Q3 2024 Liberty Latin America Ltd Earnings Call
Please stand by. Good day, everyone. You are holding for Liberty Latin America's third quarter 2024 invest call.
We'll begin in roughly one minute's time to allow all participants to get connected.
Speaker Change: 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 Bill Greer-Lee, Head of Compliance and Ethics, Liberty Latin America.
Speaker Change: Following today's formal presentation, instructions will be given for a question and answer session. As a reminder, this call is being recorded.
Speaker Change: 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 fact. Actual results may differ materially from those expressed or implied by these statements.
Speaker Change: 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 Quarterly Report on Form 10-Q, along with the associated press release.
Speaker Change: Liberty Latin America disclaims any obligation to update any forward-looking statements or information to reflect any change in its expectations or in the conditions on which any such statement or information is based.
Speaker Change: 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 Investors section of our website.
Speaker Change: I would now like to turn the call over to our CEO, Mr. Balan Nair.
Balan Nair: Thank you, Bill, and welcome everybody to Liberty Latin America's third quarter results presentation.
Balan Nair: I'll begin with our group highlights and an overview of our operating results by reporting segment.
Balan Nair: 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.
Balan Nair: As always, I'm joined by my executive team from across the region, and I'll invite them to contribute as needed during the Q&A following our prepared remarks.
Balan Nair: As a point of housekeeping, we will both be working from slides, which you can find on our website at www.lla.com.
starting on slide four in our highlights.
Balan Nair: We have added over 50,000 high-speed broadband and postpaid mobile subscribers year-to-date. This figure was a robust 225,000 ads, excluding Puerto Rico, where we have begun to recover following our complex migration project.
Balan Nair: I'll share further color on our progress later in the presentation.
Balan Nair: We also experienced some negative net ads in cable and wireless Caribbean during the quarter as a result of Hurricane Beryl.
Balan Nair: We reported adjusted OEBDA of $1.2 billion year-to-date. This includes rebase growth in CNW Caribbean, CNW Panama, and Liberty Costa Rica.
Balan Nair: We expect adjusted OEBDET performance to accelerate in Q4, driven by B2B, and anticipated improved results in our Puerto Rican operations.
Balan Nair: We successfully refinanced $1 billion of our cable and wireless credit silo senior notes last month. The issuance was significantly oversubscribed, reflecting the silo's strength.
Balan Nair: Finally, we continue to explore inorganic ways to drive shareholder value and are excited to provide more details regarding an investment that we've been cultivating in Peru.
Balan Nair: This is a large and growing market where we have built significant fiber footprint and see potential to create value.
Balan Nair: We are also pleased to announce the addition of SPARCL to our new pan-regional subsea system.
Balan Nair: Turning to slide 5, I'll begin our operating review with C&W Caribbean.
Balan Nair: On the left of the slide, we present our internet and mobile postpaid additions.
Balan Nair: Q3 broadband ads were negatively affected by Hurricane Beryl, which impacted our operations in Jamaica, Grenada, St. Vincent and the Grenadines in early July.
Balan Nair: Adjusting for this event, we would have added 3,000 broadband RGUs in the quarter.
Balan Nair: We anticipate further impacts to NetAds and Q4, but are working hard to minimize them.
Balan Nair: Postpaid mobile ads, although positive, will lower sequentially and year over year as barrel infected sales efforts.
Balan Nair: There was, however, an increase in prepaid ads as customers wanted to ensure access to mobile networks in the event of any outages, particularly in Jamaica.
Balan Nair: Moving to the center of the slide, we generated 2% rebase revenue growth year-to-date, driven by our continued consumer momentum, particularly in mobile.
Balan Nair: Finally, I want to recognize our colleagues in CNW for delivering adjusted OEBD growth, both sequentially and year-over-year in Q3, despite the challenges they faced in the quarter.
Moving to slide six in our CNW Panama segment.
starting on the left of the slide.
Balan Nair: We continue to drive penetration of our fixed footprint and deliver another solid quarter of internet subscriber ads and robust revenue growth.
Balan Nair: A fixed network provides high-speed connectivity across more than 95% of our homes passed, with the majority of those homes passed via FDTH infrastructure.
Balan Nair: In mobile, we continue to grow our post-pay base, however return to a more normalized rate of ads, following an exceptional second quarter driven by Digicel's exit from the market.
Balan Nair: We mentioned our successful 5G trials during our last earnings presentation, and last month, we became the first operator to launch 5G in Panama, highlighting our technology leadership in the market.
Balan Nair: Moving to the center of the slide, we have driven 3% top line growth year to date with positive contributions coming from all our product areas.
Balan Nair: Overall, we continue to build momentum in Panama and anticipate continued growth.
turning to slide 7 and Liberty Costa Rica.
Balan Nair: Starting on the left of the slide, we delivered another quarter of solid broadband subscriber ads against a challenging competitive backdrop in Costa Rica.
Balan Nair: We continue to work towards completing our agreed combination with Milicom, which we anticipate will close by the end of 2025.
In Mobile, we reported another strong quadrant.
Balan Nair: removed above the milestone of 1 million subscribers with net postpaid ads higher both year-over-year and sequentially
Balan Nair: Over the last 12 months, we've now added over 125,000 postpaid subs in the market, representing an almost 15% growth in our base.
Balan Nair: Moving to the center of the slide, we reported healthy rebates revenue growth of 5% year-to-date led by Mobile.
Next, to Slide 8 and Liberty Networks.
Balan Nair: On the left of the slide, we present year-to-date revenue for the current and prior year periods.
Balan Nair: And the price continues to be our fastest area of growth in this segment and was 8% higher on a rebase basis.
Balan Nair: As in prior quarters, for Liberty Networks and the wholesale business specifically, we highlight the $17 million year-over-year impact of non-cash IRU declines.
Balan Nair: Despite this headwind from lower IRU non-cash revenues, our underlying wholesale business continued to demonstrate resilience, growing modestly.
Balan Nair: Overall, we are building a business with a strong foundation of recurring revenue which underpins our future prospects.
Balan Nair: The metrics shown beneath the bars reflect the unique cash conversion characteristics in Liberty Networks.
Balan Nair: This is an infrastructure business with growing cash orbiter and over 40% OFCF conversion of revenue.
Balan Nair: Given these characteristics, Liberty Networks has a very attractive financial profile, and we have spoken previously about the opportunities to invest further in this segment.
Balan Nair: On the right side of the slide, we highlight an investment that will create a new pan-regional subsea cable system.
Balan Nair: We are excited to share that, in addition to GoldData, we will partner with Sparkle, a wholly owned subsidiary of Telecom Italia, on this project. This will enhance the system's value given Sparkle's extensive presence in the region.
Balan Nair: Other highlights of the new system will be its size, spanning over five and a half thousand kilometers, low latency with six new access points connecting major data hubs,
Balan Nair: New routes, the landing in Veracruz and Apalachic creates vital routes between Mexico and the United States, integrating and enhancing our powerful mesh infrastructure and ensuring we are future-proof ready.
Balan Nair: We are building a system that will serve the incredible growth in demand from hyperscalers and the rise in traffic requirements related to the ongoing shift to the cloud and AI innovations from the USA to Latin America and the Caribbean.
Balan Nair: Turning to slide 9 and Liberty, Puerto Rico. Starting on the left of the slide.
Balan Nair: We reported a stable quarter of internet subscriber ads, adjusting for the impact of ACP-related share.
Balan Nair: As previously indicated, we managed to keep most AACP subscribers through targeted retention offers. However, there has been some impact with 6,000 subscribers lost in Q3, in adds to the 4,000 who left during the first half.
Balan Nair: Adjusting for this impact, we would have had net broadband subscriber ads in the quarter.
Balan Nair: We continue to invest in strengthening our leading fixed business in Puerto Rico and aim to have approximately 200,000 500 homes passed by the end of the year, representing over 15% of our total footprint.
Balan Nair: In Mobile, our post-bait base was lower during the third quarter, partly driven by a migration adjustment of approximately 20,000 lines.
Balan Nair: We have begun to see some encouraging signs now that the migration is complete.
Balan Nair: I'll talk to these green shoots on the following slide, but of note, we've now launched our new Converge commercial proposition called Loop.
Balan Nair: Owning leading fixed and mobile platforms is a core differentiating feature for Liberty Puerto Rico and our strategy is centered on leveraging this as we have done successfully in other parts of LLA.
Balan Nair: In prepaid, we had more success with a second consecutive quarter of net ads in Q3.
Balan Nair: In the center of the slide, we show the revenue mixed by product in Puerto Rico and the year-to-date decline of 12%.
Speaker Change: Chris will cover the financial performance in greater detail within his section.
Speaker Change: Moving to slide 10. We wanted to share some of the early indicators that we feel represent signs of our mobile operations turning around.
Speaker Change: starting with the left chart in our average sales per month. Here we can see the drop off in sales as we started to focus our efforts on migration in 2023 and into the first half of this year.
Balan Nair: This impact was the result of our sales force needing to spend more time managing migration-related queries, thereby having less time to sell, while navigating some customer experience challenges.
Balan Nair: Encouragingly, Q3 2024 showed significant improvements across postpaid and prepaid, with prepaid now back above 2022 levels.
Balan Nair: In October, we saw postpaid sales eclipsing 2022 levels as well, which is very encouraging.
Balan Nair: In the center of the slide, we show our NPS progression, which is a leading performance indicator that we track closely.
Balan Nair: We are now above pre-migration levels and significantly better than the low points at the turn of the year for both post-pay and prepay.
Speaker Change: Importantly, we have seen a significant increase in promoters with our postpaid promoter percentage in October, three times above the December low.
Lastly, on the right of the slide, the customer sentiment.
Speaker Change: This metric has more than doubled from pre-migration levels, reflecting the work we have been doing to improve customer experience.
Speaker Change: The complexity of this integration stems from the carve-out nature of this transaction with AT&T, where we needed to build a whole new network and a whole new billing stack.
Speaker Change: This, coupled with migrating from a legacy platform within a large corporation, brought many unanticipated problems.
Speaker Change: However, as with our other acquisitions, we are now through the technical phase and positioned to improve our commercial execution.
Speaker Change: Having said that, the larger-than-expected trend has delayed our recovery to pre-migration EBITDA.
Speaker Change: To get there, we will cut costs as required, and with improving NPS and improved platforms, we will recapture market share.
Speaker Change: The commercial recovery will require investments in 2025, which we are planning for.
Speaker Change: Leveraging our FMC capabilities combined with achieving targeted cost savings sets us up for future adjusted OEBDA expansion.
Speaker Change: We remain confident of our longer-term plans and the opportunity to grow in Puerto Rico.
Speaker Change: On slide 11, we highlight our track record of organic and inorganic growth across C&W Caribbean, C&W Panama and Liberty Costa Rica segments.
Speaker Change: Firstly, taking CNW Caribbean on the left of the slide as an example of strong operational execution.
Speaker Change: This has been driven by the effective creation and implementation of converged product offerings, which has resulted in over 350,000 broadband and postpaid mobile net apps.
Speaker Change: We have also focused on driving cost efficiencies, achieving an eight percentage point improvement in OFCF margin over the period.
Speaker Change: Moving to CNW Panama in the center of the slide and the significant financial benefits of the acquisition in 2022 of Claros Mobile Business.
This is an example of a successful integration.
Speaker Change: By the middle of this year, we had migrated customers to a common platform and adjusted significant cost synergies.
Speaker Change: The business we acquired from Claro had minimal adjusted OEBDA when we closed the acquisition, and so the growth shown here reflects synergies we achieved through integration.
Speaker Change: OFCF is expected to improve further in Q4 and rise above 2020 levels as a percentage of revenue.
Speaker Change: We also see this as an exciting organic story for coming periods given the constructive market structure and our underway position in the fixed market.
Speaker Change: Finally, to Liberty Costa Rica, on the right of the slide, we initially entered the Costa Rican market through our acquisition of a controlling stake in Cabletica in 2018.
Speaker Change: Through the acquisition of Telefonica's mobile operations in 2021, we created a leading converge operator.
Speaker Change: This is another example of a successful integration which we completed during 2023.
Speaker Change: At the time of acquisition, the Telefonica business was generating approximately 70 to 80 million of adjusted OEBDAT a year. And so we've proven significant additional value through Synergies.
Speaker Change: We have continued to grow the mobile operations at a tremendous pace, surpassing 1 million postpaid subscribers and launching 5G earlier this year to further cement our position as the forefront of the market.
Speaker Change: Our track record shows that we have successfully integrated and grown operations.
Speaker Change: The nature of our Puerto Rico acquisition is much more complex compared to the transactions noted on this slide, which is the primary reason why it has taken longer than we had anticipated to achieve our targets.
Speaker Change: However, our experience and track record gives us confidence that we will begin to see improved results in Puerto Rico as we have in other markets.
Speaker Change: finally to slide 12 and an exciting inorganic move we have made in Peru.
Speaker Change: We began investing in the Greenfields Fiber-to-the-Home business alongside a local partner in 2021.
Speaker Change: Peru has significant growth potential given its low internet penetration at around 40% and it provides exposure to market much larger than those in our current footprint.
Speaker Change: WOW has been very successful driving penetration in its footprint which is mostly outside Lima.
Speaker Change: In a short period, WOW achieved an approximate 15% broadband market share nationally and 25% in the provinces outside Lima.
Speaker Change: With 34 million people and 10 million homes in total, Peru presents a large market opportunity.
Speaker Change: It is more than six times the size of our largest consolidated market.
Speaker Change: in line with the region also has a young demographic with a population median age of 34.
Finally, we are creating a leading business and brand.
Speaker Change: This was exemplified as WOW was awarded LATAM Fiber Operator of the Year in the 2024 FiberConnect LATAM Awards.
We are excited about this investment.
Speaker Change: 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
Chris Noyes: Thanks Balan. I'll now take you through our financial results starting with our group revenue and adjusted OEBDA performance on slide 14.
Chris Noyes: Sequentially, reported revenue was 3% lower at $1.1 billion and adjusted Oibida grew by 4% to $403 million in the third quarter. The sequential decline in reported revenue from Q2 was driven by lower revenue in cable and wireless, partly due to the impact of Hurricane Beryl in the quarter.
Speaker Change: and in Panama Liberty Networks related to lower project revenue and less IRU accelerations respectively.
Speaker Change: Adjusted Oibidá growth was driven by improvement in Puerto Rico and Panama. Turning to year-over-year, revenue was 4% lower on a rebase basis and adjusted Oibidá declined by 6%.
Speaker Change: Revenue performance was primarily driven by an organic reduction in Liberty, Puerto Rico, partly offset by organic growth in Liberty, Costa Rica.
Speaker Change: With respect to adjusted oibida, organic growth in Panama and C&W Caribbean was more than offset by reductions in Liberty, Puerto Rico.
Speaker Change: Moving to slide 15 and our P&E additions and adjusted FCF results for the third quarter.
Speaker Change: On the left of the slide, we incurred P&E additions of $171 million in Q3, or 16% of revenue.
Speaker Change: This compares to $187 million or 17% of revenue in the prior year period. During Q3, we built or upgraded nearly 135,000 homes and launched 5G services in Panama.
Speaker Change: On the right, we reported adjusted FCF before partner distributions of $77 million. Distributions to our partners totaled $12 million in the quarter, with $10 million in Panama and $2 million in Costa Rica.
Adjusted FCF after these distributions was $66 million in Q3.
Speaker Change: Looking to the fourth quarter, we should deliver our strongest cash flow performance of the year, driven by improved adjusted oibita, as well as seasonally positive working capital.
Speaker Change: Slide 16 recaps our segment results. Starting with CNW Caribbean, we reported $360 million of revenue in Q3, flat year-over-year on a rebase basis.
Speaker Change: 7% growth in mobile was offset by declines of 3% and 2% in fixed and B2B, respectively, on a rebase basis.
Speaker Change: Mobile performance was driven by an organic increase of over 50,000 postpaid subscribers year over year as we increased penetration of our fixed mobile convergence propositions and higher prepaid ARPU following price increases.
Hurricane Beryl drove the reduction in fixed revenue and B2B.
Speaker Change: We posted adjusted OEBDA of $158 million, representing 5% rebase growth. A very good result given the storm adversely impacted adjusted OEBDA in the quarter. Management's focus on reducing operating costs is contributing to its adjusted OEBDA expansion.
Speaker Change: Our adjusted OEBDA margin improved by over 200 basis points year-over-year to 44%.
Speaker Change: Next, moving to cable and wireless Panama. CWP generated 188 million dollars of revenue, declining 1% year-over-year. Top-line growth of 9% in mobile and 5% in fixed was more than offset by a decrease of 13% in B2B revenue.
Speaker Change: Growth and fix was driven by broadband RGU additions and mobile field by increases in ARPU and handset sales.
Speaker Change: B2B revenue declined due to lower revenue from government-related projects, some of which we anticipate will be executed in the fourth quarter.
Speaker Change: We posted $69 million of adjusted OEBDOT in Q3, representing 17% year-on-year growth driven by phasing of project-related costs and synergies from the CLARO Panama acquisition.
Speaker Change: Turning to Liberty Networks, we generated $110 million in revenue and $59 million in adjusted OEBDA, resulting in lead-based declines of 2% and 8% respectively.
Speaker Change: Top line performance was driven by a reduction of $4 million in non-cash RRU revenue, primarily due to lower amortization year over year, partly offset by higher enterprise revenue from continued growth in managed services and B2B connectivity.
Speaker Change: Rebase-adjusted OEBDA was impacted by the non-cash IRU-related revenue decline in the quarter and higher bad debt expense driven by one large customer.
Speaker Change: Second from the right, Liberty, Puerto Rico. Q3 revenue was 308 million dollars, reflecting a 13% rebate decline year-over-year.
Speaker Change: Residential fixed revenue was down four percent on a rebase basis. The decline was driven by lower ARPU following retention related discounts and the impact of credits issued to customers following Hurricane Ernesto, which impacted Puerto Rico in August 2024.
Mobile revenue declined by 22% on a rebate basis.
Speaker Change: This was driven by our lower mobile subscriber base following disruption related to the migration of customers and lower equipment sales related to reduced volumes for the iPhone 16 launch in September 2024 compared to the iPhone 15 in the previous year.
Speaker Change: B2B revenue declined 5% on a rebate basis, primarily reflecting the cancellation of the FCC's Emergency Connectivity Fund, which led to a reduction of 74,000 mobile postpaid subs over the past year, in addition to migration-related churn.
Speaker Change: We reported $88 million of adjusted OEBDOT during the quarter, representing a rebase decline of 24% as compared to Q3 2023. Negative performance year-on-year was mainly driven by lower revenue, partly offset by direct cost reductions related to lower handset sales.
Speaker Change: On a sequential basis, adjusted OIBDA improved by 24%, driven by lower indirect costs, including lower VAD debt, reduced TSA costs, and the benefits of our H-1 reorganization.
Speaker Change: Concluding with Costa Rica on the far right, we delivered Q3 revenue of $146 million in adjusted OIBDA, $51 million reflecting 5% rebase revenue growth and a 1% rebase decline in adjusted OIBDA.
Speaker Change: We delivered positive performance across all three business lines in the quarter.
Speaker Change: Adjusted OEBDA decreased slightly as a result of higher bad debt expense in light of increasing equipment sales and higher tower and labor expenses on a year-over-year basis.
Speaker Change: Slide 17 lays out our last three quarters in Puerto Rico in terms of both revenue and adjusted OEBITDA.
Speaker Change: For revenue, Q3 reported revenue was stable relative to Q2, and I wanted to call out a few items. Residential fixed revenue was $123 million in Q3, or about 40% of the $308 million total.
Speaker Change: Relative to Q2 fixed decline $3 million due in part to a $1 million credit we gave customers for Hurricane Ernesto and the impact of lower ARPUs.
Speaker Change: Similar to fixed revenue, residential mobile revenue was $125 million in Q3, or 40% of the total. The $3 million increase in Q3 was driven by the inclusion of the acquired boost subscribers in September.
Speaker Change: Excluding that, mobile revenue was broadly flat, with higher roaming revenue offsetting slightly lower post-payment equipment revenue.
Speaker Change: The remaining $60 million to 20% of revenue consists of B2B and other and was flat to Q2 levels. Our FCC revenue declined sequentially by $1 million.
Speaker Change: Turning to adjusted OEBDA, the sequential improvement was $17 million from Q2, consistent with our quarterly decline in operating expenses.
Speaker Change: Impacting the 88 million dollars, we still have elevated bad debt as we work through the last components of the migration and billing and collection processes, especially with B2B customers.
Speaker Change: Compared to Q2, bad debt was six million dollars improved but still about five million dollars higher than what would we consider a more normalized baseline.
Speaker Change: Additionally, we had $3 million of TSA and integration-related expenses in the quarter, which dropped significantly from the prior quarter.
Speaker Change: Turning to slide 18, at the end of Q3 on a consolidated basis, we had $8.2 billion of total debt, $600 million of cash, and $700 million of availability under our revolving credit lines.
Speaker Change: We had gross leverage of 5.2 times and net leverage of 4.8 times and modest improvement from Q2 driven by Q3 adjusted OEBDA.
Speaker Change: Following the quarter end in October, we refinanced more than 50% of our outstanding cable and wireless 2027 bonds with the new Senior Secured Notes issuance, which was well received by the market as Balan highlighted earlier.
Speaker Change: We raised $1 billion at a 7.125% coupon, maturing in October 2032. The net proceeds were used to redeem in full $495 million of our 2027 Senior Secure Notes.
Speaker Change: and, in part, $485 million of our $1.2 billion 2027 senior notes. As a result, we extended our weighted average life at L.A. to over four years and only a roughly 10 basis point increase to our weighted average cost of debt as of September 2024.
Speaker Change: We actively monitor credit market conditions and would expect to refinance the remaining 2027 cable wireless bonds within the next 12 months, further improving our capital structure.
Speaker Change: Moving to the final slide and our closing remarks. Operation Momentum is building in many of our operations. Year-over-year subscriber growth coupled with seasonal strength in both B2B and mobile should underpin our Q4 financial performance.
Speaker Change: In Puerto Rico, clearly the pace of recovery has been much slower and tougher than we had previously anticipated. Our consumer value propositions that became available this fall are attractively positioned. We are focused on regaining commercial momentum in the coming quarters, and we expect to see improved adjusted OIBDA performance in Q4.
Speaker Change: Finally, in terms of capital deployment, we had a very active quarter with two items accounting for about $240 million of cash use.
Speaker Change: We repaid our remaining outstanding convertible bond of $140 million and funded the roughly $100 million initial installment of the Echostar transaction in Puerto Rico and the US via.
Speaker Change: And as Balan mentioned, we are excited about our Peruvian opportunity and have been investing to support the build-out of this fiber-rich business.
Speaker Change: Overall for LLA we are driving to have our strongest quarter of the year in the fourth quarter and look forward to sharing with everyone our results next February.
With that operator, please open it up for questions.
Speaker Change: Thank you. The question and answer session will be conducted electronically. If you would like to ask a question regarding the company's operations,
Speaker Change: Please do so by pressing star 1 to ask a question, or star 0 for operator assistance.
Speaker Change: In order to accommodate everyone, we request that you only ask one question with one follow-up if needed.
Speaker Change: If you're using a speakerphone, please leave your name and phone number in the chat box.
Speaker Change: Please make sure your mute function is turned off to allow your signal to reach our equipment.
Speaker Change: We'll pause for just a moment to give everyone an opportunity to signal for questions.
Speaker Change: The first question goes to Vitor Tomita of Goldman Sachs. Vitor, please go ahead.
Is all your line is open?
Hello, can you hear me?
Yes, we can.
Okay, perfect.
Speaker Change: is lower than expected recovery in there. Also, already asking a follow-up related to capital allocation, though not really related to Puerto Rico. The Peruvian business has reached a relevant market share in a fairly short time, became a fairly relevant operator in there. Could you give more color on your strategy for that business and on how much capital has been allocated to Peru over the last three years to build that investment?
Thank you.
Speaker Change: Sure. On the Puerto Rico, and I'll ask Chris to jump in here in a bit as well. Our intent in Puerto Rico is to operate our way there on the cash side. We are implementing cost cuts.
Speaker Change: We are working really hard on the revenue line and very targeted commercial acquisitions. We don't anticipate at this point of having to support Puerto Rico from any other stack. Before I jump into my Peru answer, maybe Chris, do you want to add to that?
No, I mean, I think that, uh, I think that's...
That's accurate.
Speaker Change: We keep a close watch on the liquidity and we've been able to manage, you know, I think quite well just with the additional spend that we had in the first half of the year. You know, one thing we did do in Puerto Rico in Q3 is, you know, we did a...
Speaker Change: and we've done several of those. Now that we're off the AT&T stack, we can continue to manage working capital in a more effective way in that business.
Speaker Change: Thanks Chris. And on Peru, yes, so we've been at it now for about three years.
Speaker Change: And the total equity that we've bought, the total cash that we've put into the business is about...
$100,000,000.
Speaker Change: and clearly our partners have also contributed some. And the bill has been passed.
Speaker Change: We put in a very, very entrepreneurial team there. We are working with some really interesting technologies there that drive our costs a lot lower on a per-bill, per-home pass basis.
and we purposefully targeted...
Speaker Change: outside of Lima. And the reason for that being the very low penetration of broadband.
less competition for sure, less investments in those areas, and
Speaker Change: Clearly, we've been, I think that strategy is paying off quite well.
[inaudible]
Very clear. Thank you both very much.
Speaker Change: Thank you. As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad.
Speaker Change: Thank you. I just wanted to understand how Liberty is looking at opportunities and offering converged bundles in the current market, and if you could share metrics on how conversions could impact.
Speaker Change: operational and financial performance going forward. And a second one would be, if I may, on if you can share any updates on how far along
Speaker Change: You are in the main markets at upgrading to 5G and 4G and how these upgrades could expand addressable markets or impact subs and revenue. Thank you.
Speaker Change: Sure and I'll ask maybe Inge to help me on the Converge part as well to give some more color because we've been a lot more advanced in the Liberty Caribbean area even though I must say on a Convergence, I'll say two things. One, the reason we made the AT&T acquisition, the Telefonica acquisition in Costa Rica and and other acquisitions that we've made even in Curaçao
Speaker Change: and strengthening it in Panama with the Claro acquisition is to have a converged bundle.
Speaker Change: and the idea is that we would have a very high-speed 4G, 5G mobile network with a very high-speed fiber-to-the-home or Docsys 3.1 network.
That is our play and it is working really well.
Speaker Change: And in the case of Puerto Rico, as I indicated earlier, we've launched this thing called Liberty Loop that Eduardo, our general manager, has championed together with his team.
Speaker Change: where we are bundling both our high-speed broadband and our mobile, very high-speed 5G mobile network there.
Speaker Change: And, of course, that same thing applies in Costa Rica, in Panama, and Liberty, Caribbean.
Speaker Change: I'm going to answer your question on 5G, then I'm going to ask Inge to give you a little bit more color on the success we've been having and how we sell it. You'll find it very interesting because we've approached it in Liberty Caribbean through our digital channels.
Speaker Change: So, on upgrading 5G, we've certainly got 5G in Puerto Rico, we've launched it in Costa Rica.
Panama, and now in Cayman as well.
Speaker Change: We are very judicious about where we make our 5G investments. It is a function of when the market's ready, meaning do we have enough handsets in the market that can support 5G, and also where we stand in that market.
Speaker Change: Clearly, in Costa Rica and Panama, we are the leaders in MOBA, both in volume and in
Speaker Change: value, as well as in technology, and we continue to invest there. In some of the markets where we think that 4G is sufficient, we're going to be very, very careful with our capital spend and make sure that we don't spend too far ahead of where the consumers are ready.
Speaker Change: Having said that, Inge, can you jump in and talk a little bit about your success in FMC?
Inge: Yes, Balan, good morning everybody. Good morning, Roberta. Yes, so we've been in the last three, four years within the Caribbean, the whole region, we've been really pursuing converged offers which we adapt in every single market, because every single market, of course, is different.
Inge: executed over the last three years, and it's really working for us. Similar, for example, in Cayman, we launched a converged offer, including 5G. It's called FlowMania. And so, country by country, we go converged offerings, and we adapt it. Sometimes we do fixed mobile conversions, sometimes we do mobile fixed conversions.
Inge: And we really start from the consumer, and from the consumer out, we go and adapt our go-to-market. And it's been really working for us.
Thank you, Inge.
Thank you so much.
Thank you. Bye.
Speaker Change: We have a question from Matthew Robillard of Barclays. Matthew, please go ahead.
Move, you only have 11 million.
Speaker Change: dollars of costs to take away in order to improve diabetes. But then in order to reach the 45 target, which I understand is not any more actual, you really need a big acceleration in the top line. And so I guess my question really is, how confident can we be that you accelerate that top line also, because it seems that the market has become a bit more competitive.
Speaker Change: I realize NPS and customer sentiment has improved, but at least in my experience, it takes years before these things can translate into financials. Thank you.
Speaker Change: And the way we are going to approach our recovery inhibitor comes from a number of different areas.
Inge: I indicated that we are in addition to some of the synergies we've done from the transaction
Inge: Given the reduction in revenue, we are also tackling another round of cost cutting in the island. And the way we approach the cost cutting is certainly on areas that are non-growth related.
Inge: and so anything and any cost that doesn't touch our growth, we are scrutinizing together with my finance team and my operating team, the combination, it's going through every line item. And we've identified some costs that we're gonna build, cost cutting that we're gonna build into our 2025.
Thank you.
Inge: Secondly, as you pointed out clearly just taking costs out will not get us there.
Inge: We do have to invest into growth. We anticipate, as you saw in the numbers we shared, we are now selling already at the pre-2022 level.
Inge: and which means that our sales is coming in. Now, two things we have to manage to. One, the cost of that sale.
Inge: and in the mobile world, clearly in the postpaid mobile world.
The first year of sales and acquisition.
Inge: has very little EBITDA contribution. So the way we've been approaching this is we want to grow maximally on sales in 2025, but it'll show up in only in 2026.
Inge: To a certain degree, that's why the $45 million is moved out.
Inge: Secondly, on the sales front, we are also focusing a lot more on B2B, non-mobile B2B, and we are looking at a number of different opportunities there.
Inge: Our B2B business is about 200 million, that will grow a lot more, and so there are a number of projects that we are working on with a number of partners as well to look at growth in our B2B space.
Inge: and then our fixed business which has been steady as she goes. That's a really good business.
Inge: where we have very good share and a very, very good product. And that combination of that fixed and mobile, which we've never been able to do throughout the last three years when we had the systems with AT&T, we were never able to converge these products.
Inge: We are now looking at every of our mobile sub to see if they have broadband, and every of our broadband sub to see if they have mobile. And that is what we call Liberty Loop, which we are now putting in place a number of really exciting commercial initiatives for our customers, but also for our sales team.
to send them to sell this product.
Inge: So there's a lot of different moving parts here and how we want to get back.
Inge: on the evidence that I think my management team and I feel is appropriate for this business.
Speaker Change: That's very helpful. Thank you. If I can follow up, obviously you will have the Echostar subscriber base at some point in 2025. I mean, if I put that in the context of the difficult integration with AT&T, I mean, are there things that you learned or do you feel that in any case it's a much easier transition than what happened with AT&T? I realize you had to operate on their system, but could you, I mean, could you give a bit of color as to how you're looking to that upcoming integration?
Okay, I'll give you three specific points why...
Speaker Change: This is going to be a lot more smoother. One, we already have a network now. We didn't have a mobile network when we bought AT&T, and we had to stand it up and get it operational and scaled while we were migrating. That's done, so we have a network we can migrate to.
Second.
Speaker Change: We have an IT stack now that we didn't have when we bought the AT&T business. We had an IT stack, but it was a fixed network IT stack.
Speaker Change: both the mobile network and the IT stack, if you recall.
Inge: I mean, we actually have that in our business. When we did this migration or this acquisition as part of the conditions on the acquisition, we were not able to use our existing IT stack and mobile network.
Inge: that did not sit in Puerto Rico because this is an American business. At that point, we had to change our strategy and build everything from scratch.
Inge: because the AT&T business was within the United States. Or else you would have moved a lot more smoother if we didn't have to build a whole new IT stack and mobile network.
And then the third reason is...
Inge: This is all prepaid, so there's more complexity in lots of billing that we experience with the postpaid migration from AT&T. So those three things makes it a lot easier.
Inge: But to be sure as well, we do have some things that we are working on, because there are a number of handsets that work on the DISH network, it's actually the T-Mobile network, that may not work in our Ericsson network.
Inge: So, in that sense, our technical teams are going to work very closely, and the handset compatibility is probably the only thing I am really concerned about in that migration.
Thanks. Very useful. Thank you.
Speaker Change: Thank you, the next question goes to Matthew Harrigan of The Benchmark Company. Matthew please go ahead.
from 3rd Vocal League.
Speaker Change: Can you talk about, you know, you had, I think at one point you were well above.
70% on the U.S. dollar composition, or de facto.
Speaker Change: Tag to the Dollar. Can you talk about, update us on that, and also...
Any implications in your capital structure for that?
Speaker Change: and then any operating implications obviously to make, I don't think to make this peg. So presumably you'd have a good tourism bump there and then you'd have the countervailing effect on the translation. But how are you thinking about your business if we did have a significantly stronger dollar? Thank you.
Hey, Matthew.
Speaker Change: We haven't put lots of analysis behind this. I'll say a few things. As you pointed out, we're already in the 70s, high 70s on US dollars. So exposure is a lot less. We don't have Chilean pesos and stuff like that, right? Where it's very volatile. But having said that, Chris Noyes and our treasury team has hedged.
Speaker Change: We not only hedge the cost, but we also hedge the currency on it, and most of where we operate that is sufficient liquidity to do that. There are a couple exceptions, but it's not needle moving to us.
Speaker Change: And so on the currency side, the only thing I would say with the new elections is that the president-elect
Speaker Change: have publicly indicated that he is going to try to to look at a weaker US dollar going forward how he does it who knows but you know that that of course is You know it could be helpful. What could not be helpful is high tariffs
Speaker Change: because we do import a lot of equipment and equipment from Asia, especially for CPE.
Speaker Change: There's equipment on handsets. There's equipment on network equipment. That, I think, is wait and see, and we'll learn more. We're not adjusting any of our internal budgets to reflect any of this.
Speaker Change: but it's one that we are going to be watching closely.
Chris Noyes: Chris, do you want to add anything? Yeah, I would say, Matt, when you look at our portfolio of operating assets, it's really, you know, Jamaica and Costa Rica are the two that float.
Barrage.
Chris Noyes: Most of our other businesses are U.S. dollar or U.S. dollar PEG linked.
Chris Noyes: etc. So we have just a little bit of exposure there. The Costa Rica, Costa Rica has been particularly stable and has actually been strengthened over the last two years and similarly Jamaica has been you know quite a nice currency over the last five years, hasn't depreciated much.
Chris Noyes: So I think we feel really good from the mix of assets that we have, and we do hedge from a forward perspective.
Chris Noyes: when we do have mismatches, and then where we can, you know, we'll hedge, you know, components of the debt payment.
Thank you.
Yep, thanks Matt.
Speaker Change: Thank you. That will now conclude today's question and answer session. I'd like to hand back to Balan Nair for any additional or closing remarks.
Balan Nair: Thank you, operator, and maybe I'll say a couple of things before we close. One,
Balan Nair: Clearly, we were all surprised here in the management team on the performance in Puerto Rico between the last quarter and this quarter.
Chris Noyes: There were a number of reasons for that surprise, some of the post-migration customers that came over was not what we thought it was, and we learned a lot during that period. Rest assured, this management team is focused on recovering those losses.
The future, I think, in Puerto Rico.
It's really bright.
Chris Noyes: Some have asked me if I had to do that transaction all over again, would I have done it? I would.
clearly in the migration we are a lot smarter about
when you buy something from a very large corporation where
Chris Noyes: you know, very different than how we would run a business. There are lots of complexities that we did not anticipate. But I can tell you this, we've learned a lot and we are going to fix a lot of the problems.
Chris Noyes: We are already seeing the green shoots. We're going to solve this with
top line growth, and cost-cutting.
Chris Noyes: and then we'll get afterwards. Now the remaining part of our business, you can see all the hard work that we did is paying off. A lot of complex transactions there as well. Buying something from Claro and integrating it in Panama. Buying something from Telefonica and integrating it in Costa Rica.
Chris Noyes: the cost cutting that my management team has done in Liberty, Caribbean, the opportunities of investment in both Peru. And I can tell you, I'm really excited about our subsea network and our general manager that runs it.
Chris Noyes: This new network that we are building that will create huge opportunities in 27. So we are planting the seeds for future growth.
Chris Noyes: We've already improved a lot of our operations and growing them. We have one operation right now that's challenging, and we're going to fix through it and get through it, and we're going to grow that as well. From that sense, I can tell you we are really excited and bullish about the future. And I thank you for your support.
Thank you.
Speaker Change: There you can also find a copy of today's presentation materials. Thank you, you may now disconnect your lines.
[music]