Q3 2022 Liberty Latin America Ltd Earnings Call
Good morning, ladies and gentlemen, and thank you for sending by today's call is being recorded I would now.
Like to turn the call over to Beverly Reis, Vice President Securities and corporate Governance Council of Liberty Latin America. Please go ahead.
Good morning, and welcome to Liberty Latin America's third quarter 2022, Investor call. At this time, all participants are in listen only mode. Today's.
Today's formal presentation materials can be found under the investors section of Liberty Latin America's website at Www Dot L. L. A dot com.
Following today's formal presentation instructions will be given for a question and answer session.
As a reminder, this call is being recorded and will be available under the investors section of our website.
Today's remarks May include forward looking statements, including the company's expectations with respect to its outlook and future growth prospects and other information and statements that are not historical facts.
<unk> results may differ materially from those expressed or implied by these statements for more information. Please refer to the risk factors discussed in Liberty Latin America's Most recently filed annual report on Form 10-K, and the quarterly report on Form 10-Q, most recently filed with the SEC along with the associated press release.
Liberty Latin America disclaims any obligation to update any forward looking statements or information to reflect any changes in its expectations or in the conditions on which any such statement are information is based.
In addition on this call we will refer to certain non-GAAP financial measures, which are reconciled to the most comparable GAAP financial measures, which can be found in the appendices to this presentation, which is accessible under the investor section of our website.
I would now like to turn the call over to our CEO Mr. Balin Nair.
Thank you Debbie.
And welcome everybody to Liberty Latin America's third quarter results presentation.
I'll begin with our group highlights and an overview of our operating results Chris Noyes. Our CFO will then follow with a review of the company's financial performance. After that we will get straight to your questions and as always I'm joined by my executive team from across the region and I will invite them to contribute as needed during the Q&A.
Following our prepared remarks, it's a point of housekeeping, we will both be working from slides, which you can find on our website at www Dot LLE dotcom.
Starting on slide four.
Highlights for the quarter.
The group reported revenue of $1 2 billion in Q3 without BTR vitro still consolidated in the period, our revenue would have been $1 1 billion and up by 3% on a rebase basis, driven by topline growth across most of our reporting segments, particularly Liberty Costa Rica and all.
Cable and wireless Caribbean businesses.
Our internet and mobile postpaid subscriber basis have grown by over 400000 over the past 12 months and by 80000 in the third quarter all markets have significant penetration opportunities, which will support further subscriber growth.
This is the principal operational focus and drive of our financial performance.
ARPA and margins for postpaid subscribers and a fixed <unk>.
Very similar characteristics.
October six.
Closed our joint venture with collateral Chile to create $50 51 Claro BTR.
Now have a new management team, while working to deliver significant synergies.
We're optimistic with the future of Chile our.
Our combination will start the consolidation and rationalization of this market Sheila.
Chile is an incredible country.
New Claro BTR leadership is putting a growth plan together.
Ill review in the near future.
Finally, we continued our buyback activity and repurchased over $150 million of stock up to the end of Q3.
This reflects our view that the most compelling capital returns on.
One company.
The bar in our capital allocation any other inorganic activity.
Extremely high.
Turning to slide five.
Hi speed and reliability in the connectivity is the foundation of our fixed proposition and here, we show our broadband adds by market.
Starting with cable and wireless in the upper left of the slide where we continued to build momentum holding a slow start to the year.
Q3 performance was once again, driven by Jamaica, where we added 4000 net RG use in line with the prior quarter.
However.
There was also a stronger contribution from other markets and TWC sales effort and integrated converged offerings gain traction.
Moving to Liberty, Puerto Rico in the center of the Slide you can see from the chart that we have delivered steady growth year for a number of quarters and discontinued during Q3. In fact, we delivered stronger performance driven by the strength of our network and back to school demand. Despite the impact of Hurricane Q&A at the end of the quarter.
On the furthest right side of the top row, Costa Rica had another positive quarter.
Our lowered third quarter additions were driven by some temporary changes to our television channel lineup, which has since been replaced and we anticipate continuing to deliver healthy ads in future periods.
Moving to the lower left and <unk>, Panama, where we delivered an improved number of net adds sequentially.
We continue to see an opportunity to increase penetration and cross sell homes past in Panama from the 25% level we have today.
Finally, BTR continues to be challenge, but as mentioned we are very optimistic regarding the potential for recovery through operational improvements and some market repair.
Overall, the group continued to deliver broadband adds and as this chart in the lower right shows.
These are particularly robust if you remove the impact of BTR, which will no longer be consolidated in <unk> results from Q4 this year onwards.
Moving to slide six now more about performance.
We have highlighted postpaid adds that this is a driver of growth in recurring revenue, which is our focus.
As indicated before the ARPA and margins for postpaid subs are similar to fix or to use.
One of the drivers for the high margins that we typically don't provide significant handset subsidies outside of Puerto Rico.
In addition, the postpaid subs gives us better visibility to who our customers are.
Starting in the top left of the slide <unk>.
<unk> additions in Q3 with double the prior year amount and maintain our strong momentum sequentially.
Jamaica was the largest contributor within PNW with 10000 edge, which was its best ever quarterly performance.
FMC plans are working.
Moving to Puerto Rico, we continue to add subscribers in the quarter. However.
However, we were impacted by retail disruption related to hurricane Fyodor.
We will cover later in this section on network with the most resilient during that period, which should bode well for future performance.
Next to the right of the slide in Costa Rica, which is our largest operation by total mobile subscribers.
Net postpaid adds were consistent sequentially and doubled the prior year period, as we added 31000 customers in the quarter.
On the bottom left of the slide we present Panama's performance additions was similar to the prior year period, but lower sequentially as we changed our commission structure and also experienced increased churn.
Lastly, in Chile, our ads were again driven by a competitively priced office.
Overall, we continue to deliver postpaid subscriber growth across all our reporting segments and the robust performance in the quarter.
Next to slide seven our <unk> operations.
Starting on the left of this slide in our group performance here, we show that on a rebased basis, we grew revenue by 1% in the quarter, which represents steady year over year improvement.
In the middle of the slide we split the <unk> revenue by reporting segments to provide an overview where revenues generated and provide some color on the drivers for each.
<unk> communications with the largest <unk> segment in Q3 generating approximately 36% of our revenue. This segment contains some of our most mature BTB businesses. However, we are driving growth by leveraging our full service capabilities and delivering innovative solutions.
<unk> networks in Latam, which we have separated it into its own segment for the first time this quarter.
We thought it would be helpful to show some additional detail on the next slide but as you can see here. It is a significant part of the group generating just under 30% of <unk> revenue.
<unk>, Panama third largest <unk> segment generating 17% of our Q3 revenue.
The strategy here is similar to the PNW Caribbean business and that we are looking to leverage our extensive full service network and product capabilities as the only one stop shop for technology solutions and part of it.
Liberty, Puerto Rico, it's our fourth largest PCB operations contributing 14% of Q3 revenue.
This is predominantly comprised of the AT&T operations that we acquired looking.
Looking forward, we intend to leverage our combined proposition to drive growth as we integrate the businesses.
Finally, we are very much a challenge in Costa Rica, and now have strong growth opportunities as a full service fixed and mobile operator.
In Chile, we should benefit from the combined product capabilities of cloud of BTR.
Turning to slide eight as we covered last quarter, we have completed a strategic review of the <unk> networks in Latam operations.
Due to market conditions, we have put on hold any inorganic activity and <unk>.
We are focused on investing and growing this business organically ourselves.
In line with disability.
We have installed new leadership and created a separate reporting segment for which we provide an overview on this slide.
On the left hand side, you can see how extensive subsea footprint as well as our networks unique attributes.
This is a leading and differentiated business with just tremendous resilience and extensive point of presence.
Intend to add additional routes increase resiliency.
This will expand our footprint and open new opportunities.
On the right of the slide we have pulled out a couple of the financial highlights we see in this segment.
Lastly, it is predominantly U S dollar business to our subsea operations. The Nondollar revenue primarily relates to our <unk> operations in Colombia.
Lastly, but perhaps more importantly, the cash generation of this business is very strong as you can.
Can see in the lower right of the slide this segment generates close to 50% of operating free cash flow margins driven by high adjusted EBITDA conversion and lower Capex intensity.
This is a tremendous business for a number of reasons and we look forward to making it even better.
Turning to slide nine.
<unk> would be helpful to provide a more detailed update on our largest single market Puerto Rico.
Starting with our commercial momentum.
As we saw in the prior slides this continues to be strong with network strength underpinning our ability to add subscribers both in fixed and mobile.
We continue to invest in the network, resulting speed increases better coverage and high resiliency in both fixed and mobile.
Just as a reminder, we have been awarded FCC unit handle funding to support these improvements in.
We have also added 25000 homes so far this year.
Which provides an additional growth driver.
Our pricing levels remain competitive and subscriber trends show that we are providing value for our customers.
In mobile we continued to grow in postpaid by adding 69000 subs year to date and we also see a significant opportunity in prepaid.
Prepaid was less of a focus for AT&T historically, and we have started trialing new propositions to grow this part of the business.
Moving to the integration we remain on track to complete the migration of customers and services to our platforms by the end of next year.
This will be fantastic from a synergy perspective, but also commercially ESB that have more freedom to create and deliver on diesel products to cater for the needs of people in Puerto Rico.
We have begun trials of our new it stack and our new <unk> core network prepaid customers.
Next I wanted to cover the impact of Hurricane piano, which hit the island in September the <unk>.
Storm caused some damage to the island, but nothing like the scale, we saw through Hurricane Maria.
The impact was felt more two power outages that impacts alone Netflix.
<expletive>.
We supported our customers through these difficult times with credits to the extent that they will be top power. It did not have broadband TV service.
This focus on our customers is key to our high NPS in Puerto Rico.
Our decision on the credits in cost we incurred to repair network.
Fuel for generators will have a cash flow impact of about $20 million this year.
The Great news was that our mobile network demonstrated its resilience thanks to investments in underground fiber as well as standby generators in more than 85% of cell sites.
Network coverage remained close to 100% with utilization increasing more than 20%.
In fact, the network health, so well that we opened it up to other carriers during the storm to help your customers.
This has improved our reputation in the market and should support ads in the coming months.
Lastly on this slide our ability to USPI is now underway and also partly funded by the FCC.
We will have the only fiber network with full coverage across the islands and excited by the growth we can drive that.
Finally to slide 10.
We wanted to highlight the progress we are making against key strategic objectives and how this drives additional stakeholder value.
Starting with the network and pillar.
We have been making great progress with our Newbuild and upgrade program.
This year alone excluding Chile, we have built our upgraded approximately 280000 holds and since we split off as a separately listed company.
Four years ago, we have added or upgraded over one 3 million holds excluding 1 million homes in Chile.
This is a key aspect of our strategy as it underpins our ability to deliver our products and services.
As we look ahead, we are committed to transforming our it platforms and simplifying our numerous systems and processes across the group.
This will drive savings.
Well, it's enabling us to better serve our customers.
We are also committed to upgrading our fixed network to eliminate all of twisted pair copper plan.
We are also building out to expand our footprint.
Thanks Al.
Our commercial pillar.
Progress, we are making should speak for itself without consistent reported subscriber additions.
On the mobile side of the business our focus on FMC has been paying dividends, particularly as we grew our postpaid base.
Including the impact of acquisitions postpaid subscribers have gone from 14% of the total base at the start of 2018% to 30% at the end of third quarter.
We are also working hard to delight, our customers and thereby reducing churn and our operations.
Looking ahead, we continue to innovate through products and packages with additions to date such as wildfire.
Android based IP TV <unk> products ease him a new low cost handsets.
We have also been investing in our digital platforms to support our sales channels.
This is a common platform across all of our operations.
Lastly on this slide the capital allocation.
We made another significant stride in early October by closing the JV in Chile.
As I mentioned before we are optimistic about Chile, and this joint venture.
We have the opportunity to re grow this business and create value over the next few years.
Both we and our partner Claro are like minded in that future.
We are also a few months into our Panama integration and have been making good progress starting with back office integration. This year before moving on to combining our branch in stores next year and completion of all processes expected in 2024.
We have good visibility on over $150 million run rate cash synergies from 2024, excluding Chile.
And this is a key driver of growth for our business in the coming years. In addition, we have not made any adjustments to our reported OIBDA all free cash flow to remove integration costs.
Rich headwind flows into near term totaling over $70 million just this year alone.
Results in dis synergies as mentioned before.
We are confident that we will drive significant free cash flow growth and have continued to allocate capital in buying back our stock.
It is hard to contemplate any M&A with better risk adjusted returns than the current opportunity to repurchase our own securities.
We will continue to evaluate the risk reward tradeoffs with any investments in the same manner, taking into account shareholder returns dilution considerations and our liquidity profile accordingly.
Chris will cover our thoughts on balance sheet management in his section but in short.
Do you feel comfortable you had given a long dated maturities.
Siler debt stack.
The hedges we have in place.
And the natural deleveraging as we grow EBITDA.
With that.
I'll pass you over to Chris Noyes, Our Chief Financial Officer, who will talk you through our financial performance be Phil we take your questions Chris.
Thanks, Pallet, let's turn to slide 12 to kick off the finance section three housekeeping items first we have separated our cable and wireless Caribbean and network segment into two distinct segments going forward CFW Caribbean and CW networks in Latam.
Our acquisition of Claro, Panama is included for the full quarter third given the close of the Chilean JV in early October we will consolidate BTR for Q4 and reflect the JV as an equity investment going forward today I will reference some key financial numbers without BTR included there.
The third quarter was modestly more challenging than we had expected when we reported Q2 in early August in large part because of hurricane impact in Puerto Rico in particular through damage to the island's power grid rather than to our infrastructure. Unfortunately, this event did impact our financial and operating results in Q3 and.
Carryover into Q4, I will highlight those impacts where relevant financially. We posted Q3 consolidated revenue of one point to $2 billion as compared to $1 two zero billion dollars for Q3 2021.
Our 2% reported growth was positively impacted by acquisitions and organic growth in Costa Rica, and CFW Caribbean offset in part by significant organic decline in Chile, resulting from continued competitive intensity, coupled with our aggressive pricing strategy, which we initially launched in late Q1.
Additionally, our U S. Dollar reported results were hampered by a negative $32 million net foreign exchange impact as currencies like the Chilean peso, Colombian peso and Costa Rica colon.
Depreciated against the U S dollar year over year.
In terms of growth, we delivered flat Rebased revenue performance in Q3, excluding BTR for both periods, we delivered 3% Rebased revenue growth as compared to Q3 2021, It's importantly, without BTR, our mix shifts to around 75% of revenue denominated in U S dollars or pegged.
Linked to U S dollars, which is a key differentiator for us versus other peers in the region.
Turning to the bottom of the slide we delivered adjusted OIBDA of $415 million, which reflects a 6% reported and rebased decline to our results for Q3 2021.
Excluding BTR for both Q3 periods, our Rebased performance improved to a 1% decline on adjusted OIBDA of $384 million.
To put our results in perspective, if we were to simply adjust our results for the estimated hurricane Fiona adjusted OIBDA adverse impact of $12 million and incremental integration expenses year over year of $5 million a.
Our rebased adjusted OIBDA growth would have been about 3% for ally.
Looking towards Q4, which tends to be seasonally strong for us we would expect to see an expansion in adjusted OIBDA from Q3 levels.
Slide 13 highlights our financial results by segment for Q3, starting left to right with <unk> Caribbean, we posted revenue of $359 million for Rebased growth of 3% and $133 million of adjusted OIBDA for Rebased growth of 11% each of our three <unk>.
<unk> residential mobile <unk> and residential fixed experienced single digit Rebased top line growth over Q3, 2021, and our largest operation Jamaica continues to fuel the segment's overall result.
W. Caribbean was <unk> best segment performer in Q3 with respect to overall adjusted OIBDA growth achieving double digit rebased expansion as compared to last year.
The operating teams direct to indirect cost control combined with revenue growth drove margins up approximately 250 basis points in the quarter as compared to Q3 2021.
Next to cable and wireless Panama total revenue was $173 million, producing rebased growth of 2% and adjusted OIBDA was $47 million generating a rebased decline of 5% CW <unk> Rebased revenue growth was driven by 9% residential fixed and 4% <unk> growth.
While residential mobile declined by 2% as postpaid service revenue growth was more than offset by a prepaid decline there.
The Rebased adjusted OIBDA decline in the quarter resulted from a combination of higher <unk> equipment bad debt and integration costs with that being said, we are anticipating a strong fourth quarter in adjusted OIBDA as we typically drive <unk> projects in the last quarter of the year.
Finishing on the far right CW networks in Latin America reported revenue of $103 million and adjusted OIBDA of $59 million.
Reflecting modest year over year declines of 1% and 4% respectively.
The driver of the year over year adjusted OIBDA margin compression is due principally to higher direct costs associated with equipment sales across our <unk> services.
However, the adjusted OIBDA margin remains over 50%.
This segment quarterly results can be lumpy so best to look at the business on a full year basis. For example year to date Rebased revenue and adjusted OIBDA grew 4% and 3%, respectively, and we would expect to see a step up in reported figures in Q4.
Moving to the bottom left of the slide Liberty, Puerto Rico delivered revenue of $367 million in Q3, which reflects 2% rebased growth and produced adjusted EBITDA of $132 million, resulting in a rebased decline of 6% overall, the largest development in the quarter a worst hurricane Fiona.
In the latter half of September , which impacted our financial and operating results in Q3, and which will have a residual impact into Q4, our revenue was impacted by $8 million through the granting of customer credits and adjusted OIBDA was reduced by $12 million due to the credits and incremental operating costs to address the situation.
Other elements contributing to our revenue expansion include higher roaming equipment sales in residential mobile and growth from our newly acquired asset in the U S. Virgin Islands, driven in large part by the recognition of SEC funds.
On the cost side. Besides the increased costs from hurricane Fiona, we incurred increased equipment costs due to higher mobile handset volumes additional TSA related charges higher labor costs in part due to staffing in advance of the TSA transition and increased integration cost we expect to deliver improved financial performance in Q4, However, dips.
Upon our success in mobile we experienced pressure on our margins from mobile handset cost.
Next to Costa Rica, we posted Q3 revenue of $109 million and $33 million of adjusted OIBDA, reflecting strong rebased revenue growth of 7% and a modest adjusted EBITDA Rebased.
Kris up 1%.
Subscriber growth continues to be the primary driver of revenue in Costa Rica, adjusted OIBDA Rebased growth was compressed year over year, largely as a result of $2 million of incremental integration expenses and $2 million of nonfunctional currency impact as the Cologne depreciated by 6% on average year over year.
Finally, BTR, we generated $130 million of revenue and $31 million of adjusted OIBDA, reflecting rebased declines of 19% and 42% respectively as both heightened competitive intensity in 2022 and strategic.
Decisions to better align our propositions with those of the broader market have resulted in compression across our financial metrics are reported amounts in U S dollars reflect the depreciation of the Chilean peso and U S dollars up 10% as compared to Q2, 2022, and 20% as compared to Q3 2021.
Importantly, a repricing a large proportion of our base by year end 2022, and better aligning with Claro fixed pricing is a necessary step to establishing a stronger base from which to grow the overall business in the coming years.
Turning to our balance sheet on slide 14, the figures on this slide exclude BTR, which was classified as an asset held for sale on our September 30th balance sheet at the end of Q3, we had $8 billion of total debt approximately $800 million of cash and $1 billion of availability under our.
Our revolving credit lines.
And net leverage.
Is that four nine times and four five times respectively.
Our consolidated cash balance reduced from Q2 in large part due to the funding of the Claro Panama acquisition on July one.
Our largely turned out and the size of the capital structure remains an important asset for US we have limited maturities in the next five years as you would expect we will continue to actively address the shorter dated maturities in a manner consistent with our financing principles, we maintain ample available capacity in our Puerto Rico and cable and wireless <unk>.
Lines to address any other law maturities should the capital markets remain constrained for an extended period.
Through September 30, we have repurchased over $150 million for equity. This year, we have bought back roughly 17 million shares in 2022.
Our belief in our long range plan, including the realization of synergies coupled with the underlying value of our assets, including our networks and Puerto Rican businesses.
Reinforces our conviction that repurchasing our shares at what we see is dislocated value make solid financial sense.
With respect to our consolidated 2022 financial guidance targets, we remain on track to deliver 18% <unk> as a percent of revenue and are revising our expected adjusted FC after 2000 $22 million to $200 million too.
To account for an estimated $20 million cash flow impacts from hurricane Fiona as previously voiced over.
As highlighted in prior calls our adjusted free cash flow generation will be substantially weighted to Q4, reflecting our seasonally strong financial performance and customary working capital trends.
The primary risk to our free cash flow that we called out on the Q2 call and that still remains relates to the timing of large customer payments from the Panamanian government and certain <unk> accounts in CSW debt, we expect to collect before year end.
As Alan highlighted we now have strengthened each of our operations through M&A activity completed in the Chilean JV with American mobile in October It has been a long multiyear journey to consolidate markets and fill in gaps in our product suite, primarily a lack of own mobile in our core fixed businesses.
Such that we now can offer our residential and b to b customers, both broadband and mobile services throughout our largest markets. We are very focused on integration as we look to migrate to our own systems and overall reduced reliance on the sellers of the assets in Puerto Rico, Costa Rica, and Panama successful execution over the next 12 months to 24.
Months should result in substantial EBITDA and free cash flow expansion.
Additionally, our JV in Chile is moving forward as Ballon touched upon we are excited about the growth prospects in this business as we bring together two complementary businesses page.
Patient is required as it will take some time to realize synergies and change the momentum in the business, but together with our partner and our newly appointed joint management team as well as the further rationalization, we are seeing in the market the value opportunity is sizable.
Our third quarter was impacted by a combination of factors that I alluded to including the impact of Hurricane Fiona and integration costs.
Q4 tends to be seasonally strong and we are expecting improved financial performance and substantial free cash flow generation in the quarter or.
Our capital allocation strategy remains in place importantly, we are quite content with our existing footprint and can focus our investments within our businesses and can look to arbitrage value opportunities within our debt and equity complex.
We look forward to updating the market in February 2023, when we report our year end results and more specifically our plans for the new year, which are taking shape as we speak with that operator. Please open the line for questions.
Thank you. The question answer session will be conducted electronically if you'd like to ask a question regarding the company's operations. Please do so by pressing star followed by the digit one on your Touchtone telephone.
In order to accommodate everyone. We request that you ask only one question with one follow up if needed.
If you like you can just speak Heine. Please make sure. Your mute function is turned off allow your signal to reach them.
Well close with just a moment to give everyone the opportunity to signal for questions.
Our first question today comes from Michael Rollins of Citi. Michael Your line is open.
Well, thanks, and good morning.
Sure.
When we take a step back on a consolidated basis for the money that you're spending on integration.
The opportunity to drive the synergy targets that you've outlined.
And to consider any reinvestment that you may make to accelerate marketing our sales within the operations can you take us through like what.
Net impact of this merger integration is in terms of the potential drag on EBITDA in 2022.
And.
What that turns into.
Over a couple year period in terms of the net benefit that actually should flow through.
To the EBITDA line.
Sure.
Good morning, Michael.
So when we do these acquisitions.
In the.
Close to usually between two two and a half years.
Significant if you integrate systems, but remember these are one time costs.
License savings over long periods of the returns are quite significant and the way we look at it.
The.
Synergies the synergies come from of course, the systems to IP systems, you want to consolidate that to give a great customer experience branding stores as you invest in your investor usually in the first couple of weeks, we launched massive program.
EBIT to rebranding from new propositions.
And we've kind of I think for this year, we are going to have some headwinds.
The numbers that we have been.
Entering the market, but in the 70 $75 million range.
And.
<unk> eventually goes down.
And by 2020 for the bulk of it disappears.
And then you see the synergies come in and the synergies of course, when we look at synergies, it's kind of it's a net number so there will be some trailing.
But the synergies that we put out that would be a net number in 'twenty critical.
Thanks.
Thank you for your question.
Our next telephone question today comes from Kevin Brian of Great efficacy research Kevin. Please begin with your question.
Thank you good morning.
On the CWC properties, they're demonstrating to be very resilient in both fixed and postpaid mobile you mentioned.
Earlier fixed mobile convergence as are as being a driver could.
Could you drill down a little bit more on the primary drivers there on on Cwc's topline strength.
Youre still edging out the network how important is that to the growth that we're seeing versus the core.
The market share gains going on here and how are things trending into the fourth quarter do you expect this topline growth for CWC to continue in Q4.
Sure Hi, Kevin So TWC is kind of unique we've been investing in this last couple of years in CWC on a number of trends and it's bearing fruit.
Let me start to bear fruit this year, so a big driver of revenue growth. It's also the annualized lesion.
A lot of <unk>.
Net adds from last year. So our opening balance this year is very good and that drive lots of value accretion. This year. There are a couple of other inflection point of course and TWC one regarding.
We kind of indicated but did not clear.
Clear dates we will do this at the end of this year early next year, when we announce our full year will be more detailed around wood.
Sorry.
<unk> that we're doing in TWC, so essentially the inflection point would be one we are going to take almost all of the twisted pair copper.
That business now remember Cwc's made up a lot of incumbent businesses with a lot of.
Cable and wireless network essentially when we're done with this we would be one of them.
Telcos that.
All of this.
AT&T Hasnt been that Verizon has been done that adds and then Deutsche Telekom and done that.
Yeah.
This is one that we've been very disciplined we've been working on it over multiple years, and we are probably coming towards the end.
In the next.
Four months and so that's an inflection point and second one of course is our focus given all of these bills of broadband speeds have increased quite dramatically and our FMC tie sports on broadband and our mobile product.
And you can see from the numbers. It is working and we anticipate a broadband growth next year to be as good if not slightly even better than this year and clearly our postpaid on a good trajectory. So you have to.
<unk> very high margin products coming out and thirdly, we're not giving up much headsets.
TWC.
We budget for a certain demand, we're very carefully monitoring it.
And.
The handset subsidy and TWC is significantly lower.
Then the United States.
So as an example, so there's a lot of value creation still coming in TWC and <unk>.
And finally, I should probably add one last one which is <unk>.
<unk> is another inflection point for us.
And her team.
She was appointed one person in the back office running TWC strategically add back office as well and that's another level of growth, but it's just wait and see.
<unk> product revenue in that market.
Thank you and is that.
Through into Q4 here are you seeing those CWC positive trends continuing did you see that in October and now into November .
Yes.
Yes.
Yeah.
Alright.
Thank you.
Thanks, Kevin.
Thank you Kevin as a reminder, if you wish to ask a question. Please press star followed by one on your telephone keypad.
Our next question today comes from Cesar Medina with Morgan Stanley . Please go ahead seize up.
Hi, Thanks for taking my my my question very specific related to BTR are there now that the JV have been approved for 10 or are there any plans to inject capital on that asset near term and if so any details on that front.
Now, let's say.
So the way, we do well, let me start with the normal requirement what is being done.
Any.
Contemplated in any of our agreements in the JV, having said that redo all of our capital allocation based on returns.
So when we look at the plant as I indicated in my opening comments that the management team is selling is going to present, a nice growth plan.
And my team and I will look at it and then we will decide if we want to.
Funded and.
And compare that against all the other plants that we have an LLC.
And Thats, how we make capital allocation decisions.
Would be no different than what we would do in BTR.
Okay.
Great sorry, Chris do you want to add to that.
Okay.
Yes. Thank you so much.
Thanks, Steve.
Thank you for your question.
Our last question today comes from Sumit Datta of New Street Research. Please go ahead. Your line is open.
Hi, there thanks very much guys.
A couple of questions if I could please.
First of all on tour.
So Richard just on the wireless business.
I think on an underlying basis.
The service revenue has been deteriorating there.
I guess that would be a bit of competition coming from two teams.
And I am do you mind, giving us a sense as to what's happening on the.
Grounds.
That looks like a temporary phenomenon or is that something we should be.
Looking out as.
The risks going forward.
That's all in Puerto Rico the other.
<unk>. Please go ahead.
Morning, Kevin.
Just wondering on the.
On the funding from the FCC.
Sort of.
So I believe.
Can you give us a sense as to where that is kind of trending is getting to be kind of up for downhole. So those stable.
Really big number so that would be helpful. Thank you.
And then just.
A final one sorry, if I could just on the you've kind of talked about the networks business.
And I'm just.
So it's been a kind of a slightly definition.
Can you give a sense as to what youre going to achieve in terms of scale. Obviously it sounds like you are excited about the possibility to kind of expand the operation how much we get from this debt.
What kind of.
Kind of capital do you need to deploy to make that happen.
Thanks very much.
Okay.
Hello Len.
Let me answer.
In the reverse order and my colleagues to jump in here as well, we will start with the networks.
We've done the strategic review over the last few years.
We've made the investments in that network, but clearly what we would like to do going forward is to make even more investments in that network based on the returns and the capital allocation decisions if I kind of described earlier.
BTR.
And we've identified new routes that we want to bill increases.
Increases resiliency and opens up new markets to us.
Very specific on it.
Did indicate a new management team.
Great comments, who leads our biz Dev and corporate strategies globally.
This this segment.
Then a deeper review going on.
Downhaul visits.
All of our employees he has gone out and visited most of our customers existing and new customers and we've put together.
Kind of a review and Fran.
I am very happy with.
And I think it's one that we would probably look to fund.
On the retail side. This is going to be very good and if you as I indicated on that business line in that segment that the free cash flow generation is pretty significant.
From a margin perspective, so we will continue to make good decisions there.
And but we are quite bullish on this segment.
We will build new routes increased resiliency and I would say that dollar.
To all our customers as well in this segment that we are that.
The modules back.
<unk>.
<unk> is coming in and we feel good about it.
Now moving to your other two questions on the U S Virgin Islands, and because the numbers are about $85 million at $71 million in FCC funding on the fixed business about $37 million in the mobile business.
So.
These numbers.
Yes.
Amortize over a 10 year period, the mobile numbers.
That period that comes to an end, but we expect to renew that with other funding through the SEC.
On the fixed side, it's about a 10 year and you already saw some of that being allocated this quarter.
From USPI into a revenue stream that Chris indicated in his opening remarks.
So we feel really good it's very stable and it funds the upgrades that we've talked about essentially in USPI think I kind of indicated it would be clinical fiber everywhere.
And we have not disclosed over the period for competitive reasons, but.
But we are quite bullish on that and it's going to be great for the citizens of U S. Virgin Islands, and likewise in Puerto Rico, we are upgrading speeds, we are upgrading the network.
Funded through the <unk>, so that we feel really good about that as well no.
On the wireless.
Our revenues on the first question you have.
It's kind of a little bit.
Complicated answer because.
When you read the headline numbers.
Kind of distorts it.
Any conclusions you can come to you because it's really not made up of just one revenue stream. Its a few revenue streams. So let's walk through that and then maybe I'll ask.
<unk> also jump in here, but you can break it down.
Decline into one.
Prepaid business and prepaid business it dropped year over year.
I don't know if we disclose the actual numbers, but it has dropped year over year.
From an <unk> standpoint, and then also includes a reseller business. When we took over this business from AT&T lauded reseller contracts had to be redone and really focus on the prepaid business. So that won't that dropped year over year multiplied by the average <unk> on that property.
<unk>, maybe close to 40% of the decline.
But you can see in the in this quarter, we started to grow that business again. So so it's really a one year over year and then.
So that business the second part of it which is more interesting.
Non cash related revenue drop and this is really the amortization of.
The subsidy user by handsets and this amortization sums up to about maybe.
37% of that Delta.
Pretty significant one and then the remaining part is really just mix of our postpaid business.
Net debt.
Also we will get washed through.
Continue to grow the postpaid business in and.
So we feel really good about that the <unk> differential come from some of the BW components of it.
In mobile.
It's just an allocation thing.
But fundamentally we feel really good about the mobile business I saw your note that came out I don't think theres any concerns about any awkward destruction.
Competitive pressure of course, we have some competition we welcome it thrive on it.
But this is not.
Irrational competition like Chile.
Something like that.
But we feel really good about it and I'm going to ask <unk>.
Thoughts on on the mobile business as well.
Yeah, Thanks, Bob Hello, Good morning.
Yes.
And just to bounce comment the fact that there is definitely growth on a phone postpaid.
Boeing and net adds.
Growing in revenue.
Stable.
The difference I think that mainland was referring to also is driven by adding a lot more data devices like tablets.
Wearables is one of the hotspot and.
Our churn in the market I have to say is equal or better than the numbers you see in the mainland.
On the phone postpaid so yes, there is competition on the ground.
No doubt, but we are holding really well against the competition.
<unk>.
The hurricane actually.
It was quite an interesting event that further highlighted.
Chilean Sea our network both on the on the mobile side on the fiber backhaul and we held it through.
Gross adds improved after the hurricane.
And then further declined as well so we feel very comfortable going in going into Q4.
<unk>.
No.
We promise to our customers we're delivering it.
That's good so we'll see that turnaround for sure.
In Q4 alone.
Thanks, Doug.
Thanks, David.
I can maybe follow up after the call I didn't quite get the point until the amortization of subsidies. Upon so that's why we can when we can find a weekly format.
Sure we will get you the details and kind of explained the kind of effort.
Turning to me when we acquired the business, we reset a lot of amortization created new amortization, so that delta.
Bit outsize, because you don't have trailing.
Revenues to compensate for the amortization.
<unk>.
But we can get into the details with you.
Anticipating that to probably wash its way out in the next year or so.
Okay.
Very clear thank you.
Thank you and our final question today comes from Diego <unk> of Goldman Sachs Diego. Please go ahead.
Yes, hi, good morning, everyone. Thanks for taking my question. The first one is on BTR and I'm, sorry, if I missed something from your opening remarks can you just comment a little bit more about the competitive dynamics in Chile, considering recent market developments and maybe provide some color on your garage.
Patients as well as the churn dynamic in the Chilean market and maybe I would love to get a sense on when do you expect net adds to eventually stabilize in that market.
That's the first the first question and the second question is about the Oregon last month.
Thinking about your guidance for Capex, considering this 18%.
Capex to sales ratio how much of this is related to your first network maintenance plan Secondly, six in network expansion and customer upgrades and lastly, mobile network rollout. Thank you.
Okay.
San Diego, let me address the BTR Amir.
Amir.
You'll have to jump in here.
Capex investments.
On the BTR, Brian the competitive dynamics.
Key new Lon for a little bit there has been consolidation of <unk> starting with this you saw the entel.
Fiber to the home sale.
And that went into our wholesale network.
Sure.
I anticipate there'll be other.
No.
Such monetization consolidation as well.
Broadband adds.
We have stabilized it.
There's some minor losses, but.
It has stabilized and the reason I say that is.
A lot of our pool, which was a big disconnect in.
In that market.
Come back to close to the front book pricing for a lump of back book.
Sue.
Little north of 70%.
Oh.
<unk> has now moved from a very high back close to the front book.
Through this reset and bodes well for future growth.
Taken the pain. The second question you had on that with <unk> declines windows desktop.
BTR was the leader in voice in that market and clearly that is.
And argue that will continue to decline as people disconnect your voice and.
And video is Scott slight declines as well so between the two of them, you'll still see RGA declines, but our focus is on broadband and broadband product.
Youll start to see that coming back to growth soon.
And I'd say just in the context.
Not so much the competition of Netflix, but the competition of price.
Folks thought that geez, we losing because.
All of these fiber providers.
It's not that's not really true why we were losing was because there were too many providers.
Fiber provider to many providers and then secondly, because pricing collapse that and the delta between the back book.
And what the front book of all the $6 seven competitive competitors seven networks there.
Pretty significantly if you recall.
In March we experimented with just matching prices.
In in.
In Chile.
And when we did that on the broadband front.
Biggest growth month ever we saw more than 100000 argues that mark.
No clearly we need to do more of that to match it but we couldnt do that in a very methodical way. So we don't go from zero to 100% in like three months.
<unk> at 70%, we will continue to get the front book and back book to match and then things should get better.
Our team there led by greater for <unk>.
We are studying it right now he is coming back with a plan for us.
And the next few weeks.
We'll look at how we combine our fixed broadband and mobile product.
And get that out in the market in a way that.
Attractive to our customers, but we continue to invest there on fiber DOCSIS three one.
All of that so.
That's my feel really good about that number.
On the capital side our investments.
We guided to 18% this year.
And Chris reiterated our guidance earlier.
Yeah.
It is doing slightly better than that but we'll see what is always very lumpy.
We will see how it goes and then that will come out with the new guidance next year as well and you can see from our.
This is the business will continue to expand free cash flow.
Hi.
Sure.
Focus on.
Capex expenditure and but our view on Capex is invest in the customer.
And invest in growing our network. So we will continue to invest in.
Increasing the footprint will continue to invest in upgrading the network will continue to invest in maintenance will continue to invest in devices.
Amir.
Who joined us from Verizon.
<unk> been working really hard this last month on that.
How we allocate the capex portion of our capital into the network, maybe Mary if you want to share some of your thoughts on capital.
<unk> allocation.
Well, thank you Robin.
Good morning, I think government bonds, you have captured the essence of how we spend our capital our investment around broadband.
Key to our value proposition and we continue to do that so on broadband.
Our target really is to get as many homes on Pilar as possible and as you had mentioned earlier on the call are will hit close to 300000 plus homes already we have already hit that and we are well on our way.
To complete our target for this year, we've got a three pronged strategy whenever there's a new home build happens its fiber we continue to invest in HFC things like DOCSIS three one gets us to our target of north of a gig for a customer and then we will be the first.
For wider I think throughout the world who will.
Have an opportunity to get rid of all operating on our network by sometime next year. So those three strategies take.
Our fair share of our Capex investments and then at the same time, we are investing in our mobile coverage improving our coverage in all our markets investing in our it transformation investing in things like improving our overall capacity on mobile digital transformation. Those are key fundamentals of our investment thesis.
And we continue to make good progress on that.
Yeah.
Thanks very much.
Super helpful. Thank you.
Thanks Jacob.
Thank you that concludes today's question answer session I would like to hand, the call now for any additional or closing remarks.
Thank you operator, and thanks, everybody for joining us clearly.
The quarter was a little choppy.
The nature of our business.
We remain committed to the guidance that we have for the full year.
And.
We anticipate the <unk> been.
We get to the end of the fourth quarter, you can clearly see the delta between that and the full year or year to date and the full year.
And so we anticipate a pretty good fourth quarter.
Ending with meeting all of our guidance as well.
So thank you so much for your support and we'll talk to you again in about 90 days.
Ladies and gentlemen, this concludes Liberty Latin America's third quarter 2000, since two investor call. As a reminder, a replay of the call will be available in the Investor Relations section of the <unk>.
Liberty Latin America's website at Www Dot dot.
Dot com that you can also find a copy of today's presentation materials have a great rest of your day you may now disconnect from the call.
Okay.