due January 15, 2022 (UPCB Finance VI Senior Secured Notes), respectively. UPCB Finance II, UPCB Finance III, UPCB Finance V and UPCB Finance VI used the proceeds from the (1) UPCB Finance II Senior Secured Notes, (2) UPCB Finance III Senior Secured Notes, (3) UPCB Finance V Senior Secured Notes and (4) UPCB Finance VI Senior Secured Notes to fund new additional facilities (Facilities Y, Z, AC and AD, respectively) under the UPC Broadband Holding Bank Facility, with UPC Financing Partnership, a wholly-owned subsidiary of UPC Holding, as the borrower. The proceeds from Facility Y were used to repay outstanding amounts under Facilities M and U of the UPC Broadband Holding Bank Facility. The proceeds from Facility Z were used to repay in full Facility P of the UPC Broadband Holding Bank Facility and to repay $811.4 million under Facility T of the UPC Broadband Holding Bank Facility. Of the proceeds from Facility AC, €507.1 million ($685.7 million at the transaction date) was used to reduce amounts outstanding under Facilities AA and W of the UPC Broadband Holding Bank Facility. The proceeds from Facility AD were used to repay in full the amounts outstanding under Facilities M, N and O of the UPC Broadband Holding Bank Facility.
Pursuant to the respective indentures for the UPCB Finance II Senior Secured Notes, the UPCB Finance III Senior Secured Notes, the UPCB Finance V Senior Secured Notes and UPCB Finance VI Senior Secured Notes and the respective accession agreements for Facilities Y, Z, AC and AD, the call provisions, maturity and applicable interest rate for Facilities Y, Z, AC and AD are the same as those of the UPCB Finance II Senior Secured Notes, the UPCB Finance III Senior Secured Notes, the UPCB Finance V Senior Secured Notes and the UPCB Finance VI Senior Secured Notes, respectively. The UPCB SPEs, as lenders under the UPC Broadband Holding Bank Facility, are treated the same as the other lenders under the UPC Broadband Holding Bank Facility, with benefits, rights and protections similar to those afforded to the other lenders.
Telenet Credit Facility. The Telenet Credit Facility is the senior secured credit facility of Telenet NV and Telenet International Finance S.á.r.l. (Telenet International), each a wholly-owned subsidiary of Telenet. During the third quarter of 2011, pursuant to various facility accession agreements, Telenet International executed (1) two new term loan facilities (Telenet Facilities Q and R) in aggregate principal amounts of €431.0 million ($558.7 million) and €798.6 million ($1,035.0 million), respectively, and (2) a revolving credit facility (Telenet Facility S) in an aggregate principal amount of €158.0 million ($204.8 million), which was undrawn at December 31, 2011. In connection with these transactions, (1) certain lenders novated their existing Telenet Facility G drawn commitments to Telenet Luxembourg Finance Center S.à.r.l., a subsidiary of Telenet NV, and entered into the new Telenet Facilities Q and R and (2) Telenet's then-existing undrawn €175.0 million ($251.7 million at the transaction date) revolving credit facility was canceled. As a result of these transactions, €1,229.6 million ($1,746.3 million at the transaction date) of Telenet Facility G drawn commitments were

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effectively rolled into the new Telenet Facilities Q and R. Telenet Facilities Q, R and S mature on July 31, 2017, July 31, 2019 and December 31, 2016, respectively. Such Facilities may be increased in the future by entering into one or more additional facility accession agreements.
On February 17, 2012, Telenet International entered into an additional facility accession agreement, the Additional Facility T Accession Agreement, under the Telenet Credit Facility. Pursuant to the Additional Facility T Accession Agreement, certain lenders agreed to provide a new term loan facility in an aggregate principal amount of €175.0 million ($226.8 million) (Facility T). The final maturity date for Facility T will be December 31, 2018.
Telenet SPE Notes. Telenet Finance III Luxembourg S.C.A. (Telenet Finance III) is a special purpose financing company that is owned 99.9% by a foundation established under the laws of the Netherlands and 0.1% by a Luxembourg private limited liability company as general partner. On February 15, 2011, Telenet Finance III issued €300.0 million ($388.8 million) principal amount of 6.625% senior secured notes due February 15, 2021 (the Telenet Finance III Senior Notes). Telenet Finance III used the proceeds from the Telenet Finance III Senior Notes to fund a new additional facility (Telenet Facility O) under the Telenet Credit Facility, with Telenet International as the borrower. Telenet International applied €286.5 million ($387.1 million at the transaction date) of the proceeds from Telenet Facility O to redeem a portion of the outstanding borrowings under Telenet Facilities K and L1. The remaining €80.0 million ($103.7 million) of outstanding borrowings under Telenet Facilities K and L1 were rolled into a new Telenet Facility G2 under the Telenet Credit Facility, which had terms similar to the existing Telenet Facility G.
Telenet Finance IV Luxembourg S.C.A. (Telenet Finance IV) is a special purpose financing company that is owned 99.9% by a foundation established under the laws of the Netherlands and 0.1% by a Luxembourg private limited liability company as general partner. On June 15, 2011, Telenet Finance IV issued €400.0 million ($518.4 million) principal amount of floating rate senior secured notes due June 15, 2021(the Telenet Finance IV Senior Notes and together with the Telenet Finance III Senior Notes, the Telenet SPE Notes). Telenet Finance IV used the proceeds from the Telenet Finance IV Senior Notes to fund a new additional facility (Telenet Facility P) under the Telenet Credit Facility, with Telenet International as the borrower. In July 2011, Telenet International used the proceeds from Telenet Facility P to repay the remaining €400.1 million ($575.4 million at the transaction date) outstanding under Telenet Facilities G and J of the Telenet Credit Facility, after taking into account the €1,229.6 million ($1,746.3 million at the transaction date) of Telenet Facility G commitments that were rolled into new Telenet Facilities Q and R under the Telenet Credit Facility.
Pursuant to the respective indentures for the Telenet SPE Notes and the respective accession agreements for Facilities O and P, the call provisions, maturity and applicable interest rate for Telenet Facility O and Telenet Facility P are the same as those of the Telenet SPE Notes, the proceeds of which were used to fund loans under such Facilities. Telenet Finance III and Telenet Finance IV, as lenders under the Telenet Credit Facility, are treated the same as the other lenders under the Telenet Credit Facility, with benefits, rights and protections similar to those afforded to the other lenders.
For a further description of the terms of the above financings, including call provisions, and certain other transactions affecting our consolidated debt in 2011, see note 9 to our consolidated financial statements included in Part II of this report.

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Equity Transactions
UGC Convertible Notes. On March 15, 2011, we called for redemption the remaining €328.2 million ($425.3 million) principal amount outstanding of the 1.75% euro-denominated convertible senior notes due April 15, 2024, that had been issued by our subsidiary, UnitedGlobalCom, Inc., in 2004 (the UGC Convertible Notes).  As a result of the call for redemption, note holders became entitled to convert their UGC Convertible Notes into LGI common stock at the specified ratios during a conversion period ending on April 18, 2011. During this conversion period, all of the outstanding UGC Convertible Notes were converted into an aggregate of 7,328,994 shares of LGI Series A common stock and 7,249,539 shares of LGI Series C common stock.
LGI Convertible Notes. During the second and third quarters of 2011, we completed the exchange of 99.8% and 0.2%, respectively, of the $935.0 million principal amount of our 4.50% convertible senior notes due November 15, 2016 for aggregate consideration of 26,423,266 shares of our LGI Series A common stock, 8,807,772 shares of our LGI Series C common stock and $186.7 million of cash (excluding cash paid for accrued but unpaid interest).
Stock Repurchases. Pursuant to our various stock repurchase programs, we repurchased during 2011 a total of 9,114,812 shares of LGI Series A common stock at a weighted average price of $38.99 per share and 14,203,563 shares of LGI Series C common stock at a weighted average price of $39.22 per share, for an aggregate cash purchase price of $912.3 million, including direct acquisition costs. On December 14, 2011, our board of directors authorized a new program of up to $1.0 billion (before direct acquisition costs) for the repurchase of LGI Series A common stock, LGI Series C common stock, or any combination of the foregoing, through open market 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 December 31, 2011, the remaining amount authorized for stock repurchases was $1,011.1 million.
For additional information regarding the UGC Convertible Notes and the LGI Convertible Notes, see note 9 to our consolidated financial statements included in Part II of this report.
* * * *
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 our expectations on the timing of the closing of the Austar Transaction, our expectations with respect to our growth prospects and our strategic initiatives over the next few years, our estimated future costs for the Belgian football (soccer) rights acquired by Telenet, our expectations regarding our operating cash flow margins and percentage of revenue represented by our capital expenditures (and the composition thereof) in 2012, the amount of our anticipated non-functional currency transactions in 2012, the future projected cash flows of our continuing operations associated with our derivative instruments, our business, product, foreign currency and finance strategies, our capital expenditures, subscriber growth and retention rates, competitive, regulatory and economic factors, the maturity of our markets, anticipated cost increases, liquidity, credit risks, foreign currency risks 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 operate;
the competitive environment in the broadband communications and programming industries in the countries in which we operate, including competitor responses to our products and services;
fluctuations in currency exchange rates and interest rates;
instability in global financial markets, including sovereign debt issues in the European Union (EU) and related fiscal reforms;

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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 our existing service offerings, including our digital video, broadband internet and telephony services, and of new technology, programming alternatives and broadband services that we may offer in the future;
our ability to manage rapid technological changes;
our ability to maintain or increase the number of subscriptions to our digital video, broadband internet and telephony services and our average revenue per household;
our ability to maintain or increase rates to our subscribers or to pass through increased costs to our subscribers;
the impact of our future financial performance, or market conditions generally, on the availability, terms and deployment of capital;
changes in, or failure or inability to comply with, government regulations in the countries in which we operate and adverse outcomes from regulatory proceedings;
government intervention that opens our broadband distribution networks to competitors, such as the obligations imposed in Belgium;
the ability to obtain regulatory approval and satisfy other conditions necessary to close acquisitions and dispositions, such as our pending disposition of Austar, and the impact of conditions imposed by competition and other regulatory authorities in connection with acquisitions, including the impact of the conditions imposed in connection with the acquisition of Aster and KBW on our operations in Poland and Germany, respectively;
our ability to successfully negotiate rate increases where applicable;
changes in laws or treaties relating to taxation, or the interpretation thereof, in the U.S. or in countries in which we operate;
changes in laws and government regulations that may impact the availability and cost of credit and the derivative instruments that hedge certain of our financial risks;
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;
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 realize 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 outcome of any pending or threatened litigation;
any further consolidation of the foreign broadband distribution industry;
the loss of key employees and the availability of qualified personnel;
changes in the nature of key strategic relationships with partners and joint venturers; and
events that are outside of our control, such as political unrest in international markets, terrorist attacks, malicious human acts, natural disasters, pandemics and other similar events.
 The broadband distribution 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 the above-described 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,

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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. Readers are cautioned not to place undue reliance on any forward-looking statement.
Financial Information About Operating Segments
Financial information about our reportable segments appears in note 17 to our consolidated financial statements included in Part II of this report.
Narrative Description of Business
Broadband Distribution
Overview
We offer a variety of broadband services over our cable distribution systems, including video, broadband internet and telephony. Available service offerings depend on the bandwidth capacity of a particular system and whether it has been upgraded for two-way communications. We operate our broadband communications businesses in (1) Europe through Liberty Global Europe's UPC Broadband Division and through its subsidiary, Telenet, and (2) Chile through VTR. We also operate a cable distribution system in Puerto Rico. In addition, in select markets, we offer video services through DTH or through multichannel multipoint (microwave) distribution systems (MMDS). In terms of video subscribers, Liberty Global Europe operates the largest cable network in each of Austria, Belgium, Chile, Czech Republic, Hungary, Ireland, Poland, Slovakia and Switzerland and the second largest cable network in Germany, the Netherlands and Romania.

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The following table presents certain operating data as of December 31, 2011, with respect to the cable, DTH and MMDS systems of our subsidiaries in Europe, Chile and Puerto Rico. This table reflects 100% of the operational data applicable to each subsidiary regardless of our ownership percentage.



Consolidated Operating Data
December 31, 2011
 
 
 
Homes
Passed
(1)
 
Two-way
Homes
Passed
(2)
 
Customer
Relationships
(3)
 
Total
RGUs
(4)
 
Video
 
Internet
 
Telephony
Analog Cable Subscribers
(5)
 
Digital
Cable
Subscribers
(6)
 
DTH
Subscribers
(7)
 
MMDS
Subscribers
(8)
 
Total
Video
 
Homes
Serviceable
(9)
 
Subscribers
(10)
 
Homes
Serviceable
(11)
 
Subscribers
(12)
UPC Broadband Division:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Germany
 
12,445,300

 
12,034,500

 
6,932,300

 
10,383,600

 
4,768,600

 
1,983,800

 

 

 
6,752,400

 
12,034,500

 
1,799,500

 
12,034,500

 
1,831,700

The Netherlands (13)
 
2,797,900

 
2,784,200

 
1,819,600

 
3,605,500

 
808,000

 
1,010,200

 

 

 
1,818,200

 
2,795,600

 
943,700

 
2,793,700

 
843,600

Switzerland (13)
 
2,084,500

 
1,776,800

 
1,526,800

 
2,403,800

 
917,400

 
570,000

 

 

 
1,487,400

 
2,254,400

 
553,200

 
2,254,400

 
363,200

Austria
 
1,180,300

 
1,180,300

 
681,100

 
1,304,400

 
208,800

 
302,100

 

 

 
510,900

 
1,180,300

 
444,700

 
1,180,300

 
348,800

Ireland
 
868,200

 
709,000

 
533,000

 
886,400

 
82,400

 
331,400

 

 
55,000

 
468,800

 
709,000

 
255,400

 
674,600

 
162,200

Total Western Europe
 
19,376,200

 
18,484,800

 
11,492,800

 
18,583,700

 
6,785,200

 
4,197,500

 

 
55,000

 
11,037,700

 
18,973,800

 
3,996,500

 
18,937,500

 
3,549,500

Hungary
 
1,417,000

 
1,402,400

 
965,600

 
1,566,500

 
323,100

 
290,300

 
219,300

 

 
832,700

 
1,402,400

 
427,800

 
1,404,900

 
306,000

Romania
 
2,072,400

 
1,650,400

 
1,142,600

 
1,608,100

 
508,200

 
351,700

 
282,800

 

 
1,142,700

 
1,650,400

 
281,300

 
1,588,600

 
184,100

Poland
 
2,620,100

 
2,476,900

 
1,497,000

 
2,494,400

 
727,300

 
626,100

 

 

 
1,353,400

 
2,476,900

 
775,800

 
2,464,700

 
365,200

Czech Republic
 
1,334,900

 
1,226,600

 
741,400

 
1,212,000

 
81,800

 
421,600

 
81,400

 

 
584,800

 
1,226,600

 
432,300

 
1,223,900

 
194,900

Slovakia
 
486,400

 
455,300

 
276,900

 
395,700

 
102,400

 
109,400

 
46,700

 
800

 
259,300

 
421,400

 
87,500

 
421,400

 
48,900

Total Central and Eastern Europe
 
7,930,800

 
7,211,600

 
4,623,500

 
7,276,700

 
1,742,800

 
1,799,100

 
630,200

 
800

 
4,172,900

 
7,177,700

 
2,004,700

 
7,103,500

 
1,099,100

Total UPC Broadband Division
 
27,307,000

 
25,696,400

 
16,116,300

 
25,860,400

 
8,528,000

 
5,996,600

 
630,200

 
55,800

 
15,210,600

 
26,151,500

 
6,001,200

 
26,041,000

 
4,648,600

Telenet (Belgium)
 
2,843,800

 
2,843,800

 
2,198,500

 
4,384,200

 
789,000

 
1,409,500

 

 

 
2,198,500

 
2,843,800

 
1,305,600

 
2,843,800

 
880,100

The Americas:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
VTR (Chile)
 
2,758,300

 
2,129,800

 
1,101,800

 
2,330,800

 
214,600

 
702,700

 

 

 
917,300

 
2,129,800

 
766,300

 
2,119,900

 
647,200

Puerto Rico
 
353,000

 
353,000

 
121,600

 
214,700

 

 
79,100

 

 

 
79,100

 
353,000

 
86,200

 
353,000

 
49,400

Total The Americas
 
3,111,300

 
2,482,800

 
1,223,400

 
2,545,500

 
214,600

 
781,800

 

 

 
996,400

 
2,482,800

 
852,500

 
2,472,900

 
696,600

Grand Total
 
33,262,100

 
31,023,000

 
19,538,200

 
32,790,100

 
9,531,600

 
8,187,900

 
630,200

 
55,800

 
18,405,500

 
31,478,100

 
8,159,300

 
31,357,700

 
6,225,300


I-10


___________________
(1)
Homes Passed are homes or residential multiple dwelling units that can be connected to our networks without materially extending the distribution plant, except for DTH and MMDS homes. Our Homes Passed counts are based on census data that can change based on either revisions to the data or from new census results. We do not count homes passed for DTH. With respect to MMDS, one MMDS customer is equal to one Home Passed. Due to the fact that we do not own the partner networks (defined below) used in Switzerland and the Netherlands (see note 13) or the unbundled loop and shared access network used by one of our Austrian subsidiaries, UPC Austria GmbH (Austria GmbH), we do not report homes passed for Switzerland's and the Netherlands' partner networks or the unbundled loop and shared access network used by Austria GmbH.
(2)
Two-way Homes Passed are Homes Passed by those sections of our networks that are technologically capable of providing two-way services, including video and internet services and, in most cases, telephony services. Due to the fact that we do not own the partner networks used in Switzerland and the Netherlands or the unbundled loop and shared access network used by Austria GmbH, we do not report two-way homes passed for Switzerland's or the Netherlands' partner networks or the unbundled loop and shared access network used by Austria GmbH.
(3)
Customer Relationships are the number of customers who receive at least one of our video, internet or voice services that we count as Revenue Generating Units (RGUs), without regard to which or to how many services they subscribe. To the extent that RGU counts include equivalent billing unit (EBU) adjustments, we reflect corresponding adjustments to our Customer Relationship counts. For further information regarding our EBU calculation, see Additional General Notes to Tables below. Customer Relationships generally are counted on a unique premises basis. Accordingly, if an individual receives our services in two premises (e.g., a primary home and a vacation home), that individual generally will count as two Customer Relationships. We exclude mobile customers from Customer Relationships. For Belgium, Customer Relationships only include customers who subscribe to an analog or digital cable service due to billing system limitations.
(4)
Revenue Generating Unit is separately an Analog Cable Subscriber, Digital Cable Subscriber, DTH Subscriber, MMDS Subscriber, Internet Subscriber or Telephony Subscriber. A home, residential multiple dwelling unit, or commercial unit may contain one or more RGUs. For example, if a residential customer in our Austrian system subscribed to our digital cable service, telephony service and broadband internet service, the customer would constitute three RGUs. Total RGUs is the sum of Analog Cable, Digital Cable, DTH, MMDS, Internet and Telephony Subscribers. RGUs generally are counted on a unique premises basis such that a given premises does not count as more than one RGU for any given service. On the other hand, if an individual receives one of our services in two premises (e.g. a primary home and a vacation home), that individual will count as two RGUs for that service. Each bundled cable, internet or telephony service is counted as a separate RGU regardless of the nature of any bundling discount or promotion. Non-paying subscribers are counted as subscribers during their free promotional service period. Some of these subscribers may choose to disconnect after their free service period. Services offered without charge on a long-term basis (e.g., VIP subscribers, free service to employees) generally are not counted as RGUs.
(5)
Analog Cable Subscriber is a home, residential multiple dwelling unit or commercial unit that receives our analog cable service over our broadband network. In light of the fact that our digital free-to-air television channels are not encrypted in certain portions of our German footprint, the Analog Cable Subscriber count reported for Germany also includes subscribers who may use a purchased set-top box or other non-verifiable means to receive our unencrypted basic digital cable channels without subscribing to any services that would require the payment of recurring monthly fees in addition to the basic analog service fee (Basic Digital Cable Subscriber). In Europe, we have approximately 445,900 “lifeline” customers that are counted on a per connection basis, representing the least expensive regulated tier of video cable service, with only a few channels.
(6)
Digital Cable Subscriber is a home, residential multiple dwelling unit or commercial unit that receives our digital cable service over our broadband network or through a partner network. We count a subscriber with one or more digital converter boxes that receives our digital cable service in one premises as just one subscriber. A Digital Cable Subscriber is not counted as an Analog Cable Subscriber. As we migrate customers from analog to digital cable services, we report a decrease in our Analog Cable Subscribers equal to the increase in our Digital Cable Subscribers. Basic Digital Cable Subscribers in Germany (see note 5 above) are not included in the Digital Cable Subscriber count reported for Germany. Subscribers in Switzerland and Belgium who use purchased set-top boxes or other means to receive our basic digital cable service, but do not pay a recurring monthly service fee in addition to the basic analog service fee, are counted as Digital Cable Subscribers to the extent that such individuals are subscribing to our analog cable service. At December 31, 2011, we included 224,200 and 63,600 of these subscribers in the Digital Cable Subscribers reported for Belgium and Switzerland, respectively. In the case of Switzerland, we estimate the number of such subscribers. Subscribers to digital cable services provided by our Switzerland operations over partner networks receive analog cable services from the partner networks as opposed to our Switzerland operations.
(7)
DTH Subscriber is a home, residential multiple dwelling unit or commercial unit that receives our video programming broadcast directly via a geosynchronous satellite.
(8)
MMDS Subscriber is a home, residential multiple dwelling unit or commercial unit that receives our video programming via MMDS.
(9)
Internet Homes Serviceable are Two-way Homes Passed that can be connected to our network, or a partner network with which we have a service agreement, for the provision of broadband internet services if requested by the customer, building owner or housing association, as applicable. With respect to Austria GmbH, we do not report as Internet Homes Serviceable those homes served either over an unbundled loop or over a shared access network.

I-11


(10)
Internet Subscriber is a home, residential multiple dwelling unit or commercial unit that receives internet services over our networks, or that we service through a partner network. Our Internet Subscribers in Austria include 70,200 residential digital subscriber line (DSL) subscribers of Austria GmbH that are not serviced over our networks. Our Internet Subscribers do not include customers that receive services from dial-up connections. In Germany, we offer a 128Kbps wholesale internet service to housing associations on a bulk basis. Our Internet Subscribers in Germany include 6,000 subscribers within such housing associations who have requested and received a modem that enables the receipt of this 128Kbps wholesale internet service.
(11)
Telephony Homes Serviceable are Two-way Homes Passed that can be connected to our network, or a partner network with which we have a service agreement, for the provision of telephony services if requested by the customer, building owner or housing association, as applicable. With respect to Austria GmbH, we do not report as Telephony Homes Serviceable those homes served over an unbundled loop rather than our network.
(12)
Telephony Subscriber is a home, residential multiple dwelling unit or commercial unit that receives voice services over our networks, or that we service through a partner network. Telephony Subscribers exclude mobile telephony subscribers. Our Telephony Subscribers in Austria include 52,700 residential subscribers of Austria GmbH that are not serviced over our networks.
(13)
Pursuant to service agreements, Switzerland and, to a much lesser extent, the Netherlands offer digital cable, broadband internet and telephony services over networks owned by third-party cable operators (partner networks). A partner network RGU is only recognized if there is a direct billing relationship with the customer. Homes Serviceable for partner networks represent the estimated number of homes that are technologically capable of receiving the applicable service within the geographic regions covered by the applicable service agreements. Internet and Telephony Homes Serviceable with respect to partner networks have been estimated by our Switzerland operations. These estimates may change in future periods as more accurate information becomes available. At December 31, 2011, Switzerland's partner networks account for 118,500 Customer Relationships, 203,500 RGUs, 80,200 Digital Cable Subscribers, 477,600 Internet and Telephony Homes Serviceable, 72,700 Internet Subscribers, and 50,600 Telephony Subscribers. In addition, partner networks account for 491,800 of Switzerland's digital cable homes serviceable that are not included in Homes Passed or Two-way Homes Passed in our December 31, 2011 subscriber table.
Additional General Notes to Tables:
Certain of our residential and commercial RGUs are counted on an EBU basis, including residential multiple dwelling units and commercial establishments, such as bars, hotels and hospitals, in Chile and Puerto Rico and certain commercial establishments in Europe (with the exception of Germany and Belgium, where we do not count any RGUs on an EBU basis). Our EBUs are generally calculated by dividing the bulk price charged to accounts in an area by the most prevalent price charged to non-bulk residential customers in that market for the comparable tier of service. As such, we may experience variances in our EBU counts solely as a result of changes in rates. On a business-to-business (B2B) basis, certain of our subsidiaries provide voice, broadband internet, data and other services to businesses, primarily in Switzerland, Belgium, the Netherlands, Austria, Hungary, Ireland, Romania, the Czech Republic and Poland. We generally do not count customers of B2B services as customers or RGUs for external reporting purposes. In this regard, the RGUs presented in our December 31, 2011 subscriber table exclude 141,800 small office and home office (SOHO) subscribers to B2B internet (71,700), telephony (49,100) and digital cable (21,000) services provided by our UPC Broadband Division. In Germany, homes passed reflect the footprint, and two-way homes passed and internet and telephony homes serviceable reflect the technological capability, of our network up to the street cabinet, with drops from the street cabinet to the building generally added, and in-home wiring generally upgraded, on an as needed or success-based basis. In Belgium, Telenet leases a portion of its network under a long-term capital lease arrangement. These tables include operating statistics for Telenet's owned and leased networks.
While we take appropriate steps to ensure that subscriber statistics are presented on a consistent and accurate basis at any given balance sheet date, the variability from country to country in (i) the nature and pricing of products and services, (ii) the distribution platform, (iii) billing systems, (iv) bad debt collection experience and (v) other factors add complexity to the subscriber counting process. We periodically review our subscriber counting policies and underlying systems to improve the accuracy and consistency of the data reported on a prospective basis. Accordingly, we may from time to time make appropriate adjustments to our subscriber statistics based on those reviews.
Subscriber information for acquired entities is preliminary and subject to adjustment until we have completed our review of such information and determined that it is presented in accordance with our policies.


I-12


Residential Services

Video. Our cable operations offer a full range of video services, including basic and premium programming and incremental product and service offerings, such as high definition (HD) channels, digital video recorder (DVR), HD DVR, an electronic programming guide and, in certain markets, video-on-demand (VoD) or near-video-on-demand (NVoD). In several of our markets, we also have enhanced pay-per-view programming and/or programming in 3D format on channels we distribute and through VoD. To receive our digital services, a subscriber must either purchase or rent a set-top box, and obtain a conditional access security card, or a smart card, from our operators. A smart card is not, however, required for basic digital services in the German federal state of Baden-Württemberg because we do not encrypt our basic digital services in that market. In some of our markets, a subscriber may use a "digicard" to access our digital services. A "digicard" is a small device that allows customers with a common interface plus (CI+) enabled television set, who subscribe to, or otherwise have access to, our digital video service, to view such services without a set-top box. A set-top box is not required to receive our analog services.
Our cable operations generally offer two or three tiers of digital video programming and audio services. Subscribers to our basic digital video service pay a fixed monthly fee and generally receive at least 45 video channels and several audio services. In most of our markets, our basic digital service is at an incremental cost over the monthly fee for our basic analog service. For an additional monthly charge, a subscriber may upgrade to one of our extended digital tier services and receive an increased number of video channels, including the channels in the basic tier service. A limited number of HD channels are generally included in our basic tiers of service. Digital subscribers may also subscribe to one or more packages of premium channels, including additional HD channels. In all digital tiers of service, a subscriber also has the option for an incremental monthly charge to upgrade the digital set-top box to one with DVR or HD DVR capabilities, which may be rented or purchased. In certain of our operations, VoD services are available on a subscription basis or a transaction basis, depending on location and the tier of digital service selected by the subscriber.
In addition to our digital video services, we offer limited analog services in all of our broadband markets. Subscribers to our analog video service typically receive 18 to 54 channels of video service, depending on their location. Subscribers to our digital services also receive the channels available through our analog service. We offer in certain of our markets a lifeline tier with limited video channels. In Ireland and Slovakia, we offer a limited number of video channels through MMDS.
Discounts to our monthly service fees are available to any subscriber who selects a bundle of one or more of our services (bundled services): video, internet, telephony and, in certain markets, mobile telephony. Bundled services are referred to as "double-play" for two services, "triple-play" for three services and "quadruple-play" for four services.
We tailor our tiers of video services in each country of operation based on programming preferences, culture, demographics and local regulatory requirements. Our channel offerings include general entertainment, sports, movies, documentaries, lifestyles, news, adult, children and ethnic and foreign channels. In each of our markets, we also offer a variety of premium channel packages to meet the special interests of our subscribers. In all of our broadband operations we continue to upgrade our systems to expand our digital services and encourage our analog subscribers to convert to a digital service.
We offer digital video services through DTH satellite in the Czech Republic, Hungary, Romania and Slovakia. We offer these services through UPC DTH S.a.r.l (UPC DTH), a subsidiary of Liberty Global Europe organized in Luxembourg, which also has a management arrangement with another subsidiary, FocusSat Romania Srl (FocusSat), to provide these services in Romania. Similar to our video cable services, we offer a lifeline tier of service, a basic video tier of service and, for an additional monthly charge, subscribers may upgrade to an extended tier of service and may subscribe to various premium channel packages.
Broadband Internet.We offer multiple tiers of broadband internet service in all of our broadband communications markets. Such service has download speeds ranging up to an ultra high-speed internet service of at least 100 Mbps. In 2011, our operations in Poland began offering a download speed of up to 150 Mbps. Our ultra high-speed internet service is based primarily on Euro DOCSIS 3.0 technology. In Switzerland, it is based on US DOCSIS 3.0 technology. We also offer value-added broadband services through certain of our operations for an incremental charge. These services include security and online storage solutions. As described under —Telephony below, we offer mobile broadband services in certain of our 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. In the Netherlands, Romania and Switzerland, a subscriber must subscribe to our video service in order to subscribe to our internet service. In our other markets, our broadband internet service is available on a stand-alone basis or in combination with one or more of our other services. Subscribers to our

I-13


internet service pay a monthly fee based on the tier of service selected. We determine pricing for each different tier of internet service through analysis of speed, data limits, market conditions and other factors.
Telephony. Multi-feature telephony services are available through voice-over-internet-protocol (VoIP) in all of our broadband communication markets. In Austria, Chile and Hungary, we also provide circuit-switched telephony services. We are also offering mobile services, both internet and voice, as a mobile virtual network operator (MVNO) over third-party networks in Belgium, Germany and Poland. Our telephony service may be selected on a stand-alone basis or in combination with one or more of our other services. Our telephony service includes a basic telephony product for line rental (which includes unlimited network calling in some countries, like Romania) and, in most of our markets, unlimited national off peak calling branded “Freetime,” unlimited national 24/7 calling branded “Anytime” and Minute Packs, including calls to mobile phones. Our price plans also include unlimited international calls within the EU, in most of our markets. We also offer value-added services, such as a second phone line, a personal call manager, unified messaging and caller ID, at an incremental cost.
Telenet provides its mobile telephony service as a full MVNO through a partnership with a third party mobile network operator. Telenet owns the core network, including switching, backbone, interconnections, etc., and leases the third party's radio access network. This arrangement permits Telenet to offer its customers all mobile services using its core network without having to build and operate a cellular radio tower network. UPC Germany and UPC Poland provide their mobile telephony as light MVNOs. In each case, UPC Germany and UPC Poland lease the core network as well as the radio access network from a mobile network operator. These arrangements permit UPC Germany and UPC Poland customers to have access to the third party mobile communications services with UPC Germany and UPC Poland maintaining the customer relationships. UPC Poland offers its mobile service primarily in the Warsaw and Krakow regions of Poland. UPC Germany offers its mobile service to its customers located in Baden-Württemberg and began offering it in December 2011 in North Rhine-Westphalia and Hesse either on a stand-alone basis or in bundles. Where mobile services are available within our operations, subscribers pay varying monthly fees depending on whether the service is included with our fixed-line telephony service or includes mobile data services via mobile phones or laptops. Usually calls within the network are free and calls out of network incur a charge or are covered under a monthly service plan.
Business Services
In addition to our residential services, we offer a range of voice, broadband internet and data services to business customers in most of our service areas where our network is two-way capable. Our B2B services are designed with a wide variety of options to meet the specific demands of the business customer. Our business customers range from SOHO (generally fewer than 20 employees) to medium and large enterprises. All of our broadband operations offer B2B services, with our operations in Austria, Belgium, the Czech Republic, Hungary, Ireland, the Netherlands, Poland, Romania and Switzerland being the main providers of such services. Through an arrangement with Vodafone Group Plc (Vodafone), our operations in the Netherlands offer mobile internet to SOHOs subscribing to our broadband internet service. Hosting services are available through several of our operations, although mainly in Austria and Belgium. In addition, certain of our operations offer their B2B services on a wholesale basis. In Chile and Switzerland, we also offer video services to business customers on a wholesale basis.
Our business services are provided to business subscribers at contractually established fees based on the size of the business customer and type of services received. SOHO subscribers receive services on the same terms and conditions offered to our residential subscribers. For medium to large enterprises, we enter into individual agreements that address their needs. These agreements are for a period of one or more years and cannot be terminated during the term of the agreement. In addition to providing B2B services over our networks, we also have agreements to provide these services to our B2B customers over dedicated fiber lines and third party fiber networks.
Technology
In almost all of our markets, our video, broadband internet and telephony services are transmitted over a hybrid fiber coaxial cable network. When upgraded, this network allows for two-way communications and is flexible enough to support our current services, as well as new services. In addition, the capacity available on our network increases as our analog subscribers switch to a digital service. This is because multiple digital channels can be compressed into the same space as one analog channel in the broadcast spectrum. The available space can then be used for other purposes such as VoD services and high broadband speeds.
We continue to explore new technologies that will enhance our customer's television experience, such as:
recapturing bandwidth and optimizing our networks by increasing the number of nodes in our markets and using digital compression technologies;

I-14


using wireless technologies to extend our services outside the home;
offering remote access to our video services through personal computers, tablets and smart phones; and
developing a multimedia home gateway based on an internet protocol-based digital television-platform, which we refer to as “Horizon,” that is capable of distributing video, voice and data content throughout the home and to multiple devices, such as tablets and smart phones and provides a seamless intuitive way to access live, time-shifted, on-demand and web-based content on the television.
Horizon is currently undergoing field trials and is anticipated to be launched in the Netherlands in 2012, with a phased expansion in Switzerland and Germany thereafter. In addition, an online viewing service will be available through personal computers and will allow online viewing through IP-connected devices and smart phones. Our online video services will become available in the same markets where we launch Horizon. This service in conjunction with our Horizon gateway will allow subscribers to view and share their television programming on multiple screens wirelessly throughout the home.
Supply Sources
For our video services, we license most of our programming and on-demand offerings from broadcast and cable programming networks, as well as DTH content providers. For such licenses, we generally pay a monthly fee on a per channel or per subscriber basis. We generally enter into long-term programming licenses with volume discounts and marketing support. For on-demand programming, we generally enter into shorter-term agreements. We purchase each type of customer premise equipment from a number of different suppliers. Customer premise equipment includes set-top boxes, DVRs, tuners and similar devices. For each type of equipment, we retain specialists to provide customer support.
We license software products, including email and security software, and content, such as news feeds, from several suppliers for our internet services. The agreements for these products require us to pay on a per subscriber basis for software licenses and a share of advertising revenue for content licenses. For our telephony services, we license software products, such as voice mail and caller ID, from a variety of suppliers. For these licenses we attempt to enter into long-term contracts, which generally require us to pay based on usage of the services.

I-15


The following table presents certain penetration and network data as of December 31, 2011, with respect to the cable systems of our consolidated subsidiaries in Europe and Chile. The table reflects 100% of the data applicable to each of our subsidiaries regardless of our ownership percentage. Percentages are rounded to the nearest whole number.

Network & Product Penetration Data (%)
at December 31, 2011
 
Germany
 
Netherlands
 
Switzerland
 
Austria
 
Ireland
 
Czech Republic
 
Hungary
 
Poland
 
Romania
 
Slovakia
 
Belgium
 
Chile
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LGI Network Data:
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
Two-way homes passed (HP) percentage (1)
97
 
100
 
85
 
100
 
82
 
92
 
99
 
95
 
80
 
94
 
100
 
77
Digital video availability percentage (2)
     100(9)
 
99
 
   87(9)
 
100
 
96
 
92
 
98
 
93
 
86
 
90
 
100
 
77
Broadband internet availability percentage (2)
   97(9)
 
99
 
   85(9)
 
100
 
82
 
92
 
99
 
95
 
80
 
87
 
100
 
77
Fixed-line telephony availability percentage (2)
   97(9)
 
99
 
   85(9)
 
100
 
78
 
92
 
99
 
94
 
77
 
87
 
100
 
77
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
Bandwidth percentage (3):
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
at least 860 MHz
97
 
100
 
94
 
90
 
51
 
93
 
11
 
99
 
81
 
95
 
17
 
22
750 MHz to 859 MHz
 
 
    —(10)
 
 
22
 
    —(10)
 
59
 
   —(10)
 
3
 
 
 
60
less than 750 MHz
3
 
 
6
 
10
 
27
 
7
 
30
 
   —(10)
 
16
 
5
 
83
 
17
 
 
 
 
 
 
 

 
 
 
 
 
 
 
 
 

 
 
 
 
 
 
LGI Product Penetration:

 

 

 

 

 
 
 

 

 

 

 

 

Cable television penetration (4)
54
 
65
 
71
 
43
 
48
 
38
 
43
 
52
 
41
 
44
 
77
 
33
Digital cable penetration (5)
29
 
56
 
38
 
59
 
80
 
84
 
47
 
46
 
41
 
52
 
64
 
77
HD, DVR & HD DVR penetration (6)
21
 
62
 
68
 
54
 
68
 
23
 
48
 
77
 
14
 
14
 
89
 
27
Broadband internet penetration (7)
15
 
34
 
25
 
38
 
36
 
35
 
31
 
31
 
17
 
21
 
46
 
36
Fixed telephony penetration (7)
15
 
30
 
16
 
30
 
24
 
16
 
22
 
15
 
12
 
12
 
31
 
31
 

 

 

 

 

 
 
 

 

 

 

 

 

Double-play penetration (8)
4
 
9
 
17
 
22
 
21
 
37
 
32
 
27
 
21
 
11
 
28
 
21
Triple-play penetration (8)
23
 
44
 
20
 
35
 
22
 
17
 
24
 
20
 
17
 
20
 
36
 
45

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_____________________
(1)
Percentage of total HP that are two-way HP.
(2)
Percentage of total HP to which digital video (including digital MMDS), broadband internet or fixed telephony services, as applicable, are made available.
(3)
Percentage of total HP served by a network with the indicated bandwidth. HP for Ireland excludes MMDS HP.
(4)
Percentage of total HP that subscribe to cable television services (Analog Cable or Digital Cable).
(5)
Percentage of cable television subscribers (Analog Cable and Digital Cable Subscribers) that are Digital Cable Subscribers.
(6)
Percentage of Digital Cable Subscribers with HD, DVR or HD DVR.
(7)
Percentage of Internet Homes Serviceable and Telephony Homes Serviceable that subscribe to broadband internet or fixed-telephony services, as applicable.
(8)
Percentage of total customers that subscribe to two services (double-play customers) or three services (triple-play customers) offered by our operations (video, broadband internet and fixed-line telephony).
(9)
Assuming the contractual right to serve the building exists in the case of multiple dwelling units.
(10)
Less than 1%.
(11)
Almost all of these homes passed are served by a network with a bandwidth of at least 600 MHz.


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The following table provides information on the products and services available to our cable customers. Percentages are rounded to the nearest whole number.

Video, Broadband Internet & Telephony Services
at December 31, 2011
 
 
Germany
 
Netherlands
 
Switzerland
 
Austria
 
Ireland
 
Czech Republic
 
Hungary
 
Poland
 
Romania
 
Slovakia
 
Belgium
 
Chile
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Video services (excluding DTH):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
VoD
 
   X(4)
 
X
 
X
 
X
 
 
 
 
 
X
 
X
 
 
 
 
 
X
 
X
NVoD
 
   X(5)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
DVR
 
X
 
X
 
X
 
X
 
X
 
X
 
X
 
X
 
X
 
X
 
X
 
X
HD
 
X
 
X
 
X
 
X
 
X
 
X
 
X
 
X
 
X
 
X
 
X
 
X
Electronic programming guide
 
X
 
X
 
X
 
X
 
X
 
X
 
X
 
X
 
X
 
X
 
X
 
X
Number of channels in basic digital tier
 
up to
75 or 157(6)
 
68
 
55
 
78
 
47
 
85
 
71
 
114
 
117
 
84
 
70
 
76
Number of channels in basic analog tier(1)
 
  36 or 38(6)
 
32
 
37
 
38
 
18
 
41
 
27
 
49
 
54
 
47
 
25
 
46
Number of unique channels in basic digital tier(2)
 
40 or 119(6)
 
36
 
18
 
40
 
29
 
70
 
42
 
65
 
65
 
33
 
45
 
30
    Number of HD channels
 
  22 or 40(6)
 
28
 
20
 
23
 
13
 
13
 
12
 
22
 
13
 
11
 
16
 
19
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Broadband internet service:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Maximum download speed offered (Mbps)
 
128
 
120
 
100
 
100
 
100
 
120
 
120
 
150
 
120
 
120
 
100
 
120
Percentage of Internet Homes serviceable with 3.0 speeds of at least 100 Mbps (3)
 
98
 
100
 
81
 
100
 
79
 
93
 
93
 
66
 
74
 
84
 
100
 
100
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Telephony service:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
VoIP
 
X
 
X
 
X
 
X
 
X
 
X
 
X
 
X
 
X
 
X
 
X
 
X
Mobile (MVNO)
 
X
 
 
 
 
 
 
 
 
 
 
 
 
 
X
 
 
 
 
 
X
 
 

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___________________
(1)
Excludes the lifeline tier.
(2)
Excludes the channels that are also included in basic analog tier.
(3)
Percentage of total two-way HP to which broadband internet service with download speeds of 100 Mbps or greater is available.
(4)
Currently available in the German federal state of Baden-Württemberg.
(5)
Currently available in the German federal states of North Rhine-Westphalia and Hesse.
(6)
Depending on whether the subscriber is located in Baden-Württemberg, North Rhine-Westphalia or Hesse.

Operations
 Provided below is country-specific information with respect to the broadband communications and DTH services of our subsidiaries.
Germany. The UPC Broadband Division's operations in Germany are operated by Unitymedia and, since December 15, 2011, by KBW (collectively, UPC Germany). UPC Germany's operations are located in the German federal states of Baden-Württemberg, North Rhine-Westphalia and Hesse and includes the major cities of Cologne, Dortmund, Dusseldorf, Essen, Frankfurt, Heidelberg, Karlsruhe, Mannheim and Stuttgart. UPC Germany offers video, internet and fixed telephony services throughout most of its footprint. UPC Germany offers mobile service as a MVNO through arrangements with Telefónica Germany GmbH & Co. OHG (Telefónica Germany). This mobile service is comprised of voice and data. UPC Germany introduced a digicard for its video cable customers in 2011. The digicard is available to customers for an incremental monthly charge and allows the customer to view their digital video service without the need of a set-top box. Through an agreement with Sky Deutschland AG (Sky Deutschland), KBW offers its subscribers in Baden-Württemberg channels from Sky Deutschland and, in addition, a bundle of its internet and telephony services with premium channels from Sky Deutschland. Through another agreement with Sky Deutschland, Unitymedia subscribers in North Rhine-Westphalia and Hesse may receive Sky Deutschland channels using their Unitymedia smart cards. Transactional NVoD services are available to subscribers to UPC Germany's digital video service with a set top box or digicard in the German federal states of North Rhine-Westphalia and Hesse and VoD is available to subscribers to its digital video service in the German federal state of Baden-Württemberg. UPC Germany's VoD service, including catch-up television, has approximately 1,500 movies, including movies from several Hollywood studios and HD programming.
Approximately 64% of UPC Germany's video customers are in multiple dwelling units where UPC Germany has the billing relationship with the landlord or housing association or with a third party (Professional Operator) that operates and administers the in-building network on behalf of housing associations.  Many of these agreements allow UPC Germany to offer its digital video, broadband internet and telephony services directly to the tenant. Professional Operators may procure the basic video signals from UPC Germany at volume-based discounts and generally resell them to housing associations with whom the operator maintains the customer relationship. UPC Germany has entered into agreements with Professional Operators, such as Tele Columbus Multimedia GmbH, that allow UPC Germany to market its digital video, broadband internet and telephony services directly to the Professional Operator's subscriber base. In order to provide these advanced services to tenants who request them, UPC Germany adds a drop to connect its distribution network to the building, and upgrades the in-home wiring, on an as needed or success-based basis.
Although the majority of UPC Germany's service agreements with housing associations have multi-year terms, in connection with the KBW Acquisition, we agreed that certain of the agreements with the largest housing associations that have a remaining term of more than three years will be granted early termination rights. For additional information concerning the commitments we have made to regulators in connection with the KBW Acquisition, see Regulatory Matters—Europe—Germany below.
Unitymedia and KBW have each entered into various long-term agreements with the incumbent telecommunications operator, Deutsche Telekom AG (Deutsche Telekom), for the lease of cable duct space and hubs, as well as use of fiber optic transmission systems, towers and facility space. In addition, Unitymedia and KBW purchase a portion of the electricity required for the operation of their respective networks through Deutsche Telekom under such agreements. UPC Germany's ability to offer its broadband communications services to customers is dependent on the agreements with Deutsche Telekom. These agreements are long-term and may only be terminated under certain limited exceptions.

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Any termination, however, would have a material adverse effect on the operations of UPC Germany.
The Netherlands. The UPC Broadband Division's operations in the Netherlands (UPC Netherlands) are located in six broad regional clusters, including the major cities of Amsterdam and Rotterdam. UPC Netherlands offers video, internet and fixed telephony throughout its footprint.
UPC Netherlands' VoD service, including catch-up television, is available to subscribers to its digital tiers on a transaction basis. A subscription-based VoD service is included in the extended digital tier for no additional charge. The subscription-based VoD service includes various programming, such as catch-up television, music, kids, documentaries, adult, sports or series and a limited amount of 3D programming. Digital cable customers may also subscribe to premium channels, such as Film 1, Sport 1 NL and the premium football league channel, Eredivisie Live, alone or in combination, for additional monthly charges. In 2010, UPC Netherlands introduced an application that allows its subscribers to record a program remotely through an iPhone or iPad mobile digital device or a mobile internet browser, as well as an internet browser on a personal laptop or desktop computer. In 2011, UPC Netherlands introduced a digicard for an incremental monthly charge. The digicard allows the customer to view their full digital video service on a second television, which has a CI+ slot, without the need for a set-top box.
In April 2010, Ziggo 4 BV, a joint venture between UPC Netherlands and Ziggo BV (the largest cable operator in the Netherlands), acquired licenses in the 2.6 GHz spectrum bands. This band is suited for long-term evolution wireless service, the next generation of ultra high-speed mobile data (LTE). In October 2012, another auction for various spectrum bands, including the 800 MHz spectrum band, will take place. A portion of the 800 MHz spectrum band has been reserved for new entrants, such as UPC Netherlands. All bands are technology neutral and can be used for any mobile technology selected.
Switzerland. The UPC Broadband Division's operations in Switzerland and a small portion of Austria (UPC Cablecom) are located in 24 of the 26 member states (Cantons) of Switzerland, including major cities such as Bern, Zürich, Lausanne and Geneva, and in the region of Vorarlberg, Austria. UPC Cablecom's basic video service (digital or analog) is available in any one of three languages (French, German or Italian). In addition to its video, broadband internet and telephony services, UPC Cablecom has entered into a partnership with a mobile communications provider, which will allow it to offer mobile service as a full MVNO and market quadruple-play packages.
In each of its digital cable packages, UPC Cablecom includes the functionality for transaction-based VoD service (depending on location), including catch-up television and pay-per-view services, and HD channels. In 2010, UPC Cablecom introduced a digicard. A customer purchasing the digicard may, for a one-time fee, view UPC Cablecom's digital entry tier service without an additional monthly charge. A digicard may also be used to view any of UPC Cablecom's other digital packages with the customer paying the incremental charge over the digital entry tier's applicable rate.
For 66% of its video subscribers, UPC Cablecom maintains billing relationships with landlords or housing associations, which typically provide basic video service for an entire building and do not terminate service each time there is a change of tenant in the landlord's or housing association's premises.
UPC Cablecom offers digital video, broadband internet and fixed-line telephony service directly to the analog cable subscribers of those partner networks that enter into service operating contracts with UPC Cablecom. UPC Cablecom has the direct customer billing relationship with the subscribers who take these services on the partner networks. By permitting UPC Cablecom to offer some or all of its digital video, broadband internet and fixed-line telephony products directly to those partner network subscribers, UPC Cablecom's service operating contracts have expanded the addressable markets for UPC Cablecom's digital products. In exchange for the right to provide digital products directly to the partner network subscribers, UPC Cablecom pays to the partner network a share of the revenue generated from those subscribers. UPC Cablecom also provides full or partial analog television signal delivery services, network maintenance services and engineering and construction services to its partner networks.
Other Western Europe. The UPC Broadband Division also operates cable and DSL networks in Austria (excluding the Austrian portion of UPC Cablecom's network) (UPC Austria) and cable and MMDS networks in Ireland (UPC Ireland). The DSL services are provided over an unbundled loop or, in certain cases, over a shared access network. UPC Austria's DSL operations are available in the majority of Austria, wherever the incumbent telecommunications operator has implemented DSL technology.
Austria. UPC Austria's cable operations are located in regional clusters encompassing the capital city of Vienna, the regional capitals of Graz, Innsbruck and Klagenfurt, and two smaller cities. Three of these cities (Vienna, Wr. Neustadt and Baden), directly or indirectly, own 5% of the local operating subsidiary of UPC Austria serving the applicable city.

I-20


UPC Austria's video service (digital and analog) is available primarily in the German language. Its premium packages include ethnic channels (such as Serb, Bosnian and Turkish channels), music, adult and international channels. In addition, though an agreement with Sky Deutschland, UPC Austria offers its digital subscribers a number of premium channels, including HD channels, from Sky Deutschland.  UPC Austria offers its broadband internet service over cable and over DSL.
Ireland. UPC Ireland's operations are located in five regional clusters, including the capital city of Dublin and other cities, including Cork, Galway and Limerick. In its extended tiers of service for digital video, UPC Ireland includes two premium channels (both ESPN sports channels) for no additional charge. To complement its digital offering, UPC Ireland also offers its digital subscribers several premium channels (sports, movies, adult, ethnic and kids) and a pay-per-view service. In 2011, UPC Ireland introduced an application that allows a subscriber to record a program remotely through a web-connected device such as a personal computer or mobile phone.
Central and Eastern Europe. The UPC Broadband Division also operates cable networks in the Czech Republic (UPC Czech), Hungary (UPC Hungary), Poland (UPC Poland) and Romania (UPC Romania), and Slovakia (UPC Slovakia). VoD service, including catch-up television, is available to our subscribers in Hungary and in major metropolitan areas in Poland. The UPC Broadband Division also has DTH operations in certain of these countries, which it provides through UPC DTH.
Czech Republic. UPC Czech's operations are located in cities and towns throughout the Czech Republic, including Prague, Brno, Ostrava, Plzen and Liberec. Subscribers to UPC Czech's digital video service may also receive such service through a digicard without the need of a set-top box. UPC Czech offers a lifeline tier and basic tier of digital programming, as well as extended tiers and premium packages. Approximately 56% of UPC Czech's digital cable subscribers receive the lifeline service. UPC Czech's analog service is offered only in areas where its digital service is not available.
Hungary. UPC Hungary's operations are located in 22 major Hungarian towns and cities, including the capital city of Budapest and the cities of Debrecen, Miskolc, Pécs and Székesfehérvár. In addition to its video cable services, UPC Hungary has 36,700 asymmetric digital subscriber line (ADSL) subscribers on its twisted copper pair network located in the southeast part of Pest County. UPC Hungary offers its telephony services through circuit-switched telephony to subscribers on its twisted copper pair network and through VoIP over its two-way capable cable network.
Poland. UPC Poland's operations are located in regional clusters encompassing eight of the 10 largest cities in Poland, including the capital city Warsaw, Cracow and Katowice. In addition to its digital and analog services, UPC Poland offers a lifeline tier of analog service. Approximately 47% of UPC Poland's analog cable subscribers receive the lifeline service. In 2011, UPC Poland introduced an application that allows users to record a program remotely through a web-connected device, such as a personal computer or mobile phone.
Romania. UPC Romania's operations are located primarily in two regional clusters, which include 10 of the 12 largest cities (each with more than 200,000 inhabitants) in Romania, including the capital city of Bucharest and the cities of Timisoara, Cluj-Napoca and Constanta. UPC Romania's video service includes Romanian terrestrial broadcast channels, selected European satellite programming and other programming. In addition to its standard broadband internet service offerings, UPC Romania also offers a 256 Kbps service at no incremental charge as an inducement for customers to subscribe to bundled services. 
Slovakia. UPC Slovakia operations are located in seven regions in Slovakia, including the five largest cities of Bratislava, Kosice, Presov, Banská Bystrica and Zilina. Besides its video cable services, UPC Slovakia offers video services in certain areas over its MMDS network. UPC Slovakia offers all Slovakian terrestrial, cable and local channels, selected European satellite and other programming, and audio channels. Beginning in 2011, subscribers to UPC Slovakia's digital video services may receive such service through a digicard without the need of a set-top box. UPC Slovakia's analog service, which is not available to its MMDS subscribers, includes a lifeline tier of service. Of UPC Slovakia's analog cable subscribers, approximately 44% subscribe to the lifeline analog service.  
UPC DTH. UPC DTH provides DTH services in the countries of Czech Republic, Hungary and Slovakia and manages the Romania DTH provider FocusSat. UPC DTH and FocusSat together provide DTH services to over 625,000 customers. UPC DTH offers directly or through FocusSat a lifeline tier, a basic tier, an extended tier and premium channel options, as well as over 50 free-to-air (FTA) television and audio channels. A subscriber to its basic tier may receive 53 to 63 digital video channels depending on their location. Its premium channel offerings cover a range of interests (such as movies, adventure, sports, adult and comedy). DVRs are also available and a subscriber to the extended tier will receive three to 10 HD channels depending on their location. Subscribers to the DTH services may pay either an annual fee and receive an activation card for the lifeline tier of video service or pay a monthly fee for a basic or extended tier of service.

I-21


UPC DTH provides DTH services to 14% of our total video subscribers in Czech Republic, 26% of our total video subscribers in Hungary, 18% of our total video subscribers in Slovakia and, through FocusSat, 25% of our total video subscribers in Romania. 
UPC DTH and FocusSat have agreements with Telenor Satellite Broadcasting for the lease of transponder space, including expansion capacity, on the Thor 5 and Thor 6 satellites. These agreements will expire on December 31, 2017, unless extended as provided in such agreements. As a result of these agreements, the UPC Broadband Division has centralized all of its DTH services on the Thor satellite system. UPC DTH offers standard definition (SD) services to all its customers and HD services to the customers in Hungary, Czech Republic, Slovakia and, and through FocusSat, limited HD services in Romania.
Telenet (Belgium). Liberty Global Europe's operations in Belgium are conducted by Telenet. We own 50.2% of Telenet's outstanding ordinary shares. Telenet offers video, broadband internet and fixed and mobile telephony services (quadruple play) in Belgium, primarily to residential customers in the Flanders region and approximately one-third of the city of Brussels. In addition, pursuant to an agreement executed on June 28, 2008 (the PICs Agreement), with four associations of municipalities in Belgium (the pure intercommunales or PICs), Telenet leases the PICs broadband communications network and, accordingly, makes its services available to all of the homes passed by the cable network owned by the PICs.
Telenet's premium video channels include general entertainment, documentary, foreign language, kids, music, sports, adult and movies. In June 2011, Telenet acquired the exclusive broadcasting rights for the Belgian football championship for the next three seasons. As a result, Telenet rebranded its existing pay television sports channels into "Sporting Telenet." Together with the exclusive broadcasting rights for international football championships, Telenet now owns a rich and attractive portfolio of sports content ranging from football (soccer) and basketball to golf. In December 2010, Telenet launched a multimedia platform branded “Yelo.” Yelo allows Telenet's digital video customers to view programs remotely and access VoD with an iPad or iPhone mobile digital device or a laptop. In addition, Telenet offers, individually and as a bundle, fixed-line telephony services over its network and mobile telephony services as a full MVNO under the “Telenet Mobile” brand name.
Telenet has the direct customer relationship with the analog and digital video subscribers on the PICs network. Pursuant to the PICs Agreement, Telenet has full rights to use substantially all of the PICs network under a long-term capital lease for a period of 38 years from 2008, for which it is required to pay recurring fees in addition to the fees paid under certain pre-existing agreements with the PICs. The PICs remain the legal owners of the PICs network. All capital expenditures associated with the PICs network will be initiated by Telenet, but executed and pre-financed by the PICs through an addition to the long-term capital lease, and will follow a 15-year reimbursement schedule. The PICs Agreement has the form of an emphyotic lease agreement, which under Belgian law is the legal form that is closest to ownership of a real estate asset without actually having the full legal ownership. Unless extended, the PICs Agreement will expire on September 23, 2046, and cannot be terminated earlier (except in the case of non-payment or bankruptcy of the lessee).
In August 2011, Telenet Tecteo Bidco, a partnership between Telenet and the Tecteo Group (the second largest cable provider in Belgium operating in the Walloon region), acquired mobile spectrum licenses in the 2.1 GHz spectrum bands. This band is suited for LTE wireless services. Under the terms of the licenses, Telenet Tecteo Bidco must launch commercial services by March 2013.
Chile. Our broadband distribution business in Chile is conducted primarily through UPC Holding's 80%-owned subsidiary VTR. In addition, VTR Wireless S.A. (VTR Wireless), an 80%-owned subsidiary of Liberty Global Europe, is constructing a wireless network in Chile. We have two shareholders' agreements with Comm Corp S.A., our partner in VTR and VTR Wireless, respectively.
VTR. VTR provides video, broadband internet and fixed telephony services in 64 cities, including Santiago, Chile's largest city, the large regional cities of Iquique, Antofagasta, Concepción, Viña del Mar, Valparaiso and Rancagua, and smaller cities across Chile. VTR obtains programming from the United States, Europe, Argentina and Mexico. There is also domestic cable programming in Chile, based on local events such as football (soccer) matches and regional content. Digital cable customers may subscribe to one or more premium video channels, including HD channels for an additional monthly charge. The premium channels include movies, sports, kids, international and adult channels. VTR's analog service is offered only in areas where its digital service is not available.
VTR offers its broadband internet services in 32 communities within Santiago and 36 communities outside Santiago. VTR also offers multi-feature telephony service over its cable network to customers in 32 communities within Santiago and 36 communities outside Santiago via either circuit-switched telephony or VoIP, depending on location.

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VTR Wireless. In September 2009, the Chilean Subsecretary of Telecommunications (SubTel), which regulates the telecommunications industry for the Ministry of Transportation and Telecommunications, awarded a wholly-owned subsidiary of VTR a mobile license for one of three blocks of 30 MHz in the 1700/2100 MHz frequency band following a public auction process. In 2011, VTR transferred the license to VTR Wireless, subject to regulatory approval. VTR Wireless is using this mobile license to construct a mobile network that will be used in combination with certain third-party wireless access arrangements to provide mobile voice and broadband products. VTR Wireless expects to launch its mobile service in the first half of 2012.
Programming Services
Overview
 We own programming networks that provide programming channels to multi-channel distribution systems owned by us and by third parties. We also represent programming networks owned by others. Our programming networks distribute their services through a number of distribution technologies, principally cable television and DTH. Programming services may be delivered to subscribers as part of a video distributor's basic package of programming services for a fixed monthly fee, or may be delivered as a “premium” programming service for an additional monthly charge, or on a VoD or pay-per-view basis. Whether a programming service is on a basic or premium tier, the programmer generally enters into separate affiliation agreements, providing for terms of one or more years, with those distributors that agree to carry the service. Basic programming services generally derive their revenue from per-subscriber license fees received from distributors and the sale of advertising time on their networks. Premium services generally do not sell advertising and primarily generate their revenue from per-subscriber license fees. Programming providers generally have two sources of content: (1) rights to productions that are purchased from various independent producers and distributors and (2) original productions filmed for the programming provider by internal personnel or third-party contractors.
We operate our programming businesses in Europe principally through our subsidiary Chellomedia, and in the Americas principally through our subsidiary Pramer S.C.A. We also own joint venture interests in certain programming businesses.
Chellomedia
Liberty Global Europe's Chellomedia Division is a producer and distributor of 31 thematic television channels and 14 joint venture television channels. The Chellomedia Division also provides a full range of television services through its B2B businesses for its channel partners and clients. The Chellomedia Division reaches over 250 million television households in Europe and parts of Asia and Africa. Below is a description of the business unit operations of our Chellomedia Division:
Chello Programming. 
 Chello Zone. Chellomedia produces and markets a number of widely distributed multi-territory thematic channels in over 100 countries and in over 20 languages. Chellomedia owns five of these channels and the remaining channels are held by a joint venture with unrelated third parties, CBS Studios International, Cyfrowy Polsat SA and ARA Amigos Ireland Ltd. These channels target the following genres: extreme sports and lifestyles (the Extreme Sports Channel and Outdoor), horror films (Horror Channel), real life stories (Zone Reality and CBS Reality), women's information and entertainment and drama (Zone Romantica and CBS Drama), action (CBS Action) and children's pre-school (Jim Jam and Jim Jam Poland). In addition, Chellomedia has a channel representation business, which represents both wholly-owned and third-party channels across Europe and a programming block in China.
Chello Benelux. Chellomedia owns and manages a premium sports channel (Sport 1 NL) and a premium movie channel (Film 1) in the Netherlands. Sport 1 NL has exclusive pay television rights for a variety of sports, but it is primarily football (soccer) oriented. These exclusive pay television rights expire at various dates up to 2015. For Film 1, Chellomedia has exclusive pay television output deals with key Hollywood studios that expire at various dates through 2014. It also distributes Weer & Verkeer (Weather & Traffic Channel) to cable networks and satellite operators.
Chello DMC. Chellomedia's digital media center (DMC) is located in Amsterdam. The DMC is a technologically advanced production facility that services the Chellomedia Division, the UPC Broadband Division and third-party clients with channel origination, post-production and satellite and fiber transmission. The DMC delivers high-quality, customized programming by integrating different video elements, languages (either in dubbed or sub-titled form) and special effects and then transmits the final product to various customers in numerous countries through affiliated and unaffiliated cable systems and DTH platforms. It manages over 65 channels and feeds that are broadcast into Europe, the Middle East and Asia for both Chellomedia and third-party international channel providers.
Chello Central Europe. Chellomedia owns 11 thematic channels which are distributed to the UPC Broadband Division and other operators in Central and Eastern Europe. The channels are: Filmmuzeum (a Hungarian library film channel);

I-23


TV Paprika (a cooking channel in Hungary, Czech Republic, Slovakia, Romania and Moldova); Spektrum and Spektrum HD (a documentary channel in Hungary, Czech Republic and Slovakia); Spektrum Home (a home and lifestyle channel in Hungary, Czech Republic and Slovakia ); Club TV (a women's information and entertainment channel in Hungary and Poland); Zone Europa (an art house basic movies channel in Poland); Zone Romantica (an entertainment channel in Poland, Hungary and Romania); Minimax (a younger children's channel in Hungary, Czech Republic, Slovakia, Romania and former Yugoslavia); Megamax (an older children's channel in Hungary and Poland); and sports channels: Sport1 (in Hungary, Czech Republic, Slovakia and Romania), Sport2 (in Hungary, Czech Republic, Slovakia) and Sport M (in Hungary, Romania, Slovakia and Serbia). Chellomedia has a 50.001% joint venture with The MGM Channel Central Europe for MGM and MGM HD, serving Hungary, Czech Republic, Slovakia, Romania and Slovenia. Chellomedia also operates At Media Sp. z o.o, an advertising sales representation business in Poland, the Czech Republic and Hungary and has a channel representation business, which represents both wholly-owned and third-party channels across Central Europe.
Chello Multicanal. Through its subsidiary Multicanal Iberia S.L.U. (Multicanal), Chellomedia owns or manages a suite of 20 thematic channels carried on a number of major pay television platforms in Spain, Portugal and Portuguese speaking countries in Africa. Multicanal has 13 wholly-owned thematic channels (such as Canal Hollywood, Odisea, Sol Musica, Canal Cocina and Decasa), three joint venture channels with A&E Television Networks (Crime and Investigation, Canal de Historia and The Biography Channel), and four joint venture channels for Portuguese speaking territories with Servicos de Telecomunicacóes e Multimédia SGPS SA doing business as Zon Multimédia (Canal Hollywood, Panda, Panda Biggs, MOV and MOV HD).
Chello On Demand (Transactional Television). Chello On Demand aggregates and delivers entertainment content into VoD offers (transactional and subscription based) for the UPC Broadband Division and other broadband operators. This service offers movies, international comedy and drama, documentaries, children's entertainment and local content on the subscriber's request. Chello On Demand offers VoD services in Austria, Hungary, the Netherlands, Poland and Switzerland.
Investments. Chellomedia, through its Liberty Global Ventures division, is an investor in various ventures for the development of country-specific Pan European programming, including a 20% interest in Disney XD Poland, a 50% interest in Weer & Verkeer (Weather & Traffic Channel), an indirect 40% interest in Open Broadcast Network d.d., a television broadcaster in Bosnia and Herzegovina, and a 25% interest in Shorts HD and Shorts TV channels. Chellomedia also owns non-controlling interests in Canal+ Cyfrowy Sp zoo, a DTH platform in Poland, in Wananchi Group (Holdings), an East Africa provider of video, broadband internet and telephony services, and in O3B Networks Limited, a development stage company that plans to operate a satellite-based data backhaul business across the developing world (predominately Africa), and in various entities developing technology relevant to our operations. 
Discontinued Operations—Australia
During 2011, our operations in Australia were conducted primarily through Austar in which we own a 54.15% indirect majority ownership interest. On July 11, 2011, we and Austar entered into an agreement with FOXTEL pursuant to which FOXTEL would acquire 100% of Austar through a series of transactions, subject to certain conditions. We expect the disposition of Austar to be completed in May or June of 2012 and, accordingly, we have reported it as a discontinued operation for financial reporting purposes. Provided below is a description of Austar's business in 2011.  
Austar is Australia's leading pay television service provider to regional and rural Australia and the capital cities of Hobart and Darwin. Austar's pay television services are provided through DTH satellite. FOXTEL Management Pty Ltd. (FOXTEL Management), the other main provider of pay television services in Australia, has leased space on the Optus C1 and D3 satellites. Austar and FOXTEL Management are parties to an agreement pursuant to which Austar is able to use a portion of FOXTEL Management's leased satellite space to provide its DTH services. This agreement will expire in 2018. FOXTEL Management manages the satellite platform on Austar's behalf as part of such agreement.
Austar's DTH service is available to 2.5 million households, which is approximately one-third of Australian homes. At December 31, 2011, Austar had 755,400 subscribers (residential and business) to its DTH services. Austar's territory covers all of Tasmania and the Northern Territory and the regional areas outside of the capital cities in South Australia, Victoria, New South Wales and Queensland. Austar does not provide DTH service to Western Australia. FOXTEL Management's service area is concentrated in metropolitan areas and covers the balance of the other two-thirds of Australian homes. FOXTEL Management and Austar do not compete with each other, except in the Gold Coast area in Queensland. Austar's DTH services consist of a basic tier, an extended tier, as well as pay-per-view channels, interactive services and DVR functionality. Austar customers may also access programming from several channels streamed over the internet to their computer at no additional cost. In addition to residential subscribers, Austar provides its television services to commercial premises, including hotels, retailers and licensed venues.

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Austar owns a 50% interest in XYZ Networks Pty Ltd. (XYZ Networks). XYZ Networks has an ownership interest in or distributes various channels, including certain time shifted channels. The channels are distributed throughout Australia. Austar's partner in XYZ Networks is FOXTEL Management. Through agreements with XYZ Networks and other programmers, Austar has a number of long-term and key exclusive programming agreements for its regional territory expiring at various dates through 2020.
Competition
The markets for video, broadband internet and telephony services, and for programming, are highly competitive and rapidly evolving. Consequently, our businesses have faced and are expected to continue to face significant competition in these markets in the countries in which they operate and specifically, as a result of deregulation, in the EU. The percentage information in this section is as of the date of the relevant sources listed in the following sentences. The percentage information provided below for the various countries in Europe is based on information from the subscription based website DataXis for the third quarter of 2011. For Chile, the percentage information is based on information from DataXis for the third quarter of 2011 and information provided by SubTel as of September 30, 2011. The competition in certain countries in which we operate is described more specifically after the respective competition overview on video, broadband internet and telephony.
Video Distribution
Our businesses compete directly with a wide range of providers of communication and entertainment services to consumers. Depending upon the country and market, these may include: (1) traditional over the air broadcast television services; (2) DTH satellite service providers; (3) digital terrestrial television (DTT) broadcasters, which transmit digital signals over the air providing a greater number of channels and better quality than traditional analog broadcasting; (4) other cable operators in the same communities that we serve; (5) other fixed-line telecommunications carriers and broadband providers, including the incumbent telephony operators, offering (a) DTH satellite services, (b) internet protocol television (IPTV) through broadband internet connections using DSL, ADSL or very high-speed DSL technology (which we refer to as "DSL-TV"), or (c) IPTV over fiber optic lines of fiber-to-the-building and fiber-to-the-node networks (fiber-to-the-home/-building/-node is referred to herein as "FTTx"); (6) satellite master antenna television systems, commonly known as "SMATVs," which generally serve condominiums, apartment and office complexes and residential developments; (7) MMDS operators; (8) over-the-top video content aggregators utilizing our or our competitors' high-speed internet connections; and (9) movie theaters, video stores, video websites and home video products. Our businesses also compete to varying degrees with other sources of information and entertainment, such as online entertainment, newspapers, magazines, books, live entertainment/concerts and sporting events.
Europe 
In the European countries in which we operate, over 90% of the households own at least one television set. Our principal competition in the provision of video services in our European markets has historically been from traditional FTA broadcasters; DTH satellite providers in many markets, such as Austria, Germany and Ireland, where we compete with long-established satellite platforms; and cable operators in various markets where portions of our systems have been overbuilt. Mobile broadband has gained a noticeable share of subscribers, and competition from SMATV or MMDS could also be a factor. In addition, as accessibility to video content on the internet increases, over-the-top viewing is becoming a competitive factor. Our operations in Hungary, Romania and Slovakia are significantly overbuilt by other cable operators. Based on research of various telecommunication publications, including the Organization for Economic Cooperation and Development, and internal estimates, approximately 51%, 30% and 46% of our operations in Hungary, Romania and Slovakia, respectively, are overbuilt by other cable providers. In Poland, approximately 21% of our operations are overbuilt by other cable providers. In all of these areas competition is particularly intense. 
Over the last several years, competition has increased significantly from both new entrants and established competitors using advanced technologies, aggressively priced services and exclusive channel offerings. DTT is a significant part of the competitive market in Europe as a result of a number of different business models that range from full blown encrypted pay television to FTA television. Similarly DSL-TV, which is either provided directly by the owner of the network or by a third party, is a significant part of the competitive environment in many of our markets and FTTx networks are also becoming more prevalent. The number of providers of DTH satellite services has grown, particularly in the Central and Eastern European markets. Our ability to continue to attract and retain customers will depend on our continued ability to acquire appealing program content and third party programming services on acceptable financial or other terms. Some competitors, such as British Sky Broadcasting Group plc in Ireland and Swisscom AG (Swisscom) in Switzerland, have obtained long-term exclusive contracts for certain popular programs, which limits the opportunities for other providers, including our operations, to offer such programs. If exclusive content offerings increase through other providers, programming options could be a deciding factor for subscribers on selecting a video service.
Portions of our systems have been overbuilt by FTTx networks, primarily in the Czech Republic, Romania and Slovakia and to a lesser extent, in Hungary, the Netherlands and Switzerland. Based on research of various telecommunication publications,

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including by the Organization for Economic Cooperation and Development, and internal estimates, approximately 48%, 40% and 68% of our cable networks in the Czech Republic, Romania and Slovakia, respectively, have been overbuilt by FTTx networks. Also, 10% of our footprint in Hungary, 18% of our footprint in the Netherlands and 16% of our footprint in Switzerland are overbuilt by FTTx networks. In addition, there continues to be a willingness by government and quasi-government entities in Europe to invest in such networks, creating another source of competition.
In most of our Central and Eastern European markets, we are also experiencing significant competition from Digi TV, the DTH platform of RCS & RDS S.A. (Digi TV), a Romanian cable, telephony and internet service provider that is targeting our analog cable, MMDS and DTH customers with aggressively priced DTH packages, in addition to overbuilding portions of our cable network in Hungary, Romania and Slovakia. In the Czech Republic, SkyLink and CSLink, the brand names of M77 Group SA, a subsidiary of M7 Group SA, a European provider of DTH services, are also aggressive DTH competitors, providing a substantial package of video content for a one-time upfront fee. The incumbent telecommunications operator in Romania also operates a competing DTH platform. UPC DTH offers advanced services and functionality, including DVR and premium content, to most of our Central and Eastern Europe markets. UPC DTH's share of the subscription-based television market is 7% for Hungary, 6% for the Czech Republic, 5% for Slovakia, and through FocusSat, 5% for Romania.
In all of our European markets, competitive video services are now being offered by the incumbent telecommunications operator, whose video strategies include DSL-TV, DTH, DTT and IPTV over FTTx networks. The ability of incumbent operators to offer the triple-play of video, broadband internet and telephony services and, in some countries, a quadruple-play with mobile services, is exerting growing competitive pressure on our operations, including the pricing and bundling of our video products. In order to gain video market share, the incumbent operators and alternative service providers in a number of our larger markets have been pricing their DTT, DSL-TV or DTH video packages at a discount to the retail price of the comparable digital cable service and, in some cases, including DVRs as a standard feature.
To meet the challenges in this competitive environment, we tailor our packages in each country in line with one or more of three general strategies: attractive channel offerings, recurring discounts for bundled services and loyalty contracts. Discounts for bundled services are available in all our Europe operations. In addition, we seek to compete by accelerating the migration of our customers from analog to digital services, using advanced digital features such as HD, DVRs, VoD, catch-up television and offering attractive content packages and bundles of services at reasonable prices. HD and DVRs are an integral part of our digital services in all of our markets and VoD and catch-up television are an integral part of our digital services in most of our markets. In addition, from time to time, digital channel offerings are modified by our operations to improve the quality of our programming. Also, in Europe, the triple-play bundle is used as a means of driving video, as well as other products where convenience and price can be leveraged across the portfolio of services. We also continue to explore new technologies that will enhance our customer's television experience. In this regard, to further enhance our digital video services, Horizon will be launched in 2012.
Germany. We are the second largest cable television provider in Germany and the largest cable television provider in the federal states of Baden-Württemberg, North Rhine-Westphalia and Hesse based on the number of video cable subscribers. UPC Germany's video cable services are available to approximately 33% of the television households in Germany and it serves 18% of the total television market. UPC Germany's primary competition is from FTA television received via satellite.  UPC Germany also competes with the IPTV services over DSL of the incumbent telecommunications operator, Deutsche Telekom. Deutsche Telekom has approximately 1.4 million video subscribers in Germany, or 4% of the total television market, for its IPTV services and has announced plans to target a total of 5 million customers with its IPTV services by 2015. In August 2011, Deutsche Telekom expanded its program offerings, bundling its DSL offerings with DTH services, including a HD DVR, in areas where the broadband speeds are not sufficient to deliver television signals over DSL. In addition, Vodafone launched its IPTV service in February 2011, bundling it aggressively with its broadband offerings. Deutsche Telekom, Net Cologne GmbH and Professional Operators compete with UPC Germany for housing association contracts. Professional Operators typically procure the broadcast signals they distribute from UPC Germany or from DTH providers. Certain Professional Operators may also use such opportunities to build their own distribution networks or to install their own head-ends for receiving satellite signals. 
Other alternative distributors of television services are an increasing threat as well. To a lesser extent, UPC Germany competes with the services of Sky Deutschland, which offers a digital premium subscription service to households that receive their basic television service via FTA satellite, cable or other technologies. In addition, there is a risk of competition for video services from commercial broadcasters and other content providers that currently pay UPC Germany fees for transmitting their signals, but may seek to diversify their distribution on alternative platforms such as over-the-top video through high-speed internet connections. 
To stay competitive, UPC Germany has enhanced its digital service with DVR functionality and HD services and offers digicards as an alternative to set-top boxes. In 2011, it realigned its program options, increased the number of HD channels available and commenced a new promotion for its bundled options. In addition, it plans to expand its VoD services

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(including catch-up television) in 2012. Mobile service is also available. The bundle options allow subscribers to select various combinations of services to meet their needs.  Promotional discounts are available to new subscribers.
The Netherlands. We are the second largest cable television provider in the Netherlands based on the number of video cable subscribers. UPC Netherland's video cable services are available to approximately 38% of the television households in the Netherlands and it serves 25% of the total television market. Competition from the DTT and DSL-TV services offered by the incumbent telecommunications provider, Royal KPN NV (KPN), is strong with KPN providing subscription video services to 18% of the total television households. KPN is the majority owner of the Netherlands DTT service, Digitenne. It also offers a DSL-TV service that includes VoD, an electronic program guide and DVR functionality. In addition, the FTTx networks of Reggefiber TTH Company Ltd. (a subsidiary of KPN) are a competitive factor in a number of cities. Future expansion of these networks is expected within our service area as Reggefiber TTH Company Ltd has announced plans to reach 20% of the households in the Netherlands by year-end 2013. With its ability to offer bundled triple-play and quadruple-play services, KPN is a significant competitor. KPN targets our price sensitive customers with attractive offers for its IPTV services and its triple-play and quadruple-play bundles.
To enhance its competitive position, UPC Netherlands offers VoD services (including catch-up television), DVR functionality and HD set-top boxes to all UPC Netherlands digital cable customers, as well as the digicard and the ability to record programs remotely. Such services allow UPC Netherlands subscribers to personalize their programming. In addition, the launch of Horizon in 2012 will offer subscribers more options, giving them an enhanced television experience. Also, UPC Netherlands continues to improve the quality of its programming through the type of programs available and by increasing the number of HD channels. These enhancements, plus the variety of bundle options from which subscribers can select various combinations of services, including high-speed internet and telephony options, to meet their needs, allows UPC Netherlands to compete effectively.
Switzerland. We are the largest cable television provider in Switzerland based on the number of video cable subscribers and the sole provider in substantially all of our network area. UPC Cablecom's video cable services are available to approximately 65% of the television households in Switzerland and it serves 47% of the total television market. Due to a small program offering, competition from terrestrial television in Switzerland is limited, although DTT is now available in most parts of Switzerland. DTH satellite services are also limited due to various legal restrictions such as construction and zoning regulations or rental agreements that prohibit or impede installation of satellite dishes. Our main competitor is Swisscom, the incumbent telecommunications operator, which provides IPTV services over DSL or FTTx networks to approximately 17% of all television households in Switzerland. Swisscom offers VoD services as well as DVR functionality and HD channels and has exclusive rights to distribute certain programming. Based on internal estimates, the Swisscom FTTx network reached 341,000 households in our network area at year-end 2011. With respect to subscribers on partner networks, UPC Cablecom competes with other service providers for the contracts to serve these subscribers. To effectively compete, UPC Cablecom offers DVR functionality, VoD (including catch-up television) and several HD channels. UPC Cablecom also has a broad range of program options and continues to market promotional packages for its bundled services. The digicard is also an important marketing product.
Other Western Europe. In Austria, we are the largest cable television provider based on the number of video cable subscribers. UPC Austria's video cable service is available to approximately 33% of the television households in Austria and it serves 14% of the total television market. UPC Austria's primary competition is from FTA television received via satellite. Approximately 48% of the Austrian television households receive only FTA television. Competition from the DSL-TV services provided by the incumbent telecommunications operator, Telekom Austria AG (Telekom Austria), and from DTH satellite services offered by Sky Deutschland also continue to increase. Telekom Austria offers its DSL-TV service, which includes advanced features, such as VoD, at a heavy discount to the video cable subscription price within the market. It also offers competitively priced bundles. In addition, Telekom Austria has launched a FTTx network in parts of our footprint. To stay competitive, UPC Austria offers HD DVR functionality and VoD service and has enhanced its program offerings with programs from Sky Deutschland. UPC Austria includes these services in its bundles, which it markets at competitive prices. Many bundles are offered at a discount when subscribers select the services for twelve or more months.
Based on the number of video cable subscribers, we are the largest cable operator in Ireland. UPC Ireland's video cable service is available to approximately 54% of the television households in Ireland and it serves 26% of the total television market. UPC Ireland's primary competition for video customers is from British Sky Broadcasting Group plc, which provides DTH satellite services to 39% of the television households in Ireland and has plans to offer triple-play services in the second half of 2012. We also face potential competition from smaller video providers, including providers using FTTx networks. Although DTT is now available in most of Ireland, primarily through Ireland's national public broadcaster, Raidió Teilifís Éireann, competition is limited due to its small programming offering. To stay competitive, UPC Ireland continues to expand its channel offerings, including additional HD channels, and its digital packages to include certain

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popular premium channels at no additional charge. It also introduced an application for its subscribers to record programs remotely via the internet. It markets a variety of bundle options from which subscribers can select various combinations of services to meet their needs.
Central and Eastern Europe. We are the largest cable television provider in Poland based on the number of video cable subscribers. UPC Poland's video cable services are available to approximately 18% of the television households in Poland and it serves 9% of the total television market. In providing video services, UPC Poland competes primarily with DTH service providers, including the largest DTH provider, Cyfrowy Polsat SA. Cyfrowy Polsat SA serves 24% of the television households in Poland. It also offers a mobile broadband service. With their announced merger, another significant DTH service provider will be the combined companies of Canal+ Cyfrowy Sp z o.o and TVN Group, followed by the DTH service provider Orange Poland, an indirect subsidiary of France Telecom S.A. Orange Poland also offers IPTV and a mobile broadband service. In addition, UPC Poland competes with other cable operators with triple-play services, who have overbuilt portions of UPC Poland's operations and are aggressively promoting triple-play bundles. To stay competitive, UPC Poland offers HD DVR, VoD services and the ability to record programs remotely via the internet. It also uses its broadband internet download speeds to market its bundled services. In addition, in certain markets, it offers mobile service for a quadruple-play. Promotional discounts are available, including discounts to bundled prices for subscribers who select bundled services for a period of at least 24 months.
UPC Hungary's video cable service is available to approximately 36% of the television households in Hungary and it serves 16% of the total television market. Our subsidiary, UPC DTH, also provides satellite services in Hungary, in competition with other DTH providers. One of these, Digi TV, is an aggressive competitor. Digi TV's DTH services can reach up to 100% of our DTH and cable service areas and it has overbuilt approximately half of UPC Hungary's cable service areas with its own cable network. Digi TV is targeting UPC Hungary's video cable subscribers and UPC DTH's subscribers with low-priced triple-play packages. To meet the competition, UPC Hungary has an aggressive price plan and targeted bundle offers for the areas in which Digi TV is operating its cable service. UPC Hungary also faces competition from the incumbent telecommunications company Magyar Telekom, a subsidiary of Deutsche Telekom. Magyar Telekom offers a DSL-TV service, including a VoD service, to its internet subscribers and triple-play and, with mobile, quadruple-play packages, as well as a DTH service with bundled options. Both Magyar Telekom and Digi TV also provide IPTV services over FTTx networks. To meet such competition, UPC Hungary offers a digital television platform with DVR functionality and HD and VoD services and competitively priced bundles. Of the television households in Hungary, 10% subscribe to Digi TV's DTH service, 7% subscribe to Digi TV's cable service and 12% subscribe to Magyar Telekom's DTH or DSL-TV service. UPC DTH serves 6% of the television households in Hungary with its DTH service.
As in Hungary, Digi TV is also an aggressive competitor in Romania, the Czech Republic and Slovakia. Digi TV provides DTH services to 9%, 4% and 11% of the television households in Romania, the Czech Republic and Slovakia, respectively. UPC DTH provides DTH services to 4%, 2% and 2% of the television households in Romania, the Czech Republic and Slovakia, respectively. Of the television households in such countries, 11% in Romania, 12% in Czech Republic and 10% in Slovakia subscribe to our video cable service. Our cable services are available to the television households in each of these countries as follows: 27% in Romania, 31% in the Czech Republic and 22% in Slovakia. In Romania, competition also comes from DTH services offered by Rom Telecom SA, the incumbent telecommunications company, as well as alternative distributors of television signals. In addition, Digi TV continues to overbuild portions of our cable network with its own cable network and plans to expand its channel offerings in 2012. Of the television households in Romania, 21% subscribe to Digi TV's cable service. UPC Czech Republic competes with the incumbent telephone company's DSL-TV service and several other operators that provide DTH services and a number of local internet service providers (ISP) that provide IPTV services over FTTx networks. Providers of IPTV services over FTTx networks can reach approximately 48% of the households passed by our cable network in the Czech Republic. In Slovakia, a number of ISPs make video services available to a majority of the homes passed by our cable networks. In particular, Slovak Telekom a.s., a subsidiary of Deutsche Telekom, and Orange Slovensko a.s., a subsidiary of France Telecom S.A., have overbuilt homes passed by our cable network with their FTTx networks and offer triple-play packages through these networks. FTA broadcasters are also significant competitors in the Czech Republic and in Slovakia. Pre-paid DTH services are also increasing in popularity in the Czech Republic and Slovakia. UPC DTH offers a prepaid product in the Czech Republic and Slovakia and, through FocusSat, in Romania.
In Central and Eastern Europe, competition from DTT providers has also increased significantly. Subscribers in these countries tend to be more price sensitive than in other European markets. In particular, almost 100% of the Czech Republic can receive DTT or satellite services for free. This makes the market for television subscribers in the Czech Republic extremely competitive with price often the deciding factor. To address such sensitivity and meet competition, our operations in Central and Eastern Europe offer a variety of bundled service packages and enhanced digital services, such as VoD and DVR, and channel offerings that include certain premium channels at no additional charge. Also, digicards

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are available in the Czech Republic and Slovakia.
Belgium. Telenet is the sole provider of video cable services in its network area. Its video cable service is available to approximately 62% of the television households in Belgium and it serves approximately 48% of the total television market. It is the largest subscription television provider in Belgium based on the number of pay video subscribers. Telenet's principal competitor is Belgacom NV/SA (Belgacom), the incumbent telecommunications operator, which has interactive digital television, VoD and HD service as part of its video offer. Belgacom also offers double-play, triple-play and quadruple-play packages, with a television offered for free when a customer subscribes to bundled services. It also includes certain sports programming (primarily football (soccer) related) at no additional charge. Approximately 21% of total television households in Belgium subscribe to Belgacom's IPTV services over its DSL and DSL-TV networks. Telenet also faces competition from M7 Group SA, branded TV Vlaanderen Digitaal, which is the largest DTH service provider in Telenet's network area. Also, Mobistar SA offers a quadruple-play bundle of video, broadband internet and fixed and mobile telephony. We believe that Telenet's multimedia platform Yelo, together with its extensive cable network, the broad acceptance of its basic cable television services and its extensive additional features, such as HD and DVR functionality and VoD offerings, allow Telenet to compete effectively. In addition, Telenet offers competitively priced quadruple-play bundles, which include its mobile service.Telenet is also expanding its programming and continues to market a variety of bundle options to meet the needs of its customers.
Chile
In Chile, we are the largest cable television provider based on number of video cable subscribers. VTR's video cable services are available to approximately 60% of the Chilean television households and it serves 20% of the total television market. VTR competes primarily with DTH service providers in Chile, including the incumbent Chilean telecommunications operator Compañia de Telecomunicaciones de Chile SA using the brand name Movistar (Telefónica), Claro Chile S.A., a subsidiary of América Móvil, S.A.B. de C.V. (Claro), and DirecTV Chile. Telefónica offers double-play and triple-play packages using DTH for video and ADSL for internet and telephony and, with mobile telephony, quadruple-play packages. Telefónica has also announced plans to launch IPTV services over FTTx networks in 2012 in Santiago. Claro is offering triple-play packages using DTH and, in certain areas of Santiago, through a hybrid fiber coaxial cable network. It also offers mobile telephony for quadruple-play packages. Claro is also expanding its hybrid fiber coaxial cable network in certain regional cities of Chile. Claro is an aggressive competitor targeting video subscribers, including VTR subscribers, with low priced video packages. Other competition comes from video services offered by or over the networks of fixed-line telecommunications operators using DSL or ADSL technology. Of the Chilean television households, 8%, 7% and 5% subscribe to the DTH services of Telefónica, Claro and DirecTV Chile, respectively. To effectively compete, VTR makes VoD, catch-up television, DVR and HD services an integral part of its video packages. These enhancements, plus expanded program options and the marketing of a variety of bundle options, including internet and telephony, enhance VTR's competitive position. 
Internet
With respect to broadband internet services and online content, our businesses face competition in a rapidly evolving marketplace from incumbent and non-incumbent telecommunications companies, mobile operators and cable-based ISPs, many of which have substantial resources. The internet services offered by these competitors include both fixed-line broadband internet services using DSL or FTTx, and wireless broadband internet services, in a range of product offerings with varying speeds and pricing, as well as interactive computer-based services, data and other non-video services offered to homes and businesses. As the technology develops, competition from wireless services using various advanced technologies is becoming significant. Recently competitors have started offering high-speed mobile data via LTE wireless services in certain of our markets. We are also seeing intense competition in Europe from mobile carriers that offer mobile data cards allowing a laptop user to access the carrier's broadband wireless data network with varying speeds and pricing.
Our strategy is speed leadership and we seek to outperform on speed, including increasing the maximum speed of our connections and offering varying tiers of service and varying prices, as well as a variety of bundled product offerings and a range of value added services. In most of our operations we have launched new bundling strategies, including speeds of 25 Mbps or more at mass market price points and ultra high-speed internet with speeds of up to 128 Mbps, and in Poland up to 150 Mbps, to compete with FTTx initiatives. The focus continues to be on high-end internet products to safeguard our high-end customer base and allow us to become more aggressive at the low and medium-end of the internet market. By fully utilizing the technical capabilities of DOCSIS 3.0 technology, we can compete with local FTTx initiatives and create a competitive advantage compared to DSL infrastructures on a national level and LTE initiatives as they expand to a national level.

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Europe
Across Europe, our key competition in this product market is from the offering of broadband internet products using various DSL-based technologies both by the incumbent phone companies and third parties. The introduction of cheaper and ever faster fixed-line broadband offerings is further increasing the competitive pressure in this market. Wireless broadband services, such as LTE, are also taking a foothold in a number of countries using high-speed mobile networks and high-speed downlink packet access systems. 
In Germany, the largest broadband internet service providers, Deutsche Telekom, Vodafone Germany, a subsidiary of Vodafone, and Telefónica Germany are significant competitors. Deutsche Telekom provides services to 48% of the broadband internet subscribers through its DSL network. Vodafone Germany provide services to 14% of broadband internet subscribers. We also face increased competition from mobile broadband operators, including Deutsche Telekom, Vodafone Germany and Telefónica Germany, each of which are starting to offer mobile service through LTE wireless systems. UPC Germany serves 6% of the total broadband internet market in Germany. To effectively compete, UPC Germany is expanding its ultra high-speed internet services and strengthening its video offerings. UPC Germany offers its internet services at attractive rates and through bundled offerings, including digital video and fixed-line telephony. UPC Germany also offers mobile voice and data services.
In the Netherlands, we face competition from KPN, the largest broadband internet provider, and to a lesser extent, the telecommunications company, Tele2 Netherlands Holding NV, as well as operators using the unbundled local loop. KPN offers ultra high-speed internet services with download speeds of up to 50 Mbps over its DSL network, which is available to almost all the households in the Netherlands. In addition, KPN is the leading mobile broadband provider with its competitively priced mobile internet products. KPN serves 42% and UPC Netherlands serves 15%, respectively, of the total broadband internet market in the Netherlands. To keep competitive, UPC Netherlands is promoting faster speeds than its DSL competitors at competitive prices. It has also launched new competitively priced bundle options with high-speed internet, digital video and telephony.
In Switzerland, Swisscom is the largest provider of broadband internet services, with an estimated market share of 62% of all broadband internet customers. The next significant competitor is Sunrise Communications AG with 9% of broadband internet customers. UPC Cablecom serves 18% of broadband internet subscribers. UPC Cablecom promotes significantly faster speeds and seeks to distinguish itself through competitively priced bundled offerings, including digital video, telephony services and its ultra high-speed internet services.
UPC Austria's largest competitor with respect to broadband internet services is the incumbent telecommunications company, Telekom Austria, with approximately 60% of the broadband internet subscribers in Austria. UPC Austria's share of such market is 25%. The mobile broadband services of Telekom Austria are also a competitive factor. Telekom Austria is the largest mobile broadband provider serving 41% of the mobile broadband subscribers that use a 3G network. In addition, UPC Austria faces competition from unbundled local loop access and other mobile broadband operators. As a result, the competition in the broadband internet market is intense. Competitors in the Austrian broadband internet market are focusing on speed and pricing to attract customers. To compete, UPC Austria has launched bundled offers specifically aimed at these market segments. UPC Austria uses its ultra high-speed internet services and competitively priced bundles to encourage customers from other providers to switch to UPC Austria's services and to reduce churn in the existing customer base.
Mobile data card providers have gained market share throughout Europe. For example, in Ireland, Telefónica O2 Ireland Limited, a leading mobile telephony provider, offers a range of mobile internet products at competitive prices. The trend towards mobile internet is visible throughout Europe. Outside of mobile internet, UPC Ireland's most significant competitor is the fixed-line incumbent, Eircom Limited, with 53% of the broadband internet market. UPC Ireland's share of total broadband internet subscribers is 27%. To effectively compete, UPC Ireland promotes its high-speed internet services and bundles these services with its other services at attractive prices.
In Central and Eastern Europe, our principal competitors are DSL operators and cable companies that are overbuilding our cable network. In Poland, our principal competitors are Orange Poland and Netia SA. In Hungary, the primary competitors are the incumbent telecommunications company, Magyar Telekom and Digi TV. In addition, in these countries, as well as in our other Central and Eastern Europe operations, we face increased competition from mobile broadband operators. Intense competition coupled with challenging economic conditions has caused existing low-end options to be more prominent in these markets. In all of our Central and Eastern European markets, we are using our ultra high-speed internet service to attract and retain customers.
In Belgium, internet access penetration is higher than in most European markets causing intense competition between the two primary broadband internet technologies, cable and DSL. Telenet's primary competitor is the DSL service provider Belgacom and other DSL service providers. Approximately 48% of Belgium's broadband internet subscribers use Belgacom's DSL service with download speeds up to 30 Mbps. Also, mobile internet use is increasing. To compete, Telenet promotes its high-speed internet with attractively priced multiple-play bundles. It is also expanding its free WiFi services for current broadband and mobile

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subscribers. Telenet's high-speed internet service, coupled with product features, including Telenet's multimedia platform Yelo, enhances its competitive position. Telenet provides broadband internet service to 39% of the broadband internet market in Belgium.
Chile
In Chile, VTR faces competition primarily from non-cable-based internet service providers such as Telefónica (under the brand name Movistar) and Claro. VTR is experiencing increased pricing and download speed pressure from Telefónica and Claro and more effective competition from these companies with the bundle of their internet service with other services. Mobile broadband competition is significant as well. VTR's share of the broadband internet market in Chile is 38%, compared to 44% for Telefónica. To effectively compete, VTR is expanding its two-way coverage and offering attractive bundling with telephony and digital video service. In addition, VTR Wireless is building a wireless network that will allow VTR to offer mobile broadband services.
Telephony
With respect to telephony services, our businesses continue to compete against the incumbent telecommunications operator in each country. These operators have substantially more experience in providing telephony services, greater resources to devote to the provision of telephony services and long-standing customer relationships. In many countries, our businesses also face competition from other cable telephony providers, wireless telephony providers, FTTx-based providers or other indirect access providers. Competition in both the residential and business telephony markets will increase with certain market trends and regulatory changes, such as general price competition, the offering of carrier pre-select services, number portability, continued deregulation of telephony markets, the replacement of fixed-line with mobile telephony, and the growth of VoIP services. Carrier pre-select allows the end user to choose the voice services of operators other than the incumbent while using the incumbent's network. We seek to compete on pricing as well as product innovation, such as personal call manager and unified messaging. We also offer varying plans to meet customer needs and various bundle options with our digital video and internet services. In addition, in Belgium, Germany and in portions of our market in Poland, we offer mobile telephony services.
Europe
Across Europe our telephony businesses are generally small compared to the existing business of the incumbent phone company. The incumbent telephone companies remain our key competitors but mobile operators and other VoIP operators offering service across broadband lines are also significant competitors in these markets. Generally, we expect telephony markets to remain extremely competitive. 
Our telephony strategy in Europe is focused around value leadership, and we position our services as “anytime” or “any destination.” Our portfolio of calling plans, including "Freetime" (unlimited off peak calls), "Anytime" (unlimited national calls) and "Minute Packs," with a variety of options are designed to meet the needs of our subscribers. In most of our markets, our calling plans also include unlimited international calls within the EU. We also use our bundled offerings to help promote our telephony services.
Deutsche Telekom is the dominant fixed-line telephony provider in Germany; however, telephony services provided through alternative technologies and mobile telephony services have caused competition in the telephony market to be intense. As a result, the market for residential telephony service is price sensitive. To address this competitive market, we use innovative bundling options to encourage customers to switch to UPC Germany services. In the Netherlands, KPN is the dominant telephony provider, but all of the large multiple system operators, including UPC Netherlands, as well as ISPs, offer VoIP services and continue to gain market share from KPN. In Switzerland, we are the largest VoIP service provider, but Swisscom is the dominant fixed-line telephony service provider. Sunrise Communications AG, which offers carrier pre-select services, is also a strong competitor. To meet the competition, UPC Cablecom enhanced its portfolio with attractive bundle options. The market share of the fixed-line telephony market for UPC Germany is 5%, UPC Netherlands is 12% and UPC Cablecom is 9%.
In Austria, Ireland and in our Central and Eastern European markets, the incumbent telephone companies dominate the telephony market. Most of the fixed-line competition to the incumbent telephone operators in these countries is from entities that provide carrier pre-select or wholesale line rental services. We also compete with ISPs that offer VoIP services and mobile operators. In Austria, we serve our subscribers with VoIP over our cable network, circuit-switched telephony services and DSL technology service over an unbundled loop. In Hungary, we provide VoIP telephony services over our cable network and circuit-switched telephony services over our copper wire telephony network. To gain market share, we promote our VoIP telephony service offerings in almost all of our European markets and in some markets we have enhanced our telephony services through unlimited calling options.
In Belgium, Belgacom is the dominant telephony provider with 71% of the telephony market. To gain market share, we emphasize customer service and provide innovative plans to meet the needs of our customers, such as a flat fee plan offered in

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our bundle options (free off-peak calls to fixed-lines in Belgium and 35 European countries). Subscribers to our fixed telephony service may also make free off-peak calls to mobile lines in Belgium. We also offer competitively priced mobile telephony. We compete with other fixed-line operators and with mobile operators, including Belgacom, in the provision of telephony service in Belgium. Telenet's share of the fixed-line telephony market is 22%.
Chile
In Chile, VTR faces competition from the incumbent telecommunications operator, Telefónica, and other telecommunications operators. Telefónica has substantial experience in providing telephony services, resources to devote to the provision of telephony services and long-standing customer relationships. Competition in both the residential and business telephony markets is increasing as a result of market trends and regulatory changes affecting general price competition, number portability, and the growth of VoIP services. Also, use of mobile telephony is increasing and competitors are enhancing their competitive position by including mobile services in their bundle options. Claro, Telefónica Moviles Chile SA and Entel PCS Telecomunicaciones SA are the primary companies that offer mobile telephony in Chile. VTR offers circuit-switched and VoIP telephony services over its cable network. To enhance its competitive position, VTR plans to launch mobile telephony over VTR Wireless' network in 2012 and begin offering quadruple-play services. In the residential market, VTR's share of the fixed-line telephony market in Chile is 19%. 
Programming Services
The business of providing programming for cable and satellite television distribution is highly competitive. Our programming businesses directly compete with other programmers for distribution on a limited number of channels. Once distribution is obtained, these programming services compete, to varying degrees, for viewers and advertisers with other cable and over-the-air broadcast television programming services as well as with other entertainment media, including home video (generally video rentals), online activities, movies and other forms of news, information and entertainment.
Regulatory Matters
Overview
Video distribution, internet, telephony and content businesses are regulated in each of the countries in which we operate. The scope of regulation varies from country to country. In some significant respects, however, regulation in European markets, with the exception of Switzerland, is harmonized under the regulatory structure of the EU.
Adverse regulatory developments could subject our businesses to a number of risks. Regulation could limit growth, revenue and the number and types of services offered and could lead to increased operating costs and capital expenditures. In addition, regulation may restrict our operations and subject them to further competitive pressure, including pricing restrictions, interconnect and other access obligations, and restrictions or controls on content. Failure to comply with current or future regulation could expose our businesses to penalties.
Europe
Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the United Kingdom are the Member States of the EU. As such, these countries are required to harmonize certain of their laws with certain EU rules. In addition, other EU rules are directly enforceable in those countries. Certain EU rules are also applicable across the European Economic Area, whose Member States are the EU Member States as well as Iceland, Liechtenstein and Norway.
In the broadcasting and communications sectors, there has been extensive EU-level legislative action. As a result, most of the markets in Europe in which our businesses operate have been significantly affected by the regulatory framework that has been developed by the EU. The exception to this is Switzerland, which is not a Member State of the EU or the European Economic Area and is currently not seeking any such membership. Regulation in Switzerland is discussed separately below, as well as regulation in certain Member States in which we face regulatory issues that may have a material impact on our business in that country.
EU Communications Regulation
The body of EU law that deals with communications regulation consists of a variety of legal instruments and policies (collectively referred to as the "EU Communications Regulatory Framework" or "Regulatory Framework"). The key elements of the Regulatory Framework are various legal measures, which we refer to as the "Directives," that require Member States to harmonize their laws, as well as certain regulations that have effect without any transposition into national law.

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The Regulatory Framework primarily seeks to open European markets for communications services. It harmonizes the rules for the establishment and operation of electronic communications networks, including cable television and traditional telephony networks, and the offer of electronic communications services, such as telephony, internet and, to some degree, television services. The Regulatory Framework does not generally address issues of content.
On December 18, 2009, the Official Journal of the EU published revisions to the Regulatory Framework. Such revisions should have been transposed into the laws of the Member States before May 25, 2011, although in practice this is an ongoing process. Despite their limited nature, the changes to the Regulatory Framework will affect us. Some changes are administrative. For example, a new body of European regulators has been created. Some new powers, however, have been given to national regulators, such as the right to mandate access to ducts without finding operators or service providers to have “Significant Market Power” (defined below). This power, in particular, could require us to open our ducts to competitors and not allow us to make use of all capacity in our ducts for our own needs, or could mean we get access to ducts of third parties instead of building our own ducts. Also, there will be enhanced powers for Member States to impose transparency obligations and quality of service requirements on ISPs, which may restrict our flexibility in respect of our broadband services.
In general, pending the adoption and the transposition by the Member States of the new Directives, the existing legal situation is unchanged.
Certain key provisions included in the current Regulatory Framework are set forth below. This description is not intended to be a comprehensive description of all regulation in this area.
Licensing and Exclusivity. The Regulatory Framework requires Member States to abolish exclusivities on communication networks and services in their territory and allow operators into their markets based on a simple registration. The Regulatory Framework sets forth an exhaustive list of conditions that may be imposed on communication networks and services. Possible obligations include, among other things, financial charges for universal service or for the costs of regulation, environmental requirements, data privacy and other consumer protection rules, “must carry” obligations, provision of customer information to law enforcement agencies and access obligations.
Significant Market Power. Certain of the obligations allowed by the Regulatory Framework apply only to operators or service providers with “Significant Market Power” in a relevant market. For example, the provisions of the Access Directive allow EU Member States to mandate certain access obligations only for those operators and service providers that are deemed to have Significant Market Power. For purposes of the Regulatory Framework, an operator or service provider will be deemed to have Significant Market Power where, either individually or jointly with others, it enjoys a position of significant economic strength affording it the power to behave to an appreciable extent independently of competitors, customers and consumers.
As part of the implementation of certain provisions of the Regulatory Framework, each Member State's National Regulatory Authority (NRA) is required to analyze certain markets predefined by the EU Commission to determine if any operator or service provider has Significant Market Power. Until November 2007, there were 18 such markets but then the EU Commission adopted a new recommendation reducing the list of predefined markets to seven. This recommendation has led to a reduction in regulation. Some countries, however, continue to maintain their analysis of some of the markets from the original list and this will likely continue for some time.
We have been found to have Significant Market Power in certain markets in which we operate and further findings are possible. In particular, in those markets where we offer telephony services, we have been found to have Significant Market Power in the termination of calls on our own network.
NRAs might seek to define us as having Significant Market Power in any of the seven predefined markets or they may define and analyze additional markets. In the event that we are found to have Significant Market Power in any particular market, a NRA could impose certain conditions on us. Under the Regulatory Framework, the EU Commission has the power to veto a finding by an NRA of Significant Market Power (or the absence thereof) in any market whether or not it is included in the seven predefined markets.
Video Services. The regulation of distribution, but not the content, of television services to the public is harmonized by the Regulatory Framework. Member States are allowed to impose reasonable must carry obligations for the transmission of specified radio and television broadcast channels on certain operators under their jurisdiction. Such obligations should be based on clearly defined general interest objectives, be proportionate and transparent and be subject to periodic review. We are subject to some degree of “must carry” regulation in all European markets in which we operate. In some cases, these obligations go beyond what we believe is allowable under the Regulatory Framework. To date, however, the EU Commission has taken very limited steps to enforce EU law in this area, leaving intact “must carry” obligations that are

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in excess of what we believe to be allowed. Moreover, on December 22, 2008, the European Court of Justice took a very narrow view of the restriction on “must carry” under the Regulatory Framework, treating it as a procedural formality. Therefore, it is unlikely that there will be any reduction in the “must carry” regulations in the foreseeable future.
Net Neutrality/Traffic Management. Other current regulatory debates at the EU and national level include net neutrality/traffic management, as well as responsibilities for ISPs on illegal content or activities on the internet. With respect to net neutrality/traffic management, the EU Commission confirmed in April 2011 that no additional EU regulation is needed to preserve net neutrality. The EU Commission made this decision after concluding that the existing provisions of the Regulatory Framework on consumer transparency and the ability of regulators to impose a minimum quality of service on an operator should be given time to be tested by Member States. In December 2011, BEREC, the joint body of European telecommunications regulators, published non-binding guidelines on net neutrality and transparency. BEREC believes that transparency and the ability for end-users to easily switch providers is vital and recommends that operators should provide clear end-user information about service limitations and actual speeds. This decision, however, is still subject to ongoing political debate, and European or national regulation in this area cannot be excluded.
EU Broadcasting Law
Although the distribution of video channels by a cable operator is within the scope of the Regulatory Framework, the activities of a broadcaster are harmonized by other elements of EU law, in particular the Audiovisual Media Services Directive (AVMS). AVMS, which was published in its final form on March 10, 2010, replaced the pre-existing EU regime in this area. Generally, broadcasts originating in and intended for reception within an EU Member State must respect the laws of that Member State. Pursuant to AVMS, however, EU Member States are required to allow broadcast signals of broadcasters established in another EU Member State to be freely transmitted within their territory so long as the broadcaster complies with the law of their home state. This is referred to as the country of origin principle. Under AVMS (a change from pre-existing rules), the country of origin principle applies also to non-linear services, such as VoD. Accordingly, we should be able, if we so elect, to offer our own VoD services across the European Economic Area based on the regulation of the country of origin. As a result, we could structure our business to have a single regulatory regime for all of our VoD service offered in Europe. In addition, when we offer third party VoD services on our network, it should be the business of the third party, in its capacity as provider of the services, and not us as the local distributor, that is regulated in respect of these services.
Although Member States should have transposed the requirements of AVMS into national law, and this has generally been completed, the practical effect is still not clear. Uncertainty still remains about the proper treatment of VoD from a practical perspective. Thus, there can be no assurance that the requirements on VoD will, in fact, operate in the manner described above in any individual Member State. As a result, we may face inconsistent and uncertain regulation of our VoD service in Europe.
AVMS also establishes quotas for the transmission of European-produced programming and programs made by European producers who are independent of broadcasters.  
Other European Level Regulation
In addition to the industry-specific regimes discussed above, our European operating companies must comply with both specific and general legislation concerning, among other matters, data protection, data retention and electronic commerce. Many of these regimes are, or will be, reviewed at the EU level.
Our European operating companies are also subject to both national and European level regulations on competition and on consumer protection, which are broadly harmonized at the EU level. For example, while our operating companies may offer their services in bundled packages in European markets, they are sometimes not permitted to make a subscription to one service, such as cable television, conditional upon a subscription to another service, such as telephony. They may also face restrictions on the degree to which they may discount certain products included in the bundled packages.
Currently the telecommunications equipment we provide our customers, such as digital set-top boxes, is not subject to regulation regarding energy consumption in the EU, except as discussed below. The EU Commission is, however, considering the need for mandatory requirements regarding energy consumption of such equipment. We have been participating in discussions and studies regarding energy consumption with various parts of the EU Commission and with experts working on their behalf. In addition, we are working with suppliers of our digital set-top boxes to lower power consumption, as well as looking at possibilities through software to lower the power consumption of the existing fleet of digital set-top boxes. Finally, we are working with a large group of companies to promote the possibility of a voluntary agreement on set-top box power consumption as an alternative to regulation. Nevertheless, legislation in this area may be adopted in the near future and could adversely affect the cost and/or the functionality of equipment we deploy in customer homes.

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Pursuant to an EU regulation on standby power effective January 7, 2010, many devices are required to have either a low power standby mode or off mode unless it is inappropriate to have either such mode on the device. For this purpose, our set-top boxes and certain other equipment are equipped with an off switch. Beginning in January 2013, this regulation will impose further requirements on power management on certain devices we purchase, which devices will need to comply, unless it can be argued such further requirements are inappropriate. These additional requirements may increase costs or reduce functionality of the equipment we buy.
As part of the EU's Radio Spectrum Policy Program, spectrum made available through the switch off of analog television has been approved for mobile broadband use beginning January 1, 2013. This spectrum, known as the “digital dividend,” is in the 700 - 862 MHz band.  The terms under which this spectrum will become available will vary among the European countries in which we operate. Certain uses of this spectrum may interfere with services carried on our cable networks. If this occurs, we may need to: (1) avoid using certain frequencies on our cable networks for certain or all of our services, (2) make some changes to our networks, or (3) change the equipment which we deploy. In approving mobile broadband, however, the Radio Spectrum Policy Program states that the new mobile services must co-exist with existing services, such as cable and DTT, to avoid harmful interference. As a result, we are taking steps to be part of the Member States' LTE mobile trials in order to develop mitigation techniques and to engage NRAs to launch regulatory dialogs with equipment manufacturers and mobile operators to develop co-existing networks. We are also requesting Member States to prepare comprehensive national impact assessments when spectrum conditions are changed to ensure that the costs to prevent interference between the various services are balanced.
Germany
Germany has transposed the EU laws into national laws although under the German legal system competency is split between the Federal State (telecommunication law) and the German federal states (media law). The German Telecommunications Act broadly implemented the Regulatory Framework and covers the distribution of any signal by telecommunications networks encompassing television signals, internet data and telephony. The 2009 revisions to the Regulatory Framework are still being discussed by the Federal and regional governments. Implementation of the revised German Telecommunications Act is expected the end of the first quarter of 2012. The German Federal Network Agency is responsible inter alia for the regulation of the German telecommunications market. The Federal Cartel Office, the national competition authority, plays an important role with respect to infrastructure and media regulation. The Federal Cartel Office has powers to address competition issues in all markets, although in some cases, competition issues will be addressed by the German Federal Network Agency.
Regulation of the media falls within the legislative competence of the German federal states (Bundesländer). The media laws of all 16 federal states have been partially harmonized by the State Broadcasting Treaty (Rundfunkstaatsvertrag). The State Broadcasting Treaty establishes the main framework of the German regulation of broadcast. Nearly every German state has established its own independent regulatory body, the state media authority (Landesmedienanstalt). The state media authorities are primarily responsible for licensing and supervision of commercial broadcasters and the allocation of transmission capacities for radio and television channels. They are also in charge of the regulation of carriage fees, conditional access systems, interfaces and the bundling of programs.
The allocation and use of analog cable transmission capacities for both radio and television channels are governed by the “must carry” rules of the respective states. The allocation of digital transmission capacities for digital television and radio channels are, however, primarily governed by the “must carry” rules of the State Broadcasting Treaty. The media law in the states of Baden-Württemberg, North-Rhine-Westphalia and Hesse require UPC Germany to carry 14, 25 and 30 analog channels, respectively, and also limits the possibility to convert these analog cable channels into digital channels.
The operation of conditional access systems for television services is governed by both the State Broadcasting Treaty and the German Telecommunications Act. Generally, operators must not unfairly obstruct or discriminate against broadcasters and other content providers through conditional access systems. Sky Deutschland made a claim against Unitymedia alleging discriminatory treatment as to the provision of bandwidth and conditional access services. The Federal Network Agency, however, rejected Sky Deutschland's claim with respect to the bandwidth usage and it has not yet considered Sky Deutschland's claim on conditional access service.
On December 15, 2011, the Federal Cartel Office approved the KBW Acquisition, subject to our agreement with the following conditions:
The digital FTA television channels (as opposed to channels marketed in premium subscription packages) distributed on the networks of Unitymedia and KBW will be distributed in unencrypted form commencing January 1, 2013. This commitment is consistent with KBW's current practice and generally covers FTA television channels in SD and HD. If, however, FTA television broadcasters request their HD content to be distributed in an encrypted HD package, the encryption of FTA HD channels is still possible. In addition, we made a commitment that, through December 15, 2015,

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the annual carriage fees received by Unitymedia and KBW for each such FTA television channel distributed in digital or simulcast in digital and analog would not exceed a specified annual amount, determined by applying the respective current rate card systems of Unitymedia and KBW as of January 1, 2012.
Effective January 1, 2012, Unitymedia and KBW waived their exclusivity rights in access agreements with housing associations, with respect to the usage of infrastructures other than the in-building distribution networks of Unitymedia and KBW to provide television, internet or telephony services within the building.
Effective January 1, 2012, upon expiration of the minimum term of an access agreement with a housing association, Unitymedia or KBW, as applicable, will transfer the ownership rights to the in-building distribution network to the building owner or other party granting access. In addition, Unitymedia and KBW have waived their right to remove their in-building distribution networks.
A special early termination right will be granted with respect to certain of Unitymedia's and KBW's existing access agreements with the largest housing associations that cover more than 800 dwelling units and have a remaining term of more than three years. The total number of dwelling units covered by the affected agreements is approximately 340,000, of which approximately 230,000 and 110,000 are located in the footprints of Unitymedia and KBW, respectively. The special termination right may be exercised on or before September 30 of each calendar year up to the expiration of the current contract term, with termination effective as of January 1 or July 1 of the following year. If the special termination right is exercised, compensation will be paid to partially reimburse Unitymedia or KBW, as applicable, for their unamortized investments in modernizing the in-building network based on an agreed formula.

In January 2012, two competitors of our German cable business, including the incumbent telecommunications operator, each filed an appeal against the Federal Cartel Office regarding its decision to approve the KBW Acquisition. We believe the decision will ultimately be upheld and currently intend to support the Federal Cartel Office in defending the decision. In addition, we do not expect that the filing of these appeals will have any impact on the ongoing integration and development of our German operations. The ultimate resolution of this matter is expected to take up to four years, including the appeals process.

The Netherlands

The Netherlands has an electronic communications law that broadly transposes the Regulatory Framework. According to this electronic communications law, Onafhankelijke Post en Telecommunicatie Autoriteit (OPTA), the Netherlands NRA, should perform a market analysis to determine which, if any, operator or service provider has Significant Market Power. OPTA has completed its first and second round of market analysis and, in November 2010, commenced its third round of market analysis, which is almost completed. As part of the latter, OPTA published on June 23, 2011, its regulatory view on fixed telephony, television, internet access and business network services in the period from 2012 up to and including 2014. OPTA's draft assessment of the television market concluded that there are no grounds for regulation. This is because competition in the television market has increased, providing consumers more providers from which to choose. Following notification of its draft assessment to the European Commission, OPTA published its final assessment on December 20, 2011, with no changes to the draft assessment. This final assessment is not open for appeal. As a result, no new regulations relating to the television market may be proposed without a new analysis. On December 22, 2011, referring to its final assessment of the television market, OPTA rejected previously filed requests from a number of providers to perform a new market analysis of the television market.  This decision by OPTA has been appealed by such providers.

Shortly before the publication of OPTA's draft assessment of the television market, the Dutch Parliament adopted two amendments to the proposed transposition of the amended Regulatory Framework focusing on facilitating the resale of television services. Following a discussion of the amendments in the Senate, the Senate issued various critical questions on whether the amendments are in compliance with the Regulatory Framework. The Senate proposes to have a plenary hearing on the matter in March 2012.
OPTA's market analysis decision on call termination, which combines both the fixed termination market and the mobile termination market, became effective July 7, 2010. All providers of call termination on fixed and mobile networks in the Netherlands have been found to have Significant Market Power and a schedule or glidepath for the reduction of fixed and mobile termination rates, with a last step for mobile termination rates, through September 1, 2012 was imposed. Following an appeal, the Dutch Supreme Administrative Court, College van Beroep voor het bedrijfsleven (CBb), rendered a decision on August 31, 2011, confirming OPTA's market definition and finding of Significant Market Power but rejecting the costing methodology used by OPTA in setting the tariff schedule. Application of the costing methodology approved by the CBb would, among other things, result in a higher mobile termination rate in the final step of the glidepath. CBb obliged OPTA to make an adjusted decision by January 1, 2012. Following a national consultation, OPTA submitted the adjusted draft decision to the European Commission on

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January 12, 2012. On February 13, 2012, the European Commission expressed serious doubts on OPTA's adjusted draft decision, noting concern about the change in the costing methodology used by OPTA. The European Commission has invited comments on its position and will discuss it further with OPTA and with BEREC over the coming months.
Switzerland
Switzerland has a regulatory system which partially reflects the principles of the EU, but otherwise is distinct from the European regulatory system of telecommunications. The Telecommunications Act (Fernmeldegesetz) regulates, in general, the transmission of information, including the transmission of radio and television signals. Most aspects of the distribution of radio and television, however, are regulated under the Radio and Television Act (Radio und Fernsehgesetz). In addition, the Competition Act and the Act on Price Surveillance are potentially relevant to our business. With respect to energy consumption of electronic home devices, the Energy Act and the revised Energy Ordinance have been applicable since January 2010, to television set-top boxes as described below.
Under the Telecommunications Act, any provider of telecommunications services needs to register with the Federal Office of Communications. Dominant providers have to grant access to third parties, including unbundled access to the local loop and, until April 1, 2011, bitstream access. But this access regulation is restricted to the copper wire network of the incumbent, Swisscom. Therefore, such unbundling obligations do not apply to UPC Cablecom and other cable operators. Also, any dominant provider has to grant access to its ducts, subject to sufficient capacity being available in the relevant duct. At this time, only Swisscom has been determined to be dominant in this regard. All operators are obliged to provide interconnection and have to ensure interoperability of services.
In 2008, Swisscom announced its intention to roll out a national fiber-to-the-home network following the completion of its fiber to the building and fiber to the node networks in Switzerland. Following a review of this new network, the Federal Government has determined that it is not necessary to revise current regulations on access to such new network by third parties. In addition, several municipality-owned utility companies have announced or started to roll out local fiber networks, some in cooperation with Swisscom. Following a review of the proposed cooperation agreements by the Swiss Competition Commission, Swisscom put all agreements on hold as the Competition Commission has held that several clauses in the cooperation agreements would constitute a violation of Cartel law and adversely affect competition. Currently the cooperation partners are reviewing their plans in the light of the view of the Competition Commission. In the cities of Basel, Bern and Lucerne, the agreements have been renegotiated and executed taking into account the concerns of the Competition Commission. Any such fiber roll out could lead to increased competition for UPC Cablecom.
Under the Radio and Television Act and the corresponding ordinance, cable network operators are obliged to distribute certain programs that contribute in a particular manner to media diversity (must carry programs). The Federal Government and the Federal Office of Communications can select up to 25 programs that have to be distributed in analog without the cable operator being entitled to compensation. Currently, 17 programs have must carry status and a decision requiring UPC Cablecom to carry another channel is currently under review by the Federal Court.
Encryption of Cablecom's digital offering and its exclusive offering of proprietary set-top boxes are permissible under the Radio and Television Act. An initiative, initially adopted by the Swiss Parliament in June 2009, which demanded (1) a ban on encryption of the digital basic offering or, alternatively, (2) the introduction of a conditional access module, has been rejected by the Swiss Parliament.
UPC Cablecom's retail customer prices have been subject to review by the Swiss Price Regulator. Effective June 1, 2010, UPC Cablecom entered into an agreement with the Swiss Price Regulator, which defines prices for analog and a basic digital offer until the end of 2012. Whether UPC Cablecom will continue to be subject to price regulation going forward will depend on the assessment of its market position.
The Federal Council has introduced as an initiative a new regulation imposing power thresholds for set-top boxes. There are some exemptions and transition periods which apply in the short term to the set-top boxes we import into Switzerland. Notwithstanding, it appears that the Swiss ordinance is not in line with European regulation. Therefore, the ordinance may be reconsidered as Switzerland tries to align itself with EU norms. If, however, such regulation remains in force, it may have an adverse effect on the business of UPC Cablecom as UPC Cablecom may face restrictions regarding the import of set-top boxes.

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Belgium (Telenet)
Belgium has broadly transposed the Regulatory Framework into law. According to the electronic communications law of June 13, 2005, the Belgisch Instituut voor Post en Telecommunicatie (BIPT), the Belgian NRA, should perform the market analysis to determine which, if any, operator or service provider has Significant Market Power. In addition, draft legislation is being prepared for the Federal Parliament to transpose the 2009 revisions to the Regulatory Framework. Final adoption of this draft legislation is expected in the second quarter of 2012.
Telenet has been declared an operator with Significant Market Power on the market for call termination on an individual fixed public telephone network. A three-year reduction of termination rates imposed on Telenet, which was completed in January 2009, resulted in near reciprocal termination tariffs with Telenet charging the interconnection rate of the incumbent telecommunications operator, Belgacom, plus 15%.
Although no determination has been made on whether Telenet has Significant Market Power on the market for call termination on individual mobile networks, its rates will be affected by rate limitations implemented by BIPT. In June 2010, BIPT imposed a steep rate reduction over the next two years resulting in (1) an initial 45% decline effective August 1, 2010, over the then average rate and (2) further declines to a rate in January 2013 that will be approximately 79% less than the average rate implemented on August 1, 2010. Also, BIPT indicated the rates of mobile operators, such as Telenet, using a host network to provide service may be capped by the termination rates of their host network.
In Belgium, both the BIPT and the regional media regulators (the Vlaamse Media Regulator for Flanders, Conseil Supérieur de l'Audiovisuel (Wallonia), and Medienrat (in the German speaking community)) have worked together in order to approve the wholesale broadband and broadcasting analysis.
In December 2010, the BIPT and the regional regulators for the media sectors (the Belgium Regulatory Authorities) published their respective draft decisions reflecting the results of their joint analysis of the broadcasting market in Belgium. In addition, the BIPT published an analysis of the wholesale broadband market in Belgium. These draft decisions aimed to impose regulatory obligations on cable operators and Belgacom, the incumbent telecommunications operator.
The Belgium Regulatory Authorities held a public consultation on the proposed measures and published the comments made by various market players. Based on these comments, the Belgium Regulatory Authorities made some changes to the draft decisions. The draft decisions were then notified to the European Commission by the Belgian Conference of Regulators for Electronic Communications (the CRC), a body which brings together the BIPT and the Belgium Regulatory Authorities. On June 20, 2011, the European Commission sent a letter to the CRC criticizing the analysis of the broadcasting markets. The Commission more specifically criticized the fact that the Belgium Regulatory Authorities failed to analyze upstream wholesale markets. It also expressed doubts as to the necessity and proportionality of the various remedies.

The Belgium Regulatory Authorities nevertheless adopted a final decision on July 1, 2011 (the July 2011 Decision) after making some minor changes to the text of their draft decisions. The July 2011 Decision was notified to Telenet on July 18, 2011. The regulatory obligations imposed by the July 2011 Decision include (1) an obligation to make a resale offer at ''retail minus'' of the cable analog package available to third party operators (including Belgacom), (2) an obligation to grant third-party operators (except Belgacom) access to digital television platforms (including the basic digital video package) at "retail minus," and (3) an obligation to make a resale offer at ''retail minus'' of broadband internet access available to beneficiaries of the digital television access obligation that wish to offer bundles of digital video and broadband internet services to their customers (except Belgacom). A "retail-minus" method would imply a wholesale tariff calculated as the retail price for the offered service, excluding value-added taxes and copyrights, and further deducting the retail costs avoided by offering the wholesale service (such as, for example, costs for billing, franchise, consumer service, marketing, and sales). On February 1, 2012, Telenet submitted draft reference offers regarding the obligations described above. A national consultation and a notification to the European Commission of the reference offers still need to take place before final approval by the Belgium Regulatory Authorities. Any approved reference offer is not expected to be available in the market until 2013.

For Belgacom, the regulatory obligations include (1) an obligation to provide wholesale access to the local loop, (2) an obligation to provide wholesale internet access at bitstream level and (3) an obligation to provide wholesale multicast access for distribution of television channels. 

Telenet believes that there are serious grounds to challenge the findings of the Belgium Regulatory Authorities' broadcasting market analysis and the resulting regulatory obligations, and has lodged an appeal for suspension and annulment against the July 2011 Decision with the Brussels Court of Appeal. It cannot be excluded, however, that one or more regulatory obligations will be eventually upheld. A decision from the Brussels Court of Appeal is expected in the second quarter of 2012.
 

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The July 2011 Decision aims to, and in its application may, strengthen Telenet's competitors by granting them resale access to Telenet's network to offer competing products and services. In addition, any resale access granted to competitors could (1) limit the bandwidth available to Telenet to provide new or expanded products and services to the customers served by its network and (2) adversely impact Telenet's ability to maintain or increase its revenue and cash flows. The extent of any such adverse impacts ultimately will be dependent on whether the July 2011 Decision is implemented in its current form and, if implemented, the wholesale rates established by the Belgium Regulatory Authorities and the extent that competitors take advantage of the resale access ultimately afforded to Telenet's network.

Chile
In addition to the regulations described below, VTR was subject to certain regulatory conditions until mid-2010, which were imposed by the Chilean Antitrust Court in connections with VTR's combination with Metrópolis Intercom SA in April 2005. One such condition prohibited VTR and its control group from participating, directly or indirectly through a related person, in Chilean satellite or microwave television businesses through April 2010 (the Satellite Condition). On December 12, 2006, Liberty Media Corporation (Liberty Media), the former parent company of our predecessor, announced publicly that it had agreed to acquire an approximate 39% interest in The DirecTV Group, Inc. (DirecTV), the parent of DirecTV Chile. On August 1, 2007, VTR received formal written notice from the Chilean Federal Economic Prosecutor (FNE) stating that Liberty Media's acquisition of the DirecTV interest would violate the Satellite Condition. On March 19, 2008, following the closing of Liberty Media's investment in DirecTV, the FNE commenced an action before the Chilean Antitrust Court against John C. Malone, the chairman of our board of directors and of Liberty Media's board of directors. In this action, the FNE alleged that Mr. Malone is a controller of VTR and either controls or indirectly participates in DirecTV's satellite operations in Chile, thus violating the condition. The FNE requested the Antitrust Court to impose a fine on Mr. Malone and order him to effect the transfer of the shares, interests or other assets that are necessary to restore the independence, in ownership and administration, of VTR and DirecTV Chile. Liberty Media no longer owns an interest in DirecTV and Mr. Malone's voting interest in DirecTV has been reduced to less than 5%. On December 29, 2011, the Chilean Antitrust Court issued its final decision. No remedies impacting LGI or VTR were imposed by this decision.
Video
Cable television services are regulated in Chile by the Ministry of Transportation and Telecommunications (the Ministry). VTR has permits to provide wireline cable television services in the major cities, including Santiago, and in most of the medium-sized markets in Chile. Wireline cable television permits are granted for an indefinite term and are non-exclusive. As a result, more than one operator may be in the same geographic area. As these permits do not use the radio-electric spectrum, they are granted without ongoing duties or royalties. Wireless cable television services are also regulated by the Ministry and similar permits are granted for these services. Wireless cable permits have a 10-year term and are renewable for additional 10-year terms at the request of the permit holder.
Cable television service providers in Chile are not required to carry any specific programming, but some restrictions may apply with respect to allowable programming. The National Television Council has authority over programming content, and it may impose sanctions on providers who are found to have run programming containing excessive violence, pornography or other objectionable content.
Cable television providers have historically retransmitted programming from broadcast television, without paying any compensation to the broadcasters. Certain broadcasters, however, have filed lawsuits against VTR claiming that by retransmitting their signals VTR has breached either their intellectual property rights or the Chilean antitrust laws. The lawsuits concerning antitrust laws have been settled. In one action, the Court of Appeals of Santiago determined that no compensation or authorization is required as long as VTR retransmits the signal simultaneously, without modifying it, and in the same geographic area where the over-the-air signal is transmitted. Two other lawsuits are still pending, with decisions expected in 2012.
In November 2008, the Chilean Government introduced two bills related to DTT regarding stricter content standards and new rules for granting and operating DTT concessions (among other matters), which are still pending. Must carry and retransmission consent obligations have been added to these bills. Broadcasters are claiming that these bills should authorize them to offer pay television services and some programmers argue that this authorization will allow them to provide their premium content directly to customers. Some provisions of the bills require pay television operators to use a percentage of their capacity to carry cultural programming and prohibit advertising on cable television services. We are currently unable to predict the outcome of this matter or its impact on VTR.
Internet
Internet services are considered complementary telecommunication services and, therefore, do not require concessions, permits, or licenses. Pursuant to a condition imposed on VTR as a result of its 2005 combination with Metrópolis Intercom SA,

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VTR offers its broadband capacity for resale of internet services on a wholesale basis. After a three-year long discussion, the law on Intellectual Property was amended in May 2010. The amendment included a new chapter limiting the liability of ISPs for copyright infringements over their networks, provided the ISPs fulfill certain conditions, which vary depending on the service provided. In general, the limitation of liability of ISPs will require the ISPs to fulfill the following conditions: (1) establish public and general terms upon which the ISP may exercise its right to terminate its agreements with content providers that are judicially qualified as repeat offenders against intellectual property rights protected by law; (2) not interfere with the technological measures of protection and rights management of protected works; and (3) not generate nor select the content or its addressees. Since its enactment in May 2010, these rules apply without prejudice to the application of the general civil rules of liability.
In order to protect the constitutional rights of privacy and safety of communications, ISPs are prohibited from undertaking surveillance measures over data content on their networks. Also, special summary proceedings have been created in order to safeguard intellectual property rights against violations committed through networks or digital systems. These proceedings include measures designed to withdraw, disqualify or block infringing content in the ISP's network or systems. The law also provides for the right of intellectual property owners to judicially request from ISPs the delivery of necessary information to identify the provider of infringing content.
On June 13, 2010, the Chilean Senate approved a Bill on Net Neutrality, which became effective in August 2010. This Bill prohibits “arbitrary blockings” and the provision of differentiated service conditions according to the origin or ownership of the content or service provided through the internet. The Bill authorizes ISPs to take measures to ensure the privacy of their users, virus protection and safety of the net, as long as these measures do not entail traffic shaping with anticompetitive means. Certain consumer information obligations related to the characteristics of each internet access plan and the traffic management policies applied by each ISP were imposed on March 18, 2011. A ruling requiring internet quality of service measurements was issued on July 25, 2011. On November 17, 2011, the Ministry issued a new ruling establishing new obligations, such as the obligation to inform the effective maximum and minimum traffic speed offered in each internet access plan. VTR is assessing whether to file an opposition challenging such ruling.
Telephony
The Ministry also regulates telephony services. The provision of telephony services (both fixed and mobile) requires a public telecommunications service concession. VTR has telecommunications concessions to provide wireline fixed telephony in most major and medium-sized markets in Chile. Telephony concessions are non-exclusive and have renewable 30-year terms. The original term of VTR's wireline fixed telephony concessions expires in November 2025. Long distance telephony services are considered intermediate telecommunications services and, as such, are also regulated by the Ministry. VTR has concessions to provide this service, which is non-exclusive, for a 30-year renewable term expiring in September 2025. In October 2011, the SubTel implemented the first phase of a ruling for the elimination of domestic long distance (for calls within the country) and reducing the local exchange zones from 24 to 13. The second stage, which will eliminate all local zones, is expected in 2014, subject to approval by the Chilean Antitrust Court.
Local service concessionaires are obligated to provide telephony service to all customers that are within their service area or are willing to pay for an extension to receive service. All local service providers, including VTR, must give long distance telephony service providers equal access to their network connections at regulated prices and must interconnect with all other public services concessionaires whose systems are technically compatible.
In January 2008, the Ministry requested the Chilean Antitrust Court to review the telephony market. In January 2009, the Antitrust Court concluded that, although the local service telephony market cannot be characterized as competitive, it has enhanced its level of competition since it was reviewed in 2003. As a result, the Antitrust Court determined that incumbent local telephone operators will no longer be subject to price regulation for most services at a retail level. The Chilean Antitrust Court recommended that the Ministry, for the incumbent operators only, take measures avoiding fixed/mobile bundles and differential prices for on net and off net traffic. The Chilean Antitrust Court also recommended that the Ministry set forth rules, for all operators, forbidding tied sales of telecommunication services included in a bundle, and imposing effective network unbundling and number portability. The Chilean Antitrust Court also declared some ancillary services and network unbundling services to be subject to price regulation for all companies, including VTR.
Interconnect charges (including access charges and charges for network unbundling services) are determined by the regulatory authorities, which establish the maximum rates that may be charged by each operator for each type of service. This rate regulation is applicable to incumbent operators and all local and mobile telephony companies, including VTR. The maximum rates that may be charged by each operator for the corresponding service are made on a case-by-case basis and are effective for five years. VTR's current interconnection and unbundling rates are effective until June 2012. In July 2011, the SubTel started a new ordinary tariff process.

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In August 2009, the SubTel started a new complimentary tariff process on VTR related to certain ancillary telephone services (provided to end users) and additional network unbundling services (bitstream). The tariff decree resulting from this process should have been approved by the end of 2010, but the SubTel postponed its final decision. During September 2011, the SubTel enacted this complementary decree and it is now in its final legal review at the National General Comptroller Office.
During 2009, the SubTel awarded VTR a license for 30 MHz of spectrum in the 1700/2100 MHz frequency band. The license has a 30-year renewable term. VTR is transferring this license to our subsidiary, VTR Wireless.
In April 2007, a Bill regarding Telecommunications Antennas Towers was introduced in the Chilean House of Representatives. It includes stricter restrictions on the construction of new telecommunications towers, including (1) the requirement to obtain prior authorization from local authorities to build antennas in new sites; (2) the prohibition of the placement of towers in sites smaller than 400 square meters; (3) the camouflage of towers exceeding certain heights or clustered together; (4) payments towards community improvements based on a percentage of the value of a new tower; and (5) height and distance restrictions for towers located near certain buildings (schools, hospitals, etc.). The bill also includes provisions about co-localization of telecommunications antennas. A strong opposition to this Bill has been raised by the incumbent mobile operators on constitutional grounds. We expect this Bill to be approved by the Chilean Congress during the first quarter of 2012.
Other Chilean Regulation
MVNO Litigation. On December 23, 2011, the Supreme Court overruled a decision of the Antitrust Court and found that three mobile phone operators (Movistar, Entel and Claro) were infringing an antitrust law, by refusing to deal with third parties interested in providing mobile services as MVNOs. The Supreme Court declared that the licensed frequency allocation of the spectrum was an essential supply to provide mobile services. Therefore, the mobile companies, by refusing to allow third parties the use of the frequency and other assets of their network, were effectively excluding potential competitors. Apart from imposing a fine, it ordered the operators to make a public and reasonable offering of their facilities to third parties interested in providing mobile services as a MVNO. Even though this obligation should only affect the companies that were sanctioned in the decision, it is possible that the decision may be extended to new participants, including VTR.
LTE Bidding. In December 2011, the Ministry announced a bidding process to award three licenses for high capacity mobile data services in the 2.5 GHz spectrum, that will grant portions of spectrum rights from a total of 120 MHz. Pursuant to the bidding conditions, the successful bidder will be required to offer wholesale services and service some isolated locations. Interested parties must submit their proposals on April 19, 2012.
Rate Adjustments. With respect to VTR's ability to increase the price of its different telecommunication services to its subscribers, the General Consumer Protection Laws contain provisions that may be interpreted by the National Consumer's Service (Sernac) to require that any increase in rates - over the inflation rate - to existing subscribers must be previously accepted and agreed to by those subscribers, impairing VTR's capacity to rationalize its pricing policy over current customers. VTR disagrees with this interpretation and is evaluating its options for adjusting or increasing its subscriber rates in compliance with applicable laws.
Channel Lineup. With respect to VTR's ability to modify its channel lineup without the previous consent of the subscribers, Sernac expressed that such action may be against certain provisions of the applicable Consumer Protection Law, including those provisions prohibiting misleading advertisement, unilateral modification of the clients' contracts and abusive clauses. Sernac filed several lawsuits against VTR. In June 2008, the Court of Appeals of Santiago ruled against VTR in one of these lawsuits. The Supreme Court rejected an appeal of this decision. Based on nine favorable rulings recently obtained by VTR, granting the company the right to modify its channel lineup, VTR disagrees with Sernac's interpretation. To prevent future conflicts with Sernac, VTR is negotiating with Sernac to establish common acceptable criteria to enable modifications of VTR's channel lineup. In December 2011, VTR proposed new wording for its customer agreements that would establish a framework for future modifications. We are currently unable to predict the outcome of this matter.
On-Off Net Traffic/Bundling. The Antitrust Court launched a consultation to determine whether or not to impose restrictions on calling price differentiation (On Net/Off Net) and bundling (including resale and regulatory accounting). The Antitrust Court decision could involve significant changes in fixed and mobile pricing strategies, affecting VTR's ability to offer discounts for service bundles or imposing resale obligations on cable television, broadband and/or telephony. The Antitrust Court's decision is expected in first quarter of 2012.
Telecommunication Services Proposal. In November 2011, the Subtel published a proposal for a General Telecommunication Services Ruling. The purpose of this proposal is to regulate the offer of telecommunication services (voice, internet access, and pay television, either alone or in bundles) from a consumer protection point of view. If enacted,

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the new regulation could involve significant changes in contracts with customers; new requirements regarding compensation in case of service failure; and new rules regarding treatment of customers' personal information.
Employees
As of December 31, 2011, we, including our consolidated subsidiaries, had an aggregate of approximately 22,000 employees, certain of whom belong to organized unions and works councils. Certain of our subsidiaries also use contract and temporary employees, which are not included in this number, for various projects. We believe that our employee relations are good.
Financial Information About Geographic Areas
Financial information related to the geographic areas in which we do business appears in note 17 to our consolidated financial statements included in Part II of this report.
Available Information
All our filings with the Securities and Exchange Commission (SEC) as well as amendments to such filings are available on our internet website free of charge generally within 24 hours after we file such material with the SEC. Our website address is www.lgi.com. The information on our website is not part of this Annual Report on Form 10-K and is not incorporated by reference herein.
Item 1A.    RISK FACTORS
In addition to the other information contained in this Annual Report on Form 10-K, you should consider the following risk factors in evaluating our results of operations, financial condition, business and operations or an investment in our stock.
The risk factors described in this section have been separated into four groups:
risks that relate to the competition we face and the technology used in our businesses;
risks that relate to our operating in overseas markets and being subject to foreign regulation;
risks that relate to certain financial matters; and
other risks, including risks that relate to our capitalization and the obstacles faced by anyone who may seek to acquire us. 
Although we describe below and elsewhere in this Annual Report on Form 10-K the risks we consider to be the most material, there may be other unknown or unpredictable economic, business, competitive, regulatory or other factors that also could have material adverse effects on our results of operations, financial condition, business or operations in the future. In addition, past financial performance may not be a reliable indicator of future performance and historical trends should not be used to anticipate results or trends in future periods.
If any of the events described below, individually or in combination, were to occur, our businesses, prospects, financial condition, results of operations and/or cash flows could be materially adversely affected.
Factors Relating to Competition and Technology
We operate in increasingly competitive markets, and there is a risk that we will not be able to effectively compete with other service providers. The markets for cable television, broadband internet and telephony in many of the regions in which we operate are highly competitive. In the provision of video services we face competition from DTT broadcasters, video provided over satellite platforms, networks using DSL technology, FTTx networks and, in some countries where parts of our systems are overbuilt, cable networks, among others. Our operating businesses are facing increasing competition from video services provided by or over the networks of incumbent telecommunications operators and other service providers. As the availability and speed of broadband internet increases, we also face competition from over-the-top video content providers utilizing our or our competitors' high-speed internet connections. In the provision of telephony and broadband internet services, we are experiencing increasing competition from the incumbent telecommunications operators and other service providers in each country in which we operate, as well as mobile providers of voice and data. The incumbent telecommunications operators typically dominate the market for these services and have the advantage of nationwide networks and greater resources than we have to devote to the provision of these services. Many of the incumbent operators are now offering double-play, triple-play and quadruple-play bundles of services. In many countries, we also compete with other operators using the unbundled local loop of the incumbent telecommunications operator to provide these services, other facilities-based operators and wireless providers. Developments in the DSL technology used by the

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incumbent telecommunications operators and alternative providers have improved the attractiveness of our competitor's products and services and strengthened their competitive position. Developments in wireless technology, such as WiMax and LTE (the next generation of ultra high-speed mobile data), are creating additional competitive challenges.
In some European markets, national and local government agencies may seek to become involved, either directly or indirectly, in the establishment of FTTx networks, DTT systems or other communications systems. We intend to pursue available options to restrict such involvement or to ensure that such involvement is on commercially reasonable terms. There can be no assurance, however, that we will be successful in these pursuits. As a result, we may face competition from entities not requiring a normal commercial return on their investments. In addition, we may face more vigorous competition than would have been the case if there were no government involvement.
The market for programming services is also highly competitive. Programming businesses compete with other programmers for distribution on a limited number of channels. Once distribution is obtained, program offerings must then compete for viewers and advertisers with other programming services as well as with other entertainment media, such as home video, online activities, movies, live events, radio broadcasts and print media. Technology advances, such as download speeds, VoD, interactive and mobile broadband services, have increased audience fragmentation through the number of entertainment and information delivery choices. Such increased choices could adversely affect consumer demand for services and viewing preferences. At the same time, these advances have beneficial effects for our programming businesses by increasing the available platforms for distribution of our services.
We expect the level and intensity of competition to continue to increase from both existing competitors and new market entrants as a result of changes in the regulatory framework of the industries in which we operate, advances in technology, the influx of new market entrants and strategic alliances and cooperative relationships among industry participants. Increased competition has resulted in increased customer churn, reductions of customer acquisition rates for some services and significant price competition in most of our markets. In combination with difficult economic environments, these competitive pressures could adversely impact our ability to increase or, in certain cases, maintain the revenue, average monthly subscription revenue per average RGU (ARPU), RGUs, operating cash flows, operating cash flow margins and liquidity of our operating segments.
Changes in technology may limit the competitiveness of and demand for our services. Technology in the video, telecommunications and data services industries is changing rapidly. This significantly influences the demand for the products and services that are offered by our businesses. The ability to anticipate changes in technology and consumer tastes and to develop and introduce new and enhanced products on a timely basis will affect our ability to continue to grow, increase our revenue and number of subscribers and remain competitive. New products, once marketed, may not meet consumer expectations or demand, can be subject to delays in development and may fail to operate as intended. A lack of market acceptance of new products and services which we may offer, or the development of significant competitive products or services by others, could have a material adverse impact on our revenue and operating cash flow.
Our capital expenditures may not generate a positive return. 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 and to upgrade our networks to enhance our service offerings and improve the customer experience, including expenditures for equipment and labor costs. No assurance can be given that our future capital expenditures 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.
If we are unable to obtain attractive programming on satisfactory terms for our digital cable services, the demand for our services could be reduced, thereby lowering revenue and profitability. We rely on digital programming suppliers for the bulk of our programming content. We may not be able to obtain sufficient high-quality programming for our digital cable services on satisfactory terms or at all in order to offer compelling digital cable services. This may also limit our ability to migrate customers from lower tier programming to higher tier programming, thereby inhibiting our ability to execute our business plans. Furthermore, we may not be able to obtain attractive country-specific programming for video services. We also may be placed at a competitive disadvantage when our competitors offer exclusive programming. In addition, must carry requirements may consume channel capacity otherwise available for other services. Any or all of these factors could result in reduced demand for, and lower revenue and profitability from, our digital video services.
We depend on third-party suppliers and licensors to supply necessary equipment, software and certain services required for our businesses. We rely on third-party vendors for the equipment, software and services that we require in order to provide services to our customers. Our suppliers often conduct business worldwide and their ability to meet our needs are subject to various risks, including political and economic instability, natural calamities, interruptions in transportation systems, terrorism and labor issues. As a result, we may not be able to obtain the equipment, software and services required for our businesses on a

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timely basis or on satisfactory terms. For example, due in part to the recent flooding in Thailand, we have been experiencing longer than normal lead times with respect to our customer premises and other equipment needs for certain of our operations. Any shortfall in customer premises equipment could lead to delays in connecting customers to our services, and accordingly, could adversely impact our ability to maintain or increase our RGUs, revenue and cash flows. Also, if demand exceeds the suppliers' and licensors' capacity or if they experience financial difficulties, the ability of our businesses to provide some services may be materially adversely affected, which in turn could affect our businesses' ability to attract and retain customers. Although we actively monitor the creditworthiness of our key third party suppliers and licensors, the financial failure of a key third party supplier or licensor could disrupt our operations and have an adverse impact on our revenue and cash flows.
Failure in our technology or telecommunications systems could significantly disrupt our operations, which could reduce our customer base and result in lost revenue. Our success depends, in part, on the continued and uninterrupted performance of our information technology and network systems as well as our customer service centers. The hardware supporting a large number of critical systems for our cable network in a particular country or geographic region is housed in a relatively small number of locations. Our systems are vulnerable to damage from a variety of sources, including telecommunications failures, power loss, malicious human acts and natural disasters. Moreover, despite security measures, our servers and systems are potentially vulnerable to physical or electronic break-ins, computer viruses, worms, phishing attacks and similar disruptive problems. Despite the precautions we have taken, unanticipated problems affecting our systems could cause failures in our information technology systems or disruption in the transmission of signals over our networks or similar problems. Any disruptive problem that causes loss, misappropriation, misuse or leakage of data could damage our reputation and the credibility of our operations. Further, sustained or repeated system failures that interrupt our ability to provide service to our customers or otherwise meet our business obligations in a timely manner would adversely affect our reputation and result in a loss of customers and net revenue.
Factors Relating to Overseas Operations and Foreign Regulation
Our businesses are conducted almost exclusively outside of the United States, which gives rise to numerous operational risks. Our businesses operate almost exclusively in countries outside the United States and are thereby subject to the following inherent risks:
fluctuations in foreign currency exchange rates;
difficulties in staffing and managing international operations;
potentially adverse tax consequences;
export and import restrictions, custom duties, tariffs and other trade barriers;
increases in taxes and governmental fees;
economic and political instability; and
changes in foreign and domestic laws and policies that govern operations of foreign-based companies. 
Operational risks that we may experience in certain countries include disruptions of services or loss of property or equipment that are critical to overseas businesses due to expropriation, nationalization, war, insurrection, terrorism or general social or political unrest.
We are exposed to various foreign currency exchange rate risks. We are exposed to foreign currency exchange rate risk with respect to our consolidated debt in situations where our debt is denominated in a currency other than the functional currency of the operations whose cash flows support our ability to repay or refinance such debt. Although we generally seek to match the denomination of our and our subsidiaries' borrowings with the functional currency of the operations that are supporting the respective borrowings, market conditions or other factors may cause us to enter into borrowing arrangements that are not denominated in the functional currency of the underlying operations (unmatched debt). In these cases, our policy is to provide for an economic hedge against foreign currency exchange rate movements by using cross-currency interest rate swaps to synthetically convert unmatched debt into the applicable underlying currency. At December 31, 2011, substantially all of our debt was either directly or synthetically matched to the applicable functional currencies of the underlying operations.
In addition to the exposure that results from the mismatch of our borrowings and underlying functional currencies, we are exposed to foreign currency risk to the extent that we enter into transactions denominated in currencies other than our or our subsidiaries' respective functional currencies (non-functional currency risk), such as investments in debt and equity securities of foreign subsidiaries, equipment purchases, programming contracts, notes payable and notes receivable (including intercompany amounts) that are denominated in a currency other than the applicable functional currency. Changes in exchange rates with respect

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to amounts recorded in our consolidated balance sheets related to these items will result in unrealized (based upon period-end exchange rates) or realized foreign currency transaction gains and losses upon settlement of the transactions. Moreover, to the extent that our revenue, costs and expenses are denominated in currencies other than our respective functional currencies, we will experience fluctuations in our revenue, costs and expenses solely as a result of changes in foreign currency exchange rates. In this regard, we expect that during 2012, (1) approximately 1% to 3% of our revenue, (2) approximately 4% to 6% of our aggregate operating and selling, general and administrative (SG&A) expenses (exclusive of stock-based compensation expense) and (3) approximately 12% to14% of our capital expenditures (including capital lease additions) will be denominated in non-functional currencies, including amounts denominated in (a) U.S. dollars in Chile, Europe and Argentina and (b) euros in Poland, the Czech Republic, Romania, Switzerland and Hungary. Our expectations with respect to our non-functional currency transactions in 2012 may differ from actual results. Generally, we will consider hedging non-functional currency risks when the risks arise from agreements with third parties that involve the future payment or receipt of cash or other monetary items to the extent that we can reasonably predict the timing and amount of such payments or receipts and the payments or receipts are not otherwise hedged. In this regard, we have entered into foreign currency forward contracts covering the forward purchase of the U.S. dollar, euro and British pound sterling and the forward sale of the Hungarian forint, Polish zloty, Czech koruna, euro, Swiss Franc and Chilean peso to hedge certain of these risks. Although certain non-functional currency risks related to our revenue and operating and SG&A expenses and most of the non-functional currency risks related to our capital expenditures were not hedged as of December 31, 2011, we expect to increase the use of hedging strategies during 2012 with respect to these non-functional currency risks. In addition, we have not hedged the currency risk associated with the net Australian dollar proceeds we are to receive pursuant to the Austar Transaction. For additional information concerning our foreign currency forward contracts, see note 6 to our consolidated financial statements included in Part II of this report.
We also are exposed to unfavorable and potentially volatile fluctuations of the U.S. dollar (our reporting currency) against the currencies of our operating subsidiaries and affiliates when their respective financial statements are translated into U.S. dollars for inclusion in our consolidated financial statements. Cumulative translation adjustments are recorded in accumulated other comprehensive earnings (loss) as a separate component of equity. Any increase (decrease) in the value of the U.S. dollar against any foreign currency that is the functional currency of one of our operating subsidiaries or affiliates will cause us to experience unrealized foreign currency translation losses (gains) with respect to amounts already invested in such foreign currencies. Accordingly, we may experience a negative impact on our comprehensive earnings (loss) and equity with respect to our holdings solely as a result of foreign currency translation. Our primary exposure to foreign currency risk from a foreign currency translation perspective is to the euro and, to a lesser extent, the Swiss franc, the Chilean peso and other local currencies in Europe. We generally do not hedge against the risk that we may incur non-cash losses upon the translation of the financial statements of our subsidiaries and affiliates into U.S. dollars.
Our businesses are subject to risks of adverse regulation by foreign governments. Our businesses are subject to the unique regulatory regimes of the countries in which they operate. Cable and telecommunications businesses are subject to licensing or registration eligibility rules and regulations, which vary by country. The provision of electronic communications networks and services requires our licensing from, or registration with, the appropriate regulatory authorities and, for telephony services, entrance into interconnection arrangements with the incumbent phone companies. It is possible that countries in which we operate may adopt laws and regulations regarding electronic commerce, which could dampen the growth of the internet services being offered and developed by these businesses. In a number of countries, our ability to increase the prices we charge for our cable television service or make changes to the programming packages we offer is limited by regulation or conditions imposed by competition authorities or is subject to review by regulatory authorities.
In addition, regulatory authorities may grant new licenses to third parties and, in any event, in most of our markets new entry is possible without a license, resulting in greater competition in territories where our businesses may already be active. More significantly, regulatory authorities may require us to grant third parties access to our bandwidth, frequency capacity, facilities or services to distribute their own services or resell our services to end customers. Programming businesses are subject to regulation on a country by country basis, including programming content requirements, requirements to make programming available on non-discriminatory terms, and service quality standards. Consequently, our businesses must adapt their ownership and organizational structure as well as their pricing and service offerings to satisfy the rules and regulations to which they are subject. A failure to comply with applicable rules and regulations could result in penalties, restrictions on our business or loss of required licenses or other adverse conditions.
Adverse changes in rules and regulations could:
impair our ability to use our bandwidth in ways that would generate maximum revenue and operating cash flow;
create a shortage of capacity on our network, which could limit the types and variety of services we seek to provide our customers;

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strengthen our competitors by granting them access and lowering their costs to enter into our markets; and
have a significant adverse impact on our profitability. 
Businesses, including ours, that offer multiple services, such as video distribution as well as internet and telephony, or that are vertically integrated and offer both video distribution and programming content, often face close regulatory scrutiny from competition authorities in several countries in which we operate. This is particularly the case with respect to any proposed business combinations, which will often require clearance from national competition authorities. The regulatory authorities in several countries in which we do business have considered from time to time what access rights, if any, should be afforded to third parties for use of existing cable television networks and in certain countries have imposed access obligations. This has resulted, for example, in obligations with respect to call termination for our telephony business in Europe, video “must carry” obligations in many markets in which we operate and video and broadband internet access obligations in Belgium.
When we acquire additional communications companies, these acquisitions may require the approval of governmental authorities (either at country or, in the case of the EU, European level), which can block, impose conditions on, or delay an acquisition, thus hampering our opportunities for growth, such as the delays and conditions we faced in the KBW and Aster Acquisitions.
New legislation may significantly alter the regulatory regime applicable to us, which could adversely affect our competitive position and profitability, and we may become subject to more extensive regulation if we are deemed to possess significant market power in any of the markets in which we operate. Significant changes to the existing regulatory regime applicable to the provision of cable television, telephony and internet services have been and are still being introduced. For example, in the EU a large element of regulation affecting our business derives from a number of Directives that are the basis of the regulatory regime concerning many of the services we offer across the EU. The various Directives require Member States to harmonize their laws on communications and cover such issues as access, user rights, privacy and competition. These Directives are reviewed by the EU from time to time and any changes to them could lead to substantial changes in the way in which our businesses are regulated and to which we would have to adapt. In addition, we are subject to review by competition authorities in certain countries concerning whether we exhibit significant market power. A finding of significant market power can result in our becoming subject to pricing, open access, unbundling and other requirements that could provide a more favorable operating environment for existing and potential competitors.
We cannot be certain that we will be successful in acquiring new businesses or integrating acquired businesses with our existing operations. Historically, our businesses have grown, in part, through selective acquisitions that enabled them to take advantage of existing networks, local service offerings and region-specific management expertise. We expect to seek to continue growing our businesses through acquisitions in selected markets. Our ability to acquire new businesses may be limited by many factors, including availability of financing, debt covenants, the prevalence of complex ownership structures among potential targets, government regulation and competition from other potential acquirers, primarily private equity funds. Even if we are successful in acquiring new businesses, the integration of such new businesses may present significant costs and challenges, including: realizing economies of scale in interconnection, programming and network operations; eliminating duplicative overheads; and integrating personnel, networks, financial systems and operational systems. We cannot assure you that we will be successful in acquiring new businesses or realizing the anticipated benefits of any completed acquisition, including, for example, the recently completed KBW Acquisition.
In addition, we anticipate that most, if not all, companies acquired by us will be located outside the United States. Foreign companies may not have disclosure controls and procedures or internal controls over financial reporting that are as thorough or effective as those required by U.S. securities laws. While we intend to conduct appropriate due diligence and to implement appropriate controls and procedures as we integrate acquired companies, we may not be able to certify as to the effectiveness of these companies' disclosure controls and procedures or internal controls over financial reporting until we have fully integrated them.
We may have exposure to additional tax liabilities. We are subject to income taxes as well as non-income based taxes, in both the United States and various foreign jurisdictions. Significant judgment is required in determining our worldwide provision for income taxes and other tax liabilities. In the ordinary course of our business, there are many transactions and calculations where the ultimate tax determination is uncertain. Although we believe that our tax estimates are reasonable, there is no assurance that the final determination of tax audits or tax disputes will not be different from what is reflected in our historical income tax provisions and accruals. We are also subject to non-income based taxes, such as payroll, sales, use, value-added, net worth, property and goods and services taxes, in both the United States and various foreign jurisdictions. We are regularly under audit by tax authorities with respect to these non-income based taxes in various jurisdictions. The ultimate outcome of the income tax and non-income based taxes may differ from the amounts recorded in our financial statements and may materially affect our financial results in the period or periods for which determination is made.

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Although substantially all of our revenue and operating income is generated outside the United States, we are subject to potential current U.S. income tax on this income due to our being a U.S. corporation. Our worldwide effective tax rate is reduced under a provision in U.S. tax law that defers the imposition of U.S. tax on certain foreign active income until that income is repatriated to the United States. Any repatriation of assets currently held in foreign jurisdictions or recognition of foreign income that fails to meet the U.S. tax requirements related to deferral of U.S. income tax may result in a higher effective tax rate for the company. This includes what is typically referred to as “Subpart F Income,” which generally includes, but is not limited to, such items as interest, dividends, royalties, gains from the disposition of certain property, certain currency exchange gains in excess of currency exchange losses, and certain related party sales and services income. While the company may mitigate this increase in its effective tax rate through claiming a foreign tax credit against its U.S. federal income taxes or potentially have foreign or U.S. taxes reduced under applicable income tax treaties, we are subject to various limitations on claiming foreign tax credits or we may lack treaty protections in certain jurisdictions that will potentially limit any reduction of the increased effective tax rate.
We are subject to changing tax laws, treaties and regulations in and between countries in which we operate, including treaties between the United States and other nations. A change in these tax laws, treaties or regulations, including those in and involving the United States, or in the interpretation thereof, could result in a materially higher income or non-income tax expense. Also, various income tax proposals in the countries in which we operate, such as those relating to fundamental U.S. international tax reform and measures in response to the economic uncertainty in certain European jurisdictions in which we operate, could result in changes to the existing tax laws on which our deferred taxes are calculated. We are unable to predict whether any of these or other proposals in the United States or foreign jurisdictions will ultimately be enacted. Any such material changes could negatively impact our business.
Factors Relating to Certain Financial Matters
Our substantial leverage could limit our ability to obtain additional financing and have other adverse effects. We seek to maintain our debt at levels that provide for attractive equity returns without assuming undue risk. In this regard, we strive to cause our operating subsidiaries to maintain their debt at levels that result in a consolidated debt balance that is between four and five times our consolidated operating cash flow (as defined in note 17 to our consolidated financial statements included in Part II of this report). As a result, we are highly leveraged. At December 31, 2011, our outstanding consolidated debt and capital lease obligations were $24.8 billion, of which $184.1 million is due over the next 12 months and $24.2 billion is due in 2014 or thereafter. We believe that we have sufficient resources to repay or refinance the current portion of our debt and capital lease obligations and to fund our foreseeable liquidity requirements during the next 12 months.  As our debt maturities grow in later years, however, we anticipate that we will seek to refinance or otherwise extend our debt maturities.  In this regard, we completed refinancing transactions in 2011 and early 2012 that, among other matters, resulted in the extension of certain of our subsidiaries' debt maturities. No assurance can be given that we will be able to complete additional refinancing transactions or otherwise extend our debt maturities. In this regard, it is difficult to predict how political, economic and regulatory developments will impact the credit and equity markets we access and our future financial position.
Our ability to service or refinance our debt and to maintain compliance with the financial covenants in the credit agreements and indentures of certain of our subsidiaries is dependent primarily on our ability to maintain or increase our cash provided by operations and to achieve adequate returns on our capital expenditures and acquisitions. In this regard, if the operating cash flow of our subsidiary, UPC Broadband Holding, were to decline, we could be required to partially repay or limit the borrowings under the UPC Broadband Holding Bank Facility in order to maintain compliance with applicable covenants. Accordingly, if our cash provided by operations declines or we encounter other material liquidity requirements, we may be required to seek additional debt or equity financing in order to meet our debt obligations and other liquidity requirements as they come due. In addition, our current debt levels may limit our ability to incur additional debt financing to fund working capital needs, acquisitions, capital expenditures, or other general corporate requirements. We can give no assurance that any additional debt or equity financing will be available on terms that are as favorable as the terms of our existing debt or at all. During 2011, we purchased $912.3 million (including direct acquisition costs) of LGI Series A and Series C common stock. Any cash used by our company in connection with any future purchases of our common stock would not be available for other purposes, including the repayment of debt.
Certain of our subsidiaries are subject to various debt instruments that contain restrictions on how we finance our operations and operate our businesses, which could impede our ability to engage in beneficial transactions. Certain of our subsidiaries are subject to significant financial and operating restrictions contained in outstanding credit agreements, indentures and similar instruments of indebtedness. These restrictions will affect, and in some cases significantly limit or prohibit, among other things, the ability of those subsidiaries to:
incur or guarantee additional indebtedness;
pay dividends or make other upstream distributions;

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make investments;
transfer, sell or dispose of certain assets, including subsidiary stock;
merge or consolidate with other entities;
engage in transactions with us or other affiliates; or
create liens on their assets. 
As a result of restrictions contained in these credit facilities, the companies party thereto, and their subsidiaries, could be unable to obtain additional capital in the future to:
fund capital expenditures or acquisitions that could improve their value;
meet their loan and capital commitments to their business affiliates;
invest in companies in which they would otherwise invest;
fund any operating losses or future development of their business affiliates;
obtain lower borrowing costs that are available from secured lenders or engage in advantageous transactions that monetize their assets; or
conduct other necessary or prudent corporate activities. 
In addition, most of the credit agreements to which these subsidiaries are parties include financial covenants that require them to maintain certain financial ratios, including ratios of total debt to operating cash flow and operating cash flow to interest expense. Their ability to meet these financial covenants may be affected by adverse economic, competitive, or regulatory developments and other events beyond their control, and we cannot assure you that these financial covenants will be met. In the event of a default under such subsidiaries' credit agreements or indentures, the lenders may accelerate the maturity of the indebtedness under those agreements or indentures, which could result in a default under other outstanding credit facilities or indentures. We cannot assure you that any of these subsidiaries will have sufficient assets to pay indebtedness outstanding under their credit agreements and indentures. Any refinancing of this indebtedness is likely to contain similar restrictive covenants.
We are exposed to interest rate risks. Shifts in such rates may adversely affect the debt service obligation of our subsidiaries. We are exposed to the risk of fluctuations in interest rates, primarily through the credit facilities of certain of our subsidiaries, which are indexed to EURIBOR, LIBOR or other base rates. Although we enter into various derivative transactions to manage exposure to movements in interest rates, there can be no assurance that we will be able to continue to do so at a reasonable cost or at all. If we are unable to effectively manage our interest rate exposure through derivative transactions, any increase in market interest rates would increase our interest rate exposure and debt service obligations, which would exacerbate the risks associated with our leveraged capital structure.
We are subject to increasing operating costs and inflation risks which may adversely affect our earnings. While our operations attempt to increase our subscription rates to offset increases in operating costs, there is no assurance that they will be able to do so. In certain countries in which we operate, our ability to increase subscription rates is subject to regulatory controls. Also, our ability to increase subscription rates may be constrained by competitive pressures. Therefore, operating costs may rise faster than associated revenue, resulting in a material negative impact on our cash flow and net earnings (loss). We are also impacted by inflationary increases in salaries, wages, benefits and other administrative costs in certain of our markets.
Continuing uncertainties and challenging conditions in the global economy and in the countries in which we operate may adversely impact our business, financial condition and results of operations.  The current macroeconomic environment is highly volatile, and continuing instability in global markets, including the ongoing turmoil in Europe related to sovereign debt issues and the stability of the euro, has contributed to a global economic downturn. Future developments are dependent upon a number of political and economic factors, including the effectiveness of measures by the European Commission to address debt burdens of certain countries in Europe and the overall stability of the eurozone. As a result, we cannot predict how long these challenging conditions will exist or the extent to which the markets in which we operate may further deteriorate.
These unfavorable economic conditions may impact a significant number of our subscribers and, as a result, it may be (1) more difficult for us to attract new subscribers, (2) more likely that subscribers will downgrade or disconnect their services and (3) more difficult for us to maintain ARPUs at existing levels. Countries may also seek new or increased revenue sources due to fiscal

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deficits. Such actions may further adversely affect our company. Accordingly, our ability to increase, or, in certain cases, maintain, the revenue, ARPUs, RGUs, operating cash flow, operating cash flow margins and liquidity of our operating segments could be adversely affected if the macroeconomic environment remains uncertain or declines further. We are currently unable to predict the extent of any of these potential adverse effects.
We are exposed to sovereign debt and currency instability risks in Europe that could have an adverse impact on our liquidity, financial condition and cash flows. Our operations are subject to macro-economic and political risks that are outside of our control.  For example, high levels of sovereign debt in the U.S. and certain European countries (including Ireland and Hungary), combined with weak growth and high unemployment, could lead to fiscal reforms (including austerity measures), sovereign debt restructurings, currency instability, increased counterparty credit risk, high levels of volatility and, potentially, disruptions in the credit and equity markets, as well as other outcomes that might adversely impact our company. With regard to currency instability issues, concerns exist in the eurozone with respect to individual macro-fundamentals on a country-by-country basis, as well as with respect to the overall stability of the EU and the suitability of a single currency to appropriately deal with specific fiscal management and sovereign debt issues in individual eurozone countries. The realization of these concerns could lead to the exit of one or more countries from the EU and the re-introduction of individual currencies in these countries, or, in more extreme circumstances, the possible dissolution of the euro entirely, which could result in the redenomination of a portion, or, in the extreme case, all of our euro denominated assets, liabilities and cash flows to the new currency of the country in which they originated. This could result in a mismatch in the currencies of our assets, liabilities and cash flows. Any such mismatch, together with the capital market disruption that would likely accompany any such redenomination event, could have a material adverse impact on our liquidity and financial condition. Furthermore, any redenomination event would likely be accompanied by significant economic dislocation, particularly within the eurozone countries, which in turn could have an adverse impact on demand for our services, and accordingly, on our revenue and cash flows. Moreover, any changes from euro to non-euro currencies within the countries in which we operate would require us to modify our billing and other financial systems. No assurance can be given that any required modifications could be made within a timeframe that would allow us to timely bill our customers or prepare and file required financial reports. In light of the significant exposure that we have to the euro through our euro-denominated borrowings, derivative instruments, cash balances and cash flows, a redenomination event could have a material adverse impact on our company.
We may not freely access the cash of our operating companies. Our operations are conducted through our subsidiaries. Our current sources of corporate liquidity include (1) our cash and cash equivalents and (2) interest and dividend income received on our cash and cash equivalents and investments. From time to time, we also receive (1) proceeds in the form of distributions or loan repayments from our subsidiaries or affiliates, (2) proceeds upon the disposition of investments and other assets, (3) proceeds received in connection with the incurrence of debt or the issuance of equity securities and (4) proceeds received upon the exercise of stock options. The ability of our operating subsidiaries to pay dividends or to make other payments or advances to us depends on their individual operating results and any statutory, regulatory or contractual restrictions to which they may be or may become subject and in some cases our receipt of such payments or advances may be limited due to tax considerations or the presence of noncontrolling interests. Most of our operating subsidiaries are subject to credit agreements or indentures that restrict sales of assets and prohibit or limit the payment of dividends or the making of distributions, loans or advances to stockholders and partners, including us. In addition, because these subsidiaries are separate and distinct legal entities they have no obligation to provide us funds for payment obligations, whether by dividends, distributions, loans or other payments. With respect to those companies in which we have less than a majority voting interest, we do not have sufficient voting control to cause those companies to pay dividends or make other payments or advances to any of their partners or stockholders, including us.
We are exposed to the risk of default by the counterparties to our derivative and other financial instruments, undrawn debt facilities and cash investments. Although we seek to manage the credit risks associated with our derivative and other financial instruments, cash investments and undrawn debt facilities, we are exposed to the risk that our counterparties could default on their obligations to us. Also, even though we regularly review our credit exposures, defaults may arise from events or circumstances that are difficult to detect or foresee. At December 31, 2011, our exposure to counterparty credit risk included (1) derivative assets with a fair value of $708.8 million, (2) cash and cash equivalent and restricted cash balances of $1,760.5 million and (3) aggregate undrawn debt facilities of $1,857.7 million. While we currently have no specific concerns about the creditworthiness of any counterparty for which we have material credit risk exposures, the current economic conditions and uncertainties in global financial markets have increased the credit risk of our counterparties and we cannot rule out the possibility that one or more of our counterparties could fail or otherwise be unable to meet its obligations to us. Any such instance could have an adverse effect on our cash flows, results of operations and financial condition. In this regard, (1) additional financial institution failures could reduce amounts available under committed credit facilities, adversely impact our ability to access cash deposited with any failed financial institution and cause a default under one or more derivative contracts, and (2) further deterioration in the credit markets could adversely impact our ability to access debt financing on favorable terms, or at all.
Under our derivative contracts, it is generally only the non-defaulting party that has a contractual option to exercise early termination rights upon the default of the other counterparty and to set off other liabilities against sums due upon such termination.

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In an insolvency of a derivative counterparty under the laws of certain jurisdictions, however, the defaulting counterparty or its insolvency representatives may be able to compel the termination of one or more derivative contracts and trigger early termination payment liabilities payable by us, reflecting any mark-to-market value of the contracts for the counterparty. Alternatively, or in addition, the insolvency laws of certain jurisdictions may require the mandatory set-off of amounts due under such derivative contracts against present and future liabilities owed to us under other contracts between us and the relevant counterparty. Accordingly, it is possible that we may be subject to obligations to make payments, or may have present or future liabilities owed to us partially or fully discharged by set-off as a result of such obligations, in the event of the insolvency of a derivative counterparty, even though it is the counterparty that is in default and not us. To the extent that we are required to make such payments, our ability to do so will depend on our liquidity and capital resources at the time. In an insolvency of a defaulting counterparty, we will be an unsecured creditor in respect of any amount owed to us by the defaulting counterparty, except to the extent of the value of any collateral we have obtained from that counterparty.
The risks we would face in the event of a default by a counterparty to one of our derivative instruments might be eliminated or substantially mitigated if we were able to novate the relevant derivative contracts to a new counterparty following the default of our counterparty. While we anticipate that, in the event of the insolvency of one of our derivative counterparties, we would seek to effect such novations, no assurance can be given that we would obtain the necessary consents to do so or that we would be able to do so on terms or pricing that would be acceptable to us or that any such novation would not result in substantial costs to us. Furthermore, the underlying risks that are the subject of the relevant derivative contracts would no longer be effectively hedged due to the insolvency of our counterparty, unless and until we novate or replace the derivative contract.
The liquidity and value of our interests in our subsidiaries may be adversely affected by stockholder agreements and similar agreements to which we are a party. We own equity interests in a variety of international broadband communications and programming businesses. Certain of these equity interests are held pursuant to stockholder agreements, partnership agreements and other instruments and agreements that contain provisions that affect the liquidity, and therefore the realizable value, of those interests. Most of these agreements subject the transfer of such equity interests to consent rights or rights of first refusal of the other stockholders or partners. In certain cases, a change in control of the company or the subsidiary holding the equity interest will give rise to rights or remedies exercisable by other stockholders or partners. Some of our subsidiaries are parties to loan agreements that restrict changes in ownership of the borrower without the consent of the lenders. All of these provisions will restrict the ability to sell those equity interests and may adversely affect the prices at which those interests may be sold.
We may not report net earnings. We reported losses from continuing operations of $807.5 million, $953.7 million and $99.8 million during 2011, 2010 and 2009, respectively. In light of our historical financial performance, we cannot assure you that we will report net earnings in the near future or ever.  
Other Factors
The loss of certain key personnel could harm our business. We have experienced employees at both the corporate and operational levels who possess substantial knowledge of our business and operations. We cannot assure you that we will be successful in retaining their services or that we would be successful in hiring and training suitable replacements without undue costs or delays. As a result, the loss of any of these key employees could cause significant disruptions in our business operations, which could materially adversely affect our results of operations.
John C. Malone has significant voting power with respect to corporate matters considered by our stockholders. John C. Malone beneficially owns outstanding shares of our common stock representing 36% of our aggregate voting power as of February 16, 2012. By virtue of Mr. Malone's voting power in our company, as well as his position as Chairman of our board of directors, Mr. Malone may have significant influence over the outcome of any corporate transaction or other matters submitted to our stockholders for approval. Mr. Malone's rights to vote or dispose of his equity interests in our company are not subject to any restrictions in favor of us other than as may be required by applicable law and except for customary transfer restrictions pursuant to equity award agreements.
It may be difficult for a third-party to acquire us, even if doing so may be beneficial to our stockholders. Certain provisions of our restated certificate of incorporation and bylaws may discourage, delay, or prevent a change in control of our company that a stockholder may consider favorable. These provisions include the following:
authorizing a capital structure with multiple series of common stock: a Series B that entitles the holders to 10 votes per share; a Series A that entitles the holders to one vote per share; and a Series C that, except as otherwise required by applicable law, entitles the holder to no voting rights;
authorizing the issuance of “blank check” preferred stock, which could be issued by our board of directors to increase the number of outstanding shares and thwart a takeover attempt;

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classifying our board of directors with staggered three-year terms, which may lengthen the time required to gain control of our board of directors;
limiting who may call special meetings of stockholders;
prohibiting stockholder action by written consent, thereby requiring all stockholder actions to be taken at a meeting of the stockholders;
establishing advance notice requirements for nominations of candidates for election to our board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings;
requiring stockholder approval by holders of at least 80% of the voting power of our outstanding common stock or the approval by at least 75% of our board of directors with respect to certain extraordinary matters, such as a merger or consolidation of our company, a sale of all or substantially all of our assets, or an amendment to our restated certificate of incorporation or bylaws; and
the existence of authorized and unissued stock, which would allow our board of directors to issue shares to persons friendly to current management, thereby protecting the continuity of our management, or which could be used to dilute the stock ownership of persons seeking to obtain control of our company. 
Change in control provisions in our incentive plan and related award agreements may also discourage, delay, or prevent a change in control of our company, even if such change of control would be in the best interests of our stockholders.
Our ability to exercise control over certain of our subsidiaries may be, in some cases, dependent upon the consent and co-operation of other equity participants who are not under our control. At December 31, 2011, we had continuing operations in 13 countries through our subsidiaries. Our ownership participation in each of these subsidiaries varies from market to market, and in certain countries we have agreements with minority shareholders, which provide these minority shareholders with different rights and the ability to block transactions or decisions that we would otherwise undertake. Our ability to withdraw funds, including dividends, from our participation in, and to exercise management control over, certain of these subsidiaries and investments depends on the consent of the other equity participants in these subsidiaries. Although the terms of our investments vary, our operations may be affected if disagreements develop with other equity participants in our subsidiaries. Failure to resolve such disputes could restrict payments to us and have an adverse effect on our business operations.
Item 1B.    UNRESOLVED STAFF COMMENTS
None.
Item 2.    PROPERTIES
During 2011, we leased our executive offices in Englewood, Colorado. All of our other real or personal property is owned or leased by our subsidiaries and affiliates.
Our subsidiaries and affiliates own or lease the fixed assets necessary for the operation of their respective businesses, including office space, transponder space, headend facilities, rights of way, cable television and telecommunications distribution equipment, telecommunications switches and customer premises equipment and other property necessary for their operations. The physical components of their broadband networks require maintenance and periodic upgrades to support the new services and products they introduce. Subject to these maintenance and upgrade activities, our management believes that our current facilities are suitable and adequate for our business operations for the foreseeable future.
Item 3.    LEGAL PROCEEDINGS
From time to time, our subsidiaries and affiliates have become involved in litigation relating to claims arising out of their operations in the normal course of business. The following is a description of legal proceedings to which certain of our subsidiaries are parties outside the normal course of business that were material at the time originally reported.
Cignal. On April 26, 2002, Liberty Global Europe received a notice that certain former shareholders of Cignal Global Communications (Cignal) filed a lawsuit (the 2002 Cignal Action) against Liberty Global Europe in the District Court in Amsterdam, the Netherlands, claiming damages for Liberty Global Europe's alleged failure to honor certain option rights that were granted to those shareholders pursuant to a shareholders agreement entered into in connection with the acquisition of Cignal by Liberty Global Europe's subsidiary, Priority Telecom NV (Priority Telecom). The shareholders agreement provided that in the absence of an initial public offering (IPO), as defined in the shareholders agreement, of shares of Priority Telecom by October 1, 2001, the

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Cignal shareholders would be entitled until October 31, 2001, to exchange their Priority Telecom shares into shares of Liberty Global Europe, with a cash equivalent value of $200 million in the aggregate, or cash at Liberty Global Europe's discretion. Liberty Global Europe believes that it complied in full with its obligations to the Cignal shareholders through the successful completion of the IPO of Priority Telecom on September 27, 2001, and accordingly, the option rights were not exercisable.
On May 4, 2005, the District Court rendered its decision in the 2002 Cignal Action dismissing all claims of the former Cignal shareholders. On August 2, 2005, an appeal against the District Court decision was filed with the Court of Appeals in Amsterdam. Subsequently, when the grounds of appeal were filed in November 2005, nine individual plaintiffs, rather than all former Cignal shareholders, continued to pursue their claims. Based on the share ownership information provided by the nine plaintiffs, the damage claims remaining subject to the 2002 Cignal Action are approximately $28 million in the aggregate before statutory interest. On September 13, 2007, the Court of Appeals in Amsterdam rendered its decision that no IPO within the meaning of the shareholders agreement had been realized and accordingly the plaintiffs should have been allowed to exercise their option rights. The Court of Appeals in Amsterdam gave the parties leave to appeal to the Dutch Supreme Court and deferred all further decisions and actions, including the calculation and substantiation of the damages claimed by the plaintiffs, pending such appeal. Liberty Global Europe filed the appeal with the Dutch Supreme Court on December 13, 2007. On February 15, 2008, the plaintiffs filed a conditional appeal against the decision with the Dutch Supreme Court, challenging certain aspects of the decision of the Court of Appeals in Amsterdam in the event that Liberty Global Europe's appeal was not dismissed by the Dutch Supreme Court. On April 9, 2010, the Dutch Supreme Court issued its decision in which it honored the appeal of Liberty Global Europe, dismissed the plaintiffs' conditional appeal and referred the case to the Court of Appeals in The Hague. It is unclear whether the Cignal shareholders will request the Court of Appeals in The Hague to render a new decision.
On June 13, 2006, Liberty Global Europe, Priority Telecom, Euronext NV and Euronext Amsterdam NV were each served with a summons for a new action (the 2006 Cignal Action) purportedly on behalf of all other former Cignal shareholders and provisionally for the nine plaintiffs in the 2002 Cignal Action. The 2006 Cignal Action claims, among other things, that the listing of Priority Telecom on Euronext Amsterdam NV in September 2001 did not meet the requirements of the applicable listing rules and, accordingly, that the IPO was not valid and did not satisfy Liberty Global Europe's obligations to the Cignal shareholders. Aggregate claims of $200 million, plus statutory interest, are asserted in this action, which amount includes the $28 million provisionally claimed by the nine plaintiffs in the 2002 Cignal Action. On December 19, 2007, the District Court rendered its decision dismissing the plaintiffs' claims against Liberty Global Europe and the other defendants. The plaintiffs appealed the decision of the District Court to the Court of Appeals in Amsterdam. On December 10, 2009, the Court of Appeals in Amsterdam issued a partial decision holding that Priority Telecom was not liable to the Cignal shareholders, but postponed its decision with respect to the other defendants pending receipt of the decision of the Dutch Supreme Court. The Dutch Supreme Court's April 9, 2010 decision was delivered to the Court of Appeals in Amsterdam and, on September 6, 2011, the Court of Appeals in Amsterdam confirmed the decision of the District Court and dismissed all claims of the former Cignal shareholders. On December 6, 2011, the Cignal shareholders appealed the September 6, 2011 decision to the Dutch Supreme Court.

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PART II

Item 5.
MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

General

The capitalized terms used in PART II of this Annual Report on Form 10-K are defined in the notes to our consolidated financial statements. In the following text, the terms, “we,” “our,” “our company” and “us” may refer, as the context requires, to LGI or collectively to LGI and its predecessors and subsidiaries.

Market Information

We have three series of common stock, LGI Series A, Series B and Series C, that trade on the NASDAQ Global Select Market under the symbols “LBTYA,” “LBTYB” and “LBTYK,” respectively. The following table sets forth the range of high and low sales prices of shares of LGI Series A, Series B and Series C common stock for the periods indicated:
 
 
 
Series A
 
Series B
 
Series C
 
 
High
 
Low
 
High
 
Low
 
High
 
Low
 
 
 
 
 
 
 
 
 
 
 
 
 
Year ended December 31, 2011
 
 
 
 
 
 
 
 
 
 
 
 
First quarter
 
$44.32
 
$35.41
 
$43.87
 
$35.80
 
$43.10
 
$34.00
Second quarter
 
$47.30
 
$39.17
 
$47.07
 
$38.11
 
$45.43
 
$37.52
Third quarter
 
$47.31
 
$33.27
 
$46.64
 
$34.38
 
$44.73
 
$31.82
Fourth quarter
 
$43.23
 
$32.06
 
$43.28
 
$39.37
 
$41.25
 
$36.60
 
 
 
 
 
 
 
 
 
 
 
 
 
Year ended December 31, 2010
 
 
 
 
 
 
 
 
 
 
 
 
First quarter
 
$29.47
 
$21.82
 
$29.46
 
$21.89
 
$29.05
 
$21.76
Second quarter
 
$29.85
 
$22.78
 
$29.64
 
$23.41
 
$29.56
 
$22.57
Third quarter
 
$31.20
 
$25.18
 
$32.59
 
$26.20
 
$30.95
 
$25.13
Fourth quarter
 
$40.86
 
$30.42
 
$41.18
 
$30.92
 
$38.47
 
$30.19

Holders

As of February 16, 2012, there were 2,029, 125 and 2,075 record holders of LGI Series A, Series B and Series C common stock, respectively (which amounts do not include the number of shareholders whose shares are nominally held by banks, brokerage houses or other institutions, but include each such institution as one record holder).

Dividends

We have not paid any cash dividends on LGI Series A, Series B and Series C common stock, and we have no present intention of so doing. Payment of cash dividends, if any, in the future will be determined by our Board of Directors in light of our earnings, financial condition and other relevant considerations including applicable Delaware law. There are currently no contractual restrictions on our ability to pay dividends in cash or stock, although credit facilities to which certain of our subsidiaries are parties would restrict our ability to access their cash for, among other things, our payment of cash dividends.

Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities

None.
 

II-1


Issuer Purchase of Equity Securities

The following table sets forth information concerning our company’s purchase of its own equity securities during the three months ended December 31, 2011
Period
 
Total number of
shares  purchased
 
Average price
paid per  share (a)
 
Total number of shares
purchased as part of
publicly  announced
plans or programs
 
Approximate
dollar value
of shares
that may
yet  be
purchased
under the
plans or
programs
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
October 1, 2011 through October 31, 2011
 
Series A:
 

 
Series A:
 
$

 
Series A:
 

 
 
 
 
Series C:
 
1,138,300

 
Series C:
 
$
36.88

 
Series C:
 
1,138,300

 
(b)
November 1, 2011 through November 30, 2011
 
Series A:
 

 
Series A:
 
$

 
Series A:
 

 
 
 
 
Series C:
 
1,079,400

 
Series C:
 
$
38.88

 
Series C:
 
1,079,400

 
(b)
December 1, 2011 through December 31, 2011
 
Series A:
 

 
Series A:
 
$

 
Series A:
 

 
 
 
 
Series C:
 
990,000

 
Series C:
 
$
38.61

 
Series C:
 
990,000

 
(b)
Total — October 1, 2011 through December 31, 2011
 
Series A:
 

 
Series A:
 
$

 
Series A:
 

 
 
 
 
Series C:
 
3,207,700

 
Series C:
 
$
38.09

 
Series C:
 
3,207,700

 
(b)
_______________ 
 
(a)
Average price paid per share includes direct acquisition costs where applicable.

(b)
As of December 31, 2011, the remaining amount authorized for stock repurchases was $1,011.1 million. This amount reflects the authorization on December 15, 2011 of a new $1.0 billion equity repurchase program. For additional information, see note 11 to our consolidated financial statements.


 


II-2


Stock Performance Graph
The following graph compares the change from January 1, 2007 to December 31, 2011 in the cumulative total stockholder return (assuming reinvestment of dividends, as applicable) on LGI Series A common stock, LGI Series B common stock, LGI Series C common stock, the NASDAQ Telecommunications Index and the NASDAQ Composite Index. The graph assumes that $100 was invested on January 1, 2007.
 
 
As of December 31,
 
 
2007
 
2008
 
2009
 
2010
 
2011