Q2 2020 Liberty Latin America Ltd Earnings Call
No.
[music].
Good morning, ladies and gentlemen, thank you for standing by today's call is being recorded I'll now turn the call over to Narci, Corey Chief Executive Officer of Liberty, Puerto Rico.
Good morning, welcome to legacy led to a record quarter 20 toward this goal.
At this time.
This is greg or listen only mode.
Todays formal presentation materials can be found on the Investor Relations section of Liberty Latin America's Web site.
Www Dot Annaly dotcom.
Following to this wrong presentation construction will be given for question and answer 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 outlook for future growth prospects and other 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 or risk that could cause results to differ is available in Liberty Latin America's most recently filed form 10-K form 10-Q.
Leveraging that America disclaims any obligation to update any of these forward looking statements to reflect any changes.
Speculation or the conditions are which any statement is base.
In addition on this call will refer to certain non-GAAP financial measures, which are reconciled to the most comparable GAAP financial measures, which can be found in the appendices to this presentation and on an investor Relations website.
I would like to turn this call over to our CEO mr. balance there.
Thank you Naji and welcome everybody does second quarter results presentation.
Anthony I Hope, you and your Fannie Dave and EBITDA.
But today all running lot is I'll begin by providing an update on the impact of cobot 19 across our markets.
And how we have been managing today during this period using the framework I laid out in the last earnings call.
Chris Noise CFO will then follow up with a review of our financial performance and provide an overview of our capital structure, including the right to offer we announced yesterday.
Yes that will get straight to your question.
As always I am joined by my executive team from across the region and I'll get them involved as needed during the acuity following our prepared remarks.
As a point of housekeeping, we will both be looking from slides, which you can sign on our website at www Dot LLS Dot com.
Slide four key highlights.
Following a strong first quarter as anticipated our performance in Q2 was negatively impacted by the pandemic.
April was on more money.
Positive note, we started seeing improvements in May and then in June.
Got it clear plan on how to react to the challenges and how to be proactive as well in many areas.
That is why even as the situation remains challenging in most markets.
We have seen of business.
Month over month.
Matt effective July is also bedded in June.
Despite the difficult backdrop.
We added 47000 broadband subscribers and recorded net RG you'd growth.
Ads in Q2.
Across our markets, Puerto Rico performed particularly low recording best ever quarter for RG additions.
To put this into context normalizing for Puerto Rico size. This would have put US ahead, all you Sps in terms of bad.
Financially our focus has been on cash generation and we reported adjusted free cash flow of 130 million in the quarter.
This is based on seasonality to the year as Chris will talk to address is undoubtedly positive results.
I want to also note that this includes continued investment expand and upgrade on networks.
We are leaning into pieces.
And finally last BB would decided announced the acquisition of Telefonicas fast growing Costa Rica mobile business.
Together with tablet Deca.
Which itself has been a great growth business for us.
This combination will create a fantastic opportunity to deliver a leading converged offerings and once that regions best market.
Moving to slide five.
And an update regarding to eat focus areas I outlined last quarter.
Overall I'm very proud of what our team has achieved in a relatively short amount of time.
Our primary focus throughout has been on the safety and well being of our employee.
Good agile as an organization and adopted our practices to enable working from home that possible. While also doing as much as we can to protect our colleagues we need to be in the field as they helped to deliver the connectivity services, which are vital to the communities pieces.
We have lost one employee Q2, Colby and the whole company margins for that.
It is not loss upon as the gravity of what we are facing.
In the next two areas.
Our network and commercial activities are key drivers for future success.
Now I'll take you through some of our initiatives in the coming flights.
Moving on to government affairs.
We continue to work at partners with governments stakeholders at all levels.
Making sure that being there will be a year to provide critical services to get countries.
This includes investments we continued to make in our net but.
People and communities.
A couple of factors such as moratorium loss applicable in key markets on the net light.
We are also seeking regulatory approval as we work towards closing date, we ate DMP and Telefonica Costa Rica acquisitions.
We expect the ATM de deal to close in Q4 this year.
Turning to our Corbett 19 planning activities.
Early in the onset of the endemic we establish a task force that carried out extensive scenario planning.
I'm pleased to tell you that we are outperforming most of the scenarios that in as anticipated.
This team also looked on some exciting initiatives that will drive efficiencies and improved customer experience in the future.
Such as your touch and digital interactions.
Dr. These in more detail later in my presentation.
Next to finance and Treasury.
We continue to be active and successfully refinanced our BTR notes, taking our average maturity to approximately seven years.
We are committed to maintaining them right balance in our capital structure.
And as we look to the Telefonica Costa Rica acquisition, we took the decision to launch at 350 million rights offering yesterday.
Chris will cover the rationale in more detail.
But it is important to note that our board and leadership team is confirmed intention to subscribe to the offer and we are on track for yet with our 150 million fixed cost reduction plan across operating costs and Capex as we said previously in most cases this accelerates.
Plans, we already had and should status in good stead as we emerged from the current price.
Lastly, we have focused on free cash flow generation and Q2 should we can achieve it in a challenging environment.
In terms of M&A, we are focused on closing or greet acquisitions, we remain agile and see an attractive pipeline of opportunities in the region.
We continue to look for accretive levered free cash flow per share opportunities.
Finally, our board continues to be engage.
Provide valuable advice and support to me and my team and Thats mention of fully supportive of the rights offer.
On slide six.
I wanted to provide more color on some of the challenges uncoated 19 in our key markets.
We operate across a range of geographies with varying impacts experiencing reach over.
Overall, we are seeing markets east restrictions. However, this virus is unpredictable.
This position on dislike the markets moving from where we have seen but more stringent restrictions on the left to dose less impacted by lofthouse underwrite cyclophosphamide.
It's more markets move to the right of this slide this should provide a tailwind for the remainder of the year.
Starting on the left the Panama, which has been district is locked on measures across all of our markets.
Since late March.
Movement outside the home has been severely restricted and this has impacted all of our business lines.
In addition, the some oratory more on build collection.
Both the easing up to be should see this fall to be better than this summer.
Moving to Chile, where again quality measures continue.
Yeah, Thanks, and not getting that much better.
Really is in the winter season, thus sales have been impacted by the shutdown.
We still had positive net adds but this is one we are watching closely.
In the CNW Islands group economies that typically tourism dependent and although it varies the impact of that pandemic has tended to be significant.
That's a marker for recovery, we are seeing stores now largely reopened and they haven't been moratorium laws such as in Panama.
But in the Bahamas, they went into a lock down again this week.
Like I said this virus is unpredictable.
In Puerto Rico.
Restrictions relax.
But that was reversed and interviews in place until mid August.
Operationally all of our stores have been back to regular hours.
We opted into the FCC pledge to keep America connected however at the end of June less than 5000 subscribers were on our essential services plan.
And we did not cause them as RG use.
Lastly to the right of the slight and the markets were locked on measures have been less stringent.
In Jamaica, tourism industry slowly getting back up and running.
Reports our sales teams during the first couple of months via now back on the streets. We've also continued investing in network expansion.
Costa Rica, the final market I wanted to cover.
This has been a good marketplace and there has been limited impact from the pandemic thus far.
The government has done a great job as launch stimulus measures and have been proactive in dealing with the virus.
Turning to slide seven where we've highlighted some of the network investments innovative products and operational initiatives, we are delivering park customers.
Starting with our network investments on the left hand side.
Our industry has seen significant increases in bandwidth demand following the onset of the quoted 19 pandemic, particularly where lockdown measures have been enforced.
As a result, we have responded to ensure our customers can continue to receive high speed and good levels of service.
Across our different products.
Added 400, Gigabits on Us sub sea networks in Chile, we increased fixed network capacity by 30% as shown in the lower chart should they saw the more significant spike in bandwidth consumption across our markets.
The related to the high speed, so our customers enjoy.
The average speed in Chile was approximately 219 megabit per second in Q2, which was 36% increase over the prior year.
In total we added 1.8 terabits per second capacity to one network.
This is about 26% increase now portal capacity and we did it in a four week period.
Lastly, we continue to invest in our mobile networks by increasing core capacity in Jamaica in Panama by 40% to 50%.
We also worked with government partners to add spectrum to temporarily covers pipes and usage for example in Panama.
Moving to the center of the slide we have continued to innovate throughout this period in some cases, even more so given the evolving market conditions.
Examples I would highlight here.
Assisted self installs, providing a platform to enable customers in the Caribbean to continue to education with flows study.
Why Fi optimization products, and our Google Android platform hub, TV, which we launched in Puerto Rico and being rolled out in other markets.
Finally on the right side of the slide to the operational improvements we should support of business. Both in the near term NFI look to the future.
Except on to include adapting to the Lockdowns Caribbean markets with mobile virtual stores promoting digital payments in our markets such as in DTR Liberty, Puerto Rico, where digital payment collections were approximately 75% an 85% respectively in June.
And for the longer term, we are working hard to next year and touch installed work across our markets.
This will be a game changer.
Turning to slide eight.
Consumers continue to demand high speed connectivity and our fixed line services, which represent just over 50% of total revenue has been particularly resilient.
Starting with our R&D you additions by segment on the left of slide.
Cable and wireless and a strong start to the year record Q1 additions, but then salt weaker performance in Q2 at the markdowns and mentioned in packed in our markets to varying degrees.
In Panama, we reported 45000 RG losses during Q2.
However, this included the removal of 76000 arch use who we continue to provide a service to a debt not paid us in accordance with our recognition policy.
These customers still have our equipment in their homes and use of our service. We believe a numbers then we'll come back into our base as conditions improve.
Jamaica is worth highlighting at the market continues to perform well with 26000 Archie you adds in Q2.
Puerto Rico.
This number is amazing if you normalize the base.
Turning to VTR and cover the teacup.
We saw solid performance in Chile. Overall, however video subscribers declined in Q2, driven by the suspension of the Chilean Soccer League, which we carry on premium channels.
Coveted Teekay had another strong quarter and continues to grow as it challenges the incumbent in Costa Rica market.
Finally to Puerto Rico rate Q2, as our business.
As ever quarter, adding 34000 subscribers as consumers saw the value of our high speed proposition during times of restricted mobility.
At a good level. This aggregated 19000 net adds in Q2 and 79000 in the first half.
As you can see the chart the numbers was significantly impacted by the removal of 76000 on to use in Panama as we discussed.
Underwrite of this light I wanted to call out two important drivers are fixed business.
Firstly broadband is a driver of growth across our group and leads our proposition.
The CNW figure here would have been 28000 high end be included the Panama argues that were excluded from a subscriber count.
And secondly, we are continuing to expand our footprint with over 150000 homes passed or upgraded in the first half of the year and over 70000 up that number coming in Q2 during periods of restricted mobility.
This is quite.
Using.
We are continuing to invest in a tough for and targeted matter.
And like I said, we are leaning into our thesis turning to slide nine and our services was impacted by corporate 19, mobile and B to B.
Looking first at our model performance on the left of slide.
CNW, we begin to see impacts from corporate in the second half of March and this carried into April and May resort. The words of our subscriber losses. These losses are primarily due to mobility restrictions limiting the ability of customers to access service and reduced demand for top ups generally given.
And the time customers, but in their homes.
As you can see in the call out chart, we saw an improvement in June Lockdown restrictions East and this included net ads in Panama.
Our momentum has continued following the quarter.
In Chile, we saw small impact the additions in Q2 is driven by store closures related to Lockdowns as well.
Moving to BBB underwrite, albeit to be business reported their rebased revenue declined 3% in the first half.
Across our markets. This was driven by cable and wireless over 90% of our B to B revenues generated.
DTR cover the Deca, we continue to build another small market share and reported double digit btds rebased revenue growth.
On the fall right off the slight I wanted to break out the BDP business and provide some color on opportunities and challenges we've experienced during the pandemic.
Starting with our enterprise segment, which represented approximately 50% of our revenue base.
Here, we see opportunities to enable our client employees to securely work from home as well as delivering increased bandwidth and applications.
We've also been quick to support governments around the digital initiatives.
Moving to SMB, which is about 25% of our revenue we aim to be partners with our customers, helping them continue to operate through this difficult time and building on or reinforcing strong relationship for the future.
Finally, we have wholesale including our subsea business.
This represents about a quarter of our BBB revenue and has been the most resilient through the first half as we've responded to increase bandwidth demands from our customers.
Finally for my section to slide 10 and out in organic strategy.
Last week, we announced the acquisition of Telefonicas Costa Rica mobile operations for an enterprise value of 500 million or six times threenineteen adjusted EBITDA, including run rate synergies.
Telefonicas Costa Rica business provides a great opportunity for us in a good market. We are catalytic of fixed line cable business has grown revenue and adjusted OIBDA by 12% and 20% respectively on a cagar basic basis for 2017 to 29.
Through this acquisition, we will create a leading integrated player with capabilities across both fixed and mobile products and combined revenue of approximately 400 million.
Being able to deliver full suite of products is something that we value strategically and following this and the 80 acquisition all but one of our markets will have fixed and mobile capabilities.
Phonic or Costa Rica's, another two mobile player in a three player market. Unlike capability to it is a challenger from 2017 to 2019, the business delivered high single digit topline and strong double digit OIBDA growth.
Importantly, 60% of revenues up postpaid revenues.
This business has had a successful strategy of migrating prepaid to postpaid.
The business comes with a good mobile network and 90% LTE coverage by population with three quarters of towers carrying LTV.
Finally, as with more consolidation opportunities, we anticipate generating synergies from the transaction, which together with the growth in the business make the acquisition highly cash generative an accretive to us.
Touching on 18 key briefly we remain very confident of completing the transaction and now expect is to take place in Q4.
Through both MTN, Telefonica, Costa Rica via consolidating markets and generating synergies.
Also as a majority of postpaid revenues.
That is why IR ours and future cash flows are good.
With that I'll now pass you over the Chris Nice, our Chief Financial Officer, who will take you through our financial performance.
Chris.
Thank you Alan I'll begin on slide 12, and will touch upon both our Q2 and half year results for the quarter, we delivered $849 million revenue, reflecting a $134 million decline over Q2 2019.
Roughly $60 million of the reported decrease in revenue is due to foreign currency translation, primarily the 20% average appreciation of the U.S. dollar against the Chilean peso and the impact from the 2019 disposal of our Seychelles asset the rebate declined 8%.
Principally relates to BBB and mobile.
Year to date, our $1.8 billion in revenue reflects the rebate decline of 3% given we did not experience the full impact from coal that until the start of QQ.
Moving to the top right, we renamed LCF to adjusted OIBDA I'll buy with no change their definition for Q2 adjusted OIBDA was lower as result of inorganic decrease and about a $23 million decline from a combination of foreign currency translation and say shales disposal.
Our $333 million in Q2, adjusted EBITDA reflects an 8% or $30 million rebate declined year over year for the full six months our year over year Rebased decline was only 2% RMP any additions highlighted in the bottom left we reported 153 million.
Dollars or 18% of revenue in Q2, and $286 million or 60% of revenue year to date in dollar terms each period is lower year over year, but notably we continue to invest in our footprint in both new build and network capacity.
Finally, turning to the bottom right, we produced our best quarter ever and adjusted free cash flow with $130 million in Q2 benefiting in part from positive trade working capital and reduced cash taxes Q Twos result brings our half year total to $81 million, which is ahead of last year's first half results after it.
Adjusting for $67 million in insurance proceeds that we received in Q1 2019.
From a phasing perspective, we would expect to generate negative free cash flow in Q3 likely there in Q1 due to the concentration of our semiannual interest payments well Q4 tends to be seasonally strong for us with respect to cash flow.
Importantly, we are well on track to deliver positive free cash flow in 2020, which we had flagged on our Q1 call as a key target for the Laa management team.
On slide 13, we present our segment results I will focus just on Q2, which is the upper half of this line starting with BMW, we generated $515 million of revenue, reflecting a 12% rebate decline.
This decline was driven by 22% Rebase reduction in mobile revenue, reflecting reduced recharge activity fewer subscribers during the locked down period and less rami.
Finally, the lockdowns across our markets had impacted b to B, which had a rebate declined 12%, although our subsea business was able to modestly grow year over year fixed residential was largely resilient in Q2 as it was relatively flat in terms of rebased growth year over year with broadband.
Star performer.
Q2, adjusted OIBDA fell by 10% in rebate terms as we generated $204 million.
Compensating for the revenue decline CNW significantly reduce both direct and operating costs on a year over year basis, CW PMT additions were $18 million or 60% of revenue and included over 50000, new or upgrading homes during the quarter.
Moving to VTR in Chile in Calgary, Teekay, Costa Rica, we posted revenue of $228 million in Q2, a 3% rebate decline a key driver of this year over year decline relates to the suspension of the Shlaim soccer redo, the coated which led to discounts for our premium video customer.
We experienced a 10% rebased decrease in adjusted OIBDA due primarily to to cost drivers first we have certain costs at BTR, including about 50% of our programming costs, which are denominated in us dollars. We hedge a large portion of these costs on a near term forward basis Ian.
Back to the strong U.S. dollar combined with the FX rates, which we are hedged resulted in about an $8 million adverse impact of BPR trajectory or EBITDA on a year over year basis.
Second significant bandwidth demand related to coded resulted in much higher network and costs in our cost to handle the unprecedented spike in Chile.
Our cost me two areas were roughly $5 million higher over Q2, 2019 levels and we expect there to improve in coming quarters.
Our Piney addition for $50 million or 22% of revenue, which was slightly lower when compared to 23% of revenue in Q2 2019.
Ending on the right hand side really Puerto Rico delivered $109 million of revenue in Q2 or 5% Rebased growth.
This result was a modest improvement over Q1's growth levels.
We realize adjusted OIBDA $52 million, reflecting growth of 2% over Q2 2019, our growth was modestly hampered by acquisition integration costs.
Finally, we reported $20 million UPPI additions were 18% of revenue as we added over 5000, new homes to our footprint and investing about CE at capacity to address consumer demand and usage of our network.
Turning to slide 14, I thought it was helpful to look at how our OIBDA margin has changed since Q1.
We have mitigated the impact of our sequential revenue decline by reducing costs.
CNW and Liberty, Puerto Rico maintain their margin while the decline in the VTR, probably keep a margin was directly attributable to higher network and call center operating costs together with an incremental 3 million dollar sequential impact related to contracts denominated in non functional currency.
Overall allies OIBDA margin held steady at 39% in the quarter.
As our direct and operating costs sequentially declined by over $50 million, helping to mitigate our revenue drop.
On slide 15, I wanted to cover our balance sheet and liquidity situation in some detail annual referred to the six section on the slide in section one we've been very active on the financing from firstly, we completed an additional $90 million half of our Puerto Rico bonds at a 100 Q point.
Five of par with proceeds earmarked for the 18 T. acquisition.
Further reducing our.
Equity investment.
Secondly, we monetized VTR in the money debt derivative at the end of Q2, and we help lead the way in opening the Lat am high yield market during cold it by refinancing DTR $1.26 billion of high yield debt in July at very attractive levels.
This transaction improved our tenor lowered our cost of capital and add an efficiency and flexibility to our structure.
And thirdly, we extended near term debt at Panama to 2025.
Inception to our maturity schedule showcases the impact of our completed financing work is now 85% of our total debt during 2026 or later, providing stable financial footing for the long term.
In section three I thought it was important to walk through our cash position, excluding the $1.35 billion in restricted cash that will be used to help fund the TNT acquisition.
We finished Q2 with $1.75 billion in consolidated cash.
Post Q2, we used $187 million of cash from the debt derivatives as part of our uses in mid July BTR refinancing.
And we repaid $275 million borrowed under our RC asset CDW and Liberty Puerto Rico.
The final column of the walk shows $660 million of our cash that is allocated for the TNT acquisition.
After considering these items that leaves us with $630 million of consolidated cash, which is our level that provides us with a prudent proffer, giving covert uncertainty and a number of geography to which we operate.
Our Rcs availability right at the cash chart, we finished Q2 with $765 million available and after the Rcs Paydown and move to over $1 billion available.
Infections for as the chart depicts we have ample cushion under our maintenance Covenant is about three primary Craig.
Additionally, on an aggregate basis Alway, we finished Q2 with net consolidated leverage at four point in time and net proportionate leverage of 4.5.
Our longer term target is to drive our leverage towards four times.
It's actually inspired stick we highlight several financing that we expect to complete in the near term.
We intend to ask the acquisition of Telefonica, Costa Rica business with four times lab.
Which equates to roughly $300 million of debt to be bio either locally in Costa Rica and are at VTR Finance Holdco.
With respect to the rights offering Jeff to now we intend to utilize the capital for acquisition, including the equity portion of the Telefonica transaction and for general corporate purposes.
As I outlined earlier, we're comfortable with our existing leverage levels and we'd like to bring them down modestly over time and a rights offering provides us an additional opportunity to raise capital well not increasing our overall Allah elaborate.
The key terms of a rights offering include the following size is targeted for $350 million.
Operating will commence in September rights will be distributed to all shareholders as of the record date.
Each right, we'll provide the opportunity to purchase a class b share at 25% discount that the lab, which will be set at a later date.
Right to be transferable and publicly listed and most importantly, we have full support from our executive team and board, including John Malone, and Searchlight capital and the collective group intend to subscribe to that right.
This support equates to approximately $50 million of that $350 million that we're looking to raise from shareholders.
Turning to slide 16, I will close our prepared remarks.
We know across our markets. It will take time before consumers and businesses to back to full throttle. However, our operations as well so far interface with Covance.
Connectivity entertainment through our fixed residential services and backhaul through our subsea business provided for the degree of consistency and resiliency in our result.
I think we can all attached to our own experiences during this crisis.
It is essential to have a high speed robust internet connection.
Controlling our costs and Capex is critical we're sticking to our plan from a quarter ago and are on track to achieve our cost and capex reduction target, while still investing in future growth through new bill and through product in operational transformation touched upon by balancing.
We have more leveraging our back pocket to reduce spending leader.
However, as you can see today, we remain focused on investing in our business.
These efforts support our companywide focus on free cash flow generation into our Q2 result was a quarterly a record for us in this metric.
Good accomplishment given the topline challenges presented by killed.
Besides investing internally in Q4, we expect to close the HCT acquisition and I'll be working on closing adjustments purchased Telefonicas coaster weaker business in H. one at 2021.
We expect the two acquisitions will add over $1 billion of annual revenue to outlay.
Further increasing our scale and underpinning future growth and free cash flow generation.
As we look to the rest of year and more importantly to 2021, we're taking steps within our business that we believe will enable us to accelerate how does the recovery.
And that just announced rights offering will provide us with incremental flexibility and agility should additional opportunistic situations arise.
With that operator, we're ready to take question.
Thank you the question and answer session will be conducted electronically can you would like to ask a question regarding the company's operations. Please do so by pressing the star or Ashes key followed by the digit one on your touched on telecom.
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Hi for just a moment ticket everyone an opportunity to signal for questions.
We'll take our first question from James Ratcliffe with Evercore ISI.
Good morning take request, we feel like that.
First of all regarding the rights offering why raise equity, particularly now.
With given filmmakers and Colgate and just maybe impacting that Medicare cap rate reflected that.
Got it sounds like the movie cash or India, Costa Rican transactions on next year.
Speaking of questioning and the timing of that.
Secondly, I don't want to cost reduction year on year in any quarter can you talk about how much of that with the lower activity and having offset to be more revenue numbers and how much of that more structural thanks.
Sure.
Hi, James Let me address the cost reduction part first and then we'll get the rights offering and I'll ask Chris drove the jump in here on that.
No the cost reduction but of course, we have a bunch of direct cost that goes down proportionately to the revenue.
In that number reported 150 million, we did not include that direct costs.
The most of the indirect costs and you can imagine that on the part of that that that activity related of course.
But for the most but they have cost that we plan on picking out do you have taken out the being Dennis keeping it out permanently.
And Thats part of what we've been we've been working on over the last couple of years at the group margins as well and the rights offering I'll make one couple of comments and then I'll pass it onto Chris.
We we think it's prudent.
[music].
Capital structure that we want to get to read more equity raised.
For some of the things that we know that we've been looking at in our pipeline as well as the Telefonica transaction.
Monica put the Rica transaction. We've done this was a really really good transaction and that all of our shareholder ought to be able to participate in it.
And the rights offerings, the great refer everybody to participate in what we think it's highly accretive protected for it up.
Got it on to Chris.
Comments around the timing of it.
Yes, I mean.
Obviously, a rights offerings and efficient mechanism in which the raised capital in terms of timing and if you look back all of our transaction and we do like the de risk the.
Purchase price and speak for the capital.
On the earlier side instead of waiting until close to closing.
And it's also additionally, it's a good window for us in terms of.
Raising our security to operate over the next call it 60 days.
Thanks, Chris.
Thank you.
Well take our next question from Soomit Datta with New Street research.
Hi, guys couple of questions. Please.
Just one on land on Puerto Rico, I wondered whether we're told you could give us sense as to how the ATM T. wireless business has traded over the first part for the we probably difficult to be two pretty specific but I just wonder if it's not a market where.
As we've seen around the world, there's been very severe impact on a low borrowers that one which.
As held its ground quite well and then just also all Pulitzer Rico.
The subscriber numbers look great things come right is that in your pocket to levels ahead of where you were pretty hurricane I just wonder.
Where culex business go through each of these.
Titration of homes passed or the say seems to be performing performing well.
And then if I could just jump in with the second question on on Chile. They I.
I think the numbers both revenue and EBITDA.
Totals 40 from from all of those pieces, which had highlighted.
But but I think just to sort of focusing on all the way the cost side of things you did call out some network.
I will say tourist shoes.
With has been impacted to some degree by the volumes coming from tell you that connect and they're just at the same time.
The cost clear approach here with protection agency. So lucky is bringing a contractual suit against chief the quality of service phase threes. So.
All sounding a bit worse than it is if you could give a bit of clarity on what's happening there would be great. Thank you.
Alright, well I'll I'll I'll answer, but the question to know LS, both Guillermo and not D to be on standby as well as well on our new.
Let me start with the Chile aside.
You know our cost did go up slightly mostly because coal volumes would really high.
As well as re accelerated a lot of one network upgrade now on network upgrades in Chile indicated earlier pretty significant and we did it over a one month period, but during that one month period.
Already had one of the highest broadband speed.
All of our properties in Chile, and and it really accelerated that.
And so during that one month period during our upgrades, we did run into some network issues, we've been very transparent about that.
And and we are working with the government and the regulator right now.
Helping them understand its while that this one time event.
For the period.
This is really a fourth major it it's not something that just natural and.
But but if we look at Chile going forward, you know telus coming into the winter period. It isn't during the period right now the corporate condition that it's not improving and it's under strict lockdown, but we have powering through it.
But we also realized that the this is one that we're going to watch very closely over the next month or so.
On Puerto Rico.
You hit it right on I mean, we're not only revvy were at pre Hurricane Ria way beyond that already and we think the opportunities in the run rate, Puerto Rico is pretty good that's why reinvesting in newbuilds them reinvesting and upgrades and minutes you as Weve indicated before we also participating in this year Crs auction.
In Puerto Rico. So so we are in Puerto Rico, and we are very bullish on it and Thats why we did they didn't need transaction, which by the way it mostly postpaid and Thats why we feel confident about that that business as we as we get into it now having said all that I'm going to ask Gimoti give maybe a little bit or color on.
A little bit more color in Chile, and then.
NRG, if you can get a little bit more color on the situation underground in Puerto Rico as well so Guillermo.
Yes, Thank you bought and future city will be network side of course, we were under a challenging situation, particularly in the month may.
And so people will enter into loan balance and traffic beep.
And some 40% thing and we work diligently and adding more capacity to an iguana uptime.
Lastly, we also had telling is in serving calls.
Our.
Center sites.
We needed to move them.
Some of older people into a work from home.
Mode. So I was also a challenge in the fact.
That our ability to answer to the increased volume goals.
Turning to during that period, but you did a nice market of course, we prudently.
Number one brother provided in the country also loosening up search.
Let me say people there are more noticeable.
Influential in the country not together with.
And then the number of complaints that the.
The National petition agency received doing that view.
Created beef lots of situation, which of course, we regret but that being said we are.
Very sure that expect force majeure situation and we will.
Presents our discharges win.
We had the chance to see the biggest for they're not looked at which we have not seen yet.
Thanks Guillermo Najeeb.
Ah, yes, but barring a good morning, everyone. I mean, you have the situation on the ground up where we crossing carried on the island grocer has been doing actually agree well. Despite some locked down there you can see selectivity. He was asking about between tier situation I cannot give you specific but I can tell you there the consumer.
You drive by all the Trups I'll open the network.
I've been able to pick on a lot more traffic show you show activity. So you know, we we assume that they're doing pretty well on those balance has mentioned it gives a full speed.
Environment.
On the fixed side, yes, you answer question, whether there is more runway ahead of us and I think there is another thing is to element that we can look at that.
Differently work in our favor one is still broadband penetration.
I don't broadband penetration is likely approaching some mortgage is 60 or 70%. So there's room to grow we started the newbuild program that is in full swing that has not stopped so those two different the contributing having broadband.
I'm good sometime we don't talk about video, but video as well that is going for us and issue. If you look at our strategy and you know the correct pricing the correct cost structure, where we show a proper for example charter.
We view of subscriber while others are losing some so we feel that we hope the white terminal we have the right ingredients.
Right close cost structure to be able to continue growing the argentinean or jubilation, Puerto Rico flow.
Optimistic about the future.
Thanks.
Okay. Thank you.
Our next question comes from Mathieu Robilliard with Barclays.
Okay Thats a good morning today well.
Very well.
Thank you. Thank you for taking the questions.
Such massive excellent on the synergies that you mentioned with regards to deal with Costco recall.
The other climb up our rights it seems to me that.
The thing or cut to the through the Capex will not thanks.
Targets that we presented to 20% of the current base.
But that it was hurt a little bit of Colorado, where exact words into the Suji conference calls.
This is packed on costs.
We do metrics integration et cetera, et cetera, and its.
Suddenly sleep another one.
Just in terms of.
The capital increase we mentioned the press release, but is expected to use olin's acquisitions.
Due to the Costar Eco one and I was just wondering is is just you know a statement, but it's going to go open ended up at the moment any precise ideas of what acquisitions.
In addition to Costa Rica, you could be doing or are you guys looking at different things like some of them could be interesting and therefore, you have flexibility to to act.
If you want to materialize public and collections. Thank you.
Well thanks Matthew.
Firstly on the synergies Rekynda indicated, but then of synergies.
In that transaction, that's on our math and and you hit it pretty much close to where we would look at then it's quite traditional but indicator Costa Rica, we are in country synergies between the cable company in the mobile company.
So you can imagine you don't need do marketing groups, you don't need a lot of things that a duplicate it between the two organization.
In addition to that.
We also have been submarine cable coming into Costa Rica, which are you can imagine that we'll be moving a lot of traffic as well back into our network. So thats a number of things that this where we all we always get excited but synergies in countries synergies because those.
You can really nail it now you know.
You had a second question around the.
The rights offering and the money for raising and future M&A, let's just say that.
There's a lot of opportunities out there and our pipeline is quite active but we are going to be very disciplined it's like the Costa Rica deal as well, where we look at very specific metrics.
And where we are really confident.
But the business that we occurring as well as the synergy numbers as well as the opportunity for us that's when we really strike and.
And.
As we look at the rest of the region down a few of that but like Jeff said many times before our goal is to not get bigger our goal is to create value. We wanted to get bigger we would have actually a non to some other deals in the first quarter second quarter this year and.
But thats not our plan up lens to create value here and if we see valuable transactions, we see thinks a word for it and as well worked for the seller is going to work for both of those then you'll see us doing some announcements and the Telefonica one it's a good example, or something that would allow for it and what I think what really well telefonica as well so so.
That's how we tend to think about.
Right.
Thank you.
Our next question comes from Kevin ROE with ROE equity research.
Thank you good morning fallen out if we could turn to the Jamaica to to the Caribbean.
And broadband ARPU trends I know different markets are moving in different directions, and let met this quarter for Q2. It was it was negative what's your outlook for the third quarter.
For the Caribbean as a whole for broadband net adds we turn positive if we drilled down into specific markets you highlighted Jamaica as a standout.
And that positive trend continues.
What's the profile of those ads in their ARPU are these remote workers, primarily remote learning and if you could give us an update of the Caribbean in general on the health of the SMB segment in terms of.
Non pay and potential bad debt trends changing thanks.
Sure.
I'll ask zynga doors, a jump in here in a bit.
And put some of the cuts.
Hi, I feel really good about that but broadband business in the Caribbean.
You saw numbers in Jamaica Richard.
Tell you if you normalize for it and I mean, essentially we grew up post about 10% off a base on broadband and and that is pretty significant I mean, there isn't too many cable companies telephone companies anybody a good 10% of their base.
And so if you pull a charter Kevin and so you know that.
I am quite involved and this numbers are very comparable if not better right. If you normalize them now the reason I feel bullish about it as well is in the second quarter. We took a lot of broadband customers that we actually receiving services from it.
Off of RG account and so they appears disconnects, but they were not really disconnects and you will see that naturally come back they still have a modems in your home that getting service from it might think the team we collectively as the team and as a company built a lot of goodwill with a lot of customers. We've chosen to do the right thing.
We've always said in our company, we want to be a different kind of telecommunications company. So we didnt I'll first instinct was not just to look at customers as they how can be disconnect than we were looking for ways to find the mixture that they still have service, even though they can't afford to pay at this point and I feel that will pay back in in many ways.
And if I look at the third quarter I actually feel bullish about a broadband numbers.
I'm not going to give you a preview but July was looking a lot better than June, let's just put it that way.
In general in the Caribbean, It really goes with that tourism industry and eventually it will come back.
Really don't have a crystal ball that are we seeing some hotels opened up we've also seen hotels opened up and then close down you know this will take.
You know many months.
Them into tourism industry comes back I think all there will be good because we have a great product that and I think there's still a lot of goodwill during this quarter period and go do you want to add some more color do my comments.
Thank you bet on well.
It's.
Really the Caribbean today on fixed is clear focus area in ethanol said, we are focused on the penetration I confess to recur we can feel penetrate.
Much cheaper we have our new build that excluding for us we're upgrading our customers across the Caribbean fixed networks and we kept our then we'll next go to rebuild the focused on really making sure that we can be purchased services, we have to deliver to them. So very very very positive on let's take a fixed.
Cycling the business SMB.
Yes.
You see two things happening I continue to lever SMB customers, we kept complexity out there to help them to de Sac pandemic at the same time, we will also see new leasing new businesses.
Coming up and we'd also be careful to new businesses that are starting to rise in the Caribbean to be that boxes in light at the start to really shaped up business digital world. So both on the fixed and the customers back that's not on the beat to be SMB side, we see two sites.
Thank you and guys. Thank you.
Our next question comes freedom from Matthew Harrigan.
Thank you.
Maybe I could become the street that when you get into 21, whether it's fair to either therapeutics you can see some white on things that you're certainly still have your rough interregnum.
Interim with.
Seaway winner and all that I guess, what is a rip specific your marketing some of the governments are very limited fiscal wire to subsidize the consumer for a while as has been done in the U.S. is there a possibility we figure out.
More violent.
That over the next couple of quarters, even there so.
Longer term that business looks great and then secondly, what you will get you to M&A, obviously, you've got some large multinational salto ankle locally dumb deals with we're looking to exit the weekend and you've got a built in equity layer you need to fund the answer to multiple point.
So what will the synergies.
Is there an imperative to try to get some of those deals done over the next year or do you think you don't want to Greg, it's really growing a bit Chris so really.
Next year to four times leverage goal ultimately it do you feel like we subscribe to historic opportunity over the next 12 months, where there's a lot dislocations, we get more M&A done before the market.
I'm, sorry, or are you more going to.
By your time, given that you've got two nice deals already in the Hopper tax.
I'll start with the second one and then maybe I'll ask Chris also maybe think about his thoughts on this.
There are many opportunities, but we are patient we don't have to do any deals.
And.
And when we look at the transaction we of course look at our balance sheet and how we want to capitalize ourselves to do take advantage of any dislocation, but it also got to work from the sense that it's got to be priced right. It's got to be a business that.
Generates cash.
Or has the potential to generate lots of cash and it's got a half a path where we can clearly see how did business grows and how savings come out of it.
It. So once you put all those filters on it you don't do really a small handful of assets that you really get excited about and then then you've got to work with the cell and make sure that the seller also sees the excitement of wanting to part with those assets right at the valuation we think makes sense ways, there's quite a few deals they mutated.
Well afraid to make sense, where if you will never make sense for you and.
Let's not make too much time talking to each other.
And we are going to be disciplined that way no wonder and the government front.
Almost all the governments that we worked with.
In the countries that we operate happing actually quite prudent have been making more right decisions than.
Many of them have got help from the IMF. Some some of the government. They have really strong balance sheet than they will get power to this.
And and we've been working very closely with them My GC, John Winter and his regulatory scheme of very close with the governments. We keep track of your balance sheet. The actions they've been taking and we are here to support them as well.
I don't see that as at the cloud players I think if you look if I look at the cloud, but as you would just be mostly the macro around tourism is in some areas and then if you look at chili's commodities and currencies.
And that's how we look at it Chris.
I think you think you hit it on a on the had.
Thank you mapping fall goods Chris.
Our last question comes from Michael Rollins with Citi.
Hi, Good morning, I was wondering if you just take a step back with this strategy as you can a has in more markets both fixed and wireless operations is there a holistic way that you think about the growth rate of.
That.
Pricing in the country by having.
All of those services differently, then if you had one or the other.
I think yes, we would look at it differently and maybe that's allowed my chief operating officer to make some comments here as well.
But certainly the way we look at it when you have you know the portfolio products like that is one of the attach rates between them and you use one due to drive together. So when we buy that you know like to Telefonica Costa Rica active asset you look at it and you say, okay X amount of that that the mobile customers postpaid customers.
Half of fixing that product can X amount of Y amount of our fixed customers have that.
The the mobile product and you just take one minus wind one minus X and then you do the math that then you say, okay I can get to X percentage of attach rate and Thats your revenue synergies and.
So we think thats that that huge opportunities.
In many of our market. We've we've been very successful in some in some we're just in the early stages of testing are different.
Fixed mobile type Lance.
Same thing applied by the way to 80, NT asset in Puerto Rico, Nagi, and better while already cooking up a whole bunch of.
Offerings that we think as soon as we take ownership of that asset we can launch some things that really compelling for the mobile subscriber and depict subscriber.
That's all you have anything you want to add to that.
Yeah. Thank you Bill I think that youre spot on that but wanting to to mention especially on electric issue that we're discussing is the fact that most of our more like us obviously boasting a operations are our phosphate what is the best bet basically create that seem to agree or that operating okay FMC.
So that's why we believe those two acquisitions, we give us a great opportunity for FMC operating and create a living with synergy.
As Don said, we are finding anything between markets and really the the they've got straight when you're talking about postpaid we seek to start showing some very good times.
Thanks, Pezzella and FMC is fixed mobile convergence, though for.
If you.
Yeah, I think that's.
Is that our last question operator.
Yes that will conclude today's question and answer session I'd like to hand back to fall in there for any closing or additional remarks.
Thank you operator.
I I should have been a few comments one.
Our business is good we have products that everybody wants we I think we have a unique value that customers really appreciate and we have employees that are really motivated and our goal is to create value for our shareholders.
Certainly we want to create value for our employees.
And for sure absolutely, there's going to be value creation for our customers as well and we plan on doing that.
We think we have a good strategy in place yeah. Good team in place and we will execute on it and I want to thank all of you for your support have a great.
Ladies and gentlemen, this concludes Liberty Latin America second quarter 2020, Investor call. As a reminder, a replay of the call will be available in the Investor Relations section kind of Liberty Latin America's website at Www Dot L.L.A. Dot com there you.
Can also find a copy of today's presentation materials.
Hmm.
HM.
[music].
Good morning, ladies and gentlemen, thank you for standing by today's call is being recorded.
I'll now turn the call over to Naji, Corey Chief Executive Officer for Liberty, Puerto Rico.
Good morning, or work I'm committed to love to a record quarter 2020, I mean what school.
This time.
Good question listen only mode.
Today's presentation materials can be called them through live.
[laughter] Obliviously Latin America's website.
Www Dot definitely Gulf coast.
Following two this represents station construction will be given for of course ship America's pressure.
As a reminder, the school is being recorded.
Today's remarks may include forward looking statements, including the company's expectations.
<unk> tweets outlook on future growth prospects and all the information that's great.
That's not not historically truck.
Actual results may differ materially from those expressed or implied by these crazy.
I just heard formation on frac crews or risk that could cause results to differ there's a very limited to Latin America's most recently filed for thank you for thank you.
[noise] Labor can Latin America disclaims any obligation to update any of these forward looking statements could affect any changes that expectation according to conditions, all which I used to.
Is there.
In addition on this call.
It's hard to show <unk> non-GAAP financial measures, which are reconciled to the most comparable GAAP financial measures, which can be found the tendencies to his presentation and on an investor relations website.
I would like to talk this call ortho CEO mr. balance there.
Thank you know Gi and welcome everybody does second quarter results presentation.
Well, Firstly I hope you and your family save any good though.
But today are running a lot is I'll begin by providing an update on the impact of Colby thanks in across the market.
Well, we have been managing to that during this period.
The framework I laid out in the last earnings call.
Boy CFO does follow up with a review of thought financial performance and provide an overview of our capital structure.
Moving to write off the you announced yesterday.
That will get straight to your question.
Thats always I'm joined by many decades income across the region well get them involved that need at year end acuity pulling up prepared remarks.
The point of housekeeping, we will both be looking from slides, which you can fight on our website at www Dot LLS Dot com.
Slide four key highlights.
Following a strong first quarter.
That's anticipated performance in Q2 was negatively impacted by the bad debt.
People with a lot less.
On a positive.
We started seeing improvements in May and then in June.
Got it clear plan into how to the at the challenges.
Be proactive as well in many areas.
That is why even if the situation remains challenging in most markets.
We have seen of business.
Month over month.
Net effective July is also embedded at June.
Despite the difficult backdrop.
We added 47000 broadband subscribers and recorded net RG your growth.
Ads in Q2.
Across our markets, what a vehicle performed particularly well.
I think its best quarter for RG additions.
To put this into context normalizing for Puerto Rico site. This would have put US ahead, all U.S.P. as intense but that.
Financially our focus has been on cash generation and we reported adjusted free cash flow up 130 million in the quarter.
This is saying some seasonality through the year that's visible doctor.
This is undoubtedly positive result.
I want to also note that this includes continued investment in bed and upgrade networks.
Leaning into up pieces.
And finally last week, we would have decided to enough the acquisition of Telefonicas fast growing Costa Rica mobile business.
Together with public.
Which itself has been a great growth business for us.
Combination to create.
Opportunity can deliver a leading pinebridge offering and once that reagents best market.
Moving to slide five.
And then update regarding to eat focus areas I outlined last quarter.
Overall.
I'm proud of what our aim is to achieve.
Relatively short amount of time.
Our primary focus throughout has been on the safety and well being up our employees.
We have been agile has been organization and adopted a what practices enable working from home that possible. While also doing as much as we can to protect our colleagues we need to be and appeal as they helped to deliver the connectivity services, which are vital to the community.
We have lost one employee you quoted.
All company margins for that.
It is not lost about the gravity of what we are pacing.
In the next two areas.
Oh network and commercial activity.
Drivers Bob future success.
I'll take you through several flight initiatives in the coming side.
Moving on to government Affairs, we continue to look at partners with governments stakeholders at all levels.
Making sure that theme, though is to provide critical services to get countries.
This includes investments we continued to make the though net but.
People and communities.
A couple of factors such as moratorium loss applicable.
Buckets on the net light.
We are also seeking regulatory approval as we look towards closing to greet eight DMP and Telefonica Costa Rica acquisitions.
We expect the ATM deal to close in Q4 this year.
Turning to approve it 19 planning activities.
Early in the onset of the endemic we establish a task force that carried out extensive scenario planning.
I'm pleased to tells you that we are outperforming most of the scenario.
Anticipated.
This deem also what on some exciting initiatives that will drive efficiencies and improved customer experience in the future.
Such as Youre touch and digital interactions.
Dr. These in more detail later in my presentation.
Next to finance and treasurer.
We continue to be active and successfully refinanced our BTR nodes, taking our average maturity to approximately seven years.
We are committed to maintaining them right balance you end up capital structure.
And that's we looked at the Telefonica Costa Rica acquisition.
We took the decision to launch at 350 million rights offering yesterday.
Chris will cover the rationale in more detail.
But it is important to note that our board and leadership team have confirmed intention to subscribe to the offer.
We are on track with a 150 million fixed cost reduction plan across operating costs and Capex as we said previously in most cases this accelerates plans we already had.
It should standards in good stead as be emerged from the current crisis.
Lastly, we have focused on free cash flow generation and Q2 should that we can achieve it in a challenging environment.
In terms of M&A, we are focused on closing of greet acquisitions, we remain agile and see an attractive pipeline of opportunities in the region.
We continue to look for accretive levered free cash flow per share opportunities.
Finally aboard continues to be engage.
Provide valuable advice and support to me and my team and Thats mentioned.
Fully supportive of the rights offer.
On slide six.
I wanted to provide more color on some of the challenges of Kogut 19 in key markets.
We operate across a range of geographies varying impacts experienced in each.
Overall, we are seeing markets ease for restrictions. However, this virus is unpredictable.
This position on dislike the markets moving from where we have seen but more stringent restrictions on the left to dose less impacted by laptops underwrite cyclophosphamide.
It's more markets move to the write off this slide this should provide a tailwind for the remainder of the year.
Starting on the left the Panama, which has been district us locked on measures across all of our markets.
Since late March.
Movement outside the home has been severely restricted and this has impacted all of our business lines.
In addition, the some moratorium law on build collection.
I thought that easing up we should see this fall to be better than this summer.
Moving to achieve a red again quite keen measures continue.
Yeah.
Thanks, and not getting that much better.
Really is in the winter season, thus sales have been impacted by the shutdown.
We still had positive net adds but this is one we are watching closely.
In the CNW islands, good economies that typically tourism dependent and although it varies in back of the pandemic has tended to be significant.
That's a marker for recovery, we are seeing stores now largely reopened and they havent been Laura Doerre laws such as impediment.
I think the Bahamas do run into a lock down again this week.
As I said this virus is unpredictable.
In Puerto Rico.
Stations relax.
But that was throughput and a tough years in place until mid August.
Operationally all of our stores have been back directly to others.
Opted into the FCC pledge to keep America connected however at the end of June less than 5000 subscribers were on our essential services plan.
And we did not cause them as opposed to use.
Lastly to the rise of this light and the markets were locked on measures have been less stringent in Jamaica tourism industry slowly getting back up and running.
Reported sales teams during the first couple of months.
Back on the streets. We've also continued investing in network expansion.
Cost of you got the final market I wanted to cover.
This has been a good marketplace and there has been limited impact from that pandemic, thus far.
The government has done a great job as large stimulus measures and have been proactive in dealing the virus.
Turning to slide seven rabies highlighted some of the network investments innovative products and operational initiatives, we are delivering park customers.
Starting with our network investments on the left hand side.
Our industry has seen significant increases in bandwidth demand following the onset of the corporate banking pandemic, particularly where lockdown measures have been imports.
The result, we have responded to ensure our customers continued to receive high speed and good levels of service.
Yes, I different products, we added 400 gigabits on us subsea networks in Chile, we increased fixed network capacity by 30% as shown in the lower chart should they saw the more significant spike in bandwidth consumption across our markets partly related to the high speeds up customers enjoy.
The average speed in Chile was approximately 219 megabit per second in Q.
Which was 36% increase over the prior year.
In total.
1.8, Terabits per second capacity to our network.
This is about 26% increase no portal capacity as we did it in a four week period.
Lastly, we continue to invest in our mobile networks by increasing core capacity in Jamaica, Panorama by 40% to 50%.
He also worked with government partners to add spectrum to temporarily covers bites and usage for example in polymer.
Moving to the center of the slight we have continued to innovate throughout this period in some cases, even more so given the evolving market conditions.
Samples I would highlight here.
Assisted self installs.
Providing a platform to enable customers in the Caribbean to continue to education with flows study.
Why Fi optimization products, and Google Android platform hub, TV, which we launched in Puerto Rico and being rolled out in other markets.
Finally on the right size up the slide to the operational improvements we should support of business. Both in the near term NFI look to the future.
Except on to include adapting to the Lockdowns Caribbean markets with mobile virtual stores promoting digital payments in our markets such as in VTR Liberty, Puerto Rico, but digital payment collections, approximately 75% and 85% respectively in June.
And for the longer term, we are working hard to mix you don't touch installs work across our markets.
This would be a game changer.
Turning to slide eight.
Consumers continue to demand high speed connectivity and our fixed line services, which represent just over 50% of total revenue has been particularly resilient.
Starting with our R&D you additions by segment on the left to slide.
Cable and wireless had a strong start to the year.
Record Q1 additions, but then saw retail performance in Q2 with a lot bounce and mentioned in packed in our markets to varying degrees.
In Panama, we reported 45000, RG or losses during Q2.
However, this included the removal of 76000 Archie use we continue to provide a service to that have not paid us in accordance with a recognition policy.
These customers still have equipment into homes and use of our service. We believe a number that will come back into our base as conditions improve.
Jamaica is worth highlighting the market continues to perform well.
26000, Archie you adds in Q2 like Puerto Rico.
Nobody is amazing if you normalize the base.
Turning to VTR and coveted teacup.
We saw a solid performance in Chile overall.
However video subscribers declined in Q2, driven by the suspension of the Chilean Soccer League retreat carried on a premium channels.
Coveted Teekay had another strong quarter.
It continues to grow at the challenges the incumbent in Costa Rica market.
Finally to Puerto Rico, Red Q2, as our business.
Best ever quarter, adding 34000 subscribers as consumers saw the value of a high speed proposition during times of restricted mobility.
At a group level. This aggregated 19000 net adds in Q2 and 79000 in the first half.
As you can see in the chart that numbers was significantly impacted by the removal of 76000 RG use impediment as we discussed.
Underwrite up this light I wanted to call out two important drivers Bob fix business.
Personally broadband is a driver of growth across our group and leads our proposition.
The CNW figure here with up 28000 higher would be included the Panama argues that were excluded from a subscriber count.
And secondly.
We are continuing to expand our footprint with over 150000 homes passed or upgraded in the first half of the year and over 70000 up that number coming in Q2 during periods of restricted mobility.
This is quite.
Using.
We are continuing to invest in a tough pool and targeted matter.
And like I said.
Leaning into our thesis turning to slide nine and our services was impacted by corporate banking mobile and B to B.
Looking first at our mobile performance on the left of slide.
At CNW.
Begin to see impacts from Colgate into second half of March and does carry into April and May result, the words of subscriber losses. These losses were primarily due to mobility restrictions limiting the ability of customers to access service and reduced demand for top ups generally.
Given the time customers into homes.
You can see in the call out chart, we saw an improvement in June as Lockdown restrictions East and this included net ads in Panama.
Our momentum has continued following the quarter.
In Chile, we saw a small impact additions in Q2 is driven by store closures related to lockdowns as well.
Moving to VTB on the right.
We need to be business reported that Rebase revenue declined 3% in the first half.
Across our markets. This was driven by cable and wireless over 90% of our B to B revenues generated.
In BTR couple of Deca, we continue to build on us more market share and reported double digit beat to be rebased revenue growth.
On the far right of slide I wanted to break out the b to B business and provide some color on the opportunities and challenges we've experienced during the pandemic.
Starting with our enterprise segment, which represented approximately 50% of our revenue base.
Here, we see opportunities to enable our client employees to securely work from home as well as delivering increased bandwidth and applications.
We've also been quick to support governments around the digital initiatives.
Moving to SMB, which is about 25% of our revenue.
To be partners with our customers, helping that continued to operate through this difficult time and building on our reinforcing stronger relationships for the future.
Finally, we have wholesale including our subsea business.
This represents about a quarter of our BBB revenue and has been done most resilient through the first half as we've responded to increase bandwidth demands from our customers.
Finally for my section to slide 10 and out in organic strategy.
Last week, we announced the acquisition of Telefonicas Costa Rica mobile operations for an enterprise value of 500 million or six times threenineteen adjusted EBITDA, including run rate synergies.
Telefonicas Costa Rica business provides a great opportunity.
Good market route coveted Deca fixed line cable business has grown revenue and adjusted OIBDA by 12% and 20% respectively on a CAGR base basis for 2017 to 29.
Through this acquisition, we will create a leading integrated player with capabilities across both fixed and mobile products and combined revenue of approximately 400 million.
Being able to deliver full suite of products is something that we value strategically and following this end to 18 key acquisition, all but one of our markets will have fixed and mobile capabilities.
Telefonica, Costa Rica, and number two mobile player in a treat labor market.
Capacity to it is a challenge.
2017 to 2019, the business delivered high single digit topline and strong double digit or EBITDA growth.
Importantly, 60% of revenues up postpaid revenues.
And this business has had a successful strategy is migrating prepaid to postpaid business comes for the good mobile network and 90% of LTE coverage by population with three quarters of towers carrying out.
Finally, as a bit more consolidation opportunities, we anticipate generating synergies from the transaction, which together with the growth into business make to acquisition highly cash generative an accretive to us.
Touching on 18 key briefly we remain very confident of completing the transaction and now expected to take place in Q4.
Through both the 80, MTN Telefonica Costa Rica.
Consolidating markets and generating synergies.
Also as a majority of postpaid revenues.
That is why IR ours and future cash flows okay.
With that I'll now pass you over the Chris Nice, our Chief Financial Officer, who will take you through our financial performance.
Chris.
Thank you balance I will begin on slide 12, and will touch upon both our Q2 and half year results for the quarter, we delivered $849 million revenue, reflecting a $134 million decline over Q2 2019.
Roughly $60 million of the reporting decrease in revenue is due to foreign currency translation, primarily the 20% average appreciation of the U.S. dollar against the Chilean peso and the impact from the 2019 disposal of our Seychelles asset the rebate declined 8%.
Principally relates to BBB and mobile.
Year to date, our $1.8 billion in revenue reflects the rebate decline of 3% given we did not experience the full impact from covet until the start than Q2.
Moving to the top right. We have remained LCF to adjusted EBITDA, Alright, with no change to the definition for Q2 adjusted OIBDA was lower as a result of an organic decrease and about a $23 million decline from the combination of foreign currency translation and say shells disposal.
Our $333 million Q2, adjusted EBITDA reflects an 8% or $30 million rebates decline year over year for the full six months our year over year Rebased decline was only 2%.
Any additions highlighted in the bottom left we recorded a $153 million or 18% of revenue in Q2, and $286 million or 16% of revenue year to date in dollar terms each period is lower year over year, but notably we continue to invest in our footprint in both new build.
And network capacity.
Finally, turning to the bottom right, we produced our best quarter ever and adjusted free cash flow with $130 million in Q2 benefiting in part from positive trade working capital and reduce cash taxes. Q Twos result brings our half year totaled $281 million, which is ahead of last year's first half results accurate.
Adjusting for $67 million in insurance proceeds that we received in Q1 2019.
From a phasing perspective, we would expect to generate negative free cash flow in Q3 like we did in Q1 due to the concentration of our semiannual interest payments well Q4 tends to be seasonally strong for us with respect to cash flow.
Importantly, we are well on track to deliver positive free cash flow in 2020, which we had flagged on our Q1 call as a key target for the Ll a management team.
On slide 13, we present our segment results I will focus just on Q2, which is the upper half of this slide starting with CNW, we generated $515 million of revenue, reflecting a 12% rebate decline.
This decline was driven by 22% Rebase reduction in mobile revenue, reflecting reduced recharge activity fewer subscribers during the locked down period and less rami.
Similarly, the lockdowns across our markets had impacted due to be which had a rebate decline of 12%, although our subsea business was able to modestly grow year over year fixed residential was largely resilient in Q2 as it was relatively flat in terms of rebased growth year over year broadband.
The star performer.
Q2, adjusted OIBDA fell by 10% in rebate terms as we generated $204 million.
Compensating for the revenue decline CNW significantly reduced both direct and operating costs on a year over year basis, CW PND additions were $18 million or 60% of revenue and included over 50000, new or upgrading homes during the quarter.
Moving to VTR in Chile, and Causeway Teekay Costa Rica, we posted revenue of $228 million in Q2, a 3% rebate decline a key driver. Our this year over year decline relates to the suspension of the Shlaim Soccer League do the coated which led to discounts for our premium video customer.
We experienced a 10% rebates decrease in adjusted OIBDA due primarily to cost drivers first we have certain concept BTR, including about 50% of our programming costs, which are denominated in us dollars. We hedge a large portion of these costs on a near term forward basis the impact.
Back to the strong U.S. dollar combined with the FX rates, which we are hedged resulted in about $8 million adverse impact will be prs adjusted OIBDA on a year over year basis.
Again significant bandwidth demand related to coded resulted in much higher network and cost in our costs to handle the unprecedented spike in Chile.
Our cost me two areas were roughly $5 million higher over Q2, 2019 levels and we expect that to improve in coming quarters.
Our piney additions were $50 million or 22% of revenue, which was slightly lower when compared to 23% of revenue in Q2 2019.
Ending on the right hand side really Puerto Rico delivered $109 million of revenue in Q2 or 5% Rebased growth.
This result was a modest improvement over Q1's growth levels.
We realized adjusted OIBDA $52 million, reflecting growth of 2% over Q2 2019, our growth was modestly hampered by acquisition integration costs.
Finally, we reported $20 million a PE additions were 18% of revenue as we added over 5000, new homes to our footprint and investing about CE capacity to address consumer demand and usage of out of network.
Turning to slide 14, I thought it was helpful to look at how our OIBDA margin has changed since Q1.
We have mitigated the impact of our sequential revenue decline by reducing costs.
CNW and Liberty, Puerto Rico maintain their margins, while the decline in the VTR, probably keep the margin was directly attributable to higher network and call center operating costs together with an incremental 3 million dollar sequential impact related to contracts denominated in non functional currency.
Overall, our ways OIBDA margin held steady at 39% in the quarter.
As our direct and operating costs sequentially declined by over $50 million, helping to mitigate our revenue drop.
On slide 15, I wanted to cover our balance sheet and liquidity situation in some detail annual refer to the six section on the slide we assess your one we've been very active on the financing from firstly, we completed an additional $90 million half of our Puerto Rico bonds at a 102 point.
Five of par with proceeds earmarked for the 18 T. acquisition.
Further reducing our.
Equity investment.
Secondly, we monetized VTR in that money debt derivative at the end of Q2, and we helped lead the way in opening the Lat am high yield market during cold it by refinancing DTR is $1.26 billion of high yield debt in July at very attractive levels.
This transaction improved our tenor lowered our cost of capital and Adam efficiency and flexibility to our structure.
And thirdly, we extended near term debt at Panama to 2025.
Inception to our maturity schedule showcases the impact of our completed financing work is now 85% of our total debt. During 2026 were later, providing stable financial footing for the long term.
Section three I thought it was important to walk through our cash position, excluding the $1.35 billion and restricted cash that will be used to help fund the ATM T. acquisition.
We finished Q2 with $1.75 billion in consolidated cash.
Post Q2, we used $187 million of cash from the debt derivatives as part of our uses in mid July BTR refinancing.
We repaid $275 million borrowed under our RC asset CDW and Liberty Puerto Rico.
The final column of the walk shows that $660 million of our cash that is allocated for the 18 to acquisition.
After considering these items that leaves us with $630 million of consolidated cash, which is the level that provides us with a prudent buffer the having covered uncertainty and a number of geography to which we operate.
Our Rcs availability it took a write as a cash chart. We finished Q2 with $765 million available and after the Rcs Paydowns and moved to over $1 billion available.
Actually for as the chart depicts we have ample cushion under our maintenance covenant.
About three primary credit.
Additionally, on an aggregate based alloy. We finished Q2 with net consolidated elaborate to four point in time and net proportionate leverage of 4.5.
Our longer term target is to drive our leverage towards four time.
In section five and stick we highlight several financing that we expect to complete in the near term.
We intend to ask the acquisition of Telephonic, Costa Rica business with four times leverage.
Which equates to roughly $300 million of that to be bio either locally in Costa Rica, and or add Ctr finance holdco.
With respect to the rights offering Jeff to now we intend to utilize the capital for acquisition, including the equity portion of the Telefonica transaction and for general corporate purposes.
As I outlined earlier, we're comfortable with our existing leverage levels and would like to bring that down modestly over time and the rights offering provides us an additional opportunity to raise capital well not increasing our overall aloe right rhetoric.
The key terms or the rights offering include the following size is targeted for 350 million dollar.
The offering will commence in September rights will be distributed to our shareholders as of the record date.
Each right, we'll provide the opportunity to purchase a class b share at 25% discount that the lab, which will be set at a later day.
Rightfully transferable and publicly listed and most importantly, we have full support from L.A.'s executive team and board.
Clearly, John Malone, and Searchlight capital and the collective group and can you subscribe to that right.
This support equates to approximately $50 million of that $359 that we're looking to raise from shareholders.
Turning to slide 16, I will close our prepared remarks.
We know across our markets it'll take time before consumers and businesses that back to full throttle. However, our operations as well so far in the face of Covance.
Connectivity entertainment through our fixed residential services and backhaul through our subsea business provide us with the degree of consistency and resiliency in our resolve.
I think we can all attached to our own experiences during this crisis.
It is essential to have a high speed robust internet connection.
Controlling our costs and Capex is critical we're sticking to our plan from a quarter ago and are on track to achieve our product and capex reduction targets, while still investing in future growth through a new built and through product and operational transformation touched upon by balancing.
We have more leveraging our back pocket to reduce spending needs.
However, as you can see today, we remain focused on investing in our business.
These efforts support our companywide focus on free cash flow generation into our Q2 result was a quarterly a record for us in this metric.
Good accomplishment given the topline challenges presented by code.
Besides investing internally in Q4, we expect to close the 18 T. acquisition and I'll be working on closing that Jeff now purchase Telefonicas Custer LICA business in each one.
2021.
We expect the two acquisitions will add over $1 billion of annual revenue to outlay further increasing our scale and underpinning future growth and free cash flow generation.
As we look to the rest of the year and more importantly to 2021, we're taking steps within our business that we believe will enable us to accelerate how does the recover.
And that just announced rights offering will provide us with incremental flexibility and agility should additional opportunistic situations arise.
With that operator, we're ready to take question.
Thank you the question and answer session will be conducted electronically. If you would like to ask a question regarding the company's operations. Please do so by pressing the star or Ashurst, Keith followed by the digit one on your touched on telecom.
In order to accommodate everyone. We request that you ask only one question with one follow up if needed.
We are using a speakerphone. Please make sure your mute function is turned off to relay your signal to reach our question.
We'll pause for just a moment to give everyone an opportunity to signal for question.
Well take our first question from James Ratcliffe with Evercore ISI.
Good morning. Thank you question, we feel like that.
First of all regarding the rights offering why raise equity, particularly now.
Given so nothing Colgate and just speed the impact from that I think a cap rate reflected that.
Like we cast or.
Because we can transaction until next year.
Thinking about questioning and the timing of that.
Secondly.
I want to cost reduction year on year quarter can you talk about how much of that with.
Lower activity at instead of being offset to be more revenue numbers and how much of that more structural thanks.
Sure.
Hi, James Let me address the cost reduction part first and then we'll get the rights offering and I'll ask Chris bills the jump in here on that.
On the cost reduction but of course, we have a bunch of direct cost that goes down proportionately to the revenue.
In the number reported 150 million, we did not include that direct costs.
The most of the indirect costs and you can imagine that.
If the plot that that that activity related force.
But for the most sport day of cost that we plan on picking out the we have taken out the being down to keeping it permanently.
And Thats part of what we've been we've been working on over the last couple of years at the group margins. This brought under a rights offering I'll make one couple of comments and then I'll pass it onto Chris.
We we think it's prudent.
No.
Capital structure that we want to get to read more equity raised.
For some of the things that we that we've been looking at in our pipeline as well as the Telefonica transaction that Telefonica click the Rica transaction. We've done this was a really really good transaction and that all of our shareholder ought to be able to participate in it.
And the rights offerings to greet refer everybody to participate in what we think it's highly accretive transaction for it.
Our pass it on to Chris.
Comments around the timing of it Yemen.
Obviously, a rights offerings in an efficient mechanism in which the raise capital in terms of timing and if you look back at all of our transaction and we do like to de risk the.
Purchase price and speak for the capital.
On the earlier side instead of waiting until close to closing.
And it's also additionally, it's a good window for us in terms of.
Raising a security to operate over the next call it 60 debt.
Thanks Rich.
Thank you.
Well take our next question from Soomit Datta with New Street research.
Hi, guys two quick questions. Please.
Just one on them on Puerto Rico, I wondered whether we're told you could give us sense as to how the ATM T. Wireless business has traded over the first talk with you. When you put would be difficult to be two pretty specific but I just wondered if it's not a market where.
As we've seen around the world, there's been a sort of very severe impact on a low borrowers at one which.
Has held its ground quite well and then just all sold Pulitzer Rico.
Subscribed the numbers look great thing come right since they can go back up to.
Levels ahead of where you were pretty hurricane I just wonder.
You know what cooling business go through it in terms of.
Penetration of homes passed all the say seems to be performing.
For me well.
And then just jump in with the second question on on Chile, They I.
I think the numbers both revenue and EBITDA.
So those 40 from from all of those pieces, which you highlighted.
But but I think just to sort of focusing on.
The cost side of things you did call out some network.
Cool thing tourist shoes.
Faceless.
Has been impacted to some degree by the volumes coming from tell you that comment I'd like just at the same time the.
We are approaching with protection Agency said luck is bringing a contractual suits against to the quality of service phase threes. So.
Is that all sounding a bit worse than it is if you could give a bit of clarity on what something that would be great. Thank you.
Alright, well I'll I'll I'll answer both equipment and I'll ask what gamer and D to be on standby as well as well on you.
Let me stop me the Chile aside.
Our cost did go up slightly mostly because coal volumes would really high.
Well as re accelerated a lot of one network upgrade now on network upgrades in Chile indicated earlier was pretty significant and we did it over a one month period, but during that one month period.
Already had one of the highest broadband speed.
All of our properties in Chile, and any really accelerated that.
And so during that one month period doing an upgrade rebid running through some network issues that we've been very transparent about that.
And and we are working with the government and the regulator right now.
Helping them understand its while that this one time event.
For the period.
This is really a fourth major it it's not something that just natural and.
But but if we look at Chile going forward two days coming into the winter period. It isn't during the period right now the chronic condition that it's not improving and it's under strict locked down, but we have powering through it.
But we also realized that this is one that we're going to watch very closely over the next month or so.
On Puerto Rico.
You hit it right on I mean, we're not only revvy were at pre hurricane Rio really beyond that already and we think the opportunities in the run rate in Puerto Rico is pretty good that's why reinvesting in Newbuilds, then reinvesting in upgrades and ask you as Weve indicated before we also participating in this year Crs auction.
In Puerto Rico. So so we are in Puerto Rico and be very bullish on it and Thats why we did they didn't de transaction, which by the way, it's mostly postpaid and Thats why we feel confident about that business as we as we get into it now having said all that I'm going to have gimoti give maybe a little bit or color on.
A little bit more color in Chile, and then.
And now G., if you can get a little bit more color on duration on the ground in Puerto Rico as well so Guillermo.
Yes. Thank you Alan you just said it well network side of course, we were under a challenging situation, particularly in the month Mania ouch.
People enter into look Thomson traffic peak.
And some 40% thing and we work diligently.
Adding more capacity to an iguana uptime simultaneously, we also have telling gifts in serving calls.
Our.
The sites.
We needed to move them when we need to move older people into a work from home.
Mode. So I was also it challenge in a sense, though that our ability to answer to the increased volume goals.
Turning to during that period, but you didn't like Nomics market of course, we bought the.
Number one brother provided in the country and also low serves let me say people are more noticeable.
Information in the country not together with.
And the number of complaints that the.
But not sure competition agency received during the abuse.
Create there'd be no situation, which of course, we regret but that said we are.
Very sure that if that force majeure situation and we will.
I'll present, our discharges win.
We have to jump to see the biggest when they look losses, which we have nothing yet.
Thanks Gamma najeeb.
Yes, but barring a good morning, everyone. Yeah. I mean, you have the situation on the ground up where we crossing carried on the island grocer, because we're doing actually agree well. Despite some look down there you can see selectivity, yeah basketball DPP situation I cannot give you specific but I couldn't do you have the consumer.
You drive by all that flips the opening the network.
I've been able to pick on a lot more traffic. So you see all activities. So we we assume that they're doing pretty well on those bottling when it comes at full speed.
Environment.
On the fixed side, yes, you asked a question whether there is more runways how to work and I mean I think there is another thing is to have them, but we can look at the.
Differently work in our favor one is still broadband penetration.
I don't broadband penetration is likely approaching somewhere which 60 or 70%. So there's room to grow we started the newbuild program that is in full swing that has not stopped so we'll see we'll defer the contributing having broadband.
I'm good sometime we don't talk about video about video as well.
Is growing for us and issue if you look at our strategy I'm getting all the correct price me the cost structure, we should refer for example charter.
Review of subscriber while others are losing some so we feel that you know the white formula we have the right ingredients.
Gross cost structure to be able to continue growing the argentinean or jubilation, Puerto Rico flow.
Optimistic about the future.
Thanks.
Okay. Thank you.
Our next question comes from Mathieu Robilliard with Barclays.
Good morning continue well.
Very well.
Thank you. Thank you for taking the questions.
So its contract with excellent on the synergies that you mentioned with regards to deal with Costco recall.
Climb up our rights seems to be about.
The thing or cut too.
The Capex and Opex.
The target, but because it could be 20% of the current base.
Bob I was sort of a little bit of Colorado.
Where the to the synergy with conference calls we feedstock costs.
Metrics integration that country et cetera, and its.
On the sneak another one just in terms of.
The capital increase we mentioned the press release, but is expected to use I want to acquisitions, including the Costar Eco one and I was just wondering is this is just a spokesman buckets for the door open to develop at the moment and the precise ideas of what acquisition.
Yes.
In addition to Costa Rica, you could degree or are you guys looking at different things.
Some of them could be interesting them and therefore, you had flexibly to truck.
If you want to materialize public inflections. Thank you.
Well thanks Matthew.
Let's see under synergies, we kind of indicated by the end of synergies.
In that transaction, that's on our math and and you hit it pretty much close to where we would look at then it's quite traditional but indicate the Costa Rica right. We are in country synergies between the cable company in the mobile company.
So you can imagine you don't need do marketing groups, you don't need lot of things that a duplicate it between the two organization.
In addition to that.
We also have been submarine cable coming into Costa Rica rich.
You can imagine that we'll be moving a lot of traffic as well back into our network. So thats a number of things that that we all we always get excited but synergies in country synergies because those.
You can really a nail it now.
You had a second question around the.
The rights offering and the money for raising and future M&A, let's just say that.
There's a lot of opportunities out there and up pipeline is quite active but we are going to be very disciplined it's like the Costa Rica deal as well, where we look at very specific metrics.
And where we have really confident.
But the business that we occurring as well as the synergy numbers as well as the opportunity for us that's when we really strike and.
As we looked at the rest of the region down a few of that but look the fit many times before our goal is to not get bigger our goal is to create value.
We wanted to get bigger we would have actually a non to some other deals in the first quarter second quarter this year and.
But that's not our plan up lens to create value here and if we see valuable transactions received thinks a word for it and that's where I worked for the seller go to work for both of those then you'll see us doing some announcements in the Telefonica. One is a good example, or something that would allow for it and what I think what really relative telefonicas route so.
That's how we kind of think about.
Right.
Thank you.
Our next question comes from Kevin ROE with ROE equity research.
Thank you good morning, following up if we could turn to the Jamaica to to the Caribbean and broadband RG you trends I know different markets are moving in different directions, and let let this quarter for Q2 was it was negative.
What's your outlook for the third quarter.
For the Caribbean as a whole for broadband net adds we turn positive if we drilled down into specific markets you highlighted Jamaica as a standout.
And net positive trend continues.
What's the profile of those ads in their ARPU are these remote workers primarily remote learning.
And if you could give us an update on the Caribbean in general on the health of the SMB segment in terms of.
On pay and potential bad debt trends changing thanks.
Sure.
I think I'd also jump in here in a bit.
And put some of the cuts.
I you know I feel really good about the but broadband business in the Caribbean.
You saw numbers in Jamaica Richard.
I'll tell you if you normalize for it and I mean, essentially we grew.
Talked about 10% off a base on broadband and and that is pretty significant I mean, there isn't too many cable companies telephone companies anybody a good 10% of their base.
And so if you pull a charter Kevin and so you know that.
I am quite involved and this number is a very comparable if not better right. If you normalize them now the reason I feel bullish about it as well is in the second quarter. We took a lot of broadband customers that we actually receiving services from it.
Our do you count and so the kids disconnects, but they were not really disconnects and you will see them naturally come back do you still have a modems in your home that getting service from it might think the team we collectively at the team and as a company built a lot of goodwill, but a lot of customers. We've chosen to do the right thing.
We've always said in our company, we want to be a different kind of telecommunications company. So we didnt I'll first instinct was not just to look at customers as they how can be disconnect them. We were looking for ways to find the mixture that they still have service, even though that they can't afford to pay at this point and I feel that will pay back it and in many ways.
And if I look at the third quarter I actually feel bullish about a broadband numbers.
I'm not going to give you a preview but July was looking a lot better than June, let's just put it that way.
In general in the Caribbean, It really goes with that tourism industry and eventually it will come back.
Really don't have a crystal ball and that are we seeing some hotels opened up we've also seen what does open up and then close down you know this will take.
Many months and them into tourism industry comes back I think all there'll be good because we have a great product that and I think there's still a lot of goodwill. During this quoted period and go do you want to add some more color do my comments.
Thank you bet on.
Well it's.
Really the Caribbean today on fixed.
Clear focus area in ethanol said, we are focused on the penetration lacking fit to recur we can still penetrate.
Much deeper we have our new build that's working for US we are upgrading our customers across the Caribbean fixed networks and we kept then we'll next go to rebuild the focused on really making sure that we can defer to sort of since we have to deliver to them. So maybe JV very positive on missy fixed.
Aside from the business SMB.
Yes.
You see two things happening I think in Q2 lever SMB customers, we kept implemented to be out there to help them to be set from their me at the same time, we will also see new getting new businesses.
Coming up and we'd also be careful to new businesses that are second to right in the Caribbean to be that boxes in light at the start to really shaped up and business digital world. So both on the fixed and the customers back that's not on the B to B SMB site, we see good signs.
Thank you and guys. Thank you.
Our next question comes straight on from Matthew Harrigan.
Oh, thank you.
Yeah, good sceptical industries that when you get into 20 was whether it's actually the therapeutics you'd see some white on things that you're certainly still have your rough interregnum.
Interim with.
Lets you in winter and all that I guess, one of the ripped specific to your markets in some of the governments are very limited fiscal latitude to subsidize the consumer for a while as has been done in the U.S. is there a possibility we could get more violent false out over the next couple of quarters.
Even though so.
Longer term that business looks great.
And then secondly, when you will get you to M&A opportunity, that's large multinational talking at the local deals with we're looking to exit the weekend them you got to do it in equity layer you need to finance the multiple point.
So with the synergies.
Is there an imperative to try to get some of those deals done over the next year or do you think you don't want to Greg, it's really growing a bit Chris so really.
Thank you to four times leverage school ultimately.
Do you feel like we keep kind of historic opportunity over the next 12 months, where there's a lot dislocations, we get more M&A dog before the market.
Ups up or are you more inclined to abide by your time given that you've got two nice deals already in the hopper. Thanks.
I'll start with the second one and then maybe I'll ask script also maybe think about his thoughts on that.
Dan many opportunities, but we are patient we don't have to do any deals.
And.
And when we look at the transaction we of course look at our balance sheet and how we want to capitalize on sales due to take advantage of any dislocation, but it also got away from the sense that it's got to be priced right. It's got to be a business that.
Generates cash.
Or has the potential to generate lots of cash and it's got a half a path, where we can clearly see how the business grows and how it savings come out of it.
It. So once you put all those filters on it you down to really a small handful of assets that you really get excited about.
And then then you've got to what's going to sell and make sure that the seller also sees the excitement about wanting to part with those assets right at the valuation rethink makes sense ways. There's quite a few deals maybe you'd say to the seller for it to make sense, where you'll never make sense for you and and let's not read too much time talking to each other and we are.
Going to be discipline that rate now under under government front.
Almost all the governments that we worked with.
In the countries that we operate have been actually quite prudent have been making more right decisions than not many of them have got to help from the IMF. Some some of the government. They have really strong balance sheets and they will get power to this and.
And we've been working very closely with them My DC, John Winter and his regulatory scheme, a very close with the governments. We keep track of your balance sheet. The actions they have been taking and we I get to support them as well.
Let's see that as if at the cloud, but as I think if you look if I look at the cloud, but as you would just be mostly the macro around tourism is in some areas and then if you look at Chile commodities and currencies.
And that's how we look at it Chris.
Thank you I think you hit it on a on the had.
Thank you Matt Thanks, Paul Thanks, Chris.
Our last question comes from Michael Rollins with Citi.
Hi, Good morning, I was wondering if you just take a step back with this strategy as you said that has in more markets both fixed and wireless operations is there a holistic way that you think about the growth rate of.
That.
Present in the country by having all of those services differently than what you had one or the other.
I think yes, we would look at it differently and maybe that's allowed my chief operating officer to make some comments here as well.
But certainly the way we look at it when you have.
Portfolio of products like beds is one of the attach rates between them and you use ones do drive together. So when we buy that you know like to Telefonica Costa Rica active asset you look at it and you say, okay X amount of that that the mobile customers postpaid customer that has a fixed net product can X amount of.
Why amount of our fixed customers half that.
The the mobile product and you just take one minus wind one minus X and then you do the math that then you say, okay I can get to X percentage of attach rate and Thats your revenue synergies and.
So we think that that that huge opportunities.
In many phone market weve been very successful in some in some we had just in the early stages of testing different fixed mobile dike plants.
Same thing applied by the way to 80, Andy asset in Puerto Rico, Nadya, and best I'll already cooking up a whole bunch up.
Offerings that we think as soon as we take ownership of that asset we can launch some things that really compelling for the mobile subscriber and depicts subscriber.
That's all you have anything you want to add to that.
Yeah. Thank you Bill I think that youre spot on that but wanting to to mention especially on the direct because you've got big discussing is the fact that must look forward more like us on as we both skewed.
Operations, our phosphate, let the best guess basically create that senior deal or that operating okay. FMC. So that's why we believe those two acquisitions, we give us great to be before I could see operating and creative living with synergy.
Alan said, we are slightly maybe between markets and we need to the got straight when you're talking about postpaid with Fig you start showing some very good time.
Thanks, Pezzella and FMC, it's fixed mobile convergence, though for.
Some of you.
Yeah, I think thats.
If that last question operator.
Yes that will conclude today's question and answer session I'd like to hand back to fall in there for any closing or additional remarks.
Thank you operator.
I I should have made a few comments one you know.
Our business is good we have products that everybody. Once we I think we have a unique value that customers really appreciate and we have complete that are really motivated.
Our goal is to create value for our shareholders.
Certainly we want to create value for our employees.
And for sure absolutely, there's going to be value creation park customers as well and we plan on doing that.
And we think we have a good strategy in place good team in place and we will execute on it and I want to thank all of you for your support have a great big.
Ladies and gentlemen, this concludes Liberty Latin America second quarter 2020, Investor call. As a reminder, a replay of the call will be available in the Investor Relations section kind of Liberty Latin America's website at Www Dot L.L.A. dot com there yet.
Can also find a copy of today's presentation materials.