Q3 2019 Earnings Call
Good morning, ladies and gentlemen, and thank you for signing by today's call is being recorded I will now turn the call over the investment feel cables and wireless. Please go ahead.
Good morning, and welcome to Liberty Latin America.
First quarter 2019 invisible.
At this time, all participants will be <unk>.
Great for my presentation materials can be found under the Investor Relations section you will see Latin America's website at Www <unk> elderly book.
Following todays formal presentation instructions will be given for questions and answers session.
As a reminder, this call is being cold.
Today's remarks need going forward looking statements, including the company's expectations with respect to ultimately and future growth prospects and all that information and seasons that or not historical fact.
Actual results may differ materially from those expressed or implied by such statements.
Additional information on factors risks that could cause results to differ is available in Liberty luck in America's most recently filed Form 10-K and Form 10-Q .
No the Latin America disclaims any obligation to update any of these forward looking statements to reflect any changes expectations, we're going to conditions overall any such statements. These days.
In addition on these calls we will refer to certain non-GAAP financial measures, which are reconciled to the most comparable GAAP financial measures, which can be found in the appendix to his presentation and on our Investor Relations website.
I would now like to turn the call over to our CEO Mr. Belem there.
Thank you INGAA.
Welcome everybody to a third quarter results presentation.
As usual I enjoying Bowman senior leadership team from across the region well, we've got them involved as needed during acuity.
The structure of this call will be familiar to you.
Going to spot, but taking you through all highlights of the operating results for the third quarter before wrapping up with a strategic update.
Chris Moyles Chief Financial Officer will then follow through with some prepared remarks, redeeming our financial performance and touching upon on COVID-19 financial guidance.
I'm pleased to see we all reconfirming, but these results.
After that people just straight to your questions.
That's a point housekeeping, we will both be working from slides, which you can find on the web site.
VW Dot Belleli dot com.
Let me start on slide four without key highlights for the third quarter.
We continue to deliver solid operational performance, adding 67000 fixed and 15000 mobile subscribers in Q3, which brings our combined year to date additions to over 270 Tausome.
This represents a significant increase compared to the first three quarters of between 18, and it's a clear indicator that we are improving all commercial execution.
Our financial performance was solid in Q3 generating 967 million of revenue.
380 million of Oh, yes.
Look that these figures wouldn't pack that by Hurricane Dorian also the quarters Rebased revenue and also you have growth rates were negatively impacted by the FCC funding received last year in Puerto Rico.
Chris will take you to do but give details in his life.
More importantly, we are reconfirming, our financial guidance for the it.
Next we continue to focus on a customers have.
A number of new products and propositions launches coming up.
Including an exciting new video platform for VTR in Chile based on the Liberty Global Horizon platform. We also have a cloud based Android submission for Puerto Rico, which we don't plan to rollout across many of our mortgage.
In addition to investments in product, we continue to expand a leading that bridge.
It is upgraded over 100000 homes in the third quarter, taking our year to date tivity to over 340000 homes, and we are increasing LTE coverage across our mobile networks.
Finally, we took a significant step forward without in organic strategy through the announced acquisition of 18 piece of passage in Puerto Rico, and the U.S. Virgin Islands.
A couple of why we are excited about this acquisition late in the presentation.
And yesterday, we also announced the disposal of North Sea shells business, which was a last non core operations outside of our focus region for the enterprise value of $104 million. So overall in the third quarter, we continue to deliver solid operational mode.
Mental and made great progress on that in organic growth front.
In the next slides I'll provide an update on all three business segments fixed mobile and BTB.
Turning to slide five a fixed business representing half of our revenue.
I think the numbers you speak for themselves.
I would argue additions continued to build strong.
Across cable and wireless and Viki, our public pizza restarting improve Q3 numbers compared to the prior year driven by growing penetration of our expanded footprint as well that's improved execution, particularly in cable and wireless where maybe more than doubled additions year over year.
VTR Q3 performance at 15000 net adds for Q3 was also a significant step up versus 2018, where the quarter yielded onethree thousand net adds in Puerto Rico, while Q3 net ads was lower than the prior year. When we were coming from the 2017 Hurricanes Oh yeah.
To date net adds a strong nearly double our 2018 numbers.
Importantly, we added more subscribers sequentially in Q3, and see the business continuing to grow well with record low churn numbers.
From a product perspective.
Then the main driver of additions representing nearly two thirds of the total.
I mean do this by providing leading speech, great Wi Fi coverage and reliability Oh, all important product features for success.
Given the strong returns we have increased upgrades and new build program. This year with our year to date activity running 30% ahead of last year.
In terms of speech, we remain the neither in the number of home markets with VTR customers, receiving average speeds of 230 Megabits per second to third COVID-19 puts us hundred 50, Megabits and third quarter 18.
As a group of quarter to date and year to date additions with each over 50% higher than the prior year at 67000.
207000, RG use prospectively.
Moving to more about compete to be on slide six.
Thinking more about first representing just under 20% of our revenue.
Subscriber trends continue to show improvement.
Q3, we added 15000 subscribers across to do a significant improvement year over year as we continue to stabilize trends in cable and wireless and VTR continue to add subscribers at a consistently.
We are positive about prospect for Q4, that's we typically benefit from strong seasonal uplift and we are confident about our performance many foreign markets, particularly Jamaica.
Year to date, the mobile subscribers stories, even more positive with a string of nearly 200000 net adds highlighting the benefit of our operational changes.
No more challenging mobile markets on top of mind. The Bahamas, you also so both year over year in sequential improvement in subscriber trends.
Financially Devry negative impact from Dorian into Bahamas. However, we continue to see signs of stabilization subscription revenue.
He has been fix the strength of our mobile networks, it's vital and investments year has enabled us to reach close to 85% LTE coverage across our markets up from 75% at the end of Q2.
And as you can see into Central chart, our LTE subscribers continued to grow strongly year over year, reaching 46% of our subscribers at the end of Q3.
Sequentially. We also grew up LT base by over 120000 or close to 10 percentage points.
Moving to be to be on the right hand side of the slight representing about 30% of our revenues.
Beat to beat was up 1% on to Rebase basis in Q3 to $300 million. This growth once again represents increasing data demand, partly offset by legacy product headwinds.
We saw strong growth CNW BTB only markets showed me as let them as well as from smaller bases in VTR imported equal you.
No other CNW markets, there's an element of phasing here as we anticipate some key projects to come through in Q4, delivering a strong growth could the.
Finally, we are continuing to see a significant opportunity to drive greater market share or markets outside cable and wireless which currently comprised the bulk of our PDP business [noise].
Slide seven I wanted to run you through the acquisition of 18 keys operations in Puerto Rico, and the U.S. Virgin Islands and provide some color as to why we think it's such a good one for us.
This transaction is valued at $1.95 billion, representing a multiple of mid six unfolds here before synergies.
About a 10 lower fee with it just full run rate synergies.
Compelling valuation.
The combination with brings together the leading mobile and fixed plays in Puerto Rico, adding 1.1 million mobile subscribers to our strong existing capabilities.
I've highlighted previously free cash flow accretion on a per share basis is the key metric we look at in assessing investment opportunities.
We expect this be accrete transaction from this perspective.
We will also add to our leading and resilient high speed infrastructure on the island with ATM Keith network flip it reinforced by significant investments that Dave made over the last few years.
For example, approximately 95% of 18 keys powers of connected with fiber and over 70% of that fiber is very underground significantly increasing the resiliency of our operations.
As with any in market combination, we anticipate this transaction will generate significant synergies that will underpin future financial performance.
As you would expect from us.
Todd true the ownership transition and extensive detail.
And agreed to a comprehensive transitional services agreements with 80.
Between last up to 36 months, depending on how soon we get to cut it over.
And finally as we will discuss later in the presentation. We have already raised debt component of our funding for the transaction in a heavily oversubscribed capital raise.
On slide eight.
System that previous presentations.
I wanted to close by taking you through up business priorities and to progress with me.
It's still just shy of two years into life at Liberty Latin America.
And I'm proud of the progress we've made in building a team and culture.
We have very engaged board and experienced leadership group and a strong operating management teams down many levels.
Many look brought in the last 18 months.
Our operating model and rates are working is enabling a culture of collaboration and one team.
Never was just more evident and in the way the team rallied behind the Bahamas post Hurricane Dorian.
And we are seeing increase engagement levels throughout the organization as we seek to delivered strong results across degree.
As I covered earlier.
Our delivering improved operational performance.
It's more to do here and we've continued to see significant opportunities in certain markets and product areas.
This remains a key focus for us.
We are very committed to transforming our business improved customer experience and try scale efficiencies overtime.
Panama Operation Center is a key component of this prior.
We are rapidly scaling up here.
Very pleased that in addition to carry Scott Chief people Officer, We announced last week that that's allowed can extending our chief operating officer will be moving from Denver to Panama further demonstrating our commitment to building a scalable operation center firmly in the heart of Latin America.
Next to M&A, where we see a lot of accretive opportunities in our region. We are excited to have secured such a good one with the ATM transaction.
Just a great example of our focus and discipline in making the right acquisitions.
And as part of the financing for the transaction.
With that strengthen our balance sheet, which Chris will cover shortly.
Overall, I am happy with our progress.
Well position as we head into Q4 and look forward to taking some good momentum into the nuclear.
With that.
I'll pass you over to Chris noise, Chief Financial Officer.
Talk you through our financial performance before we take your questions.
Chris.
Thank you balance starting with the upper half a slide 10, the orange bars highlight our reported Q3 revenue of $967 million and OTI App a $380 million. These results represent reported year over year growth of over 4% helped largely by the inclusion of probably keep.
Yes, and in terms of Rebased growth, we posted a revenue declined 1%.
Yes increase of 1% our growth was adversely impacted by $16 million in revenue and $19 million.
As a result at hurricane Dorian and prior year FCC funding.
Our p. additions totaled $187 million Keith.
Or 19% of revenue as compared to $170 million were 18% of revenue last year higher CPV spend related to our improved subscriber gains and investments in more capacity contributed to our year over year growth in PMT additions moving to the bottom right, we generated $4 million.
Adjusted free cash flow, bringing our year to date total to $120 million. Our Q3 result was lower as compared to Q3 2018, because we realized roughly $30 million in last years adjusted FCF from insurance advances in the FCC funding.
We remain on track to deliver our 2019 financial targets, even with the negative impact of Hurricane Darren just to reiterate our targets first LCF greater than $1.5 billion to $5 billion at our February 20-F, 2018, FX levels, including the Chilean FX rate.
Of 670.
Importantly, our year to date Lcs would have been nearly $10 million higher if we had applied our guidance FX rates. Additionally, while FX volatility may impact our reported as yet we reaffirmed the statement we made on our 2018 year end earnings call, but our 2000.
Thank you yeah guidance implies low to mid single digit Rebased OCF growth.
Second p. any additions as a percentage of revenue of approximately 19% and third adjusted free cash flow of approximately $150 million.
Turning to our three reportable segment on slide 11, starting on the left CNW deliberate $596 million of revenue down, 2% or Rebase basis, which is broadly in line with our Q2 performance adjusted for Hurricane Dory.
Impacts from the storm in Q3 with $5 million to revenue $8 million to LCR and $5 million to peony additions as in prior quarters mobile revenue remained challenging year over year, especially in Panama, Although we continue to see signs of stabilization.
Partially offsetting the mobile decline, we continued to deliver rebased revenue growth in fixed primarily driven by the strength of our broadband business and I'm happy to be product whole price increases in managed services revenue.
He is out of your reported 2% Rebased OCF growth with $236 million in the quarter approaching a margin up 40%.
Our focus on cost efficiency continues for the quarter peony additions were $119 million, 20% of revenue and included over 40000 Youre upgraded homes.
Moving to our VTR, probably keep this segment, we posted rebased growth of 2% revenue and 4% Mircea, bringing revenue to $268 million and as you have to $109 million topline growth was supported by volume increases across consumer broadband and mobile and B to b.
Well I CF growth was also helped by decreases in interconnect and mobile access costs.
Our p. any additions were $49 million or 18% of revenue, which is consistent with the prior year and included over 60000, new homes passed.
Respect to our Puerto Rican segment.
We are delivered another strong quarter helped by 33000 organic subscriber additions here to date LPR generated revenue of $104 million post the assets $51 million NTT additions of $17 million or 16% of revenue.
Switching to the right part of the slide we show a quarterly progression as we flagged in Q2 hour comparison in the second half of this year will be more challenging due to the $11 million in FCC funding received in Puerto Rico in Q3, 2018, and $64 billion in insurance settlements recognize.
In Q4 2018 as represented by the highlighted bars.
Moving to slide 12, and building upon downs earlier comments, we successfully completed $2.2 billion, Puerto Rican financing the October which was well received by both us high yield at both investors and father credit upgrade all through those businesses, reflecting the enhanced credit profile of the combined Puerto Rican busy.
Yes.
We raised a six year 125 million dollar revolving credit line is 70 at 1 billion dollar term loan and an eight year 1.2 billion dollar secured bond. This capital raise enabled us to refinance our existing no $123 million in Puerto Rican term loans, which.
Maturities in 2020 to 2023 and as highlighted by the chart extends our average tenor on an adjusted basis to over six years.
The residual $1.3 billion from the financing will be placed in escrow ultimately find a significant portion of the 18 and keep purchase beyond the debt raise we will require roughly $750 million to fund the purchase including fees and expenses and this is intended to come from our existing Cuba and.
I was accomplished and available liquidity on balance sheet adjusting for the transaction, we would expect our consolidated net leverage ratio.
To be in a bid for about a half a turn higher than Q3 this ratio four times a.
A comfortable level that we believe works well from a levered equity return perspective, and one that we anticipate will decline over time as we continue to grow a CR across our Atlanta.
Next slide 13, and our concluding remarks, we continued our operational momentum in Q3 with strong subscriber additions building on this momentum and some phasing of due to be activity, we anticipate a strong finish to 2019.
Looking further ahead, we announced a highly strategic acquisition and Puerto Rico, which should drive strong free cash flow accretion in the future and lastly, we are reconfirming, our 2008 key financial guidance targets.
With that operator, we're ready to take questions.
The question and answer session will be conducted electronically if he would like to ask a question regarding the company's operations. Please do so my question. The Starkey followed by that this is one on your touched on top.
In order to accommodate everyone. We request that you ask only one question one follow up if needed.
If you are using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment.
We'll pause for just a moment to give everyone an opportunity to signal for question one moment. Please.
Our first let me first question comes from James Ratcliffe. Please go ahead.
Good morning, Thanks for taking the question one on M&A and one on the operations if I could on the M&A side can you talk about the sourcers the synergies that you're expecting you get other transaction and any sort of timeframe and offer if there any oxford dis synergies, we should be looking for ups from upfront investments from alike.
And secondly, I mentioned the relief on the PDP side part of the.
Offsetting drag generic services growth is it declines.
Voice business, how high peak is that business and you know what sort of decline are we looking out there. Thanks.
Sure.
Thanks, Dave.
So on the M&A started earlier it will be.
Bill obviously, it's really that's what you're asking about.
The synergies there are three indicate it's about a bid and resulted from a number of different areas.
One of the big one it's really be tier three agreements that we have to they do as we roll our 50, if they released a degree.
So to search.
In house, I think you'll see you'll definitely see some pretty good numbers there as well there's a lot of work that we are doing internally.
Your strengthen our network I think some look as we can clearly be productive combined networks.
And and let you know as we also saw for some of the.
Good so it can't be their synergies across a larger group as well.
Well, we can now use for the rest of the Caribbean et cetera. So we believe is.
I agree with many different rates and I think the one thing that we indicated.
The good number.
And ER.
I feel really really good or the second working on operations.
On the voice sorry, Yeah, you know the comment they occur or carried over into three right now to lead the telcos experiences side you have to go.
And at least out on a voice Ed and.
And we started to see some summer you know some of the our erosion there and you see.
Primarily of bundling ratio or you know the bundling richer continues to contract a little bit and it's mostly on the backflip club voice or a disconnect or more importantly, as we bring in new customers are increasingly customers the coming years without the voice product.
You know revered we've kind of model all of that in already and the incremental net adds that we see far outweigh the or.
There are lots it does vary the broadband product is really our driver.
Great. Thank you.
[noise].
Our next question comes from Soomit Datta from New Street Research. Please go ahead.
Hi, a couple of questions. Please one on Puerto Rico.
So can you kids just give us a quick update from how you see the broader demographic situation that I've had slightly different conflicting.
Things in terms of population color of growth some contraction.
And maybe also how do you see the the to sort of broader demographics going forward. What is built in to your assumptions I'm, assuming you're reasonably upbeat given the capital deployment in the country, but it'd be interesting to get a.
I got some thoughts from from people who've been on the ground.
And then the second thing plays was just an operational question.
On Panama, we've talked to a couple of Congress about stabilization.
In the market or on the wireless side I guess, we're talking but if I look at unless they still seem to be.
Under some pressure in terms of revenues and the subscriber count on wireless is ticking down still so I just wanted to you know how close are we to the fossil and as part of what are your thoughts on on consolidation, it's really kind of update thank you.
Sure. Thanks, a lot of Puerto Rico, 30, really bullish on threeq or retire or whatever.
That's because it's there and you have an amazing management too on the ground with route and Puerto Rico, and you can clearly see biochaperone allocated and we're all in there and you feel really good about it last night, we go through our COO. Some comments on that will answer the Panama curriculum that I'll pass it back to not only to give a little bit more color.
Why we're bullish or underground.
And and area is broadly in the.
In the mobile business, where do you see it's a really really JV and a lot of Chile, the prepaid market.
And.
And really you price compression specifically in pairing them or under prepaid market. You said it looks very you know, it's a quick and not on whether that's got a good cardica Becker, let's just too many competitors.
And and we haven't called the bottom yet on that but I think everybody's corporate you'll see Brady Brady you know.
The conference then can better number.
And.
We think settlement consolidation what happened.
It is sooner rather than later, we have a new regulator appointed by the President I think Uh huh.
I will.
We are hoping they'll come up with a much more certainly a interpretation of the law that lets kras and a and that could probably paved the way for for the current with consolidation to actually happen.
I'll pass it back to 19 I did want to give maybe some color on the ground lives why we are really bullish on Puerto Rico.
Oh, Thank you, Brian I'm sure I'm I mean, if we look at where we stand today, where we go through the first nine months, because we're going to fiscal year. After June into our numbers that we're seeing in because clearly the.
Migration is.
Flat to slightly positive.
I wouldn't know schuman with US you know, it's going to be complete reversal of migration, but we're not seeing the masters degree superior to the parent specifically prior to the hurricane or of course after the hurricane there's only a few other key indicators. We look out you know, we're seeing improvements who aren't going to move also there was a very clear path from the fiscal <unk>.
Lord <unk>.
In terms of renegotiating the items that are there was a proposal on the table.
In front of the judge in New York or what we believe it's going to be favorable, but we've got the significantly which in turn to go to cook the amount of debt service the government to through or be it the in 2020.
And as Kurt you know, we believe they're going to be were to go back to the captive market than 2021. Harry said those are so our view is you know is optimistic we're not overly optimistic but we believe you know we have what appears to operate.
The environment because in the case for many years and really quite successful I'm confident that we'll be able to two to continue on their terms. So again, we're very optimistic.
But so far this key indicators are hitting around the election.
If there are these great.
Thank you.
Our next question comes from Michael Rollins from Citi. Please go ahead.
Hi, Good morning, I'm curious if you could.
No longer term opportunities for margin expansion.
For the broad portfolio as well is your key operating regions. Thanks.
Thanks, Michael.
You know this is an area that we are actually quite excited about business.
We see margin expansion.
At the operating free cash flow line truly board or Opex improvements, it's wireless capex improvements.
And Chris that given your guidance this year, and we're going to limit and ER and come next year they'll give you at least at a guidance and we're going to little let it flow and all that rich chose to it.
Quite a few points of expansion both from the effect side and a independent excited so that's one we feel really good but in this business and our operating leverage continues to improve we'll see you know with all the net adds that we have the onto the network.
At some point in the future are really good enough that we are going to bring in that pick up some pricing as well. So our strategy has been very consistent about is we're going to go for volume. We've got the spring ARPU. So it's easy to get bargain when you wonder like that Youve everything away for free, but we are gonna get lots as well.
Have you lose any worker and then at some point in the future looks back within the ARPU increases but.
We feel really good about you know the.
Having said, we're going to see Galena, maybe I'll ask Chris give maybe.
Appointed two out of the margin expansion, Yeah, I mean, I think we had and just to reiterate for folks.
A big part of our focus is around Opex to revenue and our medium term target is to run the collective business in the low thirtys as a percentage of revenue versus you know were upper thirtys. Today. So that is that you have key focus area for us and I think that will underpin.
Oh, yeah for EBITDA growth.
Going forward and in addition, as we look at you could call. It the LCF less capex or other FCF ratio you know our goal is the company has to be in the you know the mid Twentys as a percent of revenue a you'd be finished in 2018 at.
90%. So we have room to go on that and that means driving down capex as a percentage of revenue on a go forward basis.
Thanks, Chris.
Thank you.
Our next question comes from Kevin ROE from ROE equity Research. Please go ahead.
<unk>.
Thank you good morning, a couple quick questions first on Hurricane Dorian.
When do you expect to return to a pre hurricane run rate what work needs to be down yet and on the Seychelles sale.
What are the expected use of proceeds you're going to keep that on the balance sheet or or potentially pay down debt. Thank you.
Oh, well, thanks, Kevin or hurting Doria, you know we.
You think comes and sometime next year, we'll get back to pre hurricane levels. They you know two parts to the story of course, you know that the Grand Bahama Island that we are focused completely rebuild anywhere already getting there and a lot of abuse to be customers are coming back up.
Bill Nobody <unk> they stood up.
And then look the other high levels of Arbuckle, where.
It's really a huge human humanitarian disaster, there are the cardium commercial activity and but that will come back that may take a little bit longer but he was in one of our bigger.
Revenue stream rarely.
Anyway, but but we are focused on bringing some new technologies, there that reduced our cost to construction. So a lot more fixed wireless and there aren't but we feel good about Bahamas, I feel really good but my thesis rather how responded to that.
On the on R&D say shelf disposal I'm going to ask Chris to make a comment nondairy pretty excited about that disposal and and you can imagine there where we would put that cast the work there.
Thanks on the on disposal proceeds we would intend not at this point to pay down debt will use the net proceeds as part of the a the cash we need to the fund 18 T. purchase.
Got it thank you guys.
[noise] and our last question comes from address Carlo from Scotiabank. Please go ahead.
And Scott.
Yes. Thank you for our for taking my question I am just for purposes of dry comparing that to see shouldn't portable equal to other markets you should the region and also to I. Just referenced 16 I was wondering if you could disclose operator, he says for H.M.T. break or equal please.
If you can that's houses have much particularly thought where he says.
Our commitment team imports were equal that will be mining my first question.
Okay well.
Well I you know it wasn't just we can't disclose really all the deals there, but but we are inheriting a network where watered out of already really do so they so there's a small part of how is that coming through it but most of them are already under existing agreements that they'd be as he does with multiple vendors.
Hey look all delays you would expect to more than one vendor there underground others now.
Therefore took the manager.
Yeah, but I've heard from what I.
Mark.
Yeah, Let me let me just to add I mean, you know ATP brings it it's over 600 krakauer sites and the the lion's share or I think is over 95% of those towers have fiber direct to those tower sites, which is which is great and ATM T. and then recovery invested significantly.
[noise] around resiliency said the towers, our state of the art you know on Puerto Rico at U.S. yet.
Okay, but kind of gratified by most of the car worst belong to the company or.
Or do you track they are a barrel pre I know that Ben Ben Ben monetize release.
Okay. Thank you I'm back mechanical spend some she there.
I'll just leave you know, we Chile sales are going on at the school or political situation right. Now I was wondering if it's that you have noticed any they change it seem that competitive landscape in e. cheese or perhaps there's no around not in terms of crop sales and just overall rock what's your what's essential if you're actually.
She there right now.
Sure.
You know the jumping to be able to bid as well you know.
Yes that we feel about it really loved the country in a business there and apparently focus it really on a employees.
On a property on our services and on our Christy I said, we want to make sure. It services all up and running you're not Christmas I love to compare so we're continuing to doing truck rolls repair is dogs or we could do that.
No on the political front, we feel good decision or something that the government or the citizens that see labor resolved eventually and it'll be it'll be okay, I last game or maybe a undergrounds maybe give some color it's a dealer.
Sure. Thank you Marlin and thank you under for the question [laughter], well I'm said we.
I remain optimistic about the ability of the society to show base.
Beyond a somewhat complicated and look at once it's in October .
From the logistical due mostly to soak in markets and I would that we see the you know situation.
Turning to Lincoln on Monday November So we don't see I believe there and we maybe a little bit showing it to you for the consequences, but we don't see affects a material effect on liquids saves when demand actually asked we had a.
Can we looked at the Leap then why we saw the Monday after the come to get to weight was you know you're not sort of a spike in the contain the amount of this week. So I wouldn't business was not.
I feel good affected at all not the service to customers.
I'm.
Not the distribution channels, all diffusion tenants like working normally and we remain confident thing you compete pushing our good research now and we actually had to be October . Despite the fact, how do we had a can pick up last week of the Mark.
They do you ever Okay, all right and I can say, we are committed to Chile, and we will continue to invest into it.
Okay. Thank you very gear.
We will take one last question from Matthew Harrigan from benchmark. Please go ahead.
Well, thank you Oh.
Thank you I'm curious as tragic adoring was when you do you got all too because theres a little bit.
Yes, or paradox, I want you alluded to using wireless drops in other elements you reduce your your capital cost for for Newbuilds, but is there anything that gives you pause in terms of what's the cost of insurance and all that out.
That leads you in that would you hit a hurricane cycle or extended hurricane cycle, regardless of of global warming and that could you talk about.
But you need to address the Los Alamos demographic and she like.
With a lower off the homes passed from a cost it seems like that that's got to do some opportunity as well.
Good for keeping your house with fraught with agency would if you'd be a really be possible on Warner brothers shoes or would you give you probably know to that one brookdale. Thanks.
Well look like five questions going down there [laughter], but I'll, let me try if he'd like I get to Europe , and the you know the quickly because you get that you want to answer and then if I missed something please.
Jump back are you know well answer Chris It think about the a it trench working on outdoor and you have to put them in the on fixed wind or can you kind of dropped off a little bit. There you broke up a bit on Paradise Island. There you know, we're not doing any fixed wireless in Paradise Island.
But we feel good about the fixed wireless solution.
Yeah and by fixed wireless what I mean, it's really LTV.
Two customers because we have enough capacity do you actually do that against the density of population certainly an obstacle and a and Grand Bahama Haswell anybody really more technical details will be happy to provide and libicki right here as well in Atlanta, some more questions come back.
In Chile, you know, you're you're spot on and they use a huge amount of a customer base that we previously had not targeted.
Given how we've driven the cost structure of our construction down because they can this be less dense just done a really good job we've been quite innovative on that front and we've got no clinical hold back down quite a bit but really no targeting you know a lot of what did you called the C and D nortechs that previously.
Fair enough bypass and we think the opportunity there has really good and you can clearly see from the last few weeks certainly in the region that you know all of the population at the same respiratory fits the needs and bring is fixed broadband to them, it's going to be a core major Michigan for El <unk>.
Maybe I'll step back to create too dark but.
Enjoyed the parametric reports that we've taken.
Yeah, Matt around a insurance for the reasons, particularly around let's call it Mandarin and that CAD for the Caribbean. Yeah. We continue to look at how we best optimize and ensuring we're getting a highest because you know value for for a cover so one thing that we've done over the last year is we have.
We have gone forward with a you know parametric.
Insurance program and that allows us to put a competitive process in place between the traditional indemnity market and a and reinsurance can market for the risk. The minimize is you have frictional cost and allows us to have a program that we can play between the two different markets and that basically its triggered off of a.
I certainly when speed pace X amount of a of the defined value. So what that does it allows us to.
Ensure that to the extent we have a a major disaster, we can have cash come into the market a lot quicker than what traditionally has been sort of an 18 to 24 months a process for the traditional indemnity market. So we continue to refine our program and continue to look at capacity for the region and I think we.
We are looking at how we continue to create the most robust risk management program for the money and we do self insure and media Kate you know the first layer of risk you know on our books as well. So you know I think we feel comfortable about places we operate and how we go about insurance and we'll continue to refine that.
Now as we look forward.
Thanks for flex gross.
Great.
I will conclude todays question and answer session I'd like to hand back to Milan, there for any additional are closing remarks.
Thank you operator and.
No I I'd say, it's you know you know 35 days into the fourth quarter.
And as Chris and I have reiterated our guidance, we seem to push 35 days savvy feel really good about how we're going to end this year and.
We continue to thank you for the sport, you've given us have a great big.
Ladies and gentlemen, this concludes Liberty Latin America's third quarter 2019, Investor call. As a reminder, a replay of the call will be available in the Investor Relations section of Liberty Latin America's Web site at Triple doubling your without L.L.A. Dotcom. There you can also find a copy of today's presentation materials.
[noise].
Oh.
Good morning, ladies and gentlemen, thank you for signing by today's call is being recorded I will now turn the call over <unk>.
Okay. Well then please go ahead.
Good morning, and welcome to Liberty Latin America.
First quarter 2019 invisible.
So I'm all participants will be more.
Based on her presentation materials can be filed under the Investor Relations section you will see Latin America's website at Www <unk> entity book.
Following todays formal presentation instructions will be given for questions that answer session.
As a reminder, this call is being recorded.
Today's anymore.
These forward looking statements, including the company's expectations with respect to Oh, PPI future growth prospects and all that information in season.
<unk> historical facts.
Actual results may differ materially from those expressed or implied by such statements.
Additional information on factors risks that could cause results to differ is available.
Good luck in Americas, Most recently filed Form 10-K and Form 10-Q .
No the Latin America disclaims any obligation to update and yields. These forward looking statements to reflect any changes expectations wanting to conditions over any such statements. These piece.
In addition on these calls we've already for two sort of non-GAAP financial measures, which are reconciled to the most comparable GAAP financial measures, which can be called in the appendix movies presentation, and although investor Relations website.
I would now like to turn the call over to always see you used to sell them yeah.
Thank you INGAA and welcome everybody <unk> third quarter results presentation.
Ladies and gentlemen, and thank you for standing by today's call is being recorded I will now turn the call over to Angus Smith CEO cables in wireless. Please go ahead.
Good morning, and welcome to Liberty lessons America through sports is 2019 invisible.
At this time, all participants will be <unk>.
Todays formal presentation materials can be phones under the Investor Relations section of Liberty Latin Americas website at Www, both elderly dot com.
Following todays formal presentation instructions will be given for questions and answers session.
As a reminder, this call is being recorded.
Today's remarks May include forward looking statements, including the company's expectations with respect to its output and future growth prospects and all that information and statements that are not historical facts.
Actual results may differ materially from those expressed or implied by these statements.
Additional information on factors risks that could cause results to differ is available in Liberty Latin Americans. Most recently filed Form 10-K and Form 10-Q .
Let me see Latin America disclaims any obligation to update any of these forward looking statements to reflect any changes into expectations or in the conditions on which any such statements is piece.
In addition on this call we will refer to certain non-GAAP financial measures, which are reconciled to the most comparable GAAP financial measures, which can be found in the appendix to this presentation and on our Investor Relations website.
I would now like to turn the call over to our CEO Mr. Belem there.
Thank you INGAA and welcome everybody to our third quarter results presentation.
Usual I'm joined by my senior leadership team from across the region, while we don't get them involved as needed during the acuity.
The structure of this call will be familiar to you.
I'm going to start by taking you through our highlights on operating results for the third quarter before wrapping up with a strategic update.
Chris noise, our Chief Financial Officer will then follow through with some prepared remarks, reviewing our financial performance and touching upon on 2019 financial guidance Rich I'm pleased to say, we have reconfirming with these results.
After that we will get straight to your questions I.
As a point of housekeeping, we will both be working from slides, which you can find on our website at www dot allele dot com.
Let me start on slide four without key highlights for the third quarter.
We continue to deliver solid operational performance, adding 67000 fixed and 13000 mobile subscribers in Q3, which brings our combined year to date additions to over 270 Tausome.
This represents a significant increase compared to the first three quarters of 28 team and is a clear indicator that we are improving our commercial execution.
Our financial performance was solid in Q3 generating 967 million of revenue of 380 million of ore was yes.
Note that these figures were impacted by Hurricane Dorian also the quarters Rebased revenue and also you have growth rates were negatively impacted by the FCC funding, we received last year in Puerto Rico.
Chris will take you through their respective details in his life.
More importantly, we are reconfirming, our financial guidance for the year.
Next we continue to focus on our customers and have a number of new products and propositions launches coming up.
Including an exciting new video platform for VTR in Chile based on the Liberty Global Horizon platform.
We also have a cloud based androids vision for Puerto Rico, which we don't plan to rollout across many of our markets.
In addition to investments in product, we continue to expand our leading which we added upgraded over 100000 homes in the third quarter, taking our year to date activity to over 340000 homes, and we are increasing LTE coverage across our mobile networks.
Finally, we took a significant step forward without in organic strategy through the announced acquisition of 18 key assets in Puerto Rico, and the U.S. Virgin Islands.
A couple of why we are excited about this acquisition late in the presentation.
And yesterday, we also announced the disposal of Seychelles business, which was our last non core operation outside of our focus region point enterprise value of $104 million. So overall in the third quarter.
We continue to deliver solid operational momentum and made great progress on the inorganic growth front.
The next slides I'll provide an update on all three business segments fixed mobile and BGB.
Turning to slide five of fixed business, representing half of our revenue.
I think the numbers you speak for themselves.
Our argue additions continued to build strong.
Across cable and wireless and Viki, our public Peter we saw improved Q3 numbers compared to the prior year driven by growing penetration of our expanded footprint as well as improved execution.
Particularly in cable and wireless where we more than doubled additions year over year.
VTR Q3 performance at 15000 net adds for Q3 was also a significant step up versus 2018, where the quarter yielded onethree thousand adapt in Puerto Rico, while our Q3 net ads was lower than the prior year, when we will covering from the 2017 Hurricanes a year.
Today net adds a strong and nearly double our 2018 numbers importantly, we added more subscribers sequentially in Q3, and see the business continuing to grow well with record low churn numbers.
From a product perspective broadband the main driver of additions representing nearly two thirds of the total.
We do this by providing leading speeds, great Wi Fi coverage and reliability.
All important product features for success.
Given the strong returns we have increased our upgrades and new build program. This year with our year to date activity running 30% ahead of last year.
In terms of speech, we remain the leader in the number of our markets with VTR customers receiving average speeds of 230 megabit per second in the third COVID-19 purchased 150 Megabits in third quarter 18.
As a group of quarter to date and year to date additions with each over 50% higher than the prior year 67200, 7000, RG use prospectively.
Moving to more about MP to be on slide six.
Taking mobile first representing just under 20% of our revenue our subscriber trends continue to show improvement in Q3, we added 13000 subscribers across the group a significant improvement year over year as we continue to stabilize trends in cable and wireless and VTR continue to add.
Subscribers at a consistently.
We are positive about prospect for Q4, as we typically benefit from strong seasonal uplift and we are confident about our performance many foreign markets, particularly Jamaica.
Year to date, the mobile subscribers stories, even more positive with a string of nearly 200000 net adds highlighting the benefit of our operational changes.
In our more challenging mobile markets of Panama and the Bahamas, you also so both year over year and sequential improvement in subscriber trends.
Financially several negative impact from Dorian into Bahamas. However, we continue to see signs of stabilization in our subscription revenue.
As with fixed the strength of our mobile networks is vital and investments here has enabled us to reach close to 85% LTE coverage across our markets up from 75% at the end of Q2.
And as you can see in the Central chart, our LTE subscribers continued to grow stronger year over year, reaching 46% of our subscribers at the end of Q3.
Sequentially.
Also grew our LTE base by over 120000 or close to 10 percentage points.
Moving to BBB on the right hand side of the slight representing about 30% of our revenues.
GDP was up 1% on a rebase basis in Q3 to $300 million. This growth once again, representing increasing data demand, partly offset by legacy product headwinds.
We saw strong growth in us CNW BTB only markets showed years Latin.
As well as from smaller bases in DTR and Puerto Rico.
In our other CNW markets. There is an element of phasing here as we anticipate some key projects to come through in Q4, delivering a strong close to the year finding.
Can you need to see a significant opportunity to drive greater market share in our markets outside cable and wireless which currently comprised the bulk of our PDP business.
On slide seven I wanted to run you through the acquisition of 18 keys operations in Puerto Rico, and the use of Virgin Islands and provide some color as to why we think it's such a good one for us.
This transaction is valued at $1.95 billion, representing a multiple of mid six of those year before synergies and about a 10 lower fee, which adjusts for full run rate synergies.
Compelling valuation.
The combination would bring together the leading mobile and fixed plays in Puerto Rico, adding $1.1 million mobile subscribers to our strong existing cable base.
As I've highlighted previously free cash flow accretion on a per share basis is the key metric we look at in assessing investment opportunities.
And we expected to be accrete transaction.
Perspective.
We will also add to our leading and resilient high speed infrastructure on the island with 18, Keith network further reinforced by significant investments that they made over the last few years.
For example, approximately 95% of 80 Aunties powers of connected with fiber and over 70% of the fiber is very underground significantly increasing the resiliency of our operations.
As with any in market combination, we anticipate this transaction will generate significant synergies that will underpin future financial performance.
As you would expect from US we have taught true the ownership transition and extensive detail.
And agreed to a comprehensive transitional services agreements with 18 team.
Which will last up to 36 months, depending on how soon we get to cut it over.
And finally as we will discuss later in the presentation. We have already raised the debt component of our funding for the transaction in a heavily oversubscribed capital. Please.
On slide eight.
Mr with previous presentations.
I wanted to close by taking you through our business priorities and the progress with me.
It's still just shy of two years into life at Liberty Latin America.
And I'm proud of the progress we've made in building our team and culture.
Yes, very engaged board and experienced leadership group and a strong operating management team down many levels.
Many what brought in the last 18 months.
Our operating model and rates are working is enabling a culture of collaboration and one team.
Never was this more evident and in the way the team rallied behind the Bahamas post hurricane during.
And.
We are seeing increase engagement levels throughout the organization as we seek to deliver strong results across the group.
As I covered earlier, we are delivering improved operational performance.
Days more to do here and we've continued to see significant opportunities in certain markets and product areas.
This remains a key focus for us.
We are very committed to transforming our business improved customer experience and try scale efficiencies overtime.
Panama Operations Center is a key component of this priority.
We are rapidly scaling up here.
Very pleased that in addition to carry Scott our Chief people Officer, We announced last week that that's allowed connect Stein, our chief operating officer will be moving from tender to Panama further demonstrating our commitment to building a scalable operation center firmly in the heart of Latin America.
Next to M&A, where we see a lot of accretive opportunities in our region. We are excited to have secured such a good one with the ATM transaction, which is a great example of our focus and discipline in making the right acquisitions.
And as part of the financing for the transaction, we further strengthened our balance sheet, which Chris will cover shortly.
Overall.
I am happy with our progress.
We are well positioned as we head into Q4 and look forward to taking some good momentum into the failure.
With that.
I'll now pass you over to Chris noise, Chief Financial Officer.
We will talk you through our financial performance before we take your questions.
Chris.
Thank you balance starting with the upper half a slide 10, the orange bars highlight our reported Q3 revenue of $967 million and LCF a $380 million. These results represent reported year over year growth of over 4% help largely by the inclusion of coverage.
Yes, and in terms of Rebased growth, we posted a revenue decline of 1%.
Net increase at 1% our growth was adversely impacted by $16 million in revenue and $19 million, an LCR as a result, a hurricane Dorian and prior year FCC funding.
Our key additions totaled $187 million in Q3, or 19% of revenue as compared to $170 million or 18% of revenue last year.
Higher CPD spend related to our improved subscriber gains and investments in more capacity contributed to our year over year growth in two new additions moving to the bottom right, we generated $4 million, an adjusted free cash flow, bringing our year to date total to $120 million out Q3 result was lower.
As compared to Q3 2018, because we realized roughly $30 million in last years, adjusted FCF from insurance advances and the FCC funded.
We remain on track to deliver our 2018 financial targets, even with the negative impact of Hurricane Darren just to reiterate our targets first AOCF greater than $1.5 billion to $5 billion at our February 20 at 2018, FX levels, including the Chilean FX.
Rate of 670.
Importantly, our year to date Lcs would have been nearly $10 million higher if we have acquired our guidance FX rates. Additionally, while FX volatility may impact our reported as yet we reaffirmed the statement we made on our 2018 year end earnings call, but our 2018.
Yes guidance implies low to mid single digit Rebased OCF growth.
Second p. any additions as a percentage of revenue of approximately 19% and third adjusted free cash flow of approximately $150 million.
Turning to our three reportable segment on slide 11, starting on the left CNW delivered $596 million of revenue down, 2% and our Rebase basis, which is broadly in line with our Q2 performance that adjusted for Hurricane Dory.
Impacts on the storm in Q3 were $5 million to revenue $8 million to LCR and $5 million to peony additions as in prior quarters mobile revenue remained challenging year over year, especially in Panama, Although we continue to see signs of stabilization largely offset in the mobile decline we continued to delay.
Ever Rebased revenue growth in fixed primarily driven by the strength of our broadband business and on the due to be product hope price increases in managed services revenue.
Dabir reported 2% Rebased OCF growth with $236 million in the quarter approaching a margin up 40% as our focus on cost efficiency continues for the quarter appealing additions were $119 million or 20% of revenue and included over 40000 Youre upgraded homes.
Moving to our VTR cover Teeter segment, we posted rebased growth of 2% revenue and 4% Mircea, bringing revenue to $268 million and AOCF to $109 million topline growth was supported by volume increases across consumer broadband and mobile and B to b.
Well as the up growth was also helped by decreases in interconnect and mobile access cost.
Our p. any additions were $49 million or 18% of revenue, which is consistent with the prior year and included over 60000, new homes passed.
And with respect to our Puerto Rican segment.
We are delivered another strong quarter helped by 33000 organic subscriber additions year to date.
We are generated revenue of $104 million closely at $51 million emptying the additions of $17 million or 60% of revenue.
Switching to the right part of the slide we show our quarterly AOCF progression as we flagged in Q2 hour comparison in the second half of this year will be more challenging due to the $11 million in FCC funding received in Puerto Rico in Q3, 2018, and $64 million insurance settlements recognize.
In Q4 2018 as represented by the highlighted bars.
Moving to slide 12, and building upon downs earlier comments, we successfully completed a $2.2 billion quarter refinancing in October which was well received by both us high yield about investors and solid credit upgrade all three rating businesses, reflecting the enhanced credit profile of the combined to Puerto Rican business.
We raised a six year 125 million dollar revolving credit line, a seven year at 1 billion dollar term loan and an eight year 1.2 billion dollar secured bond.
This capital raise enabled us to refinance our existing $923 million in Puerto Rican term loans, which have maturities in 2022, and 2023 and as highlighted by the chart extends our average tenor on an adjusted basis to over six years.
The residual $1.3 billion from the financing will be placed in escrow and will ultimately find a significant portion of the ATM to purchase beyond the debt raise we will require roughly $750 million to fund the purchase including fees and expenses and this is intended to come from our existing Cuba and.
As a cash and available liquidity our balance sheet adjusted for the transaction, we would expect our consolidated net leverage ratio.
To be amended for about a half a turn higher than Q3 this ratio four times.
A comfortable level that we believe works well from a levered equity return perspective, and one that we anticipate will decline over time as we continue to grow LCR across airline.
Next slide 13, and our concluding remarks, we continued our operation momentum in Q3 strong subscriber additions building on this momentum and some phasing of due to be activity. We anticipate a strong finish to 2019 looking further ahead, we announced a highly strategic acquisition in Puerto Rico.
Which should drive strong free cash flow accretion in the future and lastly, we are reconfirming, our 2018 finance guidance targets.
With that operator, we're ready to take questions.
A question and answer session will be conducted electronically if he would like to ask a question regarding the company's operations. Please do so my question. The Starkey Hello, My but that's just one on your touched on top.
In order to accommodate everyone. We request that you ask only one question with one follow up if needed.
If you are using a speakerphone. Please make sure your mute function is turned off to allow your signal to reach our equipment.
We will pause for just a moment to give everyone an opportunity to signal for question one moment. Please.
Our first let me first question comes from James Ratcliffe. Please go ahead.
Good morning, Thanks for taking the question one on M&A and one on the operations if I could on the M&A side can you talk about the sources of the synergies that you're expecting you get on the transaction and any sort of timeframe and also if there any odd for dis synergies, we should be looking for ups from upfront investments and alike.
And secondly, I mentioned the release the on the PDP side part of that yes, offsetting drag generic services growth is and declines in voice business. How big is that business and you know what sort of decline are we looking at there. Thanks.
Sure.
Thanks, Dave.
So on the M&A for analytics will be.
Bill I mean, it's really that's what you're asking about the synergies that we indicated about a good and Lucas from a number of different areas.
What are the big one it's really be tier three agreements that we have today. Thank you as we roll our fifth tier three agreements that degree.
So to search.
In house I think you'll see.
Definitely see some pretty good numbers there as well that's a lot of work that we are doing internally.
Sure strengthen our networks. It takes a look as we can easily be productive combined networks.
And and let you know as we also saw for some of these.
Good for it gave me there synergies across a larger group as well.
For now we can now use for the rest of the Caribbean et cetera. So.
I believe is.
Coming through at many different rates and I think the one thing that we've indicated.
The good number.
And our.
All right we are really really good over the second question on operations.
On the voice side, Yeah. You know this is a comment so you're correct or through those industry right now through the telcos experienced this idea to growth.
We cannot be Doug.
Voice Ed.
And.
And maybe starting to see some summer you know it's on the theater erosion, there and you see.
Primarily our bundling ratio or you know the bundling richer continues to contract a little bit and it's mostly on the back so far voice disconnect or more importantly, as we bring in new customers are increasingly customers are coming in we started a voice product.
But you know.
Clearly, we've kind of model all of that is already and the incremental net adds that we see for outweigh the.
You know there the losses on voice broadband product is really our driver.
Great. Thank you.
[noise].
Our next question comes from Soomit Datta from New Street Research. Please go ahead.
Hi, a couple questions. Please one on Puerto Rico.
So can you kids just give us a quick update from how you see the.
Broader demographic situation that I've had a slightly different conflicting.
In terms of population kind of growth some contraction.
Maybe also how do you see the the to sort of broader demographics going forward what is built into your.
Assumptions I'm, assuming you're reasonably upbeat given the capital deployment in the country, but if you interesting to get a.
To get some thoughts from from people who've been on the ground.
And then the second thing plays with just an operational question.
On on Panama, We've talked to a couple of time is about stabilization.
In the market or on the wireless side I guess, we're talking but if I looked at Annapolis, they still seem to be.
Under some pressure in terms of revenues and the subscriber count on wireless is ticking down the still site.
I just wondered you know how close are we to the fossil and as part of what are your thoughts on consolidation that's when the kind of update thank you.
Sure. Thanks Phillip.
Puerto Rico, 30, really bullish on threeq or retire or whatever.
That's because it's there and you have an amazing management do on the ground. This route in Puerto Rico, and if it really see by our capital allocation and we're all in there and you feel really good about it last night. We do also actually grew some comments on that will answer the Panama circular and if you back to not only the gets a little bit more color.
Hi, very bullish.
On the ground.
Fair enough.
It is broadly in the.
In the mobile business, what do you feel it's really an erosion and a lot of Chile, the prepaid market.
And.
And it really you price compression specifically apparent in our under prepaid market.
You said it looks very you know, it's a quick clearly not on whether that product. The good cardica Becker, let's just be many competitors.
And.
We haven't called the bottom yet on that but I think they pretty close to it.
You will see bringing great you know the comp against some better number.
And.
We think settlement consolidation will happen.
It is feeling about the later, we have a new regulator appointed by the President I take a.
Well.
We are hoping will come out with a much more certainly.
Depreciation of the law that was crash and a and that could probably paved the way for the current that consolidation to actually happen.
I'll pass it back to 19 actually do already give maybe some color on the ground and why we are really bullish on Puerto Rico.
Oh, Thank you for.
Sure I.
I mean, if we look at the moment, where we stand today, where we go through the first nine months because the government fiscal year presume to into our numbers that we're seeing in because clearly the.
Migration is.
Flat to slightly positive.
We're not assuming that it's going to be complete reversal of migration, but we're not seeing the masters degree superior to the path specifically prior to the hurricane and of course after the hurricane there's a few other key indicators, we look out we're seeing improvements in unemployment also there was a very clear path from the fiscal <unk>.
Board.
In terms of renegotiating the items that are there was a proposal on the table.
In front of the judge in New York, We believe it's going to be favorable, but we've got the significantly which in turn to go through.
The amount of.
Debt service. The government you have to be paid in 2020 and its search you know we believe they're going to be we could go back to the captive market completely 21, Harry said over so our view is.
Optimistic we'll not overly optimistic but we believe you know we have what appears to operate in the environment because when the taste for many years are moving quite successful I'm confident that we'll be able to to continue under terms. So.
Again, we're carefully optimistic.
Let's go for the key indicators are heading the right direction.
Okay great.
Thank you.
Our next question comes from Michael Rollins from Citi. Please go ahead.
Hi, Good morning curious if you could.
The longer term opportunities for margin expansion.
For the broad portfolio as well is your key operating regions. Thanks.
Thanks, Michael.
No. This is an area that we are actually quite excited about you know business.
We see margin expansion.
At the operating free cash flow line through both our opex improvements as well as Capex improvements.
And Chris that given your guidance this year, and we're going to layer it and.
The next year, we'll give you at least at a guidance and we're going to nail that flow and all that live show through it.
Quite a few points of expansion built from the Opex side and our independent excited Seattle. So that we wanted to do you feel really good but in this business and our operating leverage continues to improve we'll see you know with all the net assets that will be onto the network.
At some point in the future a really good enough that we are going to bring in that pick up some pricing as well. So our strategy has been very consistent about it we're going to go for volume. We've got this bring ARPU rig so it's easy to get volume and you wonder like that Youve everything away for free, but we are going to get lots of.
Have you lose any Oracle and then at some point in the future will start picking the ARPU increases, but we feel really good about you know the.
Having said, we're going to see Galena, maybe I'll ask Chris could give maybe.
According to plan in the margin expansion you only I think we had and just to reiterate for folks.
A big part of our focus is around Opex to revenue and our medium term target is to run the collective business in the low thirtys as a percentage of revenue versus you know were upper thirtys. Today. So that is that you have key focus area for us and I think that will underpin.
Oh see out for EBITDA growth.
Going forward and in addition, as we look at you could call. It the LCF less capex are all FCF ratio you know our goal is the company has to be in the mid twentys as a percent of revenue Oh, We finished 2018 Pat.
2%. So we have room to go on that and that means you're driving down capex as a percentage of revenue on a go forward basis.
Thanks, Chris.
Yes.
Our next question comes from Kevin ROE from ROE equity Research. Please go ahead.
Yes.
Thank you good morning, a couple of quick questions first on Hurricane Dorian.
When do you expect to return to a pre hurricane run rate what work needs to be down yet and on the Seychelles sale.
What are the expected use of proceeds you can keep that on the balance sheet or potentially pay down debt. Thank you.
Oh, well thanks, Kevin.
On a hurricane Doria you know we.
You pay sometime the sometime next year, we'll get back to pre hurricane levels. They use you know two bucks a story of course, you know that the Grand Bahama Island that we are focused completely rebuilding we are already getting there and a lot of probably to be customers are coming back up because they know about that but the stood up then.
The other high levels of Arbuckle, where.
It's really a huge really humanitarian disaster, there are the hardly any commercial activity and but that will come back that may take a little bit longer but he was in one of our bigger.
Very few mileage.
Anyway, but but we are focused on.
Brings a new technologies there that we used our classic instruction, so a lot more fixed wireless and important or you feel good about Bahamas, I feel really good but my feelings rather how responded to that.
On the on R&D say showpiece, Bogo I'm going to ask Chris to make a comment nondairy pretty excited about that disposal and and you can imagine there yeah, we put that cash the worker.
Thanks on the on disposal proceeds we would intend not at this point to pay down debt will use the the net proceeds as part of the the cash related to the fund 18 T. purchase.
Got it thank you guys.
[noise] and our last question comes from Andrus Carlo from Scotiabank. Please go ahead.
As Scott.
Yes. Thank you for high for taking my question I just for purposes of dry comparing the acquisition in particular equal to other parts you should the region and also to I. Just referenced 16 I was wondering if you could disclose operating leases for HMP, Puerto Rico place.
If you can that helps us how much African apparently our he says.
Our commitment team imports were equal that will be mining my first question.
Okay, well are you know we didn't want this we can't disclose what we all the deals there, but but we are inheriting a network watered out of already really do what they said that it's more protocols that coming through it but most of them are already under existing agreements that they didn't do does.
With multiple vendors.
Hey look all delays you would expect to more than one vendor there underground underground.
Is there a follow up question manager.
Yeah, Hi, Brad.
Right.
Okay.
Yeah, Let me let me just to add I mean, you know ATP brings it it's over 600 krakauer sites and the the lion share or I think is over 95% of those towers have fiber direct to those tower site, which is which is great and ATM T N. The recovery invested significantly.
Around resiliency said the towers, our state of the our you know on Puerto Rico and U.S. yet.
Okay, but can you clarify if most of the towers belong to the company or.
Are you trial they are a barrel pre I know that Ben Ben that then monetize release.
Okay. Thank you I'm documents young person some sheila.
Ultimately, we Chile sent over volume.
At the school or political situation right now I was wondering if it's that you have noticed any they change it seem that competitive landscape in in Chile, perhaps there's no around in in terms. So I'm proud of sales and just stuff overall flux direct what's essential if you're actually mean children right now.
Sure and Iraq, you're going to jump in here the bid as well you know.
Yes, I'll do you feel about it we love the country in our business, there and outwardly focused really on a employees.
On a property on our services and on our customers and we want to make sure. It services all up and running in a Christmas as well to compare so we're continuing to doing truck rolls repaired installed or we can you do that you know on the political front, we feel good decision or something that the government or the citizens are to labor.
Resolve eventually and it'll be it'll be okay, I last game or maybe a undergrounds maybe give some color gamut.
Sure. Thank you by then and thank you I'm just for the question well I'm said with.
You know remain optimistic about the ability of the society to show base beyond a somewhat complicated.
Once it's in October .
From the logistical interview, mostly because of the markets and that we see the you know situation.
Turning to Lincoln on Monday November So we don't see I believe there and we maybe.
Sure we need to each of the consequences that we don't see effects.
Material effect when you look we save some demand actually as we had a are you know convoluted elite then why we saw the Monday after they come to get to weight was you know you're not sort of a spike in the contained the amount of this week. So our business was not.
I feel good affected at all not the service to customers.
And not the distribution channels, all detergent tenants like working normally and we remain confident the you continue pushing our good results.
And we actually had to be October . Despite the fact that we had to come ticket last week of the Mark.
They do here, Okay, all right and I can say, we are committed to Chile, and we will continue to invest into it.
Okay. Thank you very clear.
We will take one last question from Matthew Harrigan from benchmark. Please go ahead.
Thank you Oh.
Thank you I'm curious the tragic ignoring was immediate all superconductor that we'll get through the mass or paradox I want you alluded to using wireless drops in other elements you reduce your your capital cost for Newbuilds, but is there anything that gives you pause in terms of it.
Awesome of insurance and and all that out in that region. It would you hear the hurricane cycle or extend the hurricane cycle, regardless of global warming am I could you talk about.
The opportunity to address the Los Alamos demographic and she like.
Yes, so lower up in the homes passed from a cost it seems like that.
To do some opportunity as well you know I get pushing out with the agency would give you really get possible on Warner brothers has or will you give you probably can answer that one book to bill. Thanks.
Well look like five questions in there man [laughter], but I'll, let me try if he'd like I get to Europe and the you know the quickly is that you did that you want to answer if I missed something please.
Jump back Oh, you know well that Chris to think about the entrench working on outdoor and you asked a question in the on fixed wireless can you kind of dropped off a little bit there you broke up a bit on Paradise Island. There you know, we're not doing any fixed wireless in Paradise Island.
But we feel good about the fixed wireless solution.
There you and by fixed wireless what I mean, it's really our PE.
Two customers because you have enough capacity do you actually do that against the density of population certainly an obstacle and and Grand Bahama Haswell anybody really more technical details will be happy to provide electric is right here as well in Atlanta, some more questions come back.
In Chile.
You know you're you're spot on on they use a huge amount of a customer base that we previously had not targeted but given how we've driven the cost structure of our construction down vacant we feel a sense just done a really good job we've been quite innovative on that front and we've gotten a crossover.
Back down quite a bit but we are now targeting you know a lot of what we call the C and D North Texas that previously we've kinda bypass and we think the opportunity that's really good and you can clearly see from the last few weeks certainly in the region.
You know all of the population at the same aspirations to me and bring new fixed broadband to them, it's going to be a core major mission for elderly.
Maybe I'll pass it back to create to talk about Oh enjoyed the parametric of course that we've taken.
Yeah, Matt around a insurance for the region, particularly around let's call it nandan and that CAD for the Caribbean. Yeah. We continue to look at how we best optimize and ensuring we're getting the highest because you know value for recover so one thing that we've done over the last year is weve.
We have gone forward with a parametric.
Insurance program that allows us to put a competitive process in place between the traditional indemnity, Marquette and and and reinsurance from market to the risk minimize is yeah frictional cost and allows us to have a program that we can play between the two different markets and that basically its triggered off a survey.
I certainly when speed pace X amount of a other to find value. So what that does is it allows us to.
Ensure that to the extent we have a a major disaster, we can have cash come into the market a lot quicker than what traditionally has been sort of then 18 to 24 months.
Process for the traditional indemnity market. So we continue to refine our program and continue to look at capacity for the region and I think we are looking at how we continue to create the most robust risk management program for the money and we do self insure and we do take you know the first layer.
Yes, you know on our books as well so.
I think we feel comfortable about places we operate and how we go about insurance and we'll continue to refine that right now as we look forward.
Thanks, Ross Flex gross.
Great.
I will conclude todays question answer session I'd like to hand back to my Panera for any additional are closing remarks.
Thank you operator, and you know I I'd say as you know, we know 35 days into the fourth quarter.
And it's Chris and I have reiterated our guidance really seem to have pushed 35 days sabby feel really good about how are we going to end disappear and.
We continue to thank you for the supported you've given us have agreed to.
Ladies and gentlemen, this concludes Liberty Latin America's third quarter 2019, Investor call. As a reminder, a replay of the call will be available in the Investor Relations section of Liberty Latin Americans web site at Triple doubling your without L.L.A. Dotcom. There you can also find a copy of today's presentation materials.