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TMCNet:  LIBERTY GLOBAL PLC - 10-K - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

[February 13, 2014]

LIBERTY GLOBAL PLC - 10-K - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(Edgar Glimpses Via Acquire Media NewsEdge) The following discussion and analysis is intended to assist in providing an understanding of our financial condition, changes in financial condition and results of operations and should be read in conjunction with our consolidated financial statements. This discussion is organized as follows: • Overview. This section provides a general description of our business and recent events.


• Results of Operations. This section provides an analysis of our results of operations for the years ended December 31, 2013, 2012 and 2011.

• Liquidity and Capital Resources. This section provides an analysis of our corporate and subsidiary liquidity, consolidated statements of cash flows and contractual commitments.

• Critical Accounting Policies, Judgments and Estimates. This section discusses those material accounting policies that contain uncertainties and require significant judgment in their application.

• Quantitative and Qualitative Disclosures about Market Risk. This section provides discussion and analysis of the foreign currency, interest rate and other market risk that our company faces.

Unless otherwise indicated, convenience translations into U.S. dollars are calculated, and operational data (including subscriber statistics) are presented, as of December 31, 2013.

Overview We are an international provider of video, broadband internet, fixed-line telephony and mobile services with consolidated operations at December 31, 2013 in 14 countries. Through Virgin Media, Unitymedia KabelBW and Telenet, we provide video, broadband internet, fixed-line telephony and mobile services in the U.K., Germany and Belgium, respectively. Through UPC Holding, we provide (i) video, broadband internet and fixed-line telephony services in nine European countries and (ii) mobile services in three European countries. The operations of UPC Holding, Virgin Media, Unitymedia KabelBW and Telenet are collectively referred to herein as the "European Operations Division." Our broadband communications operations in Chile are provided through VTR GlobalCom. Through VTR Wireless, we also offer mobile services in Chile. The operations of VTR GlobalCom and VTR Wireless are collectively referred to herein as the "VTR Group." For information regarding strategic changes that we have implemented with regard to the mobile operations of VTR Wireless, see note 8 to our consolidated financial statements. Our operations also include the broadband communications operations of Liberty Puerto Rico, an entity in which we hold a 60% ownership interest.

As further described in note 19 to our consolidated financial statements, VTR Finance and certain of its subsidiaries (including VTR GlobalCom) was extracted from the UPC Holding borrowing group and combined with VTR Wireless to form a new borrowing group in January 2014. In addition, we are currently exploring opportunities with respect to our Latin American operations (which include the VTR Group and Liberty Puerto Rico), including a possible spin-off of those operations to our shareholders.

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

We have launched "Horizon TV" in the Netherlands, Switzerland, Ireland and Germany. Horizon TV is a family of media products that allows customers to view and share content across the television, computer, tablet and smartphone.

Horizon TV is powered by a user interface that provides customers a seamless intuitive way to access linear, time-shifted, on-demand and web-based content on the television. It also features an advanced set-top box that delivers not only video, but also internet and voice connections along with a wireless network for the home. For our Horizon TV customers, we also offer applications for various services. We intend to (i) expand the availability of Horizon TV to other markets within our footprint and (ii) continue to improve the Horizon TV user experience with new functionality and software updates.

Although our digital television signals are encrypted in many of the countries in which we operate, our basic digital television channels in Germany, the Netherlands, Switzerland, Austria, Romania, the Czech Republic and Poland are unencrypted. Where our basic digital television channels are unencrypted, subscribers who have the necessary equipment and who pay the monthly subscription fee for our analog package are able to watch our basic digital television channels. Regardless of whether basic digital II-5 -------------------------------------------------------------------------------- television channels are offered on an unencrypted basis, expanded channel packages and premium channels and services continue to be available for an incremental monthly fee in all of our markets. In markets where we introduce unencryption, we generally expect to experience a positive impact on our subscriber disconnect levels and a somewhat negative impact on demand for lower tiers of digital cable services.

We offer broadband internet services in all of our broadband communications markets. Our residential subscribers generally access the internet via cable modems connected to their personal computers at various download speeds ranging up to 250 Mbps (500 Mbps in a limited area), depending on the market and the tier of service selected. We determine pricing for each tier of broadband internet service through analysis of speed, data limits, market conditions and other factors.

We offer fixed-line telephony services in all of our broadband communications markets, primarily using voice-over-internet-protocol or "VoIP" technology. In addition, we offer mobile services using third-party networks in the U.K., Belgium, Germany, Chile and, to a lesser extent, Poland, Hungary and the Netherlands.

We have completed a number of transactions that impact the comparability of our 2013, 2012 and 2011 results of operations. The most significant of these transactions were the Virgin Media Acquisition on June 7, 2013, the Puerto Rico Transaction on November 8, 2012, the KBW Acquisition on December 15, 2011, the Aster Acquisition on September 16, 2011 and the Unitymedia Acquisition on January 28, 2010. We also completed a number of less significant acquisitions during 2013, 2012 and 2011.

On January 31, 2014, we completed the Chellomedia Transaction and in May 2012, we completed the sale of Austar. We have accounted for the Chellomedia Disposal Group and Austar as discontinued operations in our consolidated financial statements. Accordingly, our consolidated balance sheet as of December 31, 2013 has been reclassified to present the Chellomedia Disposal Group as a discontinued operation and our consolidated statements of operations and cash flows have been reclassified to present the Chellomedia Disposal Group and Austar as discontinued operations for all applicable periods presented. In the following discussion and analysis, the operating statistics, results of operations, cash flows and financial condition that we present and discuss are those of our continuing operations unless otherwise indicated.

For further information regarding our completed acquisitions and dispositions, see notes 3 and 4 to our consolidated financial statements.

From a strategic perspective, we are seeking to build broadband communications, mobile and DTH businesses that have strong prospects for future growth in revenue, operating cash flow (as defined in note 17 to our consolidated financial statements) and free cash flow (as defined below under Liquidity and Capital Resources - Free Cash Flow). As discussed further under Liquidity and Capital Resources - Capitalization below, we also seek to maintain our debt at levels that provide for attractive equity returns without assuming undue risk.

We strive to achieve organic revenue and customer growth in our operations by developing and marketing bundled entertainment and information and communications services, and extending and upgrading the quality of our networks where appropriate. As we use the term, organic growth excludes foreign currency translation effects (FX) and the estimated impact of acquisitions. While we seek to obtain new customers, we also seek to maximize the average revenue we receive from each household by increasing the penetration of our digital cable, broadband internet, fixed-line telephony and mobile services with existing customers through product bundling and upselling.

Through our subsidiaries and affiliates, we are the largest international broadband communications operator in terms of customers. At December 31, 2013, our continuing operations owned and operated networks that passed 47,239,800 homes and served 48,267,800 RGUs, consisting of 21,787,600 video subscribers, 14,365,000 broadband internet subscribers and 12,115,200 fixed-line telephony subscribers. In addition, at December 31, 2013, we served 4,078,700 mobile subscribers. In connection with the Virgin Media Acquisition, we began excluding, effective April 1, 2013, our DSL internet RGUs and DSL telephony RGUs in Austria from our RGU counts, consistent with how we are treating similar DSL subscribers within our U.K. segment. This adjustment reduced our customer relationships by 85,000 and our broadband internet and telephony RGUs by 80,000 and 58,000, respectively.

Including the effects of acquisitions, our continuing operations added a total of 13,587,300 RGUs during 2013. Excluding the effects of acquisitions (RGUs added on the acquisition date), but including post-acquisition date RGU additions, our continuing operations added 1,294,300 RGUs on an organic basis during 2013. The organic RGU growth during 2013 is attributable to the growth of our (i) broadband internet services, which added 866,800 RGUs, (ii) fixed-line telephony services, which added 718,400 RGUs, (iii) digital cable services, which added 460,400 RGUs, and (iv) DTH video services, which added 68,500 RGUs.

The growth of our broadband internet, fixed-line telephony, digital cable and DTH video services was partially offset by a decline in II-6 --------------------------------------------------------------------------------our analog cable RGUs of 812,200 and a less significant decline in our multi-channel multi-point (microwave) distribution system (MMDS) video RGUs.

We are experiencing significant competition from (i) incumbent telecommunications operators (particularly in the Netherlands and, to a lesser extent, Switzerland, where the incumbent telecommunications operators are overbuilding our networks with fiber-to-the-home, -cabinet, -building or -node (referred to herein as FTTx) and advanced DSL technologies), (ii) DTH operators and/or (iii) other providers in all of our broadband communications markets.

This significant competition, together with the maturation of certain of our markets, has contributed to organic declines in certain of our markets in revenue, RGUs and/or average monthly subscription revenue per average RGU (ARPU), the more notable of which include: (i) organic declines in total subscription revenue and overall revenue in the Netherlands during the fourth quarter of 2013, as compared to the fourth quarter of 2012; (ii) organic declines in subscription revenue from video and fixed-line telephony services in the Netherlands during the fourth quarter of 2013, as compared to the fourth quarter of 2012; (iii) organic declines in subscription revenue from fixed-line telephony services in Belgium during the fourth quarter of 2013, as compared to the third quarter of 2013; (iv) organic declines in (a) video RGUs in Germany, Switzerland, the Netherlands, Belgium and the several of our other markets and (b) fixed-line telephony RGUs in the U.K. and Chile during the fourth quarter of 2013; (v) organic declines in ARPU from (a) video services in Chile and several of our other markets, (b) broadband internet services in the Netherlands and several of our other markets and (c) telephony services in Belgium, Switzerland, the Netherlands, Germany and most of our other markets during the fourth quarter of 2013, as compared to the fourth quarter of 2012; and (vi) organic declines in overall ARPU in the Netherlands, Belgium and most of our other markets during the fourth quarter of 2013, as compared to the fourth quarter of 2012.

In addition to competition, our operations are subject to macroeconomic 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 European monetary union 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 European monetary union and the re-introduction of individual currencies in these countries, or, in more extreme circumstances, the possible dissolution of the European monetary union 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 products 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.

The video, broadband internet and fixed-line telephony businesses in which we operate are capital intensive. Significant additions to our property and equipment are required to add customers to our networks and to upgrade our broadband communications networks and customer premises equipment to enhance our service offerings and improve the customer experience, including expenditures for equipment and labor costs. Significant competition, the introduction of new technologies, the expansion of existing technologies such as FTTx and advanced DSL technologies, or adverse regulatory developments could cause us to decide to undertake previously unplanned upgrades of our networks and customer premises equipment in the impacted markets. In addition, no assurance can be given that any future upgrades will generate a positive return or that we will have adequate capital available to finance such future upgrades. If we are unable to, or elect not to, pay for costs associated with adding new customers, II-7 -------------------------------------------------------------------------------- expanding or upgrading our networks or making our other planned or unplanned additions to our property and equipment, our growth could be limited and our competitive position could be harmed. For information regarding our property and equipment additions, see Liquidity and Capital Resources - Consolidated Statements of Cash Flows below.

Based on our most recent financial plan, which excludes the Chellomedia Disposal Group and Ziggo, we expect to continue to generate organic growth in our consolidated revenue and operating cash flow over the next few years. We expect this growth to come primarily from (i) organic increases in our broadband internet, fixed-line telephony and digital cable RGUs, primarily driven by growth in our operations in Germany, the U.K. and other markets, as we expect that our analog cable RGUs will decline and that our overall ARPU will remain relatively unchanged during this timeframe, and (ii) growth in B2B services. In addition, we currently expect that the continued expansion of our mobile service offerings will positively impact (i) our revenue and, towards the end of this timeframe, our operating cash flow growth and (ii) our subscriber retention rates. Additionally, we plan to continue to improve our competitive position through (i) the development and launch of new technology initiatives, including further planned launches of our Horizon TV platform, and (ii) upgrades to our network capacity in Germany, the Netherlands, Switzerland, Belgium and other markets. For information regarding our property and equipment additions, including our 2014 expectations for the European Operations Division and the VTR Group, see Liquidity and Capital Resources - Consolidated Statements of Cash Flows below. Our expectations with respect to the items discussed in this paragraph are subject to competitive, economic, technological, political and regulatory developments and other factors outside of our control. Accordingly, no assurance can be given that actual results in future periods will not differ materially from our expectations.

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 timely basis or on satisfactory terms. 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.

Results of Operations As noted under Overview above, the comparability of our operating results during 2013, 2012 and 2011 is affected by acquisitions. In the following discussion, we quantify the estimated impact of acquisitions on our operating results. The acquisition impact represents our estimate of the difference between the operating results of the periods under comparison that is attributable to an acquisition. In general, we base our estimate of the acquisition impact on an acquired entity's operating results during the first three months following the acquisition date such that changes from those operating results in subsequent periods are considered to be organic changes. Accordingly, in the following discussion, variances attributed to an acquired entity during the first twelve months following the acquisition date represent differences between the estimated acquisition impact and the actual results.

Changes in foreign currency exchange rates have a significant impact on our reported operating results as all of our operating segments, except for Puerto Rico, have functional currencies other than the U.S. dollar. Our primary exposure to FX risk during the year ended December 31, 2013 was to the euro and British pound sterling as 41.6% and 37.3% of our U.S. dollar revenue during the period was derived from subsidiaries whose functional currencies are the euro and British pound sterling, respectively. In addition, our reported operating results are impacted by changes in the exchange rates for the Swiss franc, the Chilean peso and other local currencies in Europe. The portions of the changes in the various components of our results of operations that are attributable to changes in FX are highlighted under Discussion and Analysis of our Reportable Segments and Discussion and Analysis of our Consolidated Operating Results below. For information concerning our foreign currency risks and the applicable foreign currency exchange rates in effect for the periods covered by this Annual Report, see Quantitative and Qualitative Disclosures about Market Risk - Foreign Currency Risk below.

The amounts presented and discussed below represent 100% of each operating segment's revenue and operating cash flow. As we have the ability to control Telenet, the VTR Group and Liberty Puerto Rico, we consolidate 100% of the revenue and expenses of these entities in our consolidated statements of operations despite the fact that third parties own significant interests in these entities. The noncontrolling owners' interests in the operating results of Telenet, the VTR Group, Liberty Puerto Rico and other less significant majority-owned subsidiaries are reflected in net earnings or loss attributable to noncontrolling interests in our consolidated statements of operations.

II-8 --------------------------------------------------------------------------------Discussion and Analysis of our Reportable Segments General All of the reportable segments set forth below derive their revenue primarily from broadband communications services, including video, broadband internet and fixed-line telephony services. Most of our reportable segments also provide B2B services, and certain of our reportable segments provide mobile services. For detailed information regarding the composition of our reportable segments, see note 17 to our consolidated financial statements.

The tables presented below in this section provide a separate analysis of each of the line items that comprise operating cash flow (revenue, operating expenses and SG&A expenses, excluding allocable share-based compensation expense, as further discussed in note 17 to our consolidated financial statements) as well as an analysis of operating cash flow by reportable segment for (i) 2013, as compared to 2012, and (ii) 2012, as compared to 2011. These tables present (i) the amounts reported by each of our reportable segments for the comparative periods, (ii) the U.S. dollar change and percentage change from period to period and (iii) the organic percentage change from period to period (percentage change after removing FX and the estimated impacts of acquisitions). The comparisons that exclude FX assume that exchange rates remained constant at the prior year rate during the comparative periods that are included in each table. As discussed under Quantitative and Qualitative Disclosures about Market Risk - Foreign Currency Risk below, we have significant exposure to movements in foreign currency exchange rates. We also provide a table showing the operating cash flow margins of our reportable segments for 2013, 2012 and 2011 at the end of this section.

The revenue of our reportable segments includes revenue earned from subscribers for broadband communications and mobile services, revenue earned from B2B services, interconnect fees, installation fees, channel carriage fees, late fees and advertising revenue. Consistent with the presentation of our revenue categories in note 17 to our consolidated financial statements, we use the term "subscription revenue" in the following discussion to refer to amounts received from subscribers for ongoing services, excluding installation fees and late fees. In the following tables, mobile subscription revenue excludes the related interconnect revenue.

The rates charged for certain video services offered by our broadband communications operations in some European countries and in Chile are subject to oversight and control, either before or after the fact, based on competition law or general pricing regulations. Additionally, in Chile, our ability to bundle or discount our broadband communications and mobile services is subject to certain limitations, and in Europe, our ability to bundle or discount our services may be constrained if we are held to be dominant with respect to any product we offer. The amounts we charge and incur with respect to fixed-line telephony and mobile interconnection fees are also subject to regulatory oversight in many of our markets. Adverse outcomes from rate regulation or other regulatory initiatives could have a significant negative impact on our ability to maintain or increase our revenue. For information concerning the potential impact of adverse regulatory developments in Belgium and the Netherlands, see note 16 to our consolidated financial statements.

Most of our revenue is derived from jurisdictions that administer value-added or similar revenue-based taxes. Any increases in these taxes could have an adverse impact on our ability to maintain or increase our revenue to the extent that we are unable to pass such tax increases on to our customers. In the case of revenue-based taxes for which we are the ultimate taxpayer, we will also experience increases in our operating expenses and corresponding declines in our operating cash flow and operating cash flow margins to the extent of any such tax increases. In this regard, value-added tax rates have increased in certain of the countries in which we operate over the past few years.

II-9 --------------------------------------------------------------------------------Revenue of our Reportable Segments Revenue - 2013 compared to 2012 Organic increase Year ended December 31, Increase (decrease) 2013 2012 $ % % in millions European Operations Division: U.K. (Virgin Media) (a) $ 3,653.7 $ - $ 3,653.7 N.M. N.M.

Germany (Unitymedia KabelBW) 2,559.2 2,311.0 248.2 10.7 7.2 Belgium (Telenet) 2,185.9 1,918.0 267.9 14.0 10.3 The Netherlands 1,242.4 1,229.1 13.3 1.1 (2.2 ) Switzerland 1,332.1 1,259.8 72.3 5.7 4.4 Other Western Europe 898.7 848.4 50.3 5.9 2.6 Total Western Europe 11,872.0 7,566.3 4,305.7 56.9 5.6 Central and Eastern Europe 1,141.2 1,115.7 25.5 2.3 - Central and other 130.4 117.0 13.4 11.5 8.0 Total European Operations Division 13,143.6 8,799.0 4,344.6 49.4 4.9 Chile (VTR Group) 991.6 940.6 51.0 5.4 7.4 Corporate and other 374.3 224.1 150.2 67.0 0.6 Intersegment eliminations (35.3 ) (32.9 ) (2.4 ) N.M. N.M.

Total $ 14,474.2 $ 9,930.8 $ 4,543.4 45.8 5.1 _______________ (a) The amount presented for 2013 reflects the post-acquisition revenue of Virgin Media from June 8, 2013 through December 31, 2013.

N.M. - Not Meaningful.

General. While not specifically discussed in the below explanations of the changes in the revenue of our reportable segments, we are experiencing significant competition in all of our broadband communications markets. This competition has an adverse impact on our ability to increase or maintain our RGUs and/or ARPU. For a description of the more notable recent impacts of this competition on our broadband communications markets, see Overview above.

U.K. (Virgin Media). The increase in Virgin Media's revenue during 2013, as compared to 2012, is entirely attributable to the June 7, 2013 Virgin Media Acquisition. During the six months ended December 31, 2013, Virgin Media generated revenue of $3,267.9 million, representing a 1.2% organic increase over the revenue reported by Virgin Media during the corresponding 2012 period, as adjusted to reflect a pro forma $64.6 million decrease in revenue associated with the assumed alignment of Virgin Media's policy to our policy for accounting for installation and certain nonrecurring fees received on B2B contracts effective June 7, 2012. For information regarding our accounting policy for these fees, see note 2 to our consolidated financial statements. The pro forma increase in Virgin Media's revenue during this period is primarily attributable to growth in the subscription revenue from Virgin Media's residential broadband communications operations, due primarily to the net effect of (i) an increase in subscription revenue from video services of $55.0 million or 7.6%, as the impact of higher ARPU from video services was only partially offset by a decline in the average number of RGUs, (ii) an increase in subscription revenue from broadband internet services of $48.2 million or 7.4%, attributable to higher ARPU from broadband internet services and the impact of an increase in the average number of broadband internet RGUs and (iii) a decrease in subscription revenue from fixed-line telephony services of $23.1 million or 2.9%, primarily attributable to lower ARPU from fixed-line telephony services. In addition, the decrease in subscription revenue from fixed-line telephony services includes an increase of approximately $11.3 million attributable to the net non-operational and operational impact of a new product proposition that was initiated by Virgin Media in August 2012. This positive net impact is not expected to contribute materially to Virgin Media's revenue growth in periods subsequent to the August 2013 anniversary date of the new product proposition. Virgin Media's revenue from mobile services increased slightly during the six months ended December 31, 2013, as compared to the revenue reported by Virgin Media during the corresponding 2012 period, primarily due to the positive impacts of (i) an increase in the number of customers taking postpaid mobile services and (ii) a July II-10 -------------------------------------------------------------------------------- 2013 price increase that were only partially offset by the adverse impacts of (a) a decline in the revenue from prepaid mobile customers, (b) a reduction in out-of-bundle usage and (c) a higher proportion of customers on lower-priced subscriber identification module or "SIM" card only calling plans. In addition, the increase in mobile subscription revenue was negatively impacted by a favorable nonrecurring adjustment of $4.5 million that was recorded during the fourth quarter of 2012. Virgin Media's B2B revenue increased slightly during the six months ended December 31, 2013, due primarily to the net effect of (i) higher recurring contractual revenue from B2B customers and (ii) the $9.4 million negative impact of nonrecurring items, consisting of (a) a $6.2 million net favorable impact in 2012 and (b) a $3.2 million unfavorable impact in 2013.

Germany (Unitymedia KabelBW). The increase in Unitymedia KabelBW's revenue during 2013, as compared to 2012, includes (i) an organic increase of $166.0 million or 7.2% and (ii) the impact of FX, as set forth below: Subscription Non-subscription revenue (a) revenue (b) Total in millions Increase in cable subscription revenue due to change in: Average number of RGUs (c) $ 125.7 $ - $ 125.7 ARPU (d) 64.8 - 64.8 Total increase in cable subscription revenue 190.5 - 190.5 Increase in mobile subscription revenue (e) 6.5 - 6.5 Total increase in subscription revenue 197.0 - 197.0 Increase in B2B revenue - 2.9 2.9 Decrease in other non-subscription revenue (f) - (33.9 ) (33.9 ) Total organic increase (decrease) 197.0 (31.0 ) 166.0 Impact of FX 74.2 8.0 82.2 Total $ 271.2 $ (23.0 ) $ 248.2 _______________ (a) Unitymedia KabelBW's subscription revenue includes revenue from multi-year bulk agreements with landlords or housing associations or with third parties that operate and administer the in-building networks on behalf of housing associations. These bulk agreements, which generally allow for the procurement of the basic video signals at volume-based discounts, provide access to nearly two-thirds of Unitymedia KabelBW's video subscribers.

Unitymedia KabelBW's bulk agreements are, to a significant extent, medium- and long-term contracts, although bulk agreements related to approximately 16% of the video subscribers that Unitymedia KabelBW serves through these agreements expire by the end of 2015. During 2013, Unitymedia KabelBW's 20 largest bulk agreement accounts generated approximately 7% of its total revenue (including estimated amounts billed directly to the building occupants for premium cable, broadband internet and fixed-line telephony services). No assurance can be given that Unitymedia KabelBW's bulk agreements will be renewed or extended on financially equivalent terms or at all, particularly in light of the commitments we made to the FCO in connection with the December 15, 2011 acquisition of KBW. In this regard, we have, among other items, agreed to grant a special termination right with respect to the Remedy HA Agreements. The total number of dwelling units covered by the Remedy HA Agreements was approximately 340,000 as of December 15, 2011. At December 31, 2013, approximately 14% of the dwelling units covered by the Remedy HA Agreements remain subject to special termination rights. These dwelling units (which include agreements that are not among the 20 largest bulk agreements) as of December 31, 2013 accounted for less than 1% of Unitymedia KabelBW's total revenue during the three months ended December 31, 2013. During the third quarter of 2013, the Düsseldorf Court of Appeal decided to overturn the FCO's decision to clear our acquisition of KBW. For additional information, see note 16 to our consolidated financial statements.

(b) Unitymedia KabelBW's other non-subscription revenue includes fees received for the carriage of certain channels included in Unitymedia KabelBW's analog and digital cable offerings. This carriage fee revenue is subject to contracts that expire or are otherwise terminable by either party on various dates ranging from 2014 through 2018. The aggregate amount of revenue related to these carriage contracts represented approximately 5% of Unitymedia KabelBW's total revenue during the three months ended December 31, 2013. In 2012, public broadcasters sent us notices purporting to terminate their carriage fee arrangements effective December 31, 2012. While we are seeking to negotiate with the public broadcasters to reach acceptable agreements, we have rejected the termination notices and filed lawsuits for payment of carriage fees against the public broadcasters. Until such time as we resolve these disputes or obtain favorable outcomes in our lawsuits, we don't believe we meet the criteria to recognize the impacted revenue for 2013 and future periods. The aggregate amount of II-11-------------------------------------------------------------------------------- revenue related to these public broadcasters was $8.1 million or 1% of Unitymedia KabelBW's total revenue during the three months ended December 31, 2012. In addition, some private broadcasters are seeking to change the distribution model to eliminate the payment of carriage fees and instead require that cable operators pay license fees to the broadcasters. In this regard, we are currently in negotiations with certain of the larger private broadcasters and we expect to reach agreements that are acceptable to all parties, although no assurance can be given that any of our agreements with broadcasters will be renewed or extended on financially equivalent terms, or at all. Also, our ability to increase the aggregate carriage fees that Unitymedia KabelBW receives for each channel is limited by certain commitments we made to regulators in connection with the acquisition of KBW.

(c) The increase in Unitymedia KabelBW's cable subscription revenue related to a change in the average number of RGUs is attributable to increases in the average numbers of broadband internet, fixed-line telephony and digital cable RGUs that were only partially offset by a decline in the average number of analog cable RGUs. The decline in Unitymedia KabelBW's average number of analog cable RGUs led to a decline in the average number of Unitymedia KabelBW's total video RGUs during 2013, as compared to 2012.

(d) The increase in Unitymedia KabelBW's cable subscription revenue related to a change in ARPU is due to (i) a net increase resulting primarily from the following factors: (a) higher ARPU from broadband internet services and digital cable services, (b) lower ARPU from fixed-line telephony services due to the net impact of (1) a decrease in ARPU associated with lower fixed-line telephony call volumes for customers on usage-based calling plans and (2) an increase in ARPU associated with the migration of customers to fixed-rate plans and related value-added services, (c) higher ARPU due to lower negative impacts from free bundled services provided to new subscribers during promotional periods and (d) higher ARPU from analog cable services, as price increases more than offset lower ARPU due to a higher proportion of subscribers receiving discounted analog cable services through bulk agreements and (ii) an improvement in RGU mix attributable to a higher proportion of fixed-line telephony and broadband internet RGUs.

(e) The increase in Unitymedia KabelBW's mobile subscription revenue is primarily due to the net effect of (i) an increase in the average number of mobile subscribers, (ii) a reduction in billable usage and (iii) lower ARPU due to the impact of an increase in the proportion of subscribers receiving lower-priced tiers of mobile services.

(f) The decrease in Unitymedia KabelBW's other non-subscription revenue is primarily attributable to the net effect of (i) a decrease in carriage fee revenue as described above, (ii) an increase in installation revenue, due to a higher number of installations and increases in the average installation fee, and (iii) a decrease in interconnect revenue. We expect that our interconnect revenue in Germany in 2014 will be adversely impacted by a November 2013 decrease in fixed-telephony termination rates. We believe that most of this adverse impact will be offset by corresponding decreases in Germany's interconnect expense.

Belgium (Telenet). The increase in Telenet's revenue during 2013, as compared to 2012, includes (i) an organic increase of $198.4 million or 10.3% and (ii) the impact of FX, as set forth below: Subscription Non-subscription revenue revenue Total in millions Increase (decrease) in cable subscription revenue due to change in: Average number of RGUs (a) $ 39.9 $ - $ 39.9 ARPU (b) (15.2 ) - (15.2 ) Total increase in cable subscription revenue 24.7 - 24.7 Increase in mobile subscription revenue (c) 114.9 - 114.9 Total increase in subscription revenue 139.6 - 139.6 Decrease in B2B revenue (d) - (2.7 ) (2.7 ) Increase in other non-subscription revenue (e) - 61.5 61.5 Total organic increase 139.6 58.8 198.4 Impact of FX 59.1 10.4 69.5 Total $ 198.7 $ 69.2 $ 267.9 II-12--------------------------------------------------------------------------------_______________ (a) The increase in Telenet's cable subscription revenue related to a change in the average number of RGUs is attributable to increases in the average number of digital cable, fixed-line telephony and broadband internet RGUs that were only partially offset by a decline in the average number of analog cable RGUs. The decline in the average number of analog cable RGUs led to a decline in the average number of Telenet's total video RGUs during 2013, as compared to 2012.

(b) The decrease in Telenet's cable subscription revenue related to a change in ARPU is due to the net effect of (i) a net decrease resulting primarily from following factors: (a) higher ARPU due to price increases associated with (1) higher-priced tiers of service in our bundles and (2) February 2013 increases for certain existing broadband internet, fixed-line telephony and digital cable services, (b) lower ARPU due to the impacts of higher bundling and promotional discounts, (c) lower ARPU due to the impact of an increase in the proportion of subscribers receiving lower-priced tiers of broadband internet services and (d) lower ARPU from fixed-line telephony services due to (I) lower fixed-line telephony call volume for customers on usage-based plans and (II) a higher proportion of customers migrating to fixed-rate calling plans and (ii) an improvement in RGU mix, attributable to higher proportions of digital cable, broadband internet and fixed-line telephony RGUs. In addition, the increase in Telenet's subscription revenue was offset by a nonrecurring adjustment recorded during the fourth quarter of 2012 to recognize $6.0 million of revenue following the implementation of billing system improvements. Most of this nonrecurring adjustment relates to revenue earned in years prior to 2012.

(c) The increase in Telenet's mobile subscription revenue is due primarily to an increase in the average number of mobile subscribers.

(d) The decrease in Telenet's B2B revenue is attributable to a net decrease associated with (i) a $7.7 million negative impact associated with changes in how Telenet recognizes certain up-front fees and (ii) increases in other elements of Telenet's B2B revenue.

(e) The increase in Telenet's other non-subscription revenue is due primarily to the net effect of (i) an increase in interconnect revenue of $59.1 million, primarily associated with growth in mobile services, (ii) an increase in mobile handset sales of $12.8 million and (iii) a decrease of $2.4 million associated with a change in how Telenet recognizes certain up-front fees.

The increase in Telenet's mobile handset sales, which typically generate relatively low margins, is due primarily to (a) an increase in contract termination fees applicable to subsidized handsets and (b) an increase in sales to third-party retailers.

For information concerning certain regulatory developments that could have an adverse impact on our revenue in Belgium, see note 16 to our consolidated financial statements.

The Netherlands. The increase in the Netherlands' revenue during 2013, as compared to 2012, includes (i) an organic decrease of $26.7 million or 2.2%, (ii) the impact of an acquisition and (iii) the impact of FX, as set forth below: Subscription Non-subscription revenue revenue Total in millions Increase (decrease) in cable subscription revenue due to change in: Average number of RGUs (a) $ 2.9 $ - $ 2.9 ARPU (b) (26.6 ) - (26.6 ) Total decrease in cable subscription revenue (23.7 ) - (23.7 ) Increase in mobile subscription revenue 0.1 - 0.1 Total decrease in subscription revenue (23.6 ) - (23.6 ) Decrease in B2B revenue (c) - (4.5 ) (4.5 ) Increase in other non-subscription revenue (d) - 1.4 1.4 Total organic decrease (23.6 ) (3.1 ) (26.7 ) Impact of an acquisition 0.6 - 0.6 Impact of FX 36.0 3.4 39.4 Total $ 13.0 $ 0.3 $ 13.3 II-13--------------------------------------------------------------------------------_______________ (a) The increase in the Netherlands' cable subscription revenue related to a change in the average number of RGUs is attributable to the net effect of (i) increases in the average numbers of fixed-line telephony, broadband internet and digital cable RGUs and (ii) a decline in the average number of analog cable RGUs. The decline in the average number of analog cable RGUs led to a decline in the average number of the Netherlands' total video RGUs during 2013, as compared to 2012.

(b) The decrease in the Netherlands' cable subscription revenue related to a change in ARPU is due to the net effect of (i) a decrease resulting primarily from the following factors: (a) lower ARPU due to a decrease in fixed-line telephony call volume and (b) lower ARPU due to the impact of higher bundling and promotional discounts that more than offset the positive impacts of (1) the inclusion of higher-priced tiers of digital cable, broadband internet and fixed-line telephony services in our promotional bundles and (2) July 2012 price increases for bundled services and a January 2013 price increase for certain analog cable services and (ii) an improvement in RGU mix, attributable to higher proportions of digital cable, broadband internet and fixed-line telephony RGUs.

(c) The decrease in the Netherlands' B2B revenue is primarily related to lower revenue from telephony and data services.

(d) The increase in the Netherlands' other non-subscription revenue is primarily attributable to the net effect of (i) an increase in installation revenue, (ii) a decrease in interconnect revenue, due primarily to the impact of reductions in fixed termination rates that became effective on August 1, 2012 and September 1, 2013, and (iii) a decrease in revenue from late fees.

For information concerning certain regulatory developments that could have an adverse impact on our revenue in the Netherlands, see note 16 to our consolidated financial statements.

Switzerland. The increase in Switzerland's revenue during 2013, as compared to 2012, includes (i) an organic increase of $55.4 million or 4.4%, (ii) the impact of acquisitions and (iii) the impact of FX, as set forth below: Subscription Non-subscription revenue revenue Total in millions Increase in cable subscription revenue due to change in: Average number of RGUs (a) $ 30.4 $ - $ 30.4 ARPU (b) 21.0 - 21.0 Total increase in cable subscription revenue 51.4 - 51.4 Decrease in B2B revenue - (1.9 ) (1.9 ) Increase in other non-subscription revenue (c) - 5.9 5.9 Total organic increase 51.4 4.0 55.4 Impact of acquisitions 2.3 (1.0 ) 1.3 Impact of FX 13.1 2.5 15.6 Total $ 66.8 $ 5.5 $ 72.3 _______________ (a) The increase in Switzerland's cable subscription revenue related to a change in the average number of RGUs is attributable to increases in the average numbers of digital cable, broadband internet and fixed-line telephony RGUs that were only partially offset by a decline in the average number of analog cable RGUs. The decline in the average number of analog cable RGUs led to a decline in the average number of Switzerland's total video RGUs during 2013, as compared to 2012.

(b) The increase in Switzerland's cable subscription revenue related to a change in ARPU is due to (i) an improvement in RGU mix, attributable to higher proportions of digital cable, broadband internet and fixed-line telephony RGUs, and (ii) a net increase resulting primarily from the following factors: (a) higher ARPU due to the inclusion of higher-priced tiers of broadband internet services and, to a lesser extent, digital cable services in our promotional bundles, (b) lower ARPU due to the impact of bundling discounts, (c) higher ARPU due to a January 2013 price increase for a basic cable connection, as discussed below, and, to a lesser extent, a June 2013 price increase for broadband internet services and (d) lower ARPU due to a decrease in fixed-line telephony call volume for customers on usage-based calling plans.

II-14--------------------------------------------------------------------------------(c) The increase in Switzerland's other non-subscription revenue is primarily attributable to the net effect of (i) an increase in installation revenue of $8.4 million, (ii) a decrease in sales of customer premises equipment, primarily due to the unencryption described below, (iii) a decline in revenue from usage-based wholesale residential fixed-line telephony services and (iv) an increase in advertising revenue. The increase in installation revenue includes an increase of $7.1 million associated with a change in how we recognize installation revenue in Switzerland as a result of a change in how we market and deliver services upon the November 2012 unencryption of the basic tier of digital television channels, as further described below.

In October 2012, we announced an agreement with the Swiss Price Regulator pursuant to which we will make certain changes to Switzerland's service offerings in exchange for progressive increases in the price of Switzerland's basic cable connection. In this regard, (i) effective November 1, 2012, we began offering a basic tier of digital television channels on an unencrypted basis in our Switzerland footprint and (ii) effective January 3, 2013, for video subscribers who pay the required upfront activation fee, we made available, at no additional monthly charge, a 2.0 Mbps internet connection, which was an increase from the previously-offered 300 Kbps internet connection. In addition, the monthly price for a cable connection increased by CHF 0.90 ($1.01) effective January 1, 2013 and a further increase of CHF 0.60 ($0.68) took effect on January 1, 2014.

Other Western Europe. The increase in Other Western Europe's revenue during 2013, as compared to 2012, includes (i) an organic increase of $21.9 million or 2.6% and (ii) the impact of FX, as set forth below: Subscription Non-subscription revenue revenue Total in millions Increase (decrease) in cable subscription revenue due to change in (a): Average number of RGUs (b) $ 43.2 $ - $ 43.2 ARPU (c) (19.4 ) - (19.4 ) Total increase in cable subscription revenue 23.8 - 23.8 Decrease in B2B revenue - (0.8 ) (0.8 ) Decrease in other non-subscription revenue (a) (d) - (1.1 ) (1.1 ) Total organic increase (decrease) 23.8 (1.9 ) 21.9 Impact of FX 24.1 4.3 28.4 Total $ 47.9 $ 2.4 $ 50.3 _______________ (a) In connection with the Virgin Media Acquisition, we determined that we would no longer externally report DSL subscribers as RGUs. Accordingly, we have reclassified the revenue from our DSL subscribers in Austria from broadband internet and fixed-line telephony subscription revenue to other non-subscription revenue for all periods presented.

(b) The increase in Other Western Europe's cable subscription revenue related to a change in the average number of RGUs is attributable to increases in the average numbers of fixed-line telephony, broadband internet and digital cable RGUs in each of Ireland and Austria that were only partially offset by a decline in the average number of analog cable RGUs in each of Austria and Ireland and, to a lesser extent, MMDS video RGUs in Ireland. The declines in the average numbers of analog cable and MMDS video RGUs led to a decline in the average number of total video RGUs in each of Ireland and Austria during 2013, as compared to 2012.

(c) The decrease in Other Western Europe's cable subscription revenue related to a change in ARPU is attributable to a decrease in ARPU in each of Ireland and Austria. Other Western Europe's overall ARPU was impacted by an adverse change in RGU mix, primarily attributable to a lower proportion of digital cable RGUs in Ireland. The lower ARPU in Ireland is also due to the net effect of (i) lower ARPU due to the impact of bundling discounts and (ii) higher ARPU due to the inclusion of higher-priced tiers of broadband internet and digital cable services in our promotional bundles. The decrease in Austria's ARPU is primarily due to the net effect of (a) lower ARPU due to the impact of bundling discounts, (b) higher ARPU due to January 2013 price increases for digital and analog cable and broadband internet services and (c) lower ARPU due to a higher proportion of subscribers receiving lower-priced tiers of broadband internet services in our promotional bundles.

(d) The decrease in Other Western Europe's non-subscription revenue is due to individually insignificant changes in various non-subscription revenue categories.

II-15-------------------------------------------------------------------------------- Central and Eastern Europe. The increase in Central and Eastern Europe's revenue during 2013, as compared to 2012, includes (i) an organic increase of $0.2 million, (ii) the impact of an acquisition and (iii) the impact of FX, as set forth below: Subscription Non-subscription revenue revenue Total in millions Increase (decrease) in cable subscription revenue due to change in: Average number of RGUs (a) $ 26.1 $ - $ 26.1 ARPU (b) (28.0 ) - (28.0 ) Total decrease in cable subscription revenue (1.9 ) - (1.9 ) Decrease in mobile subscription revenue (0.4 ) - (0.4 ) Total decrease in subscription revenue (2.3 ) - (2.3 ) Increase in non-subscription revenue (c) - 2.5 2.5 Total organic increase (decrease) (2.3 ) 2.5 0.2 Impact of an acquisition 3.1 0.1 3.2 Impact of FX 20.1 2.0 22.1 Total $ 20.9 $ 4.6 $ 25.5 _______________ (a) The increase in Central and Eastern Europe's cable subscription revenue related to a change in the average number of RGUs is primarily attributable to increases in the average numbers of digital cable, fixed-line telephony and broadband internet RGUs in Poland, Romania, Hungary and Slovakia that were only partially offset by a decline in the average numbers of (i) analog cable RGUs in each country within our Central and Eastern Europe segment and (ii) digital cable, fixed-line telephony and broadband internet RGUs in the Czech Republic. As a result of the declines in analog cable RGUs, each country within our Central and Eastern Europe segment experienced a decline in the average number of total video RGUs during 2013, as compared to 2012.

(b) The decrease in Central and Eastern Europe's cable subscription revenue related to a change in ARPU is primarily due to the net effect of (i) lower ARPU due to the impact of higher bundling discounts, (ii) higher ARPU due to the inclusion of higher-priced tiers of digital cable and broadband internet services in our promotional bundles, (iii) lower ARPU from incremental digital cable services and (iv) lower ARPU due to a decrease in fixed-line telephony call volume for customers on usage-based calling plans. In addition, Central and Eastern Europe's overall ARPU was positively impacted by an improvement in RGU mix, primarily attributable to higher proportions of digital cable and, to a lesser extent, broadband internet RGUs.

(c) The increase in Central and Eastern Europe's non-subscription revenue is due to individually insignificant changes in various non-subscription revenue categories.

II-16--------------------------------------------------------------------------------Chile (VTR Group). The increase in the VTR Group's revenue during 2013, as compared to 2012, includes (i) an organic increase of $69.7 million or 7.4% and (ii) the impact of FX, as set forth below: Subscription Non-subscription revenue revenue Total in millions Increase in cable subscription revenue due to change in: Average number of RGUs (a) $ 45.4 $ - $ 45.4 ARPU (b) 13.4 - 13.4 Total increase in cable subscription revenue 58.8 - 58.8 Increase in mobile subscription revenue (c) 10.2 - 10.2 Total increase in subscription revenue 69.0 - 69.0 Increase in non-subscription revenue (d) - 0.7 0.7 Total organic increase 69.0 0.7 69.7 Impact of FX (17.1 ) (1.6 ) (18.7 ) Total $ 51.9 $ (0.9 ) $ 51.0 _______________ (a) The increase in the VTR Group's cable subscription revenue related to a change in the average number of RGUs is due to increases in the average numbers of digital cable, broadband internet and fixed-line telephony RGUs that were only partially offset by a decline in the average number of analog cable RGUs.

(b) The increase in the VTR Group's cable subscription revenue related to a change in ARPU is due to (i) a net increase resulting from the following factors: (a) higher ARPU due to the impact of lower bundling and promotional discounts, (b) higher ARPU due to semi-annual inflation and other price adjustments for video, broadband internet and fixed-line telephony services, (c) lower ARPU from analog and digital cable services, largely due to a higher proportion of subscribers receiving lower-priced tiers of services, (d) higher ARPU from broadband internet services and (e) lower ARPU due to a decrease in fixed-line telephony call volume for customers on usage-based plans and (ii) improvements in RGU mix, primarily attributable to a higher proportion of digital cable RGUs.

(c) The increase in the VTR Group's mobile subscription revenue is primarily due to the May 2012 launch of mobile services at VTR Wireless.

(d) The increase in the VTR Group's non-subscription revenue is attributable to the net effect of (i) an increase in mobile interconnect revenue primarily due to the May 2012 launch of mobile services at VTR Wireless, (ii) an increase in advertising revenue, (iii) a decrease in fixed-line telephony interconnect revenue, (iv) a decrease in installation revenue and (v) a net decrease resulting from individually insignificant changes in various other non-subscription revenue categories.

II-17--------------------------------------------------------------------------------Revenue - 2012 compared to 2011 Organic increase Year ended December 31, Increase (decrease) (decrease) 2012 2011 $ % % in millions European Operations Division: Germany (Unitymedia KabelBW) $ 2,311.0 $ 1,450.0 $ 861.0 59.4 13.4 Belgium (Telenet) 1,918.0 1,918.5 (0.5 ) - 8.1 The Netherlands 1,229.1 1,273.4 (44.3 ) (3.5 ) 4.4 Switzerland 1,259.8 1,282.6 (22.8 ) (1.8 ) 3.7 Other Western Europe 848.4 893.3 (44.9 ) (5.0 ) 2.8 Total Western Europe 7,566.3 6,817.8 748.5 11.0 7.0 Central and Eastern Europe 1,115.7 1,122.5 (6.8 ) (0.6 ) (0.3 ) Central and other 117.0 122.7 (5.7 ) (4.6 ) 3.9 Total European Operations Division 8,799.0 8,063.0 736.0 9.1 6.0 Chile (VTR Group) 940.6 889.0 51.6 5.8 6.4 Corporate and other 224.1 213.6 10.5 4.9 1.9 Intersegment eliminations (32.9 ) (47.3 ) 14.4 N.M. N.M.

Total $ 9,930.8 $ 9,118.3 $ 812.5 8.9 5.9 _______________ N.M. - Not Meaningful.

Germany (Unitymedia KabelBW). The increase in Unitymedia KabelBW's revenue during 2012, as compared to 2011, includes (i) an organic increase of $194.4 million or 13.4% , (ii) the impact of the KBW Acquisition and (iii) the impact of FX, as set forth below: Subscription Non-subscription revenue revenue Total in millions Increase in cable subscription revenue due to change in: Average number of RGUs (a) $ 118.9 $ - $ 118.9 ARPU (b) 38.9 - 38.9 Total increase in cable subscription revenue 157.8 - 157.8 Increase in mobile subscription revenue (c) 5.6 - 5.6 Total increase in subscription revenue 163.4 - 163.4 Increase in non-subscription revenue (d) - 31.0 31.0 Total organic increase 163.4 31.0 194.4 Impact of the KBW Acquisition 756.3 96.2 852.5 Impact of FX (162.4 ) (23.5 ) (185.9 ) Total $ 757.3 $ 103.7 $ 861.0 _______________ (a) The increase in Unitymedia KabelBW's cable subscription revenue related to a change in the average number of RGUs is attributable to increases in the average numbers of broadband internet, fixed-line telephony and digital cable RGUs that were only partially offset by a decline in the average number of analog cable RGUs. The decline in Unitymedia KabelBW's average number of analog cable RGUs led to a decline in the average number of total video RGUs during 2012, as compared to 2011.

II-18--------------------------------------------------------------------------------(b) The increase in Unitymedia KabelBW's cable subscription revenue related to a change in ARPU is due to (i) an improvement in RGU mix, attributable to higher proportions of fixed-line telephony, broadband internet and digital cable RGUs, and (ii) a net increase resulting primarily from the following factors: (a) lower ARPU due to a decrease in fixed-line telephony call volume for customers on usage-based calling plans, (b) higher ARPU from digital cable services, (c) higher ARPU from broadband internet services, (d) higher ARPU due to a lower negative impact from free bundled services provided to new subscribers during promotional periods and (e) lower ARPU due to higher proportions of customers receiving discounted analog cable services through bulk agreements. For information concerning our commitment to distribute basic digital television channels in unencrypted form in Unitymedia KabelBW commencing January 1, 2013, see note 3 to our consolidated financial statements.

(c) The increase in Unitymedia KabelBW's mobile subscription revenue is primarily due to an increase in the average number of mobile subscribers.

(d) The increase in Unitymedia KabelBW's non-subscription revenue is primarily attributable to (i) an increase in installation revenue, due to a higher number of installations and an increase in the average installation fee, (ii) an increase in interconnect revenue and (iii) an increase in network usage revenue, most of which relates to the settlement of prior year amounts.

Belgium (Telenet). The decrease in Telenet's revenue during 2012, as compared to 2011, includes (i) an organic increase of $155.8 million or 8.1% and (ii) the impact of FX, as set forth below: Subscription Non-subscription revenue revenue Total in millions Increase in cable subscription revenue due to change in: Average number of RGUs (a) $ 29.5 $ - $ 29.5 ARPU (b) 54.9 - 54.9 Total increase in cable subscription revenue 84.4 - 84.4 Increase in mobile subscription revenue (c) 38.5 - 38.5 Total increase in subscription revenue 122.9 - 122.9 Increase in B2B revenue - 2.1 2.1 Increase in other non-subscription revenue (d) - 30.8 30.8 Total organic increase 122.9 32.9 155.8 Impact of FX (127.2 ) (29.1 ) (156.3 ) Total $ (4.3 ) $ 3.8 $ (0.5 ) _______________ (a) The increase in Telenet's cable subscription revenue related to a change in the average number of RGUs is attributable to increases in the average numbers of digital cable, broadband internet and fixed-line telephony RGUs that were only partially offset by a decline in the average number of analog cable RGUs. The decline in the average number of Telenet's analog cable RGUs led to a decline in the average number of total video RGUs during 2012, as compared to 2011.

(b) The increase in Telenet's cable subscription revenue related to a change in ARPU is due to the net effect of (i) an improvement in RGU mix, attributable to higher proportions of digital cable, broadband internet and fixed-line telephony RGUs, and (ii) a net decrease resulting primarily from the following factors: (a) lower ARPU from broadband internet services, largely due to a higher proportion of subscribers receiving lower-priced tiers of services, (b) higher ARPU due to October 2011 price increases for certain analog and digital cable services and an August 2011 price increase for certain broadband internet services, (c) lower ARPU due to a decrease in fixed-line telephony call volume for customers on usage-based plans and the negative impact of higher proportions of customers migrating to fixed-rate calling plans and (d) higher ARPU from digital cable services, due in part to an increase in the number of subscribers to Telenet's premium sporting channel following the third quarter 2011 acquisition of certain Belgian football (soccer) rights. In addition, Telenet's subscription revenue was positively impacted by a nonrecurring adjustment during the fourth quarter of 2012 to recognize $6.3 million of revenue following the implementation of billing system improvements. Most of this nonrecurring adjustment relates to revenue earned in prior years.

II-19--------------------------------------------------------------------------------(c) The increase in Telenet's mobile subscription revenue is due primarily to an increase in the average number of mobile subscribers.

(d) The increase in Telenet's other non-subscription revenue is due primarily to (i) an increase in interconnect revenue of $21.2 million, primarily associated with growth in mobile services, and (ii) an increase in mobile handset sales of $10.3 million. The increase in Telenet's mobile handset sales, which sales typically generate relatively low margins, is primarily due to an increase in sales to third-party retailers.

For information concerning certain regulatory developments that could have an adverse impact on our revenue in Belgium, see note 16 to our consolidated financial statements.

The Netherlands. The decrease in the Netherlands' revenue during 2012, as compared to 2011, includes (i) an organic increase of $55.8 million or 4.4%, (ii) the impact of an acquisition and (iii) the impact of FX, as set forth below: Subscription Non-subscription revenue revenue Total in millions Increase in cable subscription revenue due to change in: Average number of RGUs (a) $ 40.7 $ - $ 40.7 ARPU (b) 7.7 - 7.7 Total increase in cable subscription revenue 48.4 - 48.4 Increase in B2B revenue (c) - 3.2 3.2 Increase in other non-subscription revenue (d) - 4.2 4.2 Total organic increase 48.4 7.4 55.8 Impact of an acquisition 0.9 - 0.9 Impact of FX (91.3 ) (9.7 ) (101.0 ) Total $ (42.0 ) $ (2.3 ) $ (44.3 ) _______________ (a) The increase in the Netherlands' cable subscription revenue related to a change in the average number of RGUs is attributable to increases in the average numbers of fixed-line telephony, digital cable and broadband internet RGUs that were only partially offset by a decline in the average number of analog cable RGUs. The decline in the average number of analog cable RGUs in the Netherlands led to a decline in the average number of total video RGUs during 2012, as compared to 2011.

(b) The increase in the Netherlands' cable subscription revenue related to a change in ARPU is due to the net effect of (i) an improvement in RGU mix, attributable to higher proportions of digital cable, broadband internet and fixed-line telephony RGUs, and (ii) a net decrease resulting primarily from the following factors: (a) lower ARPU due to a decrease in fixed-line telephony call volume, including the impact of higher proportions of customers selecting usage-based calling plans, (b) lower ARPU due to the impact of bundling and promotional discounts and (c) higher ARPU due to January 2012 price increases for certain video services and, to a lesser extent, July 2012 price increases for bundled services.

(c) The increase in the Netherlands' B2B revenue is primarily related to higher revenue from business telephony services.

(d) The increase in the Netherlands' other non-subscription revenue is primarily attributable to the net effect of (i) an increase in revenue from late fees, (ii) an increase in installation revenue and (iii) a decrease in interconnect revenue, due primarily to the impact of an August 1, 2012 reduction in fixed termination rates.

For information concerning certain regulatory developments that could have an adverse impact on our revenue in the Netherlands, see note 16 to our consolidated financial statements.

II-20 -------------------------------------------------------------------------------- Switzerland. The decrease in Switzerland's revenue during 2012, as compared to 2011, includes (i) an organic increase of $47.7 million or 3.7%, (ii) the impact of acquisitions and (iii) the impact of FX, as set forth below: Subscription Non-subscription revenue revenue Total in millions Increase in cable subscription revenue due to change in: Average number of RGUs (a) $ 41.0 $ - $ 41.0 ARPU (b) 3.9 - 3.9 Total increase in cable subscription revenue 44.9 - 44.9 Decrease in B2B revenue (c) - (0.3 ) (0.3 ) Increase in other non-subscription revenue (d) - 3.1 3.1 Total organic increase 44.9 2.8 47.7 Impact of acquisitions 4.4 - 4.4 Impact of FX (63.4 ) (11.5 ) (74.9 ) Total $ (14.1 ) $ (8.7 ) $ (22.8 ) _______________ (a) The increase in Switzerland's cable subscription revenue related to a change in the average number of RGUs is attributable to increases in the average numbers of digital cable, broadband internet and fixed-line telephony RGUs that were only partially offset by a decline in the average number of analog cable RGUs. The decline in the average number of Switzerland's analog cable RGUs led to a decline in the average number of total video RGUs during 2012, as compared to 2011.

(b) The increase in Switzerland's cable subscription revenue related to a change in ARPU is due to the net effect of (i) an improvement in RGU mix, attributable to higher proportions of digital cable, broadband internet and fixed-line telephony RGUs, and (ii) a net decrease resulting primarily from the following factors: (a) higher ARPU from broadband internet services and, to a lesser extent, digital cable services, largely due to a higher proportion of subscribers receiving lower-priced tiers of services, (b) lower ARPU due to the impact of bundling discounts and (c) lower ARPU due to a decrease in fixed-line telephony call volume for customers on usage-based calling plans.

(c) The slight decrease in Switzerland's B2B revenue is primarily attributable to the net effect of (i) lower revenue from construction and equipment sales and (ii) growth in B2B broadband internet and fixed-line telephony services.

(d) The increase in Switzerland's other non-subscription revenue is attributable to the net effect of (i) an increase in installation revenue, (ii) a decline in revenue from usage-based wholesale residential fixed-line telephony services and (iii) a net increase resulting from various individually insignificant changes.

II-21--------------------------------------------------------------------------------Other Western Europe. The decrease in Other Western Europe's revenue during 2012, as compared to 2011, includes (i) an organic increase of $24.6 million or 2.8% and (ii) the impact of FX, as set forth below: Subscription Non-subscription revenue revenue Total in millions Increase (decrease) in cable subscription revenue due to change in (a): Average number of RGUs (b) $ 56.0 $ - $ 56.0 ARPU (c) (28.5 ) - (28.5 ) Total increase in cable subscription revenue 27.5 - 27.5 Decrease in B2B revenue (d) - (4.5 ) (4.5 ) Increase in other non-subscription revenue (a) (e) - 1.6 1.6 Total organic increase 27.5 (2.9 ) 24.6 Impact of FX (61.3 ) (8.2 ) (69.5 ) Total $ (33.8 ) $ (11.1 ) $ (44.9 ) _______________ (a) In connection with the Virgin Media Acquisition, we determined that we would no longer externally report DSL subscribers as RGUs. Accordingly, we have reclassified the revenue from our DSL subscribers in Austria from broadband internet and fixed-line telephony subscription revenue to other non-subscription revenue for all periods presented.

(b) The increase in Other Western Europe's cable subscription revenue related to a change in the average number of RGUs is attributable to increases in the average numbers of fixed-line telephony, broadband internet and digital cable RGUs in each of Ireland and Austria that were only partially offset by a decline in the average number of analog cable RGUs in each of Austria and Ireland and, to a lesser extent, MMDS video RGUs in Ireland. The declines in the average numbers of analog cable and MMDS video RGUs led to a decline in the average number of total video RGUs in each of Ireland and Austria during 2012, as compared to 2011.

(c) The decrease in Other Western Europe's cable subscription revenue related to a change in ARPU is attributable to a decrease in ARPU in each of Ireland and Austria. The decrease in Ireland's ARPU is mostly due to (i) lower ARPU due to the impact of bundling discounts, (ii) lower ARPU from digital cable services and (iii) lower ARPU due to a decrease in fixed-line telephony call volume for customers on usage-based calling plans, including the impact of higher proportions of customers selecting usage-based calling plans. The decrease in Austria's ARPU is primarily due to (a) lower ARPU due to the impact of bundling discounts, (b) lower ARPU from broadband internet services, largely due to a higher proportion of subscribers receiving lower-priced tiers of services, (c) higher ARPU due to the third quarter 2011 implementation of an additional charge for broadband internet services and (d) lower ARPU due to a decrease in fixed-line telephony call volume for customers on usage-based calling plans. In addition, Other Western Europe's overall ARPU was impacted by adverse changes in RGU mix, primarily attributable to a lower proportion of digital cable RGUs in Ireland.

(d) The decrease in Other Western Europe's B2B revenue is primarily due to a decrease in revenue from data services in Austria.

(e) The increase in Other Western Europe's other non-subscription revenue is due primarily to an increase in installation revenue in each of Austria and Ireland.

II-22-------------------------------------------------------------------------------- Central and Eastern Europe. The decrease in Central and Eastern Europe's revenue during 2012, as compared to 2011, includes (i) an organic decrease of $3.2 million or 0.3%, (ii) the impact of acquisitions and (iii) the impact of FX, as set forth below: Subscription Non-subscription revenue revenue Total in millions Increase (decrease) in cable subscription revenue due to change in: Average number of RGUs (a) $ 29.1 $ - $ 29.1 ARPU (b) (34.7 ) - (34.7 ) Total decrease in cable subscription revenue (5.6 ) - (5.6 ) Decrease in mobile subscription revenue (1.1 ) - (1.1 ) Total decrease in subscription revenue (6.7 ) - (6.7 ) Increase in B2B revenue - 1.6 1.6 Increase in other non-subscription revenue (c) - 1.9 1.9 Total organic increase (decrease) (6.7 ) 3.5 (3.2 ) Impact of acquisitions 99.9 15.0 114.9 Impact of FX (108.2 ) (10.3 ) (118.5 ) Total $ (15.0 ) $ 8.2 $ (6.8 ) _______________ (a) The increase in Central and Eastern Europe's cable subscription revenue related to a change in the average number of RGUs is primarily attributable to increases in the average numbers of digital cable, fixed-line telephony and broadband internet RGUs that were only partially offset by declines in the average numbers of analog cable and, to a much lesser extent, MMDS video RGUs in Slovakia. In each country within our Central and Eastern Europe segment, a decline in the average number of analog cable RGUs led to a decline in the average number of total video RGUs during 2012, as compared to 2011.

(b) The decrease in Central and Eastern Europe's cable subscription revenue related to a change in ARPU is primarily due to (i) lower ARPU from video, broadband internet and fixed-line telephony services, largely due to a higher proportion of subscribers receiving lower-priced tiers of services, (ii) lower ARPU due to the impact of higher bundling discounts and (iii) lower ARPU due to a decrease in fixed-line telephony call volume for customers on usage-based calling plans. In addition, Central and Eastern Europe's overall ARPU was positively impacted by an improvement in RGU mix, primarily attributable to a higher proportion of digital cable and, to a lesser extent, broadband internet RGUs.

(c) The decrease in Central and Eastern Europe's other non-subscription revenue is due primarily to the net effect of (i) an increase in sales of customer premises equipment, primarily in the Czech Republic, (ii) a decrease in installation revenue, primarily in Poland, and (iii) a net decrease resulting from individually insignificant changes in other non-subscription revenue categories.

II-23--------------------------------------------------------------------------------Chile (VTR Group). The increase in the VTR Group's revenue during 2012, as compared to 2011, includes (i) an organic increase of $57.0 million or 6.4% and (ii) the impact of FX, as set forth below: Subscription Non-subscription revenue revenue Total in millions Increase in cable subscription revenue due to change in: Average number of RGUs (a) $ 38.9 $ - $ 38.9 ARPU (b) 2.6 - 2.6 Total increase in cable subscription revenue 41.5 - 41.5 Increase in mobile subscription revenue (c) 11.0 - 11.0 Total increase in subscription revenue 52.5 - 52.5 Increase in non-subscription revenue (d) - 4.5 4.5 Total organic increase 52.5 4.5 57.0 Impact of FX (5.0 ) (0.4 ) (5.4 ) Total $ 47.5 $ 4.1 $ 51.6 _______________ (a) The increase in the VTR Group's cable subscription revenue related to a change in the average number of RGUs is primarily due to increases in the average numbers of digital cable, broadband internet and fixed-line telephony RGUs that were only partially offset by a decline in the average numbers of analog cable RGUs.

(b) The increase in the VTR Group's cable subscription revenue related to a change in ARPU is primarily due to the positive impact of an improvement in RGU mix, attributable to a higher proportion of digital cable RGUs.

Excluding the positive impact related to RGU mix, ARPU remained relatively unchanged due to the net effect of the following factors: (i) higher ARPU from digital cable services, (ii) higher ARPU due to semi-annual inflation and other price adjustments for video, broadband internet and fixed-line telephony services, (iii) lower ARPU due to the impact of promotional and bundling discounts and (iv) lower ARPU from fixed-line telephony services, due in part to the net effect of (a) the negative impact of a lower volume of calls subject to usage-based charges and (b) the positive impact of a higher proportion of customers on fixed-rate calling plans.

(c) The increase in the VTR Group's mobile subscription revenue is attributable to the May 2012 launch of mobile services by VTR Wireless.

(d) The increase in the VTR Group's non-subscription revenue is attributable to the net effect of (i) an increase in mobile handset sales in connection with the launch of mobile services by VTR Wireless and (ii) decreases in installation and interconnect revenue at VTR GlobalCom.

II-24--------------------------------------------------------------------------------Operating Expenses of our Reportable Segments Operating expenses - 2013 compared to 2012 Organic increase Year ended December 31, Increase (decrease) 2013 2012 $ % % in millions European Operations Division: U.K. (Virgin Media) (a) $ 1,663.6 $ - $ 1,663.6 N.M. N.M.

Germany (Unitymedia KabelBW) 631.5 548.3 83.2 15.2 11.4 Belgium (Telenet) 875.8 734.5 141.3 19.2 15.4 The Netherlands 376.2 354.5 21.7 6.1 2.8 Switzerland 365.7 359.8 5.9 1.6 0.4 Other Western Europe 334.5 323.6 10.9 3.4 0.1 Total Western Europe 4,247.3 2,320.7 1,926.6 83.0 8.6 Central and Eastern Europe 438.4 418.4 20.0 4.8 2.2 Central and other 131.3 104.3 27.0 25.9 21.4 Total European Operations Division 4,817.0 2,843.4 1,973.6 69.4 8.1 Chile (VTR Group) 467.2 442.4 24.8 5.6 7.5 Corporate and other 200.3 123.2 77.1 62.6 (1.0 ) Intersegment eliminations (78.9 ) (67.8 ) (11.1 ) N.M. N.M.

Total operating expenses excluding share-based compensation expense 5,405.6 3,341.2 2,064.4 61.8 7.5 Share-based compensation expense 12.1 8.5 3.6 42.4 Total $ 5,417.7 $ 3,349.7 $ 2,068.0 61.7 _______________ (a) The amount presented for 2013 reflects the post-acquisition operating expenses of Virgin Media from June 8, 2013 through December 31, 2013.

N.M. - Not Meaningful.

General. Operating expenses include programming and copyright, network operations, interconnect, customer operations, customer care, share-based compensation and other costs related to our operations. We do not include share-based compensation in the following discussion and analysis of the operating expenses of our reportable segments as share-based compensation expense is not included in the performance measures of our reportable segments.

Share-based compensation expense is discussed under Discussion and Analysis of Our Consolidated Operating Results below. Programming and copyright costs, which represent a significant portion of our operating costs, are expected to rise in future periods as a result of (i) growth in the number of our digital video subscribers, (ii) higher costs associated with the expansion of our digital video content, including rights associated with ancillary product offerings and rights that provide for the broadcast of live sporting events, and (iii) rate increases. In addition, we are subject to inflationary pressures with respect to our labor and other costs and foreign currency exchange risk with respect to costs and expenses that are denominated in currencies other than the respective functional currencies of our operating segments (non-functional currency expenses). Any cost increases that we are not able to pass on to our subscribers through service rate increases would result in increased pressure on our operating margins. For additional information concerning our foreign currency exchange risks see Quantitative and Qualitative Disclosures about Market Risk - Foreign Currency Risk below.

II-25-------------------------------------------------------------------------------- European Operations Division. The European Operations Division's operating expenses (exclusive of share-based compensation expense) increased $1,973.6 million or 69.4% during 2013, as compared to 2012. This increase includes $1,657.4 million attributable to the impact of the Virgin Media Acquisition and other less significant acquisitions. Excluding the effects of acquisitions and FX, the European Operations Division's operating expenses increased $230.6 million or 8.1%. This increase includes the following factors: • An increase in programming and copyright costs of $80.7 million or 9.3%, due primarily to growth in digital video services in Germany, the Netherlands, Belgium, Ireland and the U.K. In the U.K. and, to a lesser extent, Belgium, increased costs for sports rights also contributed to the increase. In addition, accrual releases related to the settlement or reassessment of operational contingencies gave rise to an increase in programming and copyright costs of $10.5 million, as the impact of net accrual releases that reduced the 2012 costs in Germany, the Netherlands, Poland and Belgium more than offset the impact of net accrual releases that reduced the 2013 costs in the Netherlands; • An increase in interconnect costs of $72.7 million or 23.1%, due primarily to the net effect of (i) increased costs in Belgium attributable to (a) mobile subscriber growth and (b) increased mobile voice and data volumes on a per subscriber basis and (ii) decreased costs due to lower rates in Germany and the Netherlands and lower call volumes in Switzerland; • An increase in outsourced labor and professional fees of $19.5 million or 12.0%, due primarily to (i) higher call center costs in Germany, Switzerland and the Netherlands, and (ii) higher consulting costs related to (a) the Horizon TV platform incurred in the European Operations Division's central operations and (b) a customer retention project in Germany. These increases were partially offset by lower call center costs in Belgium, Hungary and the U.K. due primarily to reduced proportions of calls handled by third parties; • An increase in personnel costs of $14.3 million or 2.9%, due primarily to (i) annual wage increases, primarily in Germany, Belgium and the Netherlands, (ii) increased staffing levels, primarily in the European Operations Division's central operations, the Netherlands and Belgium, (iii) higher costs of $3.8 million due to the impact of reimbursements received from the Belgian government during the third and fourth quarters of 2012 with respect to the employment of certain individuals with advanced degrees and (iv) higher costs of $3.1 million due to favorable reassessments of certain post-employment benefit obligations during the third and fourth quarters of 2012 in Belgium. These increases were partially offset by a decrease in personnel costs related to lower staffing levels in Germany and Ireland; • An increase in network-related expenses of $12.8 million or 2.4%, due primarily to (i) increased network and customer premises equipment maintenance costs, primarily in the Netherlands and Germany, (ii) higher outsourced labor costs associated with customer-facing activities in Germany and (iii) an increase of $2.9 million due to the net impact of favorable settlements during 2013 and 2012 for claims of costs incurred in connection with faulty customer premises equipment, primarily in Switzerland and the Netherlands. These increases were partially offset by lower costs in Belgium associated with customer-facing activities; • An increase in bad debt and collection expenses of $9.5 million or 11.0%, due to the net impact of (i) increases in bad debt expenses in Germany, Belgium and Hungary, (ii) decreases in bad debt expenses in the Netherlands due to improved collection experience and (iii) an increase of $3.0 million due to the impact of a favorable nonrecurring adjustment recorded in the second quarter of 2012 related to the settlement of an operational contingency in Belgium; and • Higher costs of $4.6 million associated with the impact of favorable nonrecurring adjustments recorded by Telenet during the third and fourth quarters of 2012 resulting from the reassessment of a social tariff obligation.

Chile (VTR Group). The VTR Group's operating expenses (exclusive of share-based compensation expense) increased $24.8 million or 5.6% during 2013, as compared to 2012. Excluding the effects of FX, the VTR Group's operating expenses increased $33.1 million or 7.5%. This increase includes the following factors: • An increase in programming and copyright costs of $13.3 million or 9.0%, primarily associated with growth in digital cable services; • An increase in mobile access and interconnect costs of $9.1 million or 12.5%, due primarily to the impact of VTR Wireless' mobile services, which launched in May 2012; II-26--------------------------------------------------------------------------------• An increase in personnel costs of $7.3 million or 14.8%, due largely to higher bonus accruals at VTR GlobalCom; • A decrease in facilities expenses of $5.5 million or 25.3%, due primarily to lower tower and real estate rental costs, as the discounted fair value of all remaining payments due under these leases was included in the restructuring charges recorded by VTR Wireless during the third and fourth quarters of 2013, as further described in note 8 to our consolidated financial statements; • An increase in bad debt and collection expenses of $3.7 million or 9.8%, primarily at VTR Wireless. This increase is largely a function of the May 2012 launch of VTR Wireless' mobile services; • An increase in outsourced labor and professional fees of $3.3 million or 17.8%. This increase is primarily attributable to a $3.0 million non-recurring charge recorded during the second quarter of 2013 to provide for VTR GlobalCom's mandated share of severance and other labor-related obligations that were incurred by a VTR GlobalCom contractor in connection with such contractor's bankruptcy; and • A decrease in VTR Wireless' mobile handset costs of $0.7 million, primarily attributable to the net effect of (i) an aggregate increase of $4.4 million related to the liquidation or write-off of slow-moving or obsolete handsets and wireless network adaptors and (ii) a decrease of $5.4 million in mobile handset sales due largely to a reduced emphasis on prepaid mobile plans.

II-27--------------------------------------------------------------------------------Operating expenses - 2012 compared to 2011 Organic increase Year ended December 31, Increase (decrease) (decrease) 2012 2011 $ % % in millions European Operations Division: Germany (Unitymedia KabelBW) $ 548.3 $ 320.5 $ 227.8 71.1 12.4 Belgium (Telenet) 734.5 704.9 29.6 4.2 12.5 The Netherlands 354.5 375.4 (20.9 ) (5.6 ) 2.1 Switzerland 359.8 372.0 (12.2 ) (3.3 ) 2.2 Other Western Europe 323.6 348.7 (25.1 ) (7.2 ) 0.4 Total Western Europe 2,320.7 2,121.5 199.2 9.4 6.9 Central and Eastern Europe 418.4 435.2 (16.8 ) (3.9 ) (3.0 ) Central and other 104.3 103.7 0.6 0.6 10.5 Total European Operations Division 2,843.4 2,660.4 183.0 6.9 5.4 Chile (VTR Group) 442.4 381.2 61.2 16.1 16.7 Corporate and other 123.2 126.7 (3.5 ) (2.8 ) 2.2 Intersegment eliminations (67.8 ) (84.5 ) 16.7 N.M. N.M.

Total operating expenses excluding share-based compensation expense 3,341.2 3,083.8 257.4 8.3 7.0 Share-based compensation expense 8.5 15.1 (6.6 ) (43.7 ) Total $ 3,349.7 $ 3,098.9 $ 250.8 8.1 _______________ N.M. - Not Meaningful.

European Operations Division. The European Operations Division's operating expenses (exclusive of share-based compensation expense) increased $183.0 million or 6.9% during 2012, as compared to 2011. This increase includes $274.8 million attributable to the impact of acquisitions. Excluding the effects of acquisitions and FX, the European Operations Division's operating expenses increased $143.3 million or 5.4%. This increase includes the following factors: • An increase in programming and copyright costs of $83.4 million or 10.4%, primarily due to (i) growth in digital video services, predominantly in Germany, Switzerland, Belgium, Austria and the Netherlands, and (ii) a $25.3 million increase resulting from Telenet's acquisition of the rights to broadcast certain Belgian football (soccer) matches for the three years that began in the third quarter of 2011. In addition, accrual releases related to the settlement or reassessment of operational contingencies gave rise to a decrease in programming and copyright costs of $9.6 million, as the impact of net accrual releases that reduced the 2012 costs in Germany, the Netherlands, Poland and Belgium more than offset the impact of net accrual releases that reduced the 2011 costs in the Netherlands and Germany; • An increase in mobile costs of $36.6 million in Belgium, due primarily to (i) higher costs associated with subscriber promotions involving free or heavily-discounted handsets and (ii) increased mobile handset sales to third-party retailers; • An increase in network-related expenses of $25.7 million or 5.2%, primarily due to (i) higher outsourced labor costs associated with customer-facing activities in Germany, Ireland and Switzerland, (ii) increased network maintenance costs, primarily in Germany and Poland, (iii) higher duct and pole rental costs, primarily in Germany and Romania, with the higher costs in Germany primarily attributable to the negative impact of a fourth quarter 2011 settlement of an operational contingency, (iv) lower costs associated with the refurbishment of customer premises equipment in Belgium due primarily to the benefit of claims taken related to faulty set-top boxes, partially offset by an increase in costs related to the refurbishment of customer premises equipment, primarily in Germany, (v) higher energy costs in Germany due in part to the release of accruals in connection with the settlement of operational contingencies during the second and fourth quarters of 2011, (vi) increased encryption costs, due largely to increased numbers of installed digital set-top boxes, primarily in Switzerland and Germany, and (vii) higher costs of $1.4 million due to the net impact of settlements in 2012 and 2011 of claims for costs incurred in connection with faulty customer premises equipment, primarily in the Netherlands, II-28--------------------------------------------------------------------------------Switzerland and Poland. In addition, in the European Operations Division's central operations, the impact of a fourth quarter 2011 settlement of a dispute with a third party contributed $2.8 million to the overall increase in network-related expenses; • An increase in interconnect costs of $19.2 million or 6.6%, due primarily to higher costs in Belgium associated with the net effect of (i) subscriber growth, (ii) increased mobile voice and data volumes and (iii) lower mobile termination rates; • An increase in outsourced labor and professional fees of $11.5 million or 8.7%, primarily due to the net effect of (i) higher call center costs due to increased call volumes in Germany and Belgium and (ii) lower call center costs in Switzerland; • An increase in costs of $10.0 million in Belgium associated with a campaign to retain customers following the move of certain channels from the analog to the basic digital channel package. This campaign involved the sale and rental of used digital set-top boxes at relatively low prices. In connection with this campaign, Telenet experienced (i) increases in the costs of set-top boxes that were sold and (ii) higher outsourced labor and professional fees due primarily to increased customer-facing activities; • A decrease in bad debt and collection expenses of $9.8 million or 10.9%, primarily in Poland, the Czech Republic, Ireland and Austria. The decrease in bad debt and collection expenses is primarily attributable to (i) improved collection experience and (ii) the $3.3 million impact associated with a nonrecurring adjustment recorded in Belgium during the second quarter of 2012 related to the settlement of an operational contingency and (iii) the $2.6 million impact of a nonrecurring increase to bad debt expense that was recorded in the Netherlands during the first quarter of 2011; • Higher costs in Belgium of (i) $4.1 million due to the impact of reimbursements received from the Belgian government during the third and fourth quarters of 2012 with respect to the employment of certain individuals with advanced degrees and (ii) $3.4 million due to reassessments of certain post-employment benefit obligations during the third and fourth quarters of 2012; and • Lower costs of $5.0 million associated with the impact of nonrecurring adjustments recorded by Telenet during the third and fourth quarters of 2012 resulting from the reassessment of a social tariff obligation.

Chile (VTR Group). The VTR Group's operating expenses (exclusive of share-based compensation expense) increased $61.2 million or 16.1% during 2012, as compared to 2011. Excluding the effects of FX, the VTR Group's operating expenses increased $63.6 million or 16.7%. This increase includes the following factors: • An increase in VTR Wireless' mobile handset costs of $21.1 million; • An increase in programming and copyright costs of $14.5 million or 10.9%, primarily associated with growth in digital cable services; • An increase in interconnect and access costs of $12.7 million or 21.1%, due primarily to (i) higher costs associated with VTR Wireless, primarily attributable to (a) the impact of the May 2012 launch of mobile services and (b) the initiation of minimum payments under a roaming agreement during the first quarter of 2012, and (ii) higher costs associated with VTR GlobalCom's broadband internet services, as the impact of higher traffic was only partially offset by lower average rates; • An increase in facilities expenses of $10.5 million, due primarily to higher site and tower rental costs incurred by VTR Wireless, including $1.9 million of fees incurred in connection with the termination of certain leases; • A decrease in personnel costs of $5.7 million or 10.4%, primarily related to lower bonus costs at VTR GlobalCom; and • An increase in outsourced labor and professional fees of $5.5 million or 19.1%, resulting from the net effect of (i) increased costs associated with VTR Wireless' network operating center and (ii) a decrease in VTR GlobalCom's customer-facing activities.

II-29-------------------------------------------------------------------------------- SG&A Expenses of our Reportable Segments SG&A expenses - 2013 compared to 2012 Organic increase Year ended December 31, Increase (decrease) (decrease) 2013 2012 $ % % in millions European Operations Division: U.K. (Virgin Media) (a) $ 465.2 $ - $ 465.2 N.M. N.M.

Germany (Unitymedia KabelBW) 386.6 398.4 (11.8 ) (3.0 ) (5.9 ) Belgium (Telenet) 260.7 242.8 17.9 7.4 4.0 The Netherlands 144.5 137.5 7.0 5.1 1.6 Switzerland 188.1 182.1 6.0 3.3 2.1 Other Western Europe 118.9 117.1 1.8 1.5 (1.4 ) Total Western Europe 1,564.0 1,077.9 486.1 45.1 (3.1 ) Central and Eastern Europe 154.3 142.2 12.1 8.5 6.1 Central and other 202.2 174.4 27.8 15.9 11.8 Total European Operations Division 1,920.5 1,394.5 526.0 37.7 (0.3 ) Chile (VTR Group) 170.8 184.0 (13.2 ) (7.2 ) (5.7 ) Corporate and other 237.8 183.9 53.9 29.3 14.4 Intersegment eliminations (1.2 ) (3.7 ) 2.5 N.M. N.M.

Total SG&A expenses excluding share-based compensation expense 2,327.9 1,758.7 569.2 32.4 0.8 Share-based compensation expense 288.6 101.6 187.0 184.1 Total $ 2,616.5 $ 1,860.3 $ 756.2 40.6 ___________ (a) The amount presented for 2013 reflects the post-acquisition SG&A expenses of Virgin Media from June 8, 2013 through December 31, 2013.

N.M. - Not Meaningful.

General. SG&A expenses include human resources, information technology, general services, management, finance, legal and sales and marketing costs, share-based compensation and other general expenses. We do not include share-based compensation in the following discussion and analysis of the SG&A expenses of our reportable segments as share-based compensation expense is not included in the performance measures of our reportable segments. Share-based compensation expense is discussed under Discussion and Analysis of Our Consolidated Operating Results below. As noted under Operating Expenses of our Reportable Segments above, we are subject to inflationary pressures with respect to our labor and other costs and foreign currency exchange risk with respect to non-functional currency expenses. For additional information concerning our foreign currency exchange risks see Quantitative and Qualitative Disclosures about Market Risk - Foreign Currency Risk below.

European Operations Division. The European Operations Division's SG&A expenses (exclusive of share-based compensation expense) increased $526.0 million or 37.7% during 2013, as compared to 2012. This increase includes $491.4 million attributable to the impact of the Virgin Media Acquisition and other less significant acquisitions. Excluding the effects of acquisitions and FX, the European Operations Division's SG&A expenses decreased $4.0 million or 0.3%.

This decrease includes the following factors: • A decrease in sales and marketing costs of $43.6 million or 8.6%, due primarily to (i) lower costs associated with advertising campaigns and rebranding, primarily in the U.K., Germany, and the European Operations Division's central operations, and (ii) lower third-party sales commissions, primarily in the Netherlands, Switzerland, Hungary, Austria and the Czech Republic; II-30--------------------------------------------------------------------------------• An increase in personnel costs of $22.7 million or 4.3%, due largely to (i) increased staffing levels, primarily in Belgium, Switzerland, Germany, Hungary and the European Operations Division's central operations, (ii) annual wage increases, primarily in the Netherlands, the European Operations Division's central operations, Belgium, Germany and Switzerland, and (iii) higher costs of $1.4 million due to the favorable reassessment of certain post-employment benefit obligations during the third quarter of 2012 in Belgium; • An increase in information technology-related expenses of $17.4 million or 26.8%, due primarily to (i) higher software and other information technology-related maintenance costs, primarily in the European Operations Division's central operations, Hungary and Germany and (ii) costs incurred in connection with the migration of operating systems in Germany; • An increase in facilities expenses of $8.4 million, due largely to higher rental expense in Germany and the European Operations Division's central operations; • An increase in outsourced labor and professional fees of $8.3 million or 8.5%, due largely to the net effect of (i) higher consulting costs associated with certain strategic initiatives in Belgium, the European Operations Division's central operations and the Netherlands, and (ii) a decrease in consulting costs in Germany, primarily associated with integration activities during 2012 related to the KBW Acquisition; and • A net decrease resulting from individually insignificant changes in other SG&A expense categories.

Chile (VTR Group). The VTR Group's SG&A expenses (exclusive of share-based compensation expense) decreased $13.2 million or 7.2%, during 2013, as compared to 2012. Excluding the effects of FX, the VTR Group's SG&A expenses decreased $10.4 million or 5.7%. This decrease is primarily attributable to the following factors: • A decrease in sales and marketing costs of $8.8 million or 14.5%, primarily due to lower advertising costs at each of VTR Wireless and VTR GlobalCom; • An increase in personnel costs of $2.9 million or 4.7%, primarily attributable to the net effect of (i) an increase at VTR GlobalCom, due primarily to (a) higher bonus accruals, (b) a combination of increased staffing levels and higher salaries and (c) higher severance, and (ii) a decrease at VTR Wireless, due primarily to lower staffing levels and bonus accruals; and • A decrease in facilities expenses of $2.3 million or 8.2%, primarily attributable to (i) a decrease at VTR GlobalCom, due primarily to (a) lower rental costs and (b) lower insurance expenses and (ii) a decrease at VTR Wireless, as the discounted fair value of all remaining payments due under certain facilities-related contracts were included in the restructuring charges recorded by VTR Wireless during the third and fourth quarters of 2013, as further described in note 8 to our consolidated financial statements.

II-31--------------------------------------------------------------------------------SG&A expenses - 2012 compared to 2011 Organic Year ended December 31, Increase (decrease) increase 2012 2011 $ % % in millions European Operations Division: Germany (Unitymedia KabelBW) $ 398.4 $ 265.8 $ 132.6 49.9 21.2 Belgium (Telenet) 242.8 246.6 (3.8 ) (1.5 ) 6.3 The Netherlands 137.5 142.7 (5.2 ) (3.6 ) 3.9 Switzerland 182.1 188.7 (6.6 ) (3.5 ) 1.5 Other Western Europe 117.1 125.9 (8.8 ) (7.0 ) 0.4 Total Western Europe 1,077.9 969.7 108.2 11.2 8.3 Central and Eastern Europe 142.2 139.3 2.9 2.1 4.5 Central and other 174.4 159.5 14.9 9.3 18.4 Total European Operations Division 1,394.5 1,268.5 126.0 9.9 9.2 Chile (VTR Group) 184.0 166.6 17.4 10.4 11.1 Corporate and other 183.9 160.7 23.2 14.4 2.3 Intersegment eliminations (3.7 ) (1.9 ) (1.8 ) N.M. N.M.

Total SG&A expenses excluding share-based compensation expense 1,758.7 1,593.9 164.8 10.3 10.0 Share-based compensation expense 101.6 114.3 (12.7 ) (11.1 ) Total $ 1,860.3 $ 1,708.2 $ 152.1 8.9 ____________ N.M. - Not Meaningful.

European Operations Division. The European Operations Division's SG&A expenses (exclusive of share-based compensation expense) increased $126.0 million or 9.9% during 2012, as compared to 2011. This increase includes $121.2 million attributable to the impact of acquisitions. Excluding the effects of acquisitions and FX, the European Operations Division's SG&A expenses increased $116.3 million or 9.2%. This increase includes the following factors: • An increase in sales and marketing costs of $48.6 million or 10.8%, largely due to (i) higher third-party sales commissions in Germany and Belgium, (ii) increased costs associated with rebranding and other advertising campaigns in Germany, (iii) higher marketing costs in connection with promotional and operational initiatives in Belgium and (iv) increased sales call center costs in Belgium. The increase in third-party sales commissions and sales call center costs in Belgium is mostly related to (a) increased sales of mobile services and (b) the aforementioned campaign to retain customers following the move of channels from the analog to the basic digital channel package. Lower sales and marketing costs in Austria, the Czech Republic and Switzerland, partially offset the increased costs in Germany and Belgium; • An increase in personnel costs of $37.2 million or 7.3%, due largely to the net effect of (i) increased staffing levels in the European Operations Division's central operations due largely to increased numbers of strategic initiatives, (ii) annual wage increases, predominantly in Belgium, the Netherlands, the European Operations Division's central operations, Germany and Switzerland, (iii) lower costs of $1.6 million in Belgium due to the reassessment of certain post-employment benefit obligations during the third quarter of 2012 and (iv) lower bonus costs in Belgium. The increases in personnel costs also include the impact of a new employee wage tax in the Netherlands. This new employee wage tax, which was authorized in September 2012, is based on wages for the year ended December 31, 2012; • An increase in facilities expenses of $8.5 million or 9.0%, due primarily to increases in costs related to the rental of office space in Germany, the European Operations Division's central operations and the Netherlands; • An increase of $7.6 million in delivery and postage costs, including higher costs associated with (i) the delivery of mobile handsets to retail locations in Belgium, (ii) the delivery of customer premises equipment to retail locations in Germany and (iii) postage for customer communications in Switzerland; and II-32--------------------------------------------------------------------------------• A decrease in outsourced labor and professional fees of $6.4 million or 6.2%, due primarily to the net effect of (i) a decrease in consulting costs associated with strategic and regulatory initiatives in Belgium, (ii) an increase in consulting costs incurred in Germany, primarily associated with integration activities related to the KBW Acquisition, and (iii) an increase in consulting costs incurred by the European Operations Division's central operations in connection with the European Operations Division's mobile and other strategic initiatives.

Chile (VTR Group). The VTR Group's SG&A expenses (exclusive of share-based compensation expense) increased $17.4 million or 10.4% during 2012, as compared to 2011. Excluding the effects of FX, the VTR Group's SG&A expenses increased $18.4 million or 11.1%. This increase includes the following factors: • An increase in sales and marketing costs of $9.0 million or 17.4%, due primarily to the net effect of (i) higher third-party sales commissions, (ii) increased advertising campaigns at VTR Wireless, primarily associated with the launch of mobile services in May 2012, and (iii) decreased advertising campaigns at VTR GlobalCom. The higher sales commissions are primarily attributable to (a) an increase at VTR GlobalCom, due primarily to a higher proportion of sales generated by third-party dealers, and (b) an increase at VTR Wireless, due primarily to higher sales volumes resulting from the May 2012 launch of mobile services; • An increase in facilities expenses of $6.4 million, due primarily to higher rental and related costs associated with (i) an increase in retail space used by VTR Wireless and (ii) an increase in office and other space used by VTR GlobalCom; and • An increase in personnel costs of $0.7 million or 1.2%, resulting from the net effect of (i) higher staffing levels and other personnel costs at VTR Wireless and (ii) lower bonus costs and, to a lesser degree, lower staffing levels at VTR GlobalCom.

II-33--------------------------------------------------------------------------------Operating Cash Flow of our Reportable Segments Operating cash flow is the primary measure used by our chief operating decision maker to evaluate segment operating performance. As we use the term, operating cash flow is defined as revenue less operating and SG&A expenses (excluding share-based compensation, depreciation and amortization, provisions and provision releases related to significant litigation, and impairment, restructuring and other operating items). For additional information concerning this performance measure and for a reconciliation of total segment operating cash flow to our loss from continuing operations before income taxes, see note 17 to our consolidated financial statements.

Operating Cash Flow - 2013 compared to 2012 Organic increase Year ended December 31, Increase (decrease) (decrease) 2013 2012 $ % % in millions European Operations Division: U.K. (Virgin Media) (a) $ 1,524.9 $ - $ 1,524.9 N.M. N.M.

Germany (Unitymedia KabelBW) 1,541.1 1,364.3 176.8 13.0 9.3 Belgium (Telenet) 1,049.4 940.7 108.7 11.6 8.0 The Netherlands 721.7 737.1 (15.4 ) (2.1 ) (5.3 ) Switzerland 778.3 717.9 60.4 8.4 7.0 Other Western Europe 445.3 407.7 37.6 9.2 5.7 Total Western Europe 6,060.7 4,167.7 1,893.0 45.4 6.2 Central and Eastern Europe 548.5 555.1 (6.6 ) (1.2 ) (3.1 ) Central and other (203.1 ) (161.6 ) (41.5 ) (25.7 ) (20.6 ) Total European Operations Division 6,406.1 4,561.2 1,844.9 40.4 4.5 Chile (VTR Group) 353.6 314.2 39.4 12.5 14.9 Corporate and other (63.8 ) (83.1 ) 19.3 23.2 N.M.

Intersegment eliminations 44.8 38.6 6.2 N.M. N.M.

Total $ 6,740.7 $ 4,830.9 $ 1,909.8 39.5 4.9 ______________ (a) The amount presented for 2013 reflects the post-acquisition operating cash flow of Virgin Media from June 8, 2013 through December 31, 2013.

II-34--------------------------------------------------------------------------------Operating Cash Flow - 2012 compared to 2011 Organic increase Year ended December 31, Increase (decrease) (decrease) 2012 2011 $ % % in millions European Operations Division: Germany (Unitymedia KabelBW) $ 1,364.3 $ 863.7 $ 500.6 58.0 11.4 Belgium (Telenet) 940.7 967.0 (26.3 ) (2.7 ) 5.4 The Netherlands 737.1 755.3 (18.2 ) (2.4 ) 5.6 Switzerland 717.9 721.9 (4.0 ) (0.6 ) 5.1 Other Western Europe 407.7 418.7 (11.0 ) (2.6 ) 5.4 Total Western Europe 4,167.7 3,726.6 441.1 11.8 6.8 Central and Eastern Europe 555.1 548.0 7.1 1.3 0.6 Central and other (161.6 ) (140.5 ) (21.1 ) (15.0 ) (25.3 ) Total European Operations Division 4,561.2 4,134.1 427.1 10.3 5.3 Chile (VTR Group) 314.2 341.2 (27.0 ) (7.9 ) (7.3 ) Corporate and other (83.1 ) (73.8 ) (9.3 ) 12.6 N.M.

Intersegment eliminations 38.6 39.1 (0.5 ) N.M. N.M.

Total $ 4,830.9 $ 4,440.6 $ 390.3 8.8 4.0 _______________ N.M. - Not Meaningful.

Operating Cash Flow Margin - 2013, 2012 and 2011 The following table sets forth the operating cash flow margins (operating cash flow divided by revenue) of each of our reportable segments: Year ended December 31, 2013 2012 2011 % European Operations Division: U.K. (Virgin Media) 41.7 N.M. N.M.

Germany (Unitymedia KabelBW) 60.2 59.0 59.6 Belgium (Telenet) 48.0 49.0 50.4 The Netherlands 58.1 60.0 59.3 Switzerland 58.4 57.0 56.3 Other Western Europe 49.5 48.1 46.9 Total Western Europe 51.1 55.1 54.7 Central and Eastern Europe 48.1 49.8 48.8 Total European Operations Division 48.7 51.8 51.3 Chile (VTR Group) 35.7 33.4 38.4 _______________ N.M. - Not Meaningful.

With the exception of Telenet, the Netherlands and Central and Eastern Europe, the operating cash flow margins of our reportable segments improved during 2013, as compared to 2012. The decline in Telenet's operating cash flow margin is primarily due to (i) increased interconnect and other costs associated with the expansion of Telenet's mobile business, (ii) the net negative impact of certain favorable nonrecurring items recorded by Telenet in 2012, as described under the Telenet (revenue) and European Operations Division (operating and SG&A expenses) sections of our Discussion and Analysis of our Reportable Segments above, II-35 -------------------------------------------------------------------------------- and (iii) a decrease in revenue associated with changes in how Telenet recognizes certain up-front fees. As discussed above under Overview, the Netherlands is experiencing significant competition from the incumbent telecommunications operator, who is overbuilding our network in the Netherlands using FTTx and advanced DSL technologies. As a result, the Netherlands experienced a decline in revenue in 2013, which resulted in a lower operating cash flow margin during 2013, as compared to 2012. We believe the Netherlands will be challenged to maintain its current operating cash flow margin in future periods. In Central and Eastern Europe, competitive, economic and other factors contributed to the decline in the operating cash flow margin. In addition, the operating cash flow margin of the European Operations Division during 2013 was negatively impacted by (i) the inclusion of the relatively lower operating cash flow margin of Virgin Media from June 8, 2013 through December 31, 2013 and (ii) an increase in the operating cash flow deficit of the European Operations Division's central and other category, which is primarily attributable to higher personnel and consulting costs, due in part to increased levels of strategic initiatives.

The increase in the VTR Group's operating cash flow margin during 2013, as compared to 2012, reflects lower advertising costs at each of VTR Wireless and VTR GlobalCom and the improvement in the incremental operating cash flow deficit of VTR Wireless. The incremental operating cash flow deficit of VTR Wireless during 2013 and 2012 was $63.1 million and $83.0 million, respectively.

The operating cash flow margin of the European Operations Division improved during 2012, as compared to 2011, as most of the cash flow margins of the European Operations Division's operating segments improved or remained relatively unchanged. The operating cash flow margin of the European Operations Division was negatively impacted by an increase in the operating cash flow deficit of the European Operations Division's central and other category, which increase is primarily attributable to higher personnel and consulting costs, due in part to increased levels of strategic initiatives. The decrease in Germany's operating cash flow margin is attributable to the net effect of (i) the positive impact of the inclusion of KBW during 2012, (ii) higher customer care, sales and marketing and programming costs and (iii) integration costs associated with the KBW Acquisition. In Belgium, the decline in Telenet's operating cash flow margin is primarily due to the net effect of (i) the expansion of lower margin mobile services, (ii) the net positive impact of certain nonrecurring items, as described under the Telenet (revenue) and European Operations Division (operating and SG&A expenses) sections of our Discussion and Analysis of our Reportable Segments above, and (iii) higher programming costs. The increase in programming costs is largely attributable to Telenet's third quarter 2011 acquisition of the rights to broadcast certain Belgian football (soccer) matches, as further described under Operating Expenses of our Reportable Segments above. The increases in the operating cash flow margins for the remaining segments of the European Operations Division generally represent the net impact of improved operational leverage, resulting from revenue growth that more than offset the accompanying increases in operating and SG&A expenses, and competitive and economic factors.

In the case of the VTR Group, the decrease in the operating cash flow margin during 2012, as compared to 2011, is attributable to an increase in the incremental operating cash flow deficit of VTR Wireless that was only partially offset by an improvement in the operating cash flow margin of VTR GlobalCom. The incremental operating cash flow deficit of VTR Wireless during 2012 and 2011 was $83.0 million and $31.0 million, respectively.

For additional discussion of the factors contributing to the changes in the operating cash flow margins of our reportable segments, see the above analyses of the revenue, operating expenses and SG&A expenses of our reportable segments.

We expect that the 2014 operating cash flow margin of (i) the European Operations Division will remain relatively unchanged and (ii) the VTR Group will increase, each as compared to 2013. In the European Operations Division, we expect that modest improvements in the operating cash flow margins in the U.K.

and Germany will be offset by modest declines in the operating cash flow margins in the Netherlands and Switzerland. As discussed under Overview and Discussion and Analysis of our Reportable Segments - General above, most of our broadband communications operations are experiencing significant competition. Sustained or increased competition, particularly in combination with unfavorable regulatory, economic or political developments, could adversely impact the operating cash flow margins of our reportable segments.

Discussion and Analysis of our Consolidated Operating Results General For more detailed explanations of the changes in our revenue, operating expenses and SG&A expenses, see the Discussion and Analysis of our Reportable Segments above. For information concerning our foreign currency exchange risks, see Quantitative and Qualitative Disclosures about Market Risk - Foreign Currency Risk below.

II-36-------------------------------------------------------------------------------- 2013 compared to 2012 Revenue Our revenue by major category is set forth below: Organic increase Year ended December 31, Increase (decrease) 2013 2012 $ % % in millions Subscription revenue (a): Video $ 5,724.1 $ 4,637.6 $ 1,086.5 23.4 0.6 Broadband internet (b) 3,536.6 2,407.0 1,129.6 46.9 10.6 Fixed-line telephony (b) 2,505.3 1,518.9 986.4 64.9 4.3 Cable subscription revenue 11,766.0 8,563.5 3,202.5 37.4 4.0 Mobile (c) 669.9 131.5 538.4 409.4 102.1 Total subscription revenue 12,435.9 8,695.0 3,740.9 43.0 5.5 B2B revenue (d) 992.2 467.9 524.3 112.1 (1.5 ) Other revenue (b) (e) 1,046.1 767.9 278.2 36.2 3.9 Total revenue $ 14,474.2 $ 9,930.8 $ 4,543.4 45.8 5.1 _______________ (a) Subscription revenue includes amounts received from subscribers for ongoing services, excluding installation fees and late fees. Subscription revenue from subscribers who purchase bundled services at a discounted rate is generally allocated proportionally to each service based on the standalone price for each individual service.

(b) In connection with the Virgin Media Acquisition, we determined that we would no longer externally report DSL subscribers as RGUs. Accordingly, we have reclassified the revenue from our DSL subscribers in Austria from broadband internet and fixed-line telephony subscription revenue to other revenue for all periods presented.

(c) Mobile subscription revenue excludes $175.2 million and $35.1 million, respectively, of mobile interconnect revenue. Mobile interconnect revenue and revenue from mobile handset sales are included in other revenue.

(d) These amounts include B2B revenue from business broadband internet, video, voice, wireless and data services offered to medium to large enterprises and, on a wholesale basis, to other operators. We also provide services to certain SOHO subscribers. SOHO subscribers pay a premium price to receive enhanced service levels along with video, broadband internet or fixed-line telephony services that are the same or similar to the mass marketed products offered to our residential subscribers. Revenue from SOHO subscribers, which aggregated $147.2 million and $59.7 million, respectively, is included in cable subscription revenue.

(e) Other revenue includes, among other items, interconnect, installation and carriage fee revenue.

Total revenue. Our consolidated revenue increased $4,543.4 million during 2013, as compared to 2012. This increase includes $3,804.7 million attributable to the impact of acquisitions. Excluding the effects of acquisitions and FX, total consolidated revenue increased $504.2 million or 5.1%.

II-37 --------------------------------------------------------------------------------Subscription revenue. The details of the increase in our consolidated subscription revenue for 2013, as compared to 2012, are as follows (in millions): Increase in cable subscription revenue due to change in: Average number of RGUs $ 350.4 ARPU (3.8 ) Total increase in cable subscription revenue 346.6 Increase in mobile revenue 134.3 Total increase in subscription revenue 480.9 Impact of acquisitions 3,053.5 Impact of FX 206.5 Total $ 3,740.9 Excluding the effects of acquisitions and FX, our consolidated cable subscription revenue increased $346.6 million or 4.0% during 2013, as compared to 2012. This increase is attributable to (i) an increase in subscription revenue from broadband internet services of $255.0 million or 10.6%, as the impact of an increase in the average number of broadband internet RGUs was only partially offset by lower ARPU from broadband internet services, (ii) an increase in subscription revenue from fixed-line telephony services of $65.3 million or 4.3%, as the impact of an increase in the average number of fixed-line telephony RGUs was only partially offset by lower ARPU from fixed-line telephony services, and (iii) an increase in subscription revenue from video services of $26.3 million or 0.6%, as the impact of higher ARPU from video services was only partially offset by a decline in the average number of video RGUs. Our consolidated mobile subscription revenue increased $134.3 million or 102.1% during 2013, as compared to 2012, primarily in Belgium and, to a lesser extent, Chile, Germany and the U.K.

B2B revenue. Excluding the effects of acquisitions and FX, our consolidated B2B revenue decreased $6.9 million or 1.5% during 2013, as compared to 2012. This decrease is primarily due to the net effect of (i) decreases in the Netherlands, Belgium, Switzerland and Austria and (ii) an increase in Germany.

Other revenue. Excluding the effects of acquisitions and FX, our consolidated other revenue increased $30.2 million or 3.9% during 2013, as compared to 2012.

This increase is primarily attributable to the net effect of (i) higher interconnect and installation revenue in Belgium and (ii) a decrease in carriage fee revenue in Germany.

For additional information concerning the changes in our subscription and other revenue, see Discussion and Analysis of our Reportable Segments - Revenue - 2013 compared to 2012 above. For information regarding the competitive environment in certain of our markets, see Overview above.

Operating expenses Our operating expenses increased $2,068.0 million during 2013, as compared to 2012. This increase includes $1,735.2 million attributable to the impact of acquisitions. Our operating expenses include share-based compensation expense, which increased $3.6 million during 2013. For additional information, see the discussion following SG&A expenses below. Excluding the effects of acquisitions, FX and share-based compensation expense, our operating expenses increased $250.1 million or 7.5% during 2013, as compared to 2012. This increase primarily is attributable to a net increase in (i) programming and copyright costs, (ii) interconnect costs, primarily in Belgium, (iii) outsourced labor and professional fees, (iv) personnel costs and (v) network-related expenses. For additional information regarding the changes in our operating expenses, see Discussion and Analysis of our Reportable Segments - Operating Expenses of our Reportable Segments above.

II-38--------------------------------------------------------------------------------SG&A expenses Our SG&A expenses increased $756.2 million during 2013, as compared to 2012.

This increase includes $516.7 million attributable to the impact of acquisitions. Our SG&A expenses include share-based compensation expense, which increased $187.0 million during 2013. For additional information, see the discussion in the following paragraph. Excluding the effects of acquisitions, FX and share-based compensation expense, our SG&A expenses increased $13.5 million or 0.8% during 2013, as compared to 2012. This increase is primarily attributable to the net effect of (i) a decrease in sales and marketing costs, (ii) an increase in personnel costs, (iii) an increase in information technology-related expenses and (iv) an increase in integration costs, due primarily to costs incurred during 2013 by our corporate offices in connection with the integration of Virgin Media. In addition, during 2013, we incurred $8.1 million of legal and consulting fees associated with certain litigation in Puerto Rico, of which $6.7 million is included in the acquisition effect that we exclude to arrive at the organic increase in SG&A expenses. For additional information regarding the changes in our SG&A expenses, see Discussion and Analysis of our Reportable Segments - SG&A Expenses of our Reportable Segments above.

Share-based compensation expense (included in operating and SG&A expenses) We record share-based compensation that is associated with Liberty Global shares and the shares of certain of our subsidiaries. A summary of the aggregate share-based compensation expense that is included in our operating and SG&A expenses is set forth below: Year ended December 31, 2013 2012 in millions Liberty Global shares: Performance-based incentive awards (a) $ 58.6 $ 33.0 Other share-based incentive awards 182.9 46.0 Total Liberty Global shares (b) 241.5 79.0 Telenet share-based incentive awards (c) 56.5 31.2 Other 4.5 2.2 Total $ 302.5 $ 112.4 Included in: Operating expense $ 12.1 $ 8.5 SG&A expense 288.6 101.6 Total $ 300.7 $ 110.1 _______________ (a) Includes share-based compensation expense related to Liberty Global PSUs for both years presented and the Challenge Performance Awards for the applicable 2013 period.

(b) In accordance with the terms of the Virgin Media Merger Agreement, we issued Virgin Media Replacement Awards to employees and former directors of Virgin Media in exchange for corresponding Virgin Media awards. In connection with the Virgin Media Acquisition, the Virgin Media Replacement Awards were remeasured as of June 7, 2013, resulting in an aggregate estimated fair value attributable to the post-acquisition period of $188.5 million. During 2013, Virgin Media recorded share-based compensation expense of $134.3 million, primarily related to the Virgin Media Replacement Awards, including $80.1 million that was charged to expense in recognition of the Virgin Media Replacement Awards that were fully vested on June 7, 2013 or for which vesting was accelerated pursuant to the terms of the Virgin Media Merger Agreement on or prior to December 31, 2013. The remaining June 7, 2013 estimated fair value will be amortized over the remaining service periods of the unvested Virgin Media Replacement Awards, subject to forfeitures and the satisfaction of performance conditions.

(c) During the second quarters of 2013 and 2012, Telenet modified the terms of certain of its share-based incentive plans to provide for anti-dilution adjustments in connection with its shareholder returns, as further described in note 11 to our consolidated financial statements. In connection with these anti-dilution adjustments, Telenet recognized share-based compensation expense of $32.7 million and $12.6 million, respectively, and continues to recognize additional share-based compensation expense as the underlying options vest. In addition, during the first quarter of 2013, Telenet recognized expense of $6.2 million related to the accelerated vesting of options granted under the Telenet 2010 SSOP.

II-39--------------------------------------------------------------------------------For additional information concerning our share-based compensation, see note 12 to our consolidated financial statements.

Depreciation and amortization expense Our depreciation and amortization expense increased $1,614.9 million during 2013 as compared to 2012. Excluding the effects of FX, depreciation and amortization expense increased $1,555.0 million or 58.4%. This increase is due primarily to the net effect of (i) an increase associated with the Virgin Media Acquisition, (ii) an increase associated with property and equipment additions related to the installation of customer premises equipment, the expansion and upgrade of our networks and other capital initiatives, (iii) a decrease associated with certain assets becoming fully depreciated, largely in Belgium, Chile and Switzerland and (iv) an increase due to accelerated depreciation, primarily in Chile where the acceleration is due to a change in our mobile strategy, as further discussed in note 8 to our consolidated financial statements.

Release of litigation provision During the third quarter of 2007, we recorded a litigation provision of $146.0 million based on our assessment at the time of our loss exposure with respect to the 2002 Cignal Action and the 2006 Cignal Action. As further described in note 16 to our consolidated financial statements, on October 25, 2013, we received what we consider to be the final resolution of the 2006 Cignal Action and the effective resolution of the 2002 Cignal Action. Accordingly, we released the entire $146.0 million provision related to this matter during the third quarter of 2013.

Impairment, restructuring and other operating items, net We recognized impairment, restructuring and other operating items, net, of $297.5 million during 2013, as compared to $76.2 million during 2012. The 2013 amount includes (i) restructuring charges of $178.7 million, (ii) direct acquisition and disposition costs of $64.7 million, primarily related to the Virgin Media Acquisition, (iii) an impairment charge of $73.0 million to reduce the carrying amount of Telenet's spectrum rights related to Telenet's determination that it would no longer be able to utilize its spectrum rights as a result of the conclusion of negotiations with network operators in Belgium and the absence of regulatory alternatives and (iv) a $20.0 million credit resulting from cash received from the Seller upon the settlement of certain claims related to the Puerto Rico Transaction, as further described in note 3 to our consolidated financial statements. The restructuring charges include (a) $84.9 million recorded by VTR Wireless during the third and fourth quarters of 2013 as a result of VTR Wireless' decision to cease commercial use of its mobile network, as further described in note 8 to our consolidated financial statements, and (b) $80.0 million of employee severance and termination costs related to certain reorganization and integration activities, primarily in the U.K., Germany and Chile. The restructuring charges recorded by VTR Wireless include the discounted amount of (i) the remaining payments due under VTR Wireless' tower and real estate operating leases of $71.5 million and (ii) certain other required payments associated with VTR Wireless' mobile network.

The 2012 amount includes (i) aggregate restructuring charges of $53.0 million, primarily associated with employee severance and termination costs related to certain reorganization activities, mainly in Germany, and (ii) $20.4 million of direct acquisition costs, primarily related to the Puerto Rico Transaction.

Telenet operates a DTT business that serves a limited number of subscribers. The DTT network is accessed by Telenet pursuant to third-party capacity contracts that are accounted for as operating agreements. During the fourth quarter of 2013, Telenet decided to discontinue the provision of DTT services. Once Telenet discontinues the provision of DTT services, which we currently estimate will occur in the first half of 2014, we expect to record a restructuring charge equal to the estimated net present value of the remaining payments due under the DTT capacity contracts. As of December 31, 2013, the remaining payments due under these capacity contracts aggregated €92.0 million ($126.9 million).

For additional information regarding our restructuring charges, see note 13 to our consolidated financial statements.

If, among other factors, (i) our equity values were to decline significantly or (ii) the adverse impacts of economic, competitive, regulatory or other factors were to cause our results of operations or cash flows to be worse than anticipated, we could conclude in future periods that impairment charges are required in order to reduce the carrying values of our goodwill, and to a lesser extent, other long-lived assets. Any such impairment charges could be significant. For additional information, see Critical Accounting Policies, Judgments and Estimates - Impairment of Property and Equipment and Intangible Assets, below.

II-40--------------------------------------------------------------------------------Interest expense Our interest expense increased $613.3 million during 2013, as compared to 2012.

Excluding the effects of FX, interest expense increased $568.8 million or 34.0%.

This increase is primarily attributable to the net impact of (i) a higher average outstanding debt balance, due largely to debt incurred in connection with the Virgin Media Acquisition, and (ii) a lower weighted average interest rate. The decrease in our weighted average interest rate is primarily related to (a) the completion of certain financing transactions (including the financing transactions related to the Virgin Media Acquisition) that resulted in extended maturities and net decreases to certain of our interest rates and (b) decreases in certain of the base rates for our variable-rate indebtedness. For additional information regarding our outstanding indebtedness, see note 9 to our consolidated financial statements.

It is possible that (i) the interest rates on any new borrowings could be higher than the current interest rates on our existing indebtedness and (ii) the interest rates on our variable-rate indebtedness could increase in future periods. As further discussed in note 6 to our consolidated financial statements and under Qualitative and Quantitative Disclosures about Market Risk below, we use derivative instruments to manage our interest rate risks.

Interest and dividend income Our interest and dividend income increased $71.0 million during 2013, as compared to 2012. This increase is primarily attributable to (i) higher dividend income related to our investment in shares of Ziggo (after taking into account the impact of the Ziggo Collar) that was only partially offset by lower dividend income related to our investment in shares of Sumitomo (before taking into account the impact of the Sumitomo Collar) and (ii) higher interest income due to the net effect of (a) higher average cash and cash equivalent and restricted cash balances and (b) lower weighted average interest rates earned on our cash and cash equivalent and restricted cash balances. For information regarding the Ziggo Collar and the Sumitomo Collar, see note 6 to our consolidated financial statements.

Realized and unrealized losses on derivative instruments, net Our realized and unrealized gains or losses on derivative instruments include (i) unrealized changes in the fair values of our derivative instruments that are non-cash in nature until such time as the derivative contracts are fully or partially settled and (ii) realized gains or losses upon the full or partial settlement of the derivative contracts. The details of our realized and unrealized losses on derivative instruments, net, are as follows: Year ended December 31, 2013 2012 in millions Cross-currency and interest rate derivative contracts (a) $ (586.5 ) $ (958.3 ) Equity-related derivative instruments (b): Sumitomo Collar (206.4 ) (109.0 ) Ziggo Collar (152.5 ) - Other (3.4 ) - Total equity-related derivative instruments (362.3 ) (109.0 ) Foreign currency forward contracts (c) (72.9 ) (6.0 ) Other 1.3 3.0 Total $ (1,020.4 ) $ (1,070.3 ) _______________ (a) The loss during 2013 is primarily attributable to the net effect of (i) losses associated with increases in the values of the British pound sterling, euro and Swiss franc relative to the U.S. dollar, (ii) gains associated with increases in market interest rates in the British pound sterling, euro and Swiss franc markets, (iii) losses associated with increases in market interest rates in the U.S. dollar market, (iv) gains associated with decreases in the values of the Chilean peso, Czech koruna, Swiss franc, Polish zloty and Hungarian forint relative to the euro, and (v) gains associated with a decrease in the value of the Chilean peso relative to the U.S. dollar. In addition, the loss during 2013 includes a net gain of $15.3 million resulting from changes in our credit risk valuation adjustments. The loss during 2012 is primarily attributable to the net effect of (i) losses associated with decreases in market interest rates in the euro, Hungarian forint, Polish zloty, Swiss franc, and Czech koruna markets, (ii) losses associated with increases in the values of the Polish zloty, Hungarian forint, Chilean peso, Swiss II-41-------------------------------------------------------------------------------- franc, and Czech koruna relative to the euro, (iii) losses associated with increases in the values of the Chilean peso, euro and Swiss franc relative to the U.S. dollar and (iv) gains associated with decreases in market interest rates in the U.S. dollar market. In addition, the loss during 2012 includes a net loss of $57.3 million resulting from changes in our credit risk valuation adjustments.

(b) For information concerning the factors that impact the valuations of our equity-related derivative instruments, see note 7 to our consolidated financial statements.

(c) Primarily includes activity related to deal contingent foreign currency forward contracts that were settled in connection with the Virgin Media Acquisition and the foreign currency forward contracts of LGE Financing.

For additional information concerning our derivative instruments, see notes 6 and 7 to our consolidated financial statements and Quantitative and Qualitative Disclosures about Market Risk below.

Foreign currency transaction gains, net Our foreign currency transaction gains or losses primarily result from the remeasurement of monetary assets and liabilities that are denominated in currencies other than the underlying functional currency of the applicable entity. Unrealized foreign currency transaction gains or losses are computed based on period-end exchange rates and are non-cash in nature until such time as the amounts are settled. The details of our foreign currency transaction gains, net, are as follows: Year ended December 31, 2013 2012 in millions Intercompany payables and receivables denominated in a currency other than the entity's functional currency (a) $ (280.0 ) $ 229.3 U.S. dollar denominated debt issued by a British pound sterling functional currency entity 249.3 - Yen denominated debt issued by a U.S. dollar functional currency entity 192.3 135.7 U.S. dollar denominated debt issued by euro functional currency entities 160.7 74.0 Cash and restricted cash denominated in a currency other than the entity's functional currency 94.6 0.5 British pound sterling denominated debt issued by a U.S.

dollar functional currency entity (37.3 ) - Euro denominated debt issued by a U.S. dollar functional currency entity (34.6 ) - Other 4.3 (1.1 ) Total $ 349.3 $ 438.4 _______________ (a) Amounts primarily relate to (i) loans between certain of our non-operating and operating subsidiaries in Europe, which generally are denominated in the currency of the applicable operating subsidiary, and (ii) loans between certain of our non-operating subsidiaries in the U.S., Europe and Chile.

For information regarding how we manage our exposure to foreign currency risk, see Quantitative and Qualitative Disclosures about Market Risk - Foreign Currency Risk below.

II-42 --------------------------------------------------------------------------------Realized and unrealized gains (losses) due to changes in fair values of certain investments and debt, net Our realized and unrealized gains or losses due to changes in fair values of certain investments and debt include unrealized gains or losses associated with changes in fair values that are non-cash in nature until such time as these gains or losses are realized through cash transactions. The details of our realized and unrealized gains (losses) due to changes in fair values of certain investments and debt, net, are as follows: Year ended December 31, 2013 2012 in millions Investments (a): Ziggo $ 582.9 $ - Sumitomo (6.8 ) (38.2 ) Other, net (b) (52.0 ) 28.0 Total $ 524.1 $ (10.2 ) _______________ (a) For additional information regarding our investments and fair value measurements, see notes 5 and 7 to our consolidated financial statements.

(b) The 2013 amount includes decreases in the fair values of our investments in Cyfra+ and O3B Networks Limited that are attributable to negative developments in the respective business plans of these entities. The 2012 amount primarily includes an increase in the fair value of our investment in Cyfra+.

Losses on debt modification, extinguishment and conversion, net We recognized losses on debt modification, extinguishment and conversion, net, of $212.2 million during 2013. These losses include the following: • aggregate losses of $112.5 million during the first and fourth quarters related to the redemption of all of Unitymedia KabelBW's euro-denominated 8.125% senior secured notes, including (i) $75.0 million representing the difference between the principal amount and redemption price of the debt redeemed and (ii) $37.5 million associated with the write-off of deferred financing costs and an unamortized discount; • an $85.5 million loss during the first quarter, which includes (i) $35.6 million of aggregate redemption premiums related to the UPC Holding 8.0% Senior Notes and the UPC Holding 9.75% Senior Notes, (ii) the write-off of $24.5 million of unamortized discount related to the UPC Holding 9.75% Senior Notes, (iii) the write-off of $19.0 million of aggregate deferred financing costs associated with the UPC Holding 8.0% Senior Notes and the UPC Holding 9.75% Senior Notes and (iv) $6.4 million of aggregate interest incurred on the UPC Holding 8.0% Senior Notes and the UPC Holding 9.75% Senior Notes between the respective dates that we and the trustee were legally discharged; and • an $11.9 million loss during the second quarter in connection with the prepayment of amounts outstanding under certain facilities of the UPC Broadband Holding Bank Facility, including (i) $7.7 million of third-party costs and (ii) $4.2 million associated with the write-off of deferred financing costs and an unamortized discount.

We recognized losses on debt modification, extinguishment and conversion, net, of $213.8 million during 2012. These losses include the following: • a $175.8 million loss during the fourth quarter associated with the redemption and repurchase of all of the 2009 UM Dollar Senior Secured Notes and a portion of the 2009 UM Euro Senior Secured Notes, including a loss of (i) $125.9 million representing the difference between the principal amount and redemption price of the debt redeemed and (ii) $49.4 million associated with the write-off of deferred financing costs and an unamortized discount; • a $16.3 million loss associated with the repayment of borrowings under the UPC Broadband Holding Bank Facility, including a $12.4 million loss during the fourth quarter associated with the write-off of deferred financing costs and an unamortized discount in connection with the prepayment of Facility AB; II-43--------------------------------------------------------------------------------• a $10.2 million loss during the third quarter representing the difference between the carrying value and redemption price of the UM Senior Secured Floating-Rate Exchange Notes; and • a $7.0 million loss incurred by Unitymedia KabelBW associated with the Unitymedia KabelBW Exchange and the Special Optional Redemptions, including $5.6 million of third-party costs and a loss of $1.4 million representing the difference between the carrying value and redemption price of the debt redeemed pursuant to the Special Optional Redemptions.

For additional information concerning our losses on debt modification, extinguishment and conversion, net, see note 9 to our consolidated financial statements.

Income tax expense We recognized income tax expense of $355.5 million and $75.0 million during 2013 and 2012, respectively.

The income tax expense during 2013 differs from the expected income tax benefit of $121.1 million (based on the U.K. statutory income tax rate of 23%) due primarily to the negative impacts of (i) a reduction in net deferred tax assets in the U.K. due to enacted changes in tax law, (ii) certain permanent differences between the financial and tax accounting treatment of interest and other items, including $51.1 million related to the reversal of a litigation provision in the third quarter, as further described in note 16 to our consolidated financial statements, (iii) a loss of subsidiary tax attributes due to a deemed change in control related to the Virgin Media Acquisition and (iv) a net increase in valuation allowance. The negative impacts of these items were partially offset by the positive impacts of (i) statutory tax rates in certain jurisdictions in which we operate that are different than the U.K. statutory income tax rate and (ii) tax effect of intercompany financing.

The income tax expense during 2012 differs from the expected income tax benefit of $178.1 million (based on the U.S. federal 35% income tax rate) due primarily to the negative impacts of (i) a net increase in valuation allowances and (ii) certain permanent differences between the financial and tax accounting treatment of interest and other items.

For additional information concerning our income taxes, see note 10 to our consolidated financial statements.

Loss from continuing operations During 2013 and 2012, we reported losses from continuing operations of $882.0 million and $583.9 million, respectively, including (i) operating income of $2,012.1 million and $1,983.1 million, respectively, (ii) net non-operating expenses of $2,538.6 million and $2,492.0 million, respectively, and (iii) income tax expense of $355.5 million and $75.0 million, respectively.

Gains or losses associated with (i) changes in the fair values of derivative instruments, (ii) movements in foreign currency exchange rates and (iii) the disposition of assets and changes in ownership are subject to a high degree of volatility, and as such, any gains from these sources do not represent a reliable source of income. In the absence of significant gains in the future from these sources or from other non-operating items, our ability to achieve earnings from continuing operations is largely dependent on our ability to increase our aggregate operating cash flow to a level that more than offsets the aggregate amount of our (a) share-based compensation expense, (b) depreciation and amortization, (c) impairment, restructuring and other operating items, net, (d) interest expense, (e) other net non-operating expenses and (f) income tax expenses.

Due largely to the fact that we seek to maintain our debt at levels that provide for attractive equity returns, as discussed under Liquidity and Capital Resources - Capitalization below, we expect that we will continue to report significant levels of interest expense for the foreseeable future. For information concerning our expectations with respect to trends that may affect certain aspects of our operating results in future periods, see the discussion under Overview above. For information concerning the reasons for changes in specific line items in our consolidated statements of operations, see the discussion under Discussion and Analysis of our Reportable Segments and Discussion and Analysis of our Consolidated Operating Results above.

Discontinued operations Our loss from discontinued operations of $23.7 million during 2013 relates to the operations of the Chellomedia Disposal Group and our earnings from discontinued operations of $47.1 million during 2012 relates to the operations of Austar and the Chellomedia Disposal Group. In addition, we recognized an after-tax gain on the disposal of discontinued operations of $924.1 million during 2012 related to the May 23, 2012 completion of the Austar Transaction.

For additional information, see note 4 to our consolidated financial statements.

II-44 --------------------------------------------------------------------------------Net earnings attributable to noncontrolling interests Net earnings or loss attributable to noncontrolling interests include the noncontrolling interests' share of the results of our continuing and discontinued operations. Net earnings attributable to noncontrolling interests decreased $6.3 million during 2013, as compared to 2012, due primarily to the net impact of (i) an increase due to the net effect of (a) an improvement in the results of operations of Telenet and (b) the impact of a decrease in the noncontrolling interests' share of Telenet's results following the Telenet Tender, (ii) a decline in the results of the VTR Group and (iii) a decrease associated with our May 2012 disposition of Austar.

2012 compared to 2011 Revenue Our revenue by major category is set forth below: Organic Year ended December 31, Increase (decrease) increase 2012 2011 $ % % in millions Subscription revenue (a): Video $ 4,637.6 $ 4,397.7 $ 239.9 5.5 2.1 Broadband internet (b) 2,407.0 2,203.4 203.6 9.2 9.2 Fixed-line telephony (b) 1,518.9 1,299.2 219.7 16.9 8.3 Cable subscription revenue 8,563.5 7,900.3 663.2 8.4 5.1 Mobile (c) 131.5 76.9 54.6 71.0 70.1 Total subscription revenue 8,695.0 7,977.2 717.8 9.0 5.7 B2B revenue (d) 467.9 495.0 (27.1 ) (5.5 ) 0.4 Other revenue (b) (e) 767.9 646.1 121.8 18.9 11.9 Total $ 9,930.8 $ 9,118.3 $ 812.5 8.9 5.9 _________________ (a) Subscription revenue includes amounts received from subscribers for ongoing services, excluding installation fees and late fees. Subscription revenue from subscribers who purchase bundled services at a discounted rate is generally allocated proportionally to each service based on the standalone price for each individual service.

(b) In connection with the Virgin Media Acquisition, we determined that we would no longer externally report DSL subscribers as RGUs. Accordingly, we have reclassified the revenue from our DSL subscribers in Austria from broadband internet and fixed-line telephony subscription revenue to other revenue for all periods presented.

(c) Mobile subscription revenue excludes $35.1 million and $13.4 million, respectively, of mobile interconnect revenue. Mobile interconnect revenue and revenue from mobile handset sales are included in other revenue.

(d) These amounts include B2B revenue from business broadband internet, video, voice, wireless and data services offered to medium to large enterprises and, on a wholesale basis, to other operators. We also provide services to certain SOHO subscribers. SOHO subscribers pay a premium price to receive enhanced service levels along with video, broadband internet or fixed-line telephony services that are the same or similar to the mass marketed products offered to our residential subscribers. Revenue from SOHO subscribers, which aggregated $59.7 million and $50.4 million, respectively, is included in cable subscription revenue.

(e) Other revenue includes, among other items, interconnect, installation and carriage fee revenue.

Total revenue. Our consolidated revenue increased $812.5 million during 2012, as compared to 2011. This increase includes $997.5 million attributable to the impact of acquisitions. Excluding the effects of acquisitions and FX, total consolidated revenue increased $535.9 million or 5.9%.

II-45 --------------------------------------------------------------------------------Subscription revenue. The details of the increase in our consolidated subscription revenue for 2012, as compared to 2011, are as follows (in millions): Increase in cable subscription revenue due to change in: Average number of RGUs $ 374.2 ARPU 28.9 Total increase in cable subscription revenue 403.1 Increase in mobile revenue 53.9 Total increase in subscription revenue 457.0 Impact of acquisitions 890.4 Impact of FX (629.6 ) Total $ 717.8 Excluding the effects of acquisitions and FX, our consolidated cable subscription revenue increased $403.1 million or 5.1% during 2012, as compared to 2011. This increase is attributable to (i) an increase in subscription revenue from broadband internet services of $201.9 million or 9.2%, as the impact of an increase in the average number of broadband internet RGUs was only partially offset by lower ARPU from broadband internet services, (ii) an increase in subscription revenue from fixed-line telephony services of $108.2 million or 8.3%, as the impact of an increase in the average number of fixed-line telephony RGUs was only partially offset by lower ARPU from fixed-line telephony services and (iii) an increase in subscription revenue from video services of $93.0 million or 2.1%, as the impact of higher ARPU from video services was only partially offset by a decline in the average number of video RGUs. Our consolidated mobile subscription revenue increased $53.9 million or 70.1% during 2012, as compared to 2011. This increase is attributable to (i) an increase in the average number of mobile subscribers in Belgium and (ii) the launch of mobile services by VTR Wireless in May 2012 in Chile.

B2B revenue. Excluding the effects of acquisitions and FX, our consolidated B2B revenue increased $2.0 million or 0.4% during 2012, as compared to 2011. This increase is primarily attributable to increases in Austria, the Netherlands and the Czech Republic.

Other revenue. Excluding the effects of acquisitions and FX, our consolidated other revenue increased $76.9 million or 11.9% during 2012, as compared to 2011.

This increase is attributable to (i) an increase in Germany due primarily to (1) an increase in installation revenue, (2) an increase in interconnect revenue and (3) an increase in network usage revenue and (ii) an increase in Belgium due primarily to (a) an increase in interconnect revenue and (b) an increase in mobile handset sales.

For additional information concerning the changes in our subscription and other revenue, see Discussion and Analysis of our Reportable Segments - Revenue - 2012 compared to 2011 above.

Operating expenses Our operating expenses increased $250.8 million during 2012, as compared to 2011. This increase includes $286.0 million attributable to the impact of acquisitions. Our operating expenses include share-based compensation expense, which decreased $6.6 million during 2012. For additional information, see the discussion following SG&A expenses below. Excluding the effects of acquisitions, FX and share-based compensation expense, our operating expenses increased $214.7 million or 7.0% during 2012, as compared to 2011. This increase primarily is attributable to increases in (i) programming and copyright costs, (ii) mobile costs, primarily in Belgium and Chile, (iii) interconnect and access costs and (iv) outsourced labor and professional fees. For additional information regarding the changes in our operating expenses, see Discussion and Analysis of our Reportable Segments - Operating Expenses of our Reportable Segments above.

II-46 --------------------------------------------------------------------------------SG&A expenses Our SG&A expenses increased $152.1 million during 2012, as compared to 2011.

This increase includes $127.9 million attributable to the impact of acquisitions. Our SG&A expenses include share-based compensation expense, which decreased $12.7 million during 2012. For additional information, see the discussion in the following paragraph. Excluding the effects of acquisitions, FX and share-based compensation expense, our SG&A expenses increased $159.1 million or 10.0% during 2012, as compared to 2011. This increase primarily reflects net increases in (i) sales and marketing costs, (ii) personnel costs, (iii) facilities expenses in the European Operations Division and the VTR Group and (iv) outsourced labor and professional fees. For additional information regarding the changes in our SG&A expenses, see Discussion and Analysis of our Reportable Segments - SG&A Expenses of our Reportable Segments above.

Share-based compensation expense (included in operating and SG&A expenses) We record share-based compensation that is associated with Liberty Global shares and the shares of certain of our subsidiaries. A summary of the aggregate share-based compensation expense that is included in our operating and SG&A expenses is set forth below: Year ended December 31, 2012 2011 in millions Liberty Global shares: Performance-based incentive awards (a) $ 33.0 $ 46.8 Other share-based incentive awards 46.0 43.4 Total Liberty Global shares 79.0 90.2 Telenet share-based incentive awards (b) 31.2 40.0 Other 2.2 4.7 Total $ 112.4 $ 134.9 Included in: Operating expense $ 8.5 $ 15.1 SG&A expense 101.6 114.3 Total $ 110.1 $ 129.4 ________________ (a) Includes share-based compensation expense related to the Liberty Global PSUs for both years presented and the Liberty Global Performance Plans for 2011.

(b) During the second quarters of 2012 and 2011, Telenet modified the terms of certain of its share-based incentive plans to provide for anti-dilution adjustments in connection with its shareholder returns, as further described in note 11 to our consolidated financial statements. In connection with these anti-dilution adjustments, Telenet recognized share-based compensation expense of $12.6 million and $15.8 million, respectively, and continues to recognize additional share-based compensation expense as the underlying options vest.

For additional information concerning our share-based compensation, see note 12 to our consolidated financial statements.

Depreciation and amortization expense Our depreciation and amortization expense increased $237.2 million during 2012 as compared to 2011. Excluding the effects of FX, depreciation and amortization expense increased $438.0 million or 18.1%. This increase is due primarily to the net effect of (i) an increase associated with acquisitions, primarily in Germany, (ii) an increase associated with property and equipment additions related to the installation of customer premises equipment, the expansion and upgrade of our networks and other capital initiatives and (iii) a decrease associated with certain assets becoming fully depreciated, largely in Belgium, Switzerland, Chile and the Netherlands.

II-47 --------------------------------------------------------------------------------Impairment, restructuring and other operating items, net We recognized impairment, restructuring and other operating items, net, of $76.2 million during 2012, as compared to $64.0 million during 2011. The 2012 amount includes (i) aggregate restructuring charges of $53.0 million associated with employee severance and termination costs related to certain reorganization activities, primarily in Germany, and (ii) $20.4 million of direct acquisition costs, primarily related to the Puerto Rico Transaction. The 2011 amount includes (i) $31.5 million of direct acquisition costs, including $22.3 million and $6.3 million attributable to the KBW Acquisition and the Aster Acquisition, respectively, and (ii) restructuring charges of $21.1 million, primarily related to reorganization and integration activities in Europe and Chile.

For additional information regarding our restructuring charges, see note 13 to our consolidated financial statements.

Interest expense Our interest expense increased $219.9 million during 2012, as compared to 2011.

Excluding the effects of FX, interest expense increased $348.2 million or 24.0%.

This increase is primarily attributable to higher average outstanding debt balances. In addition, interest expense was impacted by a slightly lower weighted average interest rate. The slight decrease in our weighted average interest rate is primarily related to the net effect of (i) decreases in certain of the base rates for our variable rate indebtedness and (ii) the completion of certain financing transactions that resulted in extended maturities, certain of which resulted in an increase to our weighted average interest rates. For additional information regarding our outstanding indebtedness, see note 9 to our consolidated financial statements.

It is possible that (i) the interest rates on any new borrowings could be higher than the current interest rates on our existing indebtedness and (ii) the interest rates on our variable-rate indebtedness could increase in future periods. As further discussed in note 6 to our consolidated financial statements and under Qualitative and Quantitative Disclosures about Market Risk below, we use derivative instruments to manage our interest rate risks.

Interest and dividend income Our interest and dividend income decreased $30.8 million during 2012, as compared to 2011. This decrease is primarily attributable to the net effect of (i) a decrease in interest income due to (a) a lower weighted average interest rate earned on our cash and cash equivalent and restricted cash balances and (b) lower average cash and cash equivalent and restricted cash balances and (ii) an increase in dividend income related to our investment in shares of Sumitomo (before taking into account the impact of the Sumitomo Collar).

Realized and unrealized losses on derivative instruments, net Our realized and unrealized gains or losses on derivative instruments include (i) unrealized changes in the fair values of our derivative instruments that are non-cash in nature until such time as the derivative contracts are fully or partially settled and (ii) realized gains or losses upon the full or partial settlement of the derivative contracts. The details of our realized and unrealized losses on derivative instruments, net, are as follows: Year ended December 31, 2012 2011 in millions Cross-currency and interest rate derivative contracts (a) $ (958.3 ) $ (110.6 ) Equity-related derivative instruments (b): Sumitomo Collar (109.0 ) 89.9 Other - (2.7 ) Total equity-related derivative instruments (109.0 ) 87.2 Foreign currency forward contracts (6.0 ) (36.1 ) Other 3.0 (0.4 ) Total $ (1,070.3 ) $ (59.9 ) _______________ (a) The loss during 2012 is primarily attributable to the net effect of (i) losses associated with decreases in market interest rates in the euro, Hungarian forint, Polish zloty, Swiss franc, and Czech koruna markets, (ii) losses associated with increases in II-48-------------------------------------------------------------------------------- the values of the Polish zloty, Hungarian forint, Chilean peso, Swiss franc, and Czech koruna relative to the euro, (iii) losses associated with increases in the values of the Chilean peso, euro and Swiss franc relative to the U.S. dollar and (iv) gains associated with decreases in market interest rates in the U.S. dollar market. In addition, the loss during 2012 includes a net loss of $57.3 million resulting from changes in our credit risk valuation adjustments. The loss during 2011 is primarily attributable to the net effect of (i) losses associated with decreases in market interest rates in the euro, Swiss franc, Chilean peso, Polish zloty and Czech koruna markets, (ii) gains associated with decreases in the values of the Polish zloty, Hungarian forint and Chilean peso relative to the euro and (iii) gains associated with decreases in the values of the euro and Chilean peso relative to the U.S. dollar. In addition, the loss during 2011 includes a net gain of $42.9 million resulting from changes in our credit risk valuation adjustments.

(b) For information concerning the factors that impact the valuations of our equity-related derivative instruments, see note 7 to our consolidated financial statements.

For additional information concerning our derivative instruments, see notes 6 and 7 to our consolidated financial statements and Quantitative and Qualitative Disclosures about Market Risk below.

Foreign currency transaction gains (losses), net Our foreign currency transaction gains or losses primarily result from the remeasurement of monetary assets and liabilities that are denominated in currencies other than the underlying functional currency of the applicable entity. Unrealized foreign currency transaction gains or losses are computed based on period-end exchange rates and are non-cash in nature until such time as the amounts are settled. The details of our foreign currency transaction gains (losses), net, are as follows: Year ended December 31, 2012 2011 in millions Intercompany payables and receivables denominated in a currency other than the entity's functional currency (a) $ 229.3 $ (354.0 ) U.S. dollar denominated debt issued by euro functional currency entities 74.0 (102.0 ) Yen denominated debt issued by a U.S. dollar functional currency entity 135.7 (63.0 ) Cash and restricted cash denominated in a currency other than the entity's functional currency 0.5 (40.7 ) Other (1.1 ) (6.9 ) Total $ 438.4 $ (566.6 ) ______________ (a) Amounts primarily relate to (i) loans between certain of our non-operating and operating subsidiaries in Europe, which generally are denominated in the currency of the applicable operating subsidiary, and (ii) loans between certain of our non-operating subsidiaries in the U.S., Europe and Chile.

For information regarding how we manage our exposure to foreign currency risk, see Quantitative and Qualitative Disclosures about Market Risk - Foreign Currency Risk below.

II-49 --------------------------------------------------------------------------------Realized and unrealized losses due to changes in fair values of certain investments and debt, net Our realized and unrealized losses due to changes in fair values of certain investments and debt include unrealized gains or losses associated with changes in fair values that are non-cash in nature until such time as these gains or losses are realized through cash transactions. The details of our realized and unrealized losses due to changes in fair values of certain investments and debt, net, are as follows: Year ended December 31, 2012 2011 in millions Investments (a): Sumitomo $ (38.2 ) $ (28.2 ) Other, net (b) 28.0 (16.5 ) Debt - UGC Convertible Notes (c) - (107.0 ) Total $ (10.2 ) $ (151.7 ) _______________ (a) For additional information regarding our investments and fair value measurements, see notes 5 and 7 to our consolidated financial statements.

(b) The 2012 amount primarily includes an increase in the fair value of our investment in Cyfra+. The 2011 amount includes decreases in the fair value of (i) our investment in a broadband communications operator in Switzerland and (ii) Cyfra+.

(c) Represents the change in the fair value of the UGC Convertible Notes prior to their conversion into LGI common stock in April 2011.

Losses on debt modification, extinguishment and conversion, net We recognized losses on debt modification, extinguishment and conversion, net, of $213.8 million during 2012. These losses include the following: • a $175.8 million loss during the fourth quarter associated with the redemption and repurchase of all of the 2009 UM Dollar Senior Secured Notes and a portion of the 2009 UM Euro Senior Secured Notes, including a loss of (a) $125.9 million representing the difference between the principal amount and redemption price of the debt redeemed and (b) $49.4 million associated with the write-off of deferred financing costs and an unamortized discount; • a $16.3 million loss associated with the repayment of borrowings under the UPC Broadband Holding Bank Facility, including a $12.4 million loss during the fourth quarter associated with the write-off of deferred financing costs and an unamortized discount in connection with the prepayment of Facility AB; • a $10.2 million loss during the third quarter representing the difference between the carrying value and redemption price of the UM Senior Secured Floating-Rate Exchange Notes; and • a $7.0 million loss incurred by Unitymedia KabelBW associated with the Unitymedia KabelBW Exchange and the Special Optional Redemptions, including $5.6 million of third-party costs and a loss of $1.4 million representing the difference between the carrying value and redemption price of the debt redeemed pursuant to the Special Optional Redemptions.

We recognized losses on debt modification, extinguishment and conversion, net, of $218.4 million during 2011. These losses include the following: • a $187.2 million debt conversion loss of recognized primarily during the second quarter of 2011 related to the exchange of substantially all of the LGI Convertible Notes for LGI common stock and cash; • a $15.7 million loss during the first quarter of 2011 related to the write-off of deferred financing costs and an unamortized discount in connection with the prepayment of amounts outstanding under Facilities M, P, T and U of the UPC Broadband Holding Bank Facility; and II-50--------------------------------------------------------------------------------• $14.8 million loss associated with the prepayment of amounts outstanding under Facilities K, L1, G and J under the Telenet Credit Facility, representing (i) a $9.5 million write-off of deferred financing costs and (ii) the incurrence of $5.3 million of third-party costs.

For additional information concerning our losses on debt modification, extinguishment and conversion, net, see note 9 to our consolidated financial statements.

Income tax expense We recognized income tax expense of $75.0 million and $241.1 million during 2012 and 2011, respectively.

The income tax expense during 2012 differs from the expected income tax benefit of $178.1 million (based on the U.S. federal 35% income tax rate) due primarily to the negative impacts of (i) a net increase in valuation allowances and (ii) certain permanent differences between the financial and tax accounting treatment of interest and other items.

The income tax expense during 2011 differs from the expected income tax benefit of $196.1 million (based on the U.S. federal 35% income tax rate) due primarily to the negative impacts of (i) a net increase in valuation allowances, including $222.7 million of valuation allowances that were recorded in France during the fourth quarter of 2011 due to a modification of our intercompany financing structure in that jurisdiction that resulted largely from a change in local tax law and (ii) certain permanent differences between the financial and tax accounting treatment of interest and other items.

For additional information concerning our income taxes, see note 10 to our consolidated financial statements.

Loss from continuing operations During 2012 and 2011, we reported losses from continuing operations of $583.9 million and $801.5 million, respectively, including (i) operating income of $1,983.1 million and $1,822.9 million, respectively, (ii) net non-operating expenses of $2,492.0 million and $2,383.3 million, respectively, and (iii) income tax expense of $75.0 million and $241.1 million, respectively.

Discontinued operations Our earnings from our discontinued operations of $47.1 million and $130.5 million during 2012 and 2011, respectively, relates to the operations of Austar and the Chellomedia Disposal Group. In addition, we recognized an after-tax gain on the disposal of discontinued operations of $924.1 million during 2012 related to the May 23, 2012 completion of the Austar Transaction. The decrease in earnings from our discontinued operations is due to a decline in Austar's operating results that was only partially offset by an improvement in the Chellomedia Disposal Group's operating results. The decline in Austar's operating results is due largely to (i) the $80.7 million after-tax impact of the gain on the sale of Austar's spectrum licenses that was included in Austar's results of operations during the first quarter of 2011 and (ii) the sale of Austar during the second quarter of 2012. The above factors were partially offset by the impact of not recording depreciation and amortization on Austar's long-lived assets during 2012 as a result of our determination that Austar was held-for-sale effective December 31, 2011. For additional information, see note 4 to our consolidated financial statements.

Net earnings attributable to noncontrolling interests Net earnings or loss attributable to noncontrolling interests include the noncontrolling interests' share of the results of our continuing and discontinued operations. Net earnings attributable to noncontrolling interests decreased $37.2 million during 2012, as compared to 2011, due primarily to the net impact of (i) a decrease associated with a decline in the results of operations of Austar, as discussed in the preceding paragraph, (ii) a decrease associated with a decline in the results of operations of Telenet and (iii) an increase associated with an improvement in the results of operations of the VTR Group.

II-51--------------------------------------------------------------------------------Liquidity and Capital Resources Sources and Uses of Cash Although our consolidated operating subsidiaries have generated cash from operating activities, the terms of the instruments governing the indebtedness of certain of these subsidiaries, including Virgin Media, UPC Broadband Holding, UPC Holding, Unitymedia KabelBW, Telenet, VTR Finance and Liberty Puerto Rico, may restrict our ability to access the assets of these subsidiaries. As set forth in the table below, these subsidiaries accounted for a significant portion of our consolidated cash and cash equivalents at December 31, 2013. In addition, our ability to access the liquidity of these and other subsidiaries may be limited by tax and legal considerations, the presence of noncontrolling interests and other factors.

Cash and cash equivalents The details of the U.S. dollar equivalent balances of our consolidated cash and cash equivalents at December 31, 2013 are set forth in the following table. With the exception of the amount for Liberty Global, which is reported on a standalone basis, the amounts presented below include the cash and cash equivalents of the named entity and its subsidiaries unless otherwise noted (in millions): Cash and cash equivalents held by: Liberty Global and non-operating subsidiaries: Liberty Global $ 796.2 Non-operating subsidiaries 698.4 Total Liberty Global and non-operating subsidiaries 1,494.6 Operating subsidiaries: UPC Holding (excluding VTR Group) 645.4 Virgin Media (a) 49.3 Telenet 295.2 VTR Group 162.8 Chellomedia (b) 26.4 Unitymedia KabelBW 18.7 Liberty Puerto Rico 9.5 Total operating subsidiaries 1,207.3 Total cash and cash equivalents $ 2,701.9 _________________ (a) Represents cash and cash equivalents held by the Virgin Media Borrowing Group. The $518.8 million of cash and cash equivalents of Virgin Media are included in the amount shown for Liberty Global's non-operating subsidiaries.

(b) Represents the cash and cash equivalents of Chellomedia at December 31, 2013 that are not attributed to the Chellomedia Disposal Group. For information regarding the Chellomedia Transaction, see note 4 to our consolidated financial statements.

Liquidity of Liberty Global and its Non-operating Subsidiaries The $796.2 million of cash and cash equivalents held by Liberty Global and, subject to certain tax and legal considerations, the $698.4 million of cash and cash equivalents held by Liberty Global's non-operating subsidiaries, represented available liquidity at the corporate level at December 31, 2013. Our remaining cash and cash equivalents of $1,207.3 million at December 31, 2013 were held by our operating subsidiaries as set forth in the table above. As noted above, various factors may limit our ability to access the cash of our operating subsidiaries. For information regarding limitations imposed by our subsidiaries' debt instruments at December 31, 2013, see note 9 to our consolidated financial statements.

As described in greater detail below, our current sources of corporate liquidity include (i) cash and cash equivalents held by Liberty Global and, subject to certain tax and legal considerations, Liberty Global's non-operating subsidiaries and (ii) interest and dividend income received on our and, subject to certain tax and legal considerations, our non-operating subsidiaries' cash and cash equivalents and investments.

II-52 -------------------------------------------------------------------------------- From time to time, Liberty Global and its non-operating subsidiaries may also receive (i) proceeds in the form of distributions or loan repayments from Liberty Global's operating subsidiaries or affiliates upon (a) the completion of recapitalizations, refinancings, asset sales or similar transactions by these entities or (b) the accumulation of excess cash from operations or other means, (ii) proceeds upon the disposition of investments and other assets of Liberty Global and its non-operating subsidiaries and (iii) proceeds in connection with the incurrence of debt by Liberty Global or its non-operating subsidiaries or the issuance of equity securities by Liberty Global. No assurance can be given that any external funding would be available to Liberty Global or its non-operating subsidiaries on favorable terms, or at all. For information concerning the disposition of the Chellomedia Disposal Group, see note 4 to our consolidated financial statements. For information concerning capital distributions of Telenet and VTR GlobalCom, see note 11 to our consolidated financial statements.

At December 31, 2013, our consolidated cash and cash equivalents balance includes $2,667.9 million that is held outside of the U.K. Based on our assessment of our ability to access the liquidity of our subsidiaries on a tax efficient basis and our expectations with respect to our corporate liquidity requirements, we do not anticipate that tax considerations will adversely impact our corporate liquidity over the next 12 months. Our ability to access the liquidity of our subsidiaries on a tax efficient basis is a consideration in assessing the extent of our share repurchase programs.

The ongoing cash needs of Liberty Global and its non-operating subsidiaries include (i) corporate general and administrative expenses and (ii) interest payments on the Sumitomo Collar Loan, the Ziggo Collar Loan and the Ziggo Margin Loan. In addition, Liberty Global and its non-operating subsidiaries may require cash in connection with (a) the repayment of outstanding debt, (b) the satisfaction of contingent liabilities, (c) acquisitions, (d) the repurchase of equity and debt securities, (e) other investment opportunities or (f) income tax payments. For information concerning the contingencies of Liberty Global and its non-operating subsidiaries, see note 16 to our consolidated financial statements.

As a U.K. incorporated company, we may only elect to repurchase shares or pay dividends to the extent of our "Distributable Reserves." On June 19, 2013, we received approval from the English Companies Court to reduce our share premium and in connection with that approval, we recognized Distributable Reserves of approximately $29.0 billion. For additional information, see note 11 to our consolidated financial statements. For information regarding a share dividend that was declared by our board of directors subsequent to December 31, 2013, see note 19 to our consolidated financial statements.

During 2013, we repurchased a total of 6,550,197 shares of our Liberty Global Class A ordinary shares or LGI Series A common stock at a weighted average price of $73.82 per share and 9,105,600 shares of our Liberty Global Class C ordinary shares or LGI Series C common stock at a weighted average price of $73.41 per share, for an aggregate purchase price of $1,151.9 million, including direct acquisition costs and the effects of derivative instruments. At December 31, 2013, the remaining amount authorized for share repurchases was $2,522.1 million. Subsequent to December 31, 2013, our board of directors increased the amount authorized under our current repurchase program by $1.0 billion. We currently intend to complete this repurchase program by the end of 2015.

Liquidity of Operating Subsidiaries The cash and cash equivalents of our operating subsidiaries are detailed in the table above. In addition to cash and cash equivalents, the primary sources of liquidity of our operating subsidiaries are cash provided by operations and, in the case of UPC Broadband Holding, Virgin Media, Unitymedia KabelBW, Telenet, VTR Finance and Liberty Puerto Rico, borrowing availability under their respective debt instruments. For the details of the borrowing availability of such entities at December 31, 2013, see note 9, and for information regarding certain financing transactions completed by VTR Finance in January 2014, see note 19 to our consolidated financial statements. The aforementioned sources of liquidity may be supplemented in certain cases by contributions and/or loans from Liberty Global and its non-operating subsidiaries. Our operating subsidiaries' liquidity generally is used to fund property and equipment additions and debt service requirements. From time to time, our operating subsidiaries may also require funding in connection with (i) acquisitions and other investment opportunities, (ii) loans to Liberty Global, (iii) capital distributions to Liberty Global and other equity owners or (iv) the satisfaction of contingencies. No assurance can be given that any external funding would be available to our operating subsidiaries on favorable terms, or at all. For information concerning (a) the acquisitions and (b) the contingencies of our subsidiaries, see notes 3 and 16 to our consolidated financial statements, respectively.

For additional information concerning our consolidated capital expenditures and cash provided by operating activities, see the discussion under Consolidated Statements of Cash Flows below.

II-53 --------------------------------------------------------------------------------Capitalization We seek to maintain our debt at levels that provide for attractive equity returns without assuming undue risk. In this regard, we generally seek to cause our operating subsidiaries to maintain their debt at levels that result in a consolidated debt balance (excluding the Sumitomo Collar Loan, the Ziggo Collar Loan and the Ziggo Margin Loan and measured using subsidiary debt figures at swapped foreign currency exchange rates, consistent with the covenant calculation requirements of our subsidiary debt agreements) that is between four and five times our consolidated operating cash flow, although it should be noted that the timing of our acquisitions and financing transactions may temporarily cause this ratio to exceed our targeted range. The ratio of our December 31, 2013 consolidated debt to our annualized consolidated operating cash flow for the quarter ended December 31, 2013 was 5.3x. In addition, the ratio of our December 31, 2013 consolidated net debt (debt, as defined above, less cash and cash equivalents) to our annualized consolidated operating cash flow for the quarter ended December 31, 2013 was 4.9x.

When it is cost effective, we generally seek to match the denomination of the borrowings of our subsidiaries with the functional currency of the operations that are supporting the respective borrowings. As further discussed under Quantitative and Qualitative Disclosures about Market Risk below and in note 6 to our consolidated financial statements, we also use derivative instruments to mitigate foreign currency and interest rate risk associated with our debt instruments.

Our ability to service or refinance our debt and to maintain compliance with the leverage covenants in the credit agreements and indentures of certain of our subsidiaries is dependent primarily on our ability to maintain or increase the operating cash flow of our operating subsidiaries and to achieve adequate returns on our property and equipment additions and acquisitions. In addition, our ability to obtain additional debt financing is limited by the leverage covenants contained in the various debt instruments of our subsidiaries. For example, if the operating cash flow of UPC Broadband Holding were to decline, we could be required to partially repay or limit our borrowings under the UPC Broadband Holding Bank Facility in order to maintain compliance with applicable covenants. No assurance can be given that we would have sufficient sources of liquidity, or that any external funding would be available on favorable terms, or at all, to fund any such required repayment. The ability to access available borrowings under the UPC Broadband Holding Bank Facility and/or UPC Holding's ability to complete additional financing transactions can also be impacted by the interplay of average and spot foreign currency rates with respect to leverage calculations under the indentures for UPC Holding's senior notes. At December 31, 2013, each of our borrowing subsidiaries was in compliance with its debt covenants. In addition, we do not anticipate any instances of non-compliance with respect to our subsidiaries' debt covenants that would have a material adverse impact on our liquidity during the next 12 months.

At December 31, 2013, our outstanding consolidated debt and capital lease obligations aggregated $44.7 billion, including $1,023.4 million that is classified as current in our consolidated balance sheet and $38.9 billion that is not due until 2018 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. However, as our maturing debt grows in later years, we anticipate that we will seek to refinance or otherwise extend our debt maturities. No assurance can be given that we will be able to complete these refinancing transactions or otherwise extend our debt maturities. In this regard, it is not possible to predict how political and economic conditions, sovereign debt concerns or any adverse regulatory developments could impact the credit and equity markets we access and, accordingly, our future liquidity and financial position. However, (i) the financial failure of any of our counterparties could (a) reduce amounts available under committed credit facilities and (b) adversely impact our ability to access cash deposited with any failed financial institution and (ii) tightening of the credit markets could adversely impact our ability to access debt financing on favorable terms, or at all. In addition, any weakness in the equity markets could make it less attractive to use our shares to satisfy contingent or other obligations, and sustained or increased competition, particularly in combination with adverse economic or regulatory developments, could have an unfavorable impact on our cash flows and liquidity.

All of our consolidated debt and capital lease obligations have been borrowed or incurred by our subsidiaries at December 31, 2013.

For additional information concerning our debt and capital lease obligations, see note 9 to our consolidated financial statements.

Consolidated Statements of Cash Flows General. Our cash flows are subject to significant variations due to FX. See related discussion under Quantitative and Qualitative Disclosures about Market Risk - Foreign Currency Risk below. All of the cash flows discussed below are those of our continuing operations.

II-54 --------------------------------------------------------------------------------Consolidated Statements of Cash Flows - 2013 compared to 2012 Summary. The 2013 and 2012 consolidated statements of cash flows of our continuing operations are summarized as follows: Year ended December 31, 2013 2012 Change in millions Net cash provided by operating activities $ 3,921.0 $ 2,837.5 $ 1,083.5 Net cash used by investing activities (7,950.1 ) (957.7 ) (6,992.4 ) Net cash provided (used) by financing activities 4,623.3 (1,465.1 ) 6,088.4 Effect of exchange rate changes on cash 85.4 28.3 57.1 Net increase in cash and cash equivalents $ 679.6 $ 443.0 $ 236.6 Operating Activities. The increase in net cash provided by our operating activities is primarily attributable to the net effect of (i) an increase in the cash provided by our operating cash flow and related working capital items, due largely to the impact of the Virgin Media Acquisition, (ii) a decrease in cash provided due to higher cash payments for interest, due largely to the impact of the Virgin Media Acquisition, (iii) an increase in the reported net cash provided by operating activities due to FX, (iv) a decrease in cash provided due to higher net cash payments for taxes and (v) an increase in cash provided due to lower cash payments related to derivative instruments.

Investing Activities. The increase in net cash used by our investing activities is primarily attributable to (i) an increase in cash used of $3,919.2 million associated with higher cash paid in connection with acquisitions, (ii) an increase in cash used of $1,317.9 million associated with higher cash paid in connection with investments in and loans to affiliates and others, due primarily to the cash we paid to acquire Ziggo shares during 2013, (iii) an increase in cash used of $1,055.4 million associated with cash proceeds received in connection with the Austar Transaction during 2012 and (iv) an increase in cash used of $613.2 million associated with higher capital expenditures. Capital expenditures increased from $1,868.3 million during 2012 to $2,481.5 million during 2013, primarily due to an increase related to the Virgin Media Acquisition and other less significant acquisitions that was only partially offset by a net decrease in the local currency capital expenditures of our subsidiaries.

The capital expenditures that we report in our consolidated statements of cash flows do not include amounts that are financed under vendor financing or capital lease arrangements. Instead, these amounts are reflected as non-cash additions to our property and equipment when the underlying assets are delivered, and as repayments of debt when the principal is repaid. In the following discussion, we refer to (i) our capital expenditures as reported in our consolidated statements of cash flows, which exclude amounts financed under vendor financing or capital lease arrangements, and (ii) our total property and equipment additions, which include our capital expenditures on an accrual basis and amounts financed under vendor financing or capital lease arrangements. A reconciliation of our consolidated property and equipment additions to our consolidated capital expenditures as reported in the consolidated statements of cash flows is set forth below: Year ended December 31, 2013 2012 in millions Property and equipment additions $ 3,161.6 $ 2,258.6 Assets acquired under capital-related vendor financing arrangements (573.5 ) (246.5 ) Assets acquired under capital leases (143.0 ) (63.1 ) Changes in current liabilities related to capital expenditures 36.4 (80.7 ) Capital expenditures $ 2,481.5 $ 1,868.3 The European Operations Division accounted for $2,901.0 million and $1,981.6 million (including $755.4 million and nil attributable to Virgin Media, $543.4 million and $559.5 million attributable to Unitymedia KabelBW and $453.7 million and $440.0 million attributable to Telenet) of our consolidated property and equipment additions during 2013 and 2012, respectively. The increase in the European Operations Division's property and equipment additions is due primarily to the net effect of (i) an increase due to the Virgin Media Acquisition and other less significant acquisitions, (ii) an increase in expenditures for support capital, such as information technology upgrades and general support systems, (iii) an increase due to FX, (iv) a decrease in expenditures for the purchase and installation of customer premises equipment and (v) an increase in expenditures for new build II-55 -------------------------------------------------------------------------------- and upgrade projects to expand services. During 2013 and 2012, the European Operations Division's property and equipment additions represented 22.1% and 22.5% (including 20.7% and nil for Virgin Media, 21.2% and 24.2% for Unitymedia KabelBW and 20.8% and 22.9% for Telenet) of its revenue, respectively.

The VTR Group accounted for $188.5 million and $243.4 million (including $8.7 million and $36.7 million attributable to VTR Wireless) of our consolidated property and equipment additions during 2013 and 2012, respectively. The decrease in the VTR Group's property and equipment additions is due primarily to the net effect of (i) a decrease in expenditures related to the construction of the VTR Wireless mobile network, (ii) a decrease in expenditures for the purchase and installation of customer premises equipment, (iii) a decrease in expenditures for new build and upgrade projects, (iv) an increase in expenditures for support capital, such as information technology upgrades and general support systems and (v) a decrease due to FX. During 2013 and 2012, the VTR Group's property and equipment additions represented 19.0% and 25.9% (18.1% and 22.0% excluding VTR Wireless) of its revenue, respectively.

We expect the percentage of revenue represented by our aggregate 2014 consolidated property and equipment additions to decline slightly as compared to 2013, with the 2014 percentage expected to range from 21% to 23% for the European Operations Division (including 19% to 21% for Virgin Media, 20% to 22% for Unitymedia KabelBW and 19% to 21% for Telenet) and 18% to 20% for the VTR Group. The actual amount of the 2014 consolidated property and equipment additions and the 2014 property and equipment additions of the European Operations Division (including Virgin Media, Unitymedia KabelBW and Telenet) and the VTR Group may vary from expected amounts for a variety of reasons, including (i) changes in (a) the competitive or regulatory environment, (b) business plans or (c) our current or expected future operating results and (ii) the availability of sufficient capital. Accordingly, no assurance can be given that our actual property and equipment additions will not vary materially from our expectations.

Financing Activities. The change in net cash provided (used) by our financing activities is primarily attributable to the net effect of (i) an increase in cash of $3,534.2 million due primarily to a change in cash collateral associated with the Virgin Media Acquisition, (ii) an increase in cash of $3,003.8 million due to the release of restricted cash in connection with the Telenet Tender, (iii) an increase in cash of $632.9 million due to higher cash received related to derivative instruments, (iv) a decrease in cash of $458.0 million related to shares purchased in connection with the Telenet Tender, (v) a decrease in cash of $256.1 million related to lower net borrowings of debt, (vi) a decrease in cash of $203.0 million related to higher distributions by subsidiaries to noncontrolling interests, (vii) a decrease in cash of $186.9 million related to higher repurchases of our shares and (viii) a decrease in cash of $159.8 million due to higher payments for financing costs, debt premiums and exchange offer consideration.

Consolidated Statements of Cash Flows - 2012 compared to 2011 Summary. The 2012 and 2011 consolidated statements of cash flows of our continuing operations are summarized as follows: Year ended December 31, 2012 2011 Change in millions Net cash provided by operating activities $ 2,837.5 $ 2,510.2 $ 327.3 Net cash used by investing activities (957.7 ) (4,020.4 ) 3,062.7 Net cash used by financing activities (1,465.1 ) (641.7 ) (823.4 ) Effect of exchange rate changes on cash 28.3 32.6 (4.3 ) Net increase (decrease) in cash and cash equivalents $ 443.0 $ (2,119.3 ) $ 2,562.3 Operating Activities. The increase in net cash provided by our operating activities is primarily attributable to the net effect of (i) an increase in the cash provided by our operating cash flow and related working capital items, including the impact of the KBW Acquisition, (ii) a decrease in cash provided due to higher cash payments for interest, largely attributable to the KBW Acquisition, (iii) a decrease in the reported net cash provided by operating activities due to FX, (iv) an increase in cash provided due to lower net cash payments for taxes and (v) an increase in cash provided due to lower cash payments related to derivative instruments.

Investing Activities. The decrease in net cash used by our investing activities is primarily attributable to (i) a decrease in cash used of $1,826.3 million due to lower cash paid in connection with acquisitions, (ii) a decrease in cash used of $1,055.4 million associated with cash proceeds received in connection with the Austar Transaction, (iii) a decrease in cash used of $127.5 million related to an escrow account that was established in connection with the March 2011 execution of the KBW Purchase Agreement II-56 -------------------------------------------------------------------------------- and (iv) a decrease in cash used of $52.5 million associated with lower capital expenditures. Capital expenditures decreased from $1,920.8 million during 2011 to $1,868.3 million during 2012, as an increase in the local currency capital expenditures of our subsidiaries, including an increase due to the KBW Acquisition and other less significant acquisitions, was more than offset by a decrease due to FX.

A reconciliation of our consolidated property and equipment additions to our consolidated capital expenditures as reported in the consolidated statements of cash flows is set forth below: Year ended December 31, 2012 2011 in millions Property and equipment additions $ 2,258.6 $ 2,125.4 Assets acquired under capital-related vendor financing arrangements (246.5 ) (101.4 ) Assets acquired under capital leases (63.1 ) (38.2 ) Changes in current liabilities related to capital expenditures (80.7 ) (65.0 ) Capital expenditures $ 1,868.3 $ 1,920.8 The European Operations Division accounted for $1,981.6 million and $1,824.0 million (including $559.5 million and $371.0 million attributable to Unitymedia KabelBW and $440.0 million and $413.3 million attributable to Telenet) of our consolidated property and equipment additions during 2012 and 2011, respectively. The increase in the European Operations Division's property and equipment additions is due primarily to the net effect of (i) an increase in expenditures for the purchase and installation of customer premises equipment, (ii) a decrease due to FX, (iii) an increase in expenditures for support capital, such as information technology upgrades and general support systems, and (iv) an increase in expenditures for new build and upgrade projects to expand services. During 2012 and 2011, the European Operations Division's property and equipment additions represented 22.5% and 22.6% (including 24.2% and 25.6% for Unitymedia KabelBW and 22.9% and 21.5% for Telenet) of its revenue, respectively.

The VTR Group accounted for $243.4 million and $270.8 million (including $36.7 million and $86.9 million attributable to VTR Wireless) of our consolidated property and equipment additions during 2012 and 2011, respectively. The decrease in the VTR Group's property and equipment additions is due primarily to the net effect of (i) a decrease in expenditures related to the construction of the VTR Wireless mobile network, (ii) an increase in expenditures for the purchase and installation of customer premises equipment, (iii) an increase in expenditures for new build and upgrade projects, (iv) a decrease in expenditures for support capital, such as information technology upgrades and general support systems, and (v) a decrease due to FX. During 2012 and 2011, the VTR Group's property and equipment additions represented 25.9% and 30.5% (22.0% and 20.7% excluding VTR Wireless) of its revenue, respectively.

Financing Activities. The increase in net cash used by our financing activities is primarily attributable to the net effect of (i) an increase in cash used of $1,464.1 million to fund restricted cash related to the Telenet Tender, (ii) a decrease in cash used of $504.1 million related to higher net borrowings of debt, (iii) a decrease in cash used of $124.2 million related to the release of cash collateral, (iv) a decrease in cash used of $88.4 million due to higher cash contributions from noncontrolling interest owners to Liberty Global subsidiaries, (v) a decrease in cash used of $81.6 million due to lower cash distributions from Liberty Global subsidiaries to noncontrolling interest owners, (vi) a decrease in cash used of $61.8 million resulting from lower cash payments of net settled employee withholding taxes on share incentive awards and (vii) an increase in cash used of $57.7 million due to higher repurchases of our Liberty Global Series A and Series C common stock. The increase in our net borrowings of debt was partially offset by a decrease due to FX.

Free cash flow We define free cash flow as net cash provided by our operating activities, plus (i) excess tax benefits related to the exercise of share-based incentive awards and (ii) cash payments for third-party costs directly associated with successful and unsuccessful acquisitions and dispositions, less (a) capital expenditures, as reported in our consolidated statements of cash flows, (b) principal payments on vendor financing obligations and (c) principal payments on capital leases (exclusive of the portions of the network lease in Belgium and the duct leases in Germany that we assumed in connection with certain acquisitions), with each item excluding any cash provided or used by our discontinued operations. We believe that our presentation of free cash flow provides useful information to our investors because this measure can be used to gauge our ability to service debt and fund new investment opportunities. Free cash flow should not be understood to represent our ability to fund discretionary amounts, as we have various II-57 -------------------------------------------------------------------------------- mandatory and contractual obligations, including debt repayments, which are not deducted to arrive at this amount. Investors should view free cash flow as a supplement to, and not a substitute for, GAAP measures of liquidity included in our consolidated statements of cash flows.

The following table provides the details of our free cash flow: Year ended December 31, 2013 2012 2011 in millions Net cash provided by operating activities of our continuing operations $ 3,921.0 $ 2,837.5 $ 2,510.2 Excess tax benefits from share-based compensation 41.0 6.7 37.7 Cash payments for direct acquisition and disposition costs 61.0 31.5 19.6 Capital expenditures (2,481.5 ) (1,868.3 ) (1,920.8 ) Principal payments on vendor financing obligations (320.4 ) (104.7 ) (10.0 ) Principal payments on certain capital leases (95.8 ) (17.5 ) (11.4 ) Free cash flow $ 1,125.3 $ 885.2 $ 625.3 Off Balance Sheet Arrangements In the ordinary course of business, we may provide indemnifications to our lenders, our vendors and certain other parties and performance and/or financial guarantees to local municipalities, our customers and vendors. Historically, these arrangements have not resulted in our company making any material payments and we do not believe that they will result in material payments in the future.

Contractual Commitments The U.S. dollar equivalents of the commitments of our continuing operations as of December 31, 2013 are presented below: Payments due during: 2014 2015 2016 2017 2018 Thereafter Total in millions Debt (excluding interest) $ 787.6 $ 354.5 $ 2,352.3 $ 1,691.6 $ 3,436.6 $ 34,069.1 $ 42,691.7 Capital leases (excluding interest) 233.0 191.9 147.5 100.0 86.0 1,089.9 1,848.3 Network and connectivity commitments 398.5 338.3 283.7 267.3 145.8 1,358.6 2,792.2 Programming obligations 497.6 374.8 258.8 132.2 32.2 1.7 1,297.3 Purchase commitments 791.9 145.1 60.9 10.4 3.4 - 1,011.7 Operating leases 177.6 148.0 118.9 97.0 64.5 320.3 926.3 Other commitments 326.6 236.5 155.9 117.6 54.2 66.1 956.9 Total (a) $ 3,212.8 $ 1,789.1 $ 3,378.0 $ 2,416.1 $ 3,822.7 $ 36,905.7 $ 51,524.4 Projected cash interest payments on debt and capital lease obligations (b) $ 2,462.9 $ 2,446.5 $ 2,440.3 $ 2,341.1 $ 2,189.9 $ 6,118.8 $ 17,999.5 _______________ (a) The commitments reflected in this table do not reflect any liabilities that are included in our December 31, 2013 consolidated balance sheet other than debt and capital lease obligations. Our liability for uncertain tax positions in the various jurisdictions in which we operate ($371.1 million at December 31, 2013) has been excluded from the table as the amount and timing of any related payments are not subject to reasonable estimation.

(b) Amounts are based on interest rates, interest payment dates and contractual maturities in effect as of December 31, 2013. These amounts are presented for illustrative purposes only and will likely differ from the actual cash payments required in future periods. In addition, the amounts presented do not include the impact of our interest rate derivative contracts, deferred financing costs, discounts or premiums, all of which affect our overall cost of borrowing.

II-58-------------------------------------------------------------------------------- Network and connectivity commitments include (i) Telenet's commitments for certain operating costs associated with its leased network, (ii) commitments associated with our MVNO agreements, (iii) certain repair and maintenance, fiber capacity and energy commitments of Unitymedia KabelBW and (iv) certain commitments of Telenet to purchase broadcasting capacity on a DTT network.

Subsequent to October 1, 2015, Telenet's commitments for certain operating costs are subject to adjustment based on changes in the network operating costs incurred by Telenet with respect to its own networks. These potential adjustments are not subject to reasonable estimation, and therefore, are not included in the above table. The amounts reflected in the table with respect to our MVNO commitments represent fixed minimum amounts payable under these agreements and therefore may be significantly less than the actual amounts we ultimately pay in these periods.

Programming commitments consist of obligations associated with certain of our programming, studio output and sports rights contracts that are enforceable and legally binding on us in that we have agreed to pay minimum fees without regard to (i) the actual number of subscribers to the programming services, (ii) whether we terminate service to a portion of our subscribers or dispose of a portion of our distribution systems or (iii) whether we discontinue our premium film or sports services. The amounts reflected in the table with respect to these contracts are significantly less than the amounts we expect to pay in these periods under these contracts. Payments to programming vendors have in the past represented, and are expected to continue to represent in the future, a significant portion of our operating costs. In this regard, during 2013, 2012 and 2011, (a) the programming and copyright costs incurred by our broadband communications and DTH operations aggregated $1,685.4 million, $1,055.7 million and $965.3 million, respectively (including intercompany charges that eliminate in consolidation of $28.0 million, $38.7 million and $40.4 million, respectively), and (b) the third-party programming costs incurred by our programming distribution operations aggregated $47.4 million, $45.6 million and $49.4 million, respectively. The ultimate amount payable in excess of the contractual minimums of our studio output contracts, which expire at various dates through 2019, is dependent upon the number of subscribers to our premium movie service and the theatrical success of the films that we exhibit.

Purchase commitments include unconditional purchase obligations associated with commitments to purchase customer premises and other equipment that are enforceable and legally binding on us.

Commitments arising from acquisition agreements (including with respect to the Ziggo Merger Agreement, as described in note 19 to our consolidated financial statements) are not reflected in the above table.

In addition to the commitments set forth in the table above, we have significant commitments under (i) derivative instruments and (ii) defined benefit plans and similar arrangements, pursuant to which we expect to make payments in future periods. For information concerning projected cash flows associated with these derivative instruments, see Quantitative and Qualitative Disclosures about Market Risk - Projected Cash Flows Associated with Derivatives below. For information concerning our derivative instruments, including the net cash paid or received in connection with these instruments during 2013, 2012 and 2011, see note 6 to our consolidated financial statements. For information concerning our defined benefit plans, see note 14 to our consolidated financial statements.

We also have commitments pursuant to agreements with, and obligations imposed by, franchise authorities and municipalities, which may include obligations in certain markets to move aerial cable to underground ducts or to upgrade, rebuild or extend portions of our broadband communication systems. Such amounts are not included in the above table because they are not fixed or determinable.

Critical Accounting Policies, Judgments and Estimates In connection with the preparation of our consolidated financial statements, we make estimates and assumptions that affect the reported amounts of assets and liabilities, revenue and expenses and related disclosure of contingent assets and liabilities. Critical accounting policies are defined as those policies that are reflective of significant judgments, estimates and uncertainties, which would potentially result in materially different results under different assumptions and conditions. We believe the following accounting policies are critical in the preparation of our consolidated financial statements because of the judgment necessary to account for these matters and the significant estimates involved, which are susceptible to change: • Impairment of property and equipment and intangible assets (including goodwill); • Costs associated with construction and installation activities; • Useful lives of long-lived assets; • Fair value measurements; and • Income tax accounting.

II-59--------------------------------------------------------------------------------We have discussed the selection of the aforementioned critical accounting policies with the Audit Committee of our Board of Directors. For additional information concerning our significant accounting policies, see note 2 to our consolidated financial statements.

Impairment of Property and Equipment and Intangible Assets Carrying Value. The aggregate carrying value of our property and equipment and intangible assets (including goodwill) that were held for use comprised 80% of our total assets at December 31, 2013.

We review, when circumstances warrant, the carrying amounts of our property and equipment and our intangible assets (other than goodwill and other indefinite-lived intangible assets) to determine whether such carrying amounts continue to be recoverable. Such changes in circumstance may include, among other items, (i) an expectation of a sale or disposal of a long-lived asset or asset group, (ii) adverse changes in market or competitive conditions, (iii) an adverse change in legal factors or business climate in the markets in which we operate and (iv) operating or cash flow losses. For purposes of impairment testing, long-lived assets are grouped at the lowest level for which cash flows are largely independent of other assets and liabilities, generally at or below the reporting unit level (see below). If the carrying amount of the asset or asset group is greater than the expected undiscounted cash flows to be generated by such asset or asset group, an impairment adjustment is recognized. Such adjustment is measured by the amount that the carrying value of such asset or asset group exceeds its fair value. We generally measure fair value by considering (a) sale prices for similar assets, (b) discounted estimated future cash flows using an appropriate discount rate and/or (c) estimated replacement cost. Assets to be disposed of are carried at the lower of their financial statement carrying amount or fair value less costs to sell.

We evaluate the goodwill, franchise rights and other indefinite-lived intangible assets for impairment at least annually on October 1 and whenever other facts and circumstances indicate that the carrying amounts of goodwill and other indefinite-lived intangible assets may not be recoverable. For impairment evaluations with respect to both goodwill and other indefinite-lived intangibles, we first make a qualitative assessment to determine if the goodwill or other indefinite-lived intangible may be impaired. In the case of goodwill, if it is more likely than not that a reporting unit's fair value is less than its carrying value, we then compare the fair value of the reporting unit to its respective carrying amount. A reporting unit is an operating segment or one level below an operating segment (referred to as a "component"). In most cases, our operating segments are deemed to be a reporting unit either because the operating segment is comprised of only a single component, or the components below the operating segment are aggregated as they have similar economic characteristics. If the carrying value of a reporting unit were to exceed its fair value, we would then compare the implied fair value of the reporting unit's goodwill to its carrying amount, and any excess of the carrying amount over the fair value would be charged to operations as an impairment loss. With respect to franchise rights or other indefinite-lived intangible assets, if is is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying value, we then estimate its fair value and any excess of the carrying value over the fair value of the franchise right or other indefinite-lived intangible asset is also charged to operations as an impairment loss.

When required, considerable management judgment is necessary to estimate the fair value of reporting units and underlying long-lived and indefinite-lived assets. The equity of one of our reporting units, Telenet, is publicly traded in an active market. For this reporting unit, our fair value determination is based on quoted market prices. For other reporting units, we typically determine fair value using an income-based approach (discounted cash flows) based on assumptions in our long-range business plans and, in some cases, a combination of an income-based approach and a market-based approach. With respect to our discounted cash flow analysis used in the income-based approach, the timing and amount of future cash flows under these business plans require estimates, among other items, of subscriber growth and retention rates, rates charged per product, expected gross margin and operating cash flow margins and expected property and equipment additions. The development of these cash flows, and the discount rate applied to the cash flows, is subject to inherent uncertainties, and actual results could vary significantly from such estimates. Our determination of the discount rate is based on a weighted average cost of capital approach, which uses a market participant's cost of equity and after-tax cost of debt and reflects the risks inherent in the cash flows. Based on the results of our 2013 qualitative assessment of our reporting unit carrying values, we determined that it was more likely than not that fair value exceeded carrying value for all but one small reporting unit. Upon our determination of the implied fair value of the goodwill and other long-lived assets of this reporting unit, we concluded that the goodwill and long-lived assets of this reporting unit were not impaired.

During the three years ended December 31, 2013, the most significant impairment charge that we recorded with respect to our property and equipment and intangible assets was the $73.0 million impairment charge that Telenet recorded during the fourth quarter of 2013 to reduce the carrying value of the intangible assets related to certain of its spectrum rights. For additional information, see note 8 to our consolidated financial statements.

II-60 -------------------------------------------------------------------------------- In the case of our broadband communications operations in Puerto Rico, a hypothetical decline of 20% or more in the fair value of this reporting unit could result in the need to record a goodwill impairment charge based on the results of our October 1, 2013 goodwill impairment test. At December 31, 2013, the goodwill associated with this reporting unit aggregated $347.0 million. If, among other factors, (i) our equity values were to decline significantly, or (ii) the adverse impacts of economic, competitive, regulatory or other factors were to cause our results of operations or cash flows to be worse than anticipated, we could conclude in future periods that impairment charges are required in order to reduce the carrying values of our goodwill and, to a lesser extent, other long-lived assets. Any such impairment charges could be significant.

Costs Associated with Construction and Installation Activities We capitalize costs associated with the construction of new cable transmission and distribution facilities and the installation of new cable services.

Installation activities that are capitalized include (i) the initial connection (or drop) from our cable system to a customer location, (ii) the replacement of a drop and (iii) the installation of equipment for additional services, such as digital cable, telephone or broadband internet service. The costs of other customer-facing activities such as reconnecting customer locations where a drop already exists, disconnecting customer locations and repairing or maintaining drops, are expensed as incurred.

The nature and amount of labor and other costs to be capitalized with respect to construction and installation activities involves significant judgment. In addition to direct external and internal labor and materials, we also capitalize other costs directly attributable to our construction and installation activities, including dispatch costs, quality-control costs, vehicle-related costs and certain warehouse-related costs. The capitalization of these costs is based on time sheets, time studies, standard costs, call tracking systems and other verifiable means that directly link the costs incurred with the applicable capitalizable activity. We continuously monitor the appropriateness of our capitalization policies and update the policies when necessary to respond to changes in facts and circumstances, such as the development of new products and services, and changes in the manner that installations or construction activities are performed.

Useful Lives of Long-Lived Assets We depreciate our property and equipment on a straight-line basis over the estimated useful life of the assets. The determination of the useful lives of property and equipment requires significant management judgment, based on factors such as the estimated physical lives of the assets, technological changes, changes in anticipated use, legal and economic factors, rebuild and equipment swap-out plans, and other factors. Our intangible assets with finite lives primarily consist of customer relationships. Customer relationship intangible assets are amortized on a straight-line basis over the estimated weighted average life of the customer relationships. The determination of the estimated useful life of customer relationship intangible assets requires significant management judgment and is primarily based on historical and forecasted subscriber disconnect rates, adjusted when necessary for risk associated with demand, competition, technological changes and other economic factors. We regularly review whether changes to estimated useful lives are required in order to accurately reflect the economic use of our property and equipment and intangible assets with finite lives. Any changes to estimated useful lives are reflected prospectively. Depreciation and amortization expense of our continuing operations during 2013, 2012 and 2011 was $4,276.4 million, $2,661.5 million and $2,424.3 million, respectively. A 10% increase in the aggregate amount of the depreciation and amortization expense of our continuing operations during 2013 would have resulted in a $427.6 million or 21.3% decrease in our 2013 operating income.

Fair Value Measurements GAAP provides guidance with respect to the recurring and nonrecurring fair value measurements and for a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. Level 1 inputs are quoted market prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 inputs are inputs other than quoted market prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability.

Recurring Valuations. We perform recurring fair value measurements with respect to our derivative instruments and fair value method investments, each of which are carried at fair value. We use (i) cash flow valuation models to determine the fair values of our interest rate and foreign currency derivative instruments and (ii) a binomial option pricing model to determine the fair values of our equity-related derivative instruments. We use quoted market prices when available and, when not available, we use a combination of an income approach (discounted cash flows) and a market approach (market multiples of similar businesses) to determine the fair value of our fair value method investments.

For a detailed discussion of the inputs we use to determine the fair value of our derivative instruments and fair value method investments, see note 7 to our consolidated financial statements. See also notes 5 and 6 to our consolidated financial statements for information concerning our fair value method investments and derivative instruments, respectively.

II-61 -------------------------------------------------------------------------------- Changes in the fair values of our derivative instruments and fair value method investments have had, and we believe will continue to have, a significant and volatile impact on our results of operations. During 2013, 2012 and 2011, our continuing operations included net losses of $496.3 million, $1,080.5 million and $104.6 million, respectively, attributable to changes in the fair values of these items.

As further described in note 7 to our consolidated financial statements, actual amounts received or paid upon the settlement of our derivative instruments or disposal of our fair value method investments may differ materially from the recorded fair values at December 31, 2013.

For information concerning the sensitivity of the fair value of certain of our more significant derivative instruments to changes in market conditions, see Quantitative and Qualitative Disclosures About Market Risk - Sensitivity Information below.

Nonrecurring Valuations. Our nonrecurring valuations are primarily associated with (i) the application of acquisition accounting and (ii) impairment assessments, both of which require that we make fair value determinations as of the applicable valuation date. In making these determinations, we are required to make estimates and assumptions that affect the recorded amounts, including, but not limited to, expected future cash flows, market comparables and discount rates, remaining useful lives of long-lived assets, replacement or reproduction costs of property and equipment and the amounts to be recovered in future periods from acquired net operating losses and other deferred tax assets. To assist us in making these fair value determinations, we may engage third-party valuation specialists. Our estimates in this area impact, among other items, the amount of depreciation and amortization, impairment charges and income tax expense or benefit that we report. Our estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain. A significant portion of our long-lived assets were initially recorded through the application of acquisition accounting and all of our long-lived assets are subject to impairment assessments. For additional information, see notes 3, 7 and 8 to our consolidated financial statements.

Income Tax Accounting We are required to estimate the amount of tax payable or refundable for the current year and the deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts and income tax basis of assets and liabilities and the expected benefits of utilizing net operating loss and tax credit carryforwards, using enacted tax rates in effect for each taxing jurisdiction in which we operate for the year in which those temporary differences are expected to be recovered or settled. This process requires our management to make assessments regarding the timing and probability of the ultimate tax impact of such items.

Net deferred tax assets are reduced by a valuation allowance if we believe it more-likely-than-not such net deferred tax assets will not be realized.

Establishing or reducing a tax valuation allowance requires us to make assessments about the timing of future events, including the probability of expected future taxable income and available tax planning strategies. At December 31, 2013, the aggregate valuation allowance provided against deferred tax assets was $7,052.8 million. The actual amount of deferred income tax benefits realized in future periods will likely differ from the net deferred tax assets reflected in our December 31, 2013 balance sheet due to, among other factors, possible future changes in income tax law or interpretations thereof in the jurisdictions in which we operate and differences between estimated and actual future taxable income. Any of such factors could have a material effect on our current and deferred tax positions as reported in our consolidated financial statements. A high degree of judgment is required to assess the impact of possible future outcomes on our current and deferred tax positions.

Tax laws in jurisdictions in which we operate are subject to varied interpretation, and many tax positions we take are subject to significant uncertainty regarding whether the position will be ultimately sustained after review by the relevant tax authority. We recognize the financial statement effects of a tax position when it is more-likely-than-not, based on technical merits, that the position will be sustained upon examination. The determination of whether the tax position meets the more-likely-than-not threshold requires a facts-based judgment using all information available. In a number of cases, we have concluded that the more-likely-than-not threshold is not met, and accordingly, the amount of tax benefit recognized in our consolidated financial statements is different than the amount taken or expected to be taken in our tax returns. As of December 31, 2013, the amount of unrecognized tax benefits for financial reporting purposes, but taken or expected to be taken on tax returns, was $490.9 million, of which $419.0 million would have a favorable impact on our effective income tax rate if ultimately recognized, after considering amounts that we would expect to be offset by valuation allowances.

We are required to continually assess our tax positions, and the results of tax examinations or changes in judgment can result in substantial changes to our unrecognized tax benefits.

II-62-------------------------------------------------------------------------------- We have taxable outside basis differences on certain investments in non-U.S.

subsidiaries. We do not recognize the deferred tax liabilities associated with these outside basis differences when the difference is considered essentially permanent in duration. In order to be considered essentially permanent in duration, sufficient evidence must indicate that the foreign subsidiary has invested or will invest its undistributed earnings indefinitely, or that earnings will be remitted in a tax-free liquidation. If circumstances change and it becomes apparent that some or all of the undistributed earnings will be remitted on a taxable basis in the foreseeable future, a net deferred tax liability must be recorded for some or all of the outside basis difference. The assessment of whether these outside basis differences are considered permanent in nature requires significant judgment and is based on management intentions to reinvest the earnings of a foreign subsidiary indefinitely in light of anticipated liquidity requirements and other relevant factors. At December 31, 2013, income and withholding taxes for which a net deferred tax liability might otherwise be required have not been provided on an estimated $8.0 billion of cumulative temporary differences on non-U.S. entities. If our plans or intentions change in the future due to liquidity or other relevant considerations, we could decide that it would be prudent to repatriate significant funds or other assets from one or more of our subsidiaries, even though we would incur a tax liability in connection with any such repatriation.

If our plans or intentions were to change in this manner, the recognition of all or a part of these outside basis differences could have an adverse impact on our consolidated net earnings (loss).

For additional information concerning our income taxes, see note 10 to our consolidated financial statements.

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