Q3 2023 Liberty Latin America Ltd Earnings Call
Good morning, ladies and gentlemen, and thank you for standing by today's call is being recorded.
I'll now turn the call over to match rate Treasurer of Liberty Latin America.
Good morning, and welcome to Liberty Latin America's third quarter 2023 Investor Group.
At this time, all participants are in listen only mode.
Today's formal presentation materials can be found under the investors section of Liberty Latin America's website at Www Dot.
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.
Announced pending transactions and future growth prospects and other information and statements that are not historical fact.
Actual results may differ materially from those expressed or implied by these statements.
Information please refer to the risk factors discussed in Liberty Latin America's Most recently filed annual report on Form 10-K, and our quarterly report on Form 10-Q, most recently filed with the SEC along with the associated press release.
Liberty Latin America disclaims any obligations to update any forward looking statements or information to reflect any change in its expectations were in the conditions on which any such statements or information as base.
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. Ballan that.
Thank you, Matt and welcome everyone to Liberty Latin America's third quarter results presentation, I'll begin with our group highlights and an overview of our operating results by reporting segment, 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 as always I am 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.
Point of housekeeping, we will both be working from slides, which you can find on our website at www Dot <unk>.
Dot com.
Starting on slide four and our highlights for the third quarter.
We had another strong operating quarter with 44000 additions across Internet and postpaid mobile subscribers.
Over the past year, we have added close to a quarter of a million subscribers across these two products, which shows the strength of our commercial office.
We are also continuing to invest in our networks with over 100000 homes passed or upgraded in the quarter and 285000 year to date driven by activity in cable and wireless Caribbean and Panama.
We reported adjusted OIBDA of $428 million in the quarter, representing a 10% year over year increase.
This is up best rebates growth performance in two years, driven by double digit growth in all of our segments apart from Puerto Rico, which we will cover it in later slides.
And to emphasize that this significant growth primarily reflects structural efficiency improvements across our operations and not one offs.
We continue to allocate capital for buyback program with $112 million between stock and convertible repurchases in the quarter.
Towards the end of Q3, we bought back $111 million of livestock.
$111 million of our stock and reduce the outstanding amount of our convertible bonds due next year by 45% to $220 million.
Finally, we are making progress with our key business integrations and Panama.
Already seeing the benefits of synergies driving the Q3, adjusted OIBDA growth rate of 25% and in Puerto Rico over 225000 customers have now been migrated to our platform.
We anticipate the process been though run into next year. However, completing a multi year project of this scale within a few months of initial target is still a very good outcome.
Im also excited to highlight the two accretive transactions, we announced this week firstly the acquisition of spectrum and subscribers in Puerto Rico, and the U S. Virgin Islands, and secondly, the sale of mobile tower infrastructure across a number of our markets I'll cover both deals at the end of May.
Section.
Turning to slide five.
Ill begin our operating review would CSW Caribbean.
Recovery in tourism initially notice in the first half of the year continued in Q3, despite it being the low season bolstering performance in this segment.
Starting on the left of the slide with our subscriber adds we delivered another positive quarter with 20000 ads across internet and mobile postpaid with more than 50% coming from Jamaica.
Our FMC strategy continues to drive performance in these two product lines growing volume and improving our churn levels.
Moving to the center of the slide and our revenue by product.
Chart depicts the well diversified <unk> Caribbean revenue BTB and consumer fixed the largest elements followed by consumer mobile.
Year over year Rebased growth of 1% was driven by Internet and mobile postpaid subscriber growth, where we have achieved over 100000 net adds in the last 12 months.
Adjusting for the discontinuation of the transit business that we announced earlier this year. This rebased growth rate would have been nearly 300 basis points higher.
Moving to slide six and our CFW Panamax segment.
Starting on the left of the slide.
Fixed momentum continued with almost 60000 <unk> net adds in the last 12 months across our service bundles.
We have a strong network with 93% of our homes passed either via FTE th or HFC, and we are targeting 100% to the removal of all residual copper next year.
In mobile we reported our first quarter postpaid losses in over three years. This was driven by a conscious decision to reduce our pushing to lower value segments of the market, where you can see the increase reported <unk> in Q3 as well as some impact from integration activities.
Moving to the center of the slide in our revenue streams together drove 10% growth in the quarter.
In Panama.
Largest product by revenue of mobile and BBB.
Fixes the smallest product area, but one of the fastest growing.
Positive trends from the first half of the year continued with both fixed and <unk> recording strong revenue growth of 7% and 26% year over year, respectively.
Growth in fixed revenue was supported by higher volume from our successful commercial strategy focused on increasing penetration in our growing fiber to the home network and across Triple blade plants.
In mobile we saw reduced churn in both prepaid and postpaid.
Finally, our integration update in the lower right to slide.
We have made significant progress with integration of collateral Panama operation.
Our network consolidation is close to complete with 99% of overlapping sites now.
This is in addition to commercial progress, including optimization of sales channels people advertising and sponsorships.
These actions have driven significant synergies supporting our financial growth despite integration costs, peaking in the quarter.
Next to slide seven and Liberty, Puerto Rico.
Starting on the left of the slide.
We delivered another very robust quarter in net additions.
<unk> investments in our network and commercial activities have supported a 6% subscriber growth over the past year.
Turning to mobile we maintained a relatively stable postpaid base with 7000 net losses across a total of 900000 subscribers.
We anticipate being able to grow share from our number two position in the market.
Once migration activities have been completed.
Our announced acquisition of spectrum will further support these growth plans.
Moving to the center of the slide and the highlights for the segment.
<unk> recorded 11% year over year fixed revenue growth in the quarter driven by teams across all fixed services.
In mobile we continued with our subsidy optimization strategy targeting investments with high value customers in connection with the new iPhone 15 launch having previously reduced subsidy levels in the first half of the year.
Our sales volume grew more than 50% higher than the iPhone 14 lunch in the previous year.
Finally to our integration update.
We have been progressing with our migration activities and have now moved approximately 225000 customers to our new it platform, which is fully operational and being used to sell prepaid and postpaid products to our customers.
The migration itself has slowed down due to many factors such as data quality suffer incompatibility of number of Android devices.
IPhone 15 launch complexity and since software issues it stack.
These have been solved or we have a solution that will be delivered in the near term.
We continue to monitor and manage these technologies as we scale the platform.
However, there will be an impact to our cost under the T. SEC third party contractors and doubling of software licenses costs.
In addition, we have invested in more equipment replacement additional hiring to handle migrations and additional staff in our call centers.
These decisions result in onetime spend to ensure the best possible customer experience and to minimize churn from migration.
We now anticipate integration activities will conclude by April 2024.
As I mentioned earlier, we do not regard this as a material shift in the context of such a large and important project.
Turning to slide eight and Liberty Costa Rica.
Starting on the left of slide.
We tend to internet subscriber growth in Q3, showing encouraging stabilization in a more competitive fixed market.
In mobile we ripped.
<unk> strongest quarter of the year in terms of net adds postpaid subscribers increasing by 27000.
FMC has been steadily growing and we are now above 20% penetration in our fixed base.
Moving to the center of the slide.
Consumer mobile remains our largest product close to 60% share of revenue.
This is followed by a consumer fixed business, representing just over 30% and debit small fast growing <unk> operations.
Finally, our integration activities are now substantially complete with some smaller TSA supported activities dissipated to be migrated early next year.
Moving to slide nine and our Liberty networks segment.
Turning to the revenue performance in the middle of the slide.
Wholesale accounting for 70% of the segment's revenue delivered 8% Rebased growth in Q3, driven by a significant customer would be recognized on a cash basis and higher affiliate capacity usage.
Typically the wholesale operations delivered steady low single digit topline growth, mostly USD denominated revenue and has low capex requirements, which underpins high cash flow conversion.
Our unique multi ring infrastructure as shown on the left of slide remains a differentiating factor in relation to the other networks in the region and importantly brings reliability.
And the price representing the remaining 30% of revenue posted a 14% increase driven by higher demand for our connectivity solutions and IP as a service product.
This is a high growth area for the group with significant opportunities across our markets, particularly in Latin America, where we have a low market share and a low penetration of services generally.
Moving to the right of the slight and some highlights for this segment.
Following our successful branding to Liberty networks in Q2, we were recently awarded the best marketing team accolades at the global Carrier Awards.
We also continued to deploy innovative solutions to support the resiliency and redundancy abundantly.
For example, we successfully deployed Dara Google Moonshot technology.
Finally to slide 10 and.
And a summary of the transactions, we have announced in the past.
Firstly, the acquisition of spectrum and subscribers from dish.
Our commitment to Puerto Rico, and the U S. Virgin Islands is further reflected in this deal to.
To acquire a combination of 100 megahertz of spectrum and the approximately 120000 subscribers.
Upon completion this transaction will provide us with valuable spectrum.
Now is to add more capacity increased speeds and further strengthened our leading <unk> mobile network as well as increase of scale in the prepaid market.
Important to note that purchase consideration will be spread across four annual payments from the date of closing, which we expect to take place next year.
We expect funding for these payments to come from local sources.
Secondly, we are pleased to have announced an agreement with a high quality partner in Phoenix towers.
Crystallizes the value of approximately 1300 of our mobile tower infrastructure assets.
Very attractive cash flow multiple.
We will enter into long term lease agreements with PDI upon close which will enable us to continue delivering leading mobile services to our customers and support network expansion, including future <unk> deployment plans across the Caribbean and Latin America.
We anticipate using the transaction proceeds to reduce debt party debt.
And buy back shares.
Overall <unk>.
We feel very positive as we approach the end of the year with many of our businesses delivering good top line and adjusted OIBDA growth.
We remain focused on finalizing the integrations in Panama in Puerto Rico, which will further add to our momentum and contribute to cash flow growth in the coming years.
Add the transactions have just Dr true and we as a management team feel that the business has lots of opportunity for growth ahead.
With that I'll pass you over to Chris Noyes, Our Chief Financial Officer, who will take you through our financial performance before we move on to your questions.
Chris.
Thanks Alan.
Now I'll take you through our financial performance in greater detail starting on slide 12, as a reminder, we deconsolidation our Chilean business at the start of Q4 2022 through our reported results in 2023 do not include the operating results of ETR.
Revenue was 1% higher on a rebased basis at $1 1 billion in the third quarter, we saw positive commercial traction across many of our markets with performance driven by double digit growth and CDW, Panama and Liberty networks as mentioned in prior quarters CDW Caribbean reported revenue was impacted by a business decision to.
Discontinue legacy noncore <unk> voice transit arrangement in Q1, 2023, which was accounted for about $10 million of quarterly revenue and we will have a similar impact in Q4.
Adjusting for this Q3 group revenue would have grown by 2% on a rebased basis year over year.
Turning to adjusted OIBDA, We reported Rebased growth of 10% to $428 million. Our best quarterly result in two years and reflecting structural efficiency improvements year to date Rebased growth was 5% for the group and with further growth anticipated in Q4, we are well positioned to deliver our target of mid to high single digit <unk>.
Based adjusted OIBDA growth for <unk> this year.
In the third column, our <unk> additions were $187 million from Q3 or 17% of revenue nearly 60% of our quarterly spend was directed to CPE newbuild upgrade and capacity, we continue to step up our new build and upgrade activity sequentially, reaching over 100000 homes in the <unk>.
<unk>, we are on track to deliver our guidance target of 16% of revenue for 2023.
And the last chart, we delivered $33 million of adjusted FCS in the quarter as in previous years, we anticipate that our adjusted free cash flow generation for the year will be substantially weighted to Q4, reflecting our seasonally strong financial performance and favorable working capital swings.
Our adjusted Scf target remains at approximately $300 million before distributions to Noncontrolling interests. Several factors have materialized recently, which add variability to the target this year, including the delay in timing of the Puerto Rico migration and dependency on large payments, particularly in Panama.
<unk> from BTG and B to be customers that could fall into next year.
Slide 13 highlights our segment results beginning on the left with <unk> Caribbean, We reported $361 million of revenue in Q3, reflecting 1% rebased growth and $150 million of adjusted OIBDA, resulting in 14% rebased growth year on year.
Sure.
Adjusting for the transit impact in the prior year period revenues would have been 4% higher on a rebased basis.
Our primary driver of growth was through residential mobile with service revenue expansion led by our postpaid efforts prepaid <unk> following price increases earlier in the year and higher inbound roaming our strong adjusted OIBDA Rebased growth was driven by lower direct costs, including programming and improved.
Operating leverage across many of our islands.
We finished the quarter with a margin of around 42% more than 400 basis points higher than the prior year quarter.
Moving to cable and wireless Panama, CW, <unk> contributed $190 million of revenue and $59 million of adjusted OIBDA in Q3, reflecting 10% Rebased revenue growth and 25% Rebased adjusted OIBDA growth.
<unk> top line growth was driven by contract wins in our <unk> business and an increase in residential fixed subscribers over the past year.
Adjusted OIBDA grew strongly in Q3, as we captured value from the collateral Panama integration.
Turning to the Middle column Liberty networks, we generated $113 million in revenue for 10% Rebased growth and $64 million and adjusted OIBDA for an 11% Rebased increase year over year Rebased revenue growth followed robust performances in both our wholesale and enterprise operations as Balan highlighted.
Adjusted OIBDA growth was driven by our revenue performance. Our adjusted OIBDA margin was just below 60% for the quarter and our operating free cash flow margin stood at a very robust 45% of revenue.
Second from the right Liberty, Puerto Rico, Q3 revenue was $351 million, reflecting a year over year Rebased decline of 4% and adjusted EBITDA of $116 million, reflecting a rebased decline of 11% as compared to Q3 2022 I'll cover this in more detail on the next slide.
Wrapping up with Costa Rica in the far right. We delivered Q3 revenue of $135 million and adjusted EBITDA of $50 million, reflecting flat rebased revenue and Rebased adjusted OIBDA growth of 21% year over year revenue was flat as subscribers driven growth in mobile was offset by declines in fixed residential revenue from <unk>.
Lower video RG use in <unk> due to the increased retention discounts and declines in higher RPC plants.
Adjusted OIBDA expanded significantly year over year benefiting from the year over year strengthening of the Costa Rica, Cologne to the US dollar as we have certain cost denominated in U S dollars.
Turning to slide 14, and a detailed review of our financial performance in Puerto Rico, starting with revenue in the upper half of the slide sequentially revenue was stable with mobile fixed and <unk> growth, mostly offset by a reduction in FCC funds effective in June this year year over year, we reported a revenue decline of 15 million.
A 4% residential fixed continued to be strong with growth following rate increases and a negative prior year impact of credits issued to customers related to hurricane Fiona the.
The increase was also driven by net broadband subscriber additions totaling 23000 over the past 12 months residential mobile decreased year over year, driven by lower <unk>, including the impact of higher contract asset amortization and reduced roaming revenue due to a changing our agreement with AT&T This year.
Other revenue was impacted by the reduction in FCC funds in June as well as the prior year benefiting from increased revenue recognition in USPI move.
Moving to the lower half of the slide adjusted OIBDA was lower sequentially due to an increase in both direct and operating costs. This includes higher equipment costs related to the iPhone <unk> launch with strong sales by Alan mentioned and free handsets, we have offered to customers as part of their migration labor costs also increased in part due to a one off Craig.
In Q2 related to the cares act the year over year decline in adjusted EBITDA is mainly explained by lower revenue and an increase in opex, including the impact of higher professional services and it related costs related to the migration.
Looking ahead to the coming quarters, we anticipate expenses will continue to run at a higher than normal level of duty duplication of costs in our business during migration related to the TSA, we have with AT&T.
Moving to our usual balance sheet overview on slide 15 at the end of Q3 on a consolidated basis, we had $8 billion of total debt $600 million of cash and $900 million of availability under our revolving credit lines important to note that 96% of our debt stack is due in 2027 or beyond.
And more than 95% is fixed interest rates a lot of maturity and fixed interest features of our balance sheet, coupled with significant liquidity resulted in a robust capital structure for the group.
In terms of leverage we have made good progress reducing levels year to date and ended Q3 at net leverage of four three times in the bottom right. At this slide we have repurchased about $182 million of our convert and $111 million of equity year to date, including a combined $112 million in Q3.
Importantly, we have retired about 45% of our convert this year and with $220 million outstanding and due next July we will have ample liquidity to manage redemption next year.
Moving to the final slide in our closing remarks are consistent subscriber additions and <unk> expansion helped deliver topline rebased growth in the quarter operational leverage and synergy realization contributed to a strong quarter of growth delivering a double digit increase in adjusted OIBDA integration execution continues to be our primary.
Focus for us while there has been some movement in timelines. These projects are inherently highly complex and we feel good overall about their execution and the benefits we will achieve once completed during the quarter. We continued to invest in our leading networks. While also repurchasing our equity and convertible notes at attractive prices as noted by the car.
Commentary today, we have been active inorganically, which continues to be a key lever of value for us.
We are positioned to have a strong Q4 and look forward to updating everyone in February.
With that operator, please open it up for questions.
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 star followed by the one on your touch tone telephone.
In order to accommodate everyone. We request that you ask only one question with one follow up if needed.
Thank you are using a speaker phone. Please make sure. Your mute function is turned off to allow us to reach our equipment reports suggest amendment to give everyone an opportunity to signal for questions.
Our first question Michael Rollins of Citigroup. Michael. Please go ahead your line is open.
Thanks, and good morning.
Just focusing on Puerto Rico.
For all the color in detail on a sequential and year over year changes can you provide a little more context in terms of how much the totality of accretion and duplicative TSA cost maybe.
Maybe weighing on the <unk>.
EBITDA in the quarter.
For the year.
And maybe just talk about the journey.
How did these things as you get to your line.
To April of next year and get fully done with the integration.
Actual performance.
You may begin.
Sure. Thanks, Michael.
We.
We had signaled a $70 million type synergies.
Synergy for the report.
Still going to get that.
It's kind of slightly delayed.
But perhaps a couple of quarters.
Due to the <unk>.
Delays in that migration.
And so the way we think about it is the base definitely an impact that that has a few impacts here on the cash for its one <unk>.
Because of the delay in the migration, we are now not only paying AT&T for the services of the TSA, but we've also stood up our own platforms, plus the Netflix and the it stack and we're already paying licenses for all of that so we kind of like doubled up in costs. During this period.
The second part is as we looked at the migration there were a few things that we.
Over the last six months or so have come to the conclusion.
There's just a whole bunch of handset.
It's just not feasible for us to software upgrades.
Lisa handsets like Android devices that on an Android.
Past that is really determined by AT&T and the software push has come up from AT&T you Didnt come out from Samsung as an example, so when a Samsung release comes out it's on a different floor at the one with AT&T and in some cases, we've just decided you know what it's going to be a terrible customer experience there.
We do the migration and suddenly the devices do not work.
So.
We've also taken the decision to start replacing proactively headsets. During these migrations. So thats also going to cause that we suddenly.
<unk>.
Budget for.
So theres a number of things that youll see impact us towards the end of the year.
Sydney Bleed, a little bit into the first quarter of next year in second quarter as well, but for the most part next year will be less about handsets and stuff and it's really about the doubling of costs on the TSA as well as our own internal licensing costs now what happens after April two.
Two things one the TSA doesn't completely and at the end of the migration, we still have to buy the couple of months, where we still going to contract with AT&T.
Access to these systems the cost drops quite a bit but it doesn't go to zero and the reason we are going to do that is of course, although a period after the migration of customers may call.
The billings and the whole bunch of things that we still need access to prior records.
And then I think by June will be completely us that's on the cost side, but from an operation standpoint, beginning in January we are going to start exclusively selling all of our five devices all of our postpaid plans.
Our own stack and that has big implications. So as positively we can start doing a lot of the FMC that we want to do is we can be a lot more nimble and the promotions that we're doing.
That today any changes in our offerings, we really need to coordinate with AT&T. So it gives us a lot of flexibility operational.
And as well as a few months later.
I will take a lot of costs out of the system.
Hopefully that was helpful.
Thank you.
And if I'm looking back at Slide 13, where you lay out the financial performance in the quarter.
By segment.
And.
And then looking at the.
Stronger rebase for EBITDA growth.
W. Panama and Liberty networks in Costa Rica can you just give us a sense of how much of those four EBITDA levels are.
Consider.
Right.
<unk>, maybe any impact that might be.
Seasonal point of strength or I.
Transitory source of strength to the extent that there were some one time benefits or some things that.
Maybe costs that you avoided that need to come back at some point. So I'm just trying to think about it.
Durability of these new adjusted OIBDA levels that youre hitting in <unk>.
Other parts of your business.
Sure.
So the OIBDA that we're hitting its actually kind of a new run rate. So we've already.
A lot of the synergies in Panama, and Costa Rica, and when you look at the or EBITDA in cable and wireless. It also included not necessarily synergies, but some serious cost reductions that are permanent so.
What would that be.
One would be programming, we restructured a lot of our content costs in.
Cable and wireless that gave us some really good upside on the OIBDA line in addition to that.
Sure.
The one the one other area that.
Give us.
Incremental EBITDA as well.
Increment enrolling.
Our roaming test return not to the levels pre COVID-19, but people are starting to travel again cruise ships out there and so we'll be getting that upside as well now you can say that roaming will go up and down over the years, but we think we've kind of hit that kind of a steady state that it's never going to come back to pre COVID-19 levels, but it certainly an expansion.
Over last year.
So between those two you saw quite a bit.
And OIBDA expansion there and in addition to revenues as Chris pointed out the revenue growth, it's actually larger than what we what.
What it shows.
On a year to year basis.
So some of the trends in traffic that had zero margins in it.
So that was helpful.
As matter of fact, when I look at the overall <unk>.
There are a couple of things here that actually we show a 1% increase at the LLC level it should be close to like 3% because thats about a couple of one offs from last year like FCC funding that we got last year that don't exist. This year, so that went away.
That was great.
So I think if you if you normalize for some of the things across MLA as well.
We actually.
Drew.
With more than 1% and Thats why I feel really good about the OIBDA contribution margin has expanded.
So you would normally look at it operating wise about a 3% grower on the top line with 10% growth on the bottom line, which is kind of a healthy way to run an operation.
Thank you very much.
Thank you and the next question go to Vito to meet <unk> of Goldman Sachs. Please go ahead. Your line is open.
Hello, Marty and thanks for taking our question two questions from our side. The first one is also on the Puerto Rico integration.
You could give us a bit more color on how.
On how the decision was taken and why now.
<unk> extended the timeframe for Puerto Rico in particular, if anything came up that you did not expect during the course of the integration and on the Hong Kong first of all you are with completing the integration under the new timeframe and our second question would be also in Puerto Rico, If you could give us an update on the competitive.
<unk> scenario, specifically for mobile and on how Youll have been navigating it in terms of offerings and promotions since I recall. This was a major topic can sell off the previous conference calls and was still being deferred.
With competitive environment. Thank you.
Sure. Thanks for those questions. So the decision to expand the migration was we made that decision.
In the September timeframe August September timeframe and.
And at that point, we were still hoping that we could close some of it and let me give you a little bit of color to this migration. The migration is made up of multiple migrations, so rehab windows between us and AT&T.
Each window in the window as a day.
Where we can actually push subscribe its through so it's really kind of like if you think of a regular basis are pulled out so it would be a pulled out from AT&T and important to ourselves. So that's kind of like the migration and we were anticipating to do about 10000 a day in.
In that migration in each window.
Over the period, we've discovered two things one that will whole bunch of folks that we would kind of migrated we decided not to migrate because of the handset issues disguise somewhere not underwrite releases and then even with the iphones not just Android we have for future voice over Wi Fi when you get to you Rune <unk>.
Housing goes over Wi Fi that specific feature on our stack required a software release of about $16, five and above and a lot of them.
<unk> is a lot of users.
We migrated to that software release, so as.
All of these things we said, okay do we optimize for cost me just read everything through how do we optimize for the experience of our customers.
Let's optimize.
And so the customers not only because we have such good guys anything.
It's a terrible experience of China is going to really mess you up so we can optimize for let's make this as smooth as possible and we went back to AT&T and said we need it more windows.
The second problem, then hit US that we were getting to Thanksgiving, we were getting through Christmas holidays.
And then of course, there was the ice.
15 launch in September, which AT&T shut down all the windows rightfully. So we didnt, we didnt argue with them. We just said okay. Now we've lost 14 windows because of the iPhone 15 that we've lost like a whole bunch of windows almost 14 windows during the Thanksgiving period, we kind of lose like almost 18 windows during Christmas.
And then when you do the math you go Okay, let's methodically do this we will need to get into January and February.
We think we're going to beat the April deadline, but.
We want to make sure that we have enough runway and get to the end of April and get this thing done done methodically, but if you do the backward math in January February March and April and the number of Windows behalf.
Easily close to this and our engineering teams our operating teams.
A bunch of people are just working really hard on all facets of this setting up a new network turning up a whole new Ikea stacked.
It's quite unusual in the migration, usually you had migrating customers their own billing system, because you buy a company and it comes with a mobile.
Core and everything in this case, we didn't get that from AT&T AT&T feel supported us on the network. We have the radios, we opened the radios, we own the towers, but.
But we didn't have the core and then we have to stand up a whole new mobile stack, because we didn't have a mobile network.
In Puerto Rico.
And the other complexity as we couldnt use any of our other IP stacks all core from the rest of our network because Puerto Rico, It's part of the United States and we have a whole bunch of U S regulations and U S privacy and security laws that we have to comply with.
That puts us at a kind of a.
Situation, where our core has to be Puerto Rico, and a redundancy in Miami as an example, so we could not use any of our other elements. This thing is really complex, but I'll tell you I'm really proud of the team I've been on many I used to be a CTO and he can talk to any of the cdos.
In North America, Europe and Asia.
One of these.
Migration projects.
Usually.
You never get to where youre at Youre missing it by a year year and a half.
Abandoned the project altogether.
In this case, we really going to come like within months.
And I tell the team this is actually quite quite magical.
Thank you our next <unk>.
Can you guys see that Medina of Morgan Stanley.
Please go ahead your line is open.
Thank you. The first question is regarding your guidance.
Mentioned that there is now a little bit more of our early on on that.
On that target could you. Please maybe quantify the magnitude of potential <unk>.
After the retrofit over.
And then second regarding Panama, several moving parts in the back.
You have a very positive uplift from B to B is that sustainable and then there is appropriate in the country.
The failure.
The third operator did you sell in that country. Thank you.
Sure I'll answer these questions and then im going to ask Chris to jump in as well.
On the guidance as Gregg pointed out it is two things one it's all migration thing we may end up spending more in handsets we.
We're going to be very flexible on it right now the reason we're not changing the guidance. We think we are going to hit it but there is a few things and we thought we ought to like.
Just give everybody a heads up when the equipment and do as Chris highlighted in Panama, We have a very large <unk> customer that at the end of a lot of the bills get paid in the months of November and December and we see light at the end of the tunnel, but we thought maybe we should highlight that if that doesn't come in.
Coming in January it's just a timing issue.
Kevin will give you more color on that.
In Panama the business itself, the <unk> business, that's where a lot of the growth.
<unk> business day, its about two thirds monthly recurring and want that nonrecurring revenue.
A lot of nonrecurring revenue comes in in the third and fourth quarter, a lot of government contracts large enterprise contracts and we close those deals usually in the second half of the year and we arrived at the following year.
It's kind of like the same cadence that way.
But we feel fairly confident.
It's about a $300 million business <unk> I don't know if we break that segment of about $300 million.
Business, it's about $100 million of NR and our sales team there.
Hi.
Actually one of our best sales person and.
Yes.
That team delivers every year.
Not that worried about the variability.
Of that business on the <unk> segment on the protest.
Is what it is in Panama It has impacted us a bit of shops have been closed one of our key shops have been closed a number of other shops to foot traffic have dropped quite a bit and as you know in these regions a lot of our sales happens at the retail level.
And it happens at the door to door level as well. So a lot of these protests have kind of cramped and a little bit, but I did check on our sales. We go through our sales numbers every week.
And sales while it slowed down our backlog installs have been increasing so as soon as this protest is done the installed get get gets out there and we should recover.
So it's a temporary blip with the protest I don't expect much.
Much of a hit to us financially.
With that I'll pass to Chris maybe.
Maybe just.
A little bit color as to.
The potential headwind, we would see in particular around the delay in the in the migration Theres kind of two key points. One is the the inventory since we have both our new stack, which is.
Getting up and running and then we have the AT&T platform, we basically have double <unk>.
<unk> said inventory than one would normally carry.
Going into the holiday season, and then second we have obviously monthly TSA costs and additional costs related to the migration.
Say just conceptually.
The headwind around that with the greater than sort of $30 million on the free cash flow side, but we are working hard driving our businesses across the group to continue.
Produce and strive to meet our target that we had given at the start of the year.
Thanks, Chris.
Thank you very careful Goldman thank you.
Sorry, we missed that question.
Thank you. Our next question go to Sumit Datta of New Street Research. Please go ahead. Your line is open.
Hi, Chris Thanks for the call yes.
A couple please.
I think the week.
Lance on the on the Puerto Rican mobile.
<unk> been instead, if you could circle back on that so I think that was the previous question.
Just first of all on <unk>.
Just thinking about free cash flow.
Looking into next year.
Thank <unk> you mentioned, the 70 million of synergies.
Puerto Rico is still intact.
As we look forward should we think about those synergies layering in from here as well as some of the kind of extra cost we have seen at the moment falling away. So is the uplift kind of $70 million plus.
A little bit more.
And then secondly, as well kind of looping into the same theme how much of the synergies and now.
Coming through in Panama, So how much more can we think about coming.
Coming in from from that market as well just trying to get a feel for what sort of cash flow uplift. We can think about on a run rate basis. Once this integration process is completed please.
<unk>.
That's the first question I'll, maybe come back in a second.
Sure I'll come back to that beyond mobile.
On the free cash flow.
I don't anticipate us changing our synergy guidance on Puerto Rico, It would be about $70 million annualized clearly next year because of the bleed in cost.
We'll probably not see the full $70 million next year.
Panama the incremental synergies.
It's not that significant anymore going forward. So you will see the synergies that we've captured a lot. This year and next year there is an incremental.
Driver number like five $5 million or so that probably won't exceed 10 million next year over and above what we.
We've captured this year.
That's the number of top of my head formulary reviews.
On Puerto Rico model.
Yes that was the question.
So we actually feel pretty good about it we said there's two things that happened at the end of last year when T mobile really aggressive on your subsidies.
Offering iPhone Fourteens Airpods.
$601 60.
<unk> 6600 Bucks buyout contracts.
We had the Max did through the end of last year.
<unk>.
And of course, Chris and I would not very happy with the free cash flow implications of matching that so in the first half of this year, we kind of slowed down the subsidies.
And subsequently you can see that our net adds came flat right.
Right flat, just slightly south but kind of noise. So we can say, it's just flat.
And then what happened in the second half of this year.
We did a number of.
Changes in our executive team in Puerto Rico on the product side.
And so we've been looking at it through a new lens and.
And with the iPhone 15, we've come back into the subsidy game.
Right aggressively.
On the iPhone as well as none.
Non apple devices as well.
And my sense is next year youre going to see postpaid do better youre going to see prepaid do better as well, we just launched a new prepaid.
Promotion that I think we'll capture attention its a four by 'twenty plan, you've got four lines 20 Bucks each.
Very aggressive and the reason we can do some of these things before is we did have a nike stacks. So I did indicate earlier that in January we will have our own postpaid mobile exclusively sell in of all postpaid spec, but on the prepaid side, we stood that up already so as of last week, we can just do whatever.
<unk> three one and so we're going to get aggressive in the prepaid and as you look at our mobile business and the number and the lengths that we've lost most of its on the prepaid side. So this will allow short the prepaid with the boost transaction with dish, which we should close some time next year that will give us more channels on the prepaid so we feel like the prepaid we'll get back to.
Good place and then on the postpaid side, we're backing the subsidy gain.
It's actually quite good on that we've got are structured in a way that I think looks really well for us. So we will get back into the capture business and you shouldn't look at this.
In 'twenty four 'twenty five after we have our own stack running on our own network that we will be the attacker in Puerto Rico.
And Thats, our mobile slate going forward.
Okay great.
A quick follow up.
Yes, thank you very much.
On the tower deal.
Great deal, which is which has just been announced could you give any.
Thought it was a great free cash flow multiple any kind of statements.
The multiple will be for the.
Free cash flow will kind of fall out as a result of.
Does that transaction and I just wondered other more towers.
Or is that potentially sort of other infrastructure you are looking to monetize at this time as well thanks very much.
I'll answer the last question first no we're not looking at any other infrastructure to monetize at this point of course, you know we will be very opportunistic.
That's what we're looking at this type of a deal is.
We kind of like bundled up a lot of the dollars that we thought we should put in just eight days at any more towers, what we thought we should transact we've included in this.
Sure.
And we feel really good about it I'm glad you asked the question.
Released right before the call literally we were closing the final points on the deal.
Five this morning, $5 30, and then about six o'clock still getting some governance issues resolved.
And that's why that's why he was very late.
On the press release coming out.
We are really excited about it you asked about the multiple we agreed with US sorry, with the buyer that we wouldn't talk too much about the multiples, but you can imagine it's highly accretive.
It's we're very very happy with it the headline price and is that the.
The EBITDA, Chris John can I talk about the EBITDA.
Okay, just checking my general counsel.
Yes, we're probably won't say, David I hit on it but you can clearly imagine it's not that significant.
Yeah.
Great. Okay. Thank you.
Yes, we are excited about SMA that dollar deal is a good one.
Thank you and our next question go to Matthew Harrigan Benchmark Matthew. Please go ahead. Your line is open.
Thank you.
<unk> per megahertz pop price.
On the spectrum transaction.
Really good especially for that quality.
Backdrop.
Discounts in the U S, but really if you take out the 120000 mobile customers Youre also getting it looks like it was just a really good deal for you could you elaborate a little bit more on the pricing and the input.
Relative to the.
Relative to the stage. Thank you.
Sure Puerto Rico, all these trades in the auction.
There's a slight discount against mainland for couple of reasons one.
Bias they're limited.
Two it's kind of a captive market.
And so it has always traded at a slight discount because it's easier to build a lot more dollars there as opposed to just.
Relying on spectrum now having said that the team has done a tremendously good job I think it's a win win for both us and dish on that.
It's quite accretive for them accretive for us it's accretive for them because we don't have to build out in Puerto Rico, we are going to take on the buildout obligations.
In Puerto Rico, and save them a lot of Capex that they can focus in mainland our general counsel and what's at the SEC yesterday at the Justice Department and.
Did a tremendous job of explaining the rationale for the deal together with executives from dish and so we feel positive about is about it.
I think it is.
It's a good deals for dish.
A good one for us.
Well it shows two things one our confidence in Puerto Rico.
And secondly.
T Mobile has this huge humongous company 30 times, our size that we are going to go up head to head with those guys with them day in day out.
We are all in in Puerto Rico and mobile.
Great. Thanks, Paul.
Thank you.
Today's question answer session I would like to hand back to Glenn for any additional or closing remarks.
Thank you operator.
You can clearly see.
I am very happy I am very happy with.
With our earnings results for this quarter.
I think the growth that you see here.
Sure.
It's really good I think fourth quarter is looking pretty good as well and then next year as we go into next year. We will go in with a base of our EBITDA and revenue that I think we can build nicely on as well.
<unk> is in good place I know there will be a lot of consensus about Puerto Rico.
It's a phase.
Through the migrations.
<unk> has stood up it's running really well.
It stacks has stood up we need to finish the migration, we get off the cost in.
In a year nobody will remember about the integration and all that.
And this is fundamentally a really strong good business the fixed network is growing really well.
Prepaid business is going to grow.
Let's base business I think our plans are really good business.
The spectrum acquisition, we just made the prepaid business. We just bought I think we're going to put Puerto Rico in a good place so between that and a good place our CFW business operating really well Panama onto bigger and better things Costa Rica is doing really well Liberty Netflix is doing really well I think we've got a good Frank.
Ics and I'm really excited about it so thank you so much for all your support and have a great day.
Thank you ladies and gentlemen, this concludes Liberty Latin America's third quarter 2023, Investor call. As a reminder, a replay of the call will be available in the Investor Relations section of Liberty Latin America's website at Www Dot.
<unk> Dot com.
You can also find a copy of today's presentation materials.
Thank you all for joining you may now disconnect your lines.
Yeah.
Yes.
Sure.
Yes.
Yes.
Yes.
Yes.
Okay.