Full Year 2024 Liberty Latin America Ltd Earnings Call
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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 Asad Nabi, BP IT business partner, Liberty Latin America.
Good morning and welcome to Liberty Latin America's full year 2024 investor call.
At this time, all participants are in lesson-only mode.
Following today's formal presentation, instructions will be given for a question-and-answer session. As a reminder, this call is being recorded.
Today's remarks may include forward-looking statements, including the company's expectations with respect to its outlook.
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.
For more information, please refer to the risk factors discussed in Liberty Latin America's most recently filed annual report on Form 10-K, along with the associated press release.
Liberty Latin America disclaims any obligation to update any forward-looking statement or information to reflect any change in its expectations or in the conditions on which any such statements or information is based.
In addition, on this call, we will refer to certain non-GAAP financial measures.
which are reconciled to the most comparable gap financial measures.
which can be found in the appendices to this presentation, which is accessible under the investor 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, Asad, and welcome everybody to Liberty Latin America's fourth quarter and year-end 2024 results presentation.
Speaker Change: I'll begin with a 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'll get straight to your questions.
Speaker Change: As always, I am joined by my executive team from across our operations, and I will invite them to contribute as needed during the Q&A following our prepared remarks.
Speaker Change: As a point of housekeeping, we will both be working from slides, which you can find on our website at www.lla.com.
Speaker Change: starting on slide four and our highlights for the year. We grew our fixed and mobile basis throughout the year, adding nearly 100,000 subscribers in total.
Speaker Change: Broadband and post-paid performance was particularly robust, with over 260,000 ads in 2024, excluding Puerto Rico.
Speaker Change: This represents an increase of 9% and shows the potential for volume growth in our region.
Speaker Change: We reported adjusted OEBDA of $1.6 billion in the year, and this was driven by strong year-over-year rebase growth in CNW Caribbean and Costa Rica, and double-digit rebase growth in CNW Panama.
Speaker Change: After a challenging 2024, we are committed to making progress in rebuilding Puerto Rico over the coming quarters.
Speaker Change: We continued investing in our networks with approximately 400,000 homes passed or upgraded to fiber-to-the-home. 97% of our footprint is now gigabit ready, exceeding the target we previously set.
Speaker Change: Finally, we have been making important strides to future-proof our capital structure.
Speaker Change: In the past six months, we have successfully refinanced 3.3 billion of CNW debt.
Speaker Change: Over 75% of the siloed debt is now maturing in 2032 and beyond, in line with our financing principle of maintaining a long-dated capital structure.
Speaker Change: Turning to slide 5, I'll begin our operating review with C&W Caribbean, where we delivered operating momentum in mobile postpaid and strong financial execution.
Speaker Change: starting on the left of the slide with our subscriber ads.
Speaker Change: Full year 2024 broadband ads were negatively impacted by Hurricane Beryl, primarily in Jamaica.
Speaker Change: In Q3, we saw the immediate impact of the storm with 16,000 broadband losses. And in Q4, we lost a further 11,000 broadband RGUs, mainly related to the disconnection of non-paying customers.
Speaker Change: Adjusting for this event we would have added 7,000 broadband subscribers in Q4 and 18,000 for the year.
Speaker Change: In mobile, our positive post-pay performance continued in Q4, with 43,000 net ads in 2024. Our post-pay base increased by 14% year-over-year, driven by Jamaica.
Speaker Change: Moving to the center of the slide and now revenue by product.
Speaker Change: The pie chart depicts the well-diversified nature of CNW Caribbean's revenue with B2B and consumer fixed, the largest element, followed by consumer mobile.
Speaker Change: In our Caribbean market, the operating environment is constructive as we primarily compete in duopolies, where we are often the leading player.
Speaker Change: Rebase revenue grew 2% year-over-year driven by double-digit growth in postpaid revenue and supported by successful price increases in fixed and mobile across our main markets.
Speaker Change: Overall, 2024 was a strong operational year for CNW Caribbean, with cost efficiencies driving nearly 200 basis points of margin expansion.
Speaker Change: As Chris will come on to, we expect operational leverage to continue to be a focus and driver of adjusted oibida growth in 2025.
Moving to slide six in our CNW Panama segment.
Speaker Change: Starting on the left of the slide, we continued our broadband momentum in 2024, adding 23,000 subscribers, which was 10% higher year over year.
Speaker Change: We have been investing in our network, expanding and upgrading with FTTH home passings, and I'm pleased to say that only 2% of our footprint is now covered by copper, with most of this to be decommissioned by the end of this year.
Speaker Change: In mobile, we had a record year reporting 78,000 postpaid ads driven by a successful acquisition campaign following the exit of a competitor.
Speaker Change: an increase in FMC penetration, and a focus on prepaid to postpaid migration.
Speaker Change: Moving to the center of the slide and our revenue streams, which in aggregate drove our top line 3% higher in the year.
Speaker Change: Growth was driven by mobile and fixed products, which were up by 7% and 4% respectively.
Speaker Change: Mobile Growth benefited from a larger subscriber base and pricing actions we took throughout the year.
Speaker Change: In FIX, performance was driven by double-digit growth in broadband revenue following higher volume from our successful commercial strategy, including a focus on triple-play plans which now represent nearly 60% of our customer base.
Speaker Change: After the exit of a competitor in 2024, the market structure became primarily a duopoly in both fixed and mobile with Tego. We are number one in mobile and the challenging fixed where we see great potential.
Speaker Change: Finally, we posted double-digit adjusted OEBIDA rebase growth year-on-year driven by cost efficiencies and the full-year benefit of synergies from the Claro Panama acquisition.
turning to slide 7 and Liberty, Costa Rica.
Speaker Change: starting on the left of the slide. We saw consistent quarterly broadband ads throughout the year in what is our most competitive fixed market.
Speaker Change: We continue to expand our footprint, adding over 170,000 fiber-to-the-home homes passed in 2024.
and taking our total network to 830,000 homes passed.
Speaker Change: We now have 45% of our network on FTTH, more than double the 20% of a year ago, and exceeding the 40% target communicated last year.
Speaker Change: In mobile, we were once again successful growing our base. We added 114,000 postpaid subscribers in the year for 31% year-over-year increase.
Speaker Change: We also secured a total of 570 MHz of spectrum across four different bands in an auction completed earlier this year.
Speaker Change: We are pleased with the results as we were awarded the amount of incremental spectrum that we were asking.
Speaker Change: which will enable us to enhance and grow our 5G networks and increasing capacity and speeds.
Speaker Change: Moving to the center of the slide, Consumer Mobile remains our largest product with 60% share of revenue.
Speaker Change: This is followed by a consumer fixed business representing just under 30% and then a small but fast growing B2B operations.
Speaker Change: Costa Rica is our most competitive fixed market with five nationwide players while in mobile we compete against two other operators
Speaker Change: Overall, I am very pleased with our performance and future growth prospects in Costa Rica as we await for approval of our proposed merger with DECO, which we expect to close towards the end of the year.
Thank you for watching!
Moving to slide 8 in our Liberty Networks segment.
Speaker Change: This continues to be a great business for us, with exceptional free cash flow generation.
Speaker Change: To provide some visibility of the underlying trends in the business, on the left side of the slide we present revenue broken down by lines of business.
Speaker Change: Enterprise has been the faster grower up 9% year-over-year driven by growth in IT as a service and connectivity especially in Colombia, Dominican Republic and Honduras.
Speaker Change: Wholesale reported figures continue to be challenged by the impact of non-cash IRU declines totaling 18 million year-over-year. This headwind is progressively reducing as IRUs are replaced by lease capacity sales.
Speaker Change: Full year rebates revenue declined by 2%, but excluding the impact of IRUs, it would have been up by 2%.
Speaker Change: Lastly, we are finalizing contract terms to commence the construction of Manta, our subsea cable system project in collaboration with Sparkle, owned by Telecom Italia and Goldata.
Next, to slide nine and Liberty, Puerto Rico.
Speaker Change: starting on the left of the slide. In Q4, we added 5,000 fixed RGUs with broadband mostly flat.
Speaker Change: Adjusting for the impact of the discontinuation of ACP, we would have delivered an increased 7,000 broadband RGUs this year.
Speaker Change: Earlier this year we also put through an annual pricing increase for a fixed base which should underpin revenue performance.
Speaker Change: Our business continues to invest in products and infrastructure with 55,000 homes passed or upgraded to FDTH in the year.
Speaker Change: We also made material progress towards making our network gigabit ready. At the end of 2024, over 90% of our HFC homes were on DOCSIS 3.1, more than a 30 percentage point increase compared to the previous year.
Speaker Change: Overall, our network is now capable of delivering speeds of 1 gigabit per second or more on 95% of our footprint.
Speaker Change: As a testament to the strength of our network, UCLA recently confirmed Liberty as having Puerto Rico's fastest network.
Speaker Change: Turning to mobile, we had a challenging year in Post B.
with ECF disconnections exacerbating losses caused by the migration.
Speaker Change: In prepaid, our momentum continued in Q4 with a third consecutive quarter of net ads. As we integrate the EchoStar distribution network in the coming months, we aim to build on this trend in a segment where there is significant opportunity.
Speaker Change: For POSPE, performance has been improving and Q4 losses more than halved sequentially.
Speaker Change: We also observed improvements in other key operating indicators, such as NPS, which I will cover in the next slide.
Speaker Change: However, there is more work to do here, and we are focused on returning to net ads as quickly as possible.
Speaker Change: In the center of the slide, we show the revenue mix in Puerto Rico and our overall top line decline versus 2023.
Speaker Change: mainly driven by the subscriber reduction we experienced over the course of the year.
Speaker Change: On slide 10, we wanted to show postpaid net ads and mobile NPS evolution over the past three years.
Speaker Change: On the left side of the slide, we break down activity into gross ads and disconnects.
Speaker Change: Gross ads have been relatively stable over the past three years showing the underlying strength of our product offering.
Speaker Change: This includes the migration-related destructions in 2024, when our sales force was redeployed to focus on customer care.
Speaker Change: Looking forward we see an opportunity to offer bespoke and converged offerings to drive additions.
Speaker Change: Conversely, churn increased materially during the migration period, driven primarily by billing issues as we moved to new IT platforms, as well as the termination of the ECF program.
Speaker Change: In the past two quarters, we have seen our efforts to improve this metric drive lower disconnects and a reversal of the negative trend, a key component we strive for NetAdds.
Speaker Change: On the right of the slide, we show NPS progression, which is a leading performance metric we monitor closely.
Speaker Change: The graph depicts the evolution of this metric since the beginning of Q1 2022 when our NPS was at similar levels as of today.
Speaker Change: Following Hurricane Fiona and Q3 22, we recorded an improvement in the score as our customers recognized the reliability of our networks and our efforts to support our local communities in a time of crisis.
Speaker Change: Finally, as we discussed during our Q3 call, we are now getting back to pre- migration levels and 50 points better compared to the migration lows.
Speaker Change: undeniably. 2024 is a very challenging year for us in Puerto Rico and with hindsight we underestimated how difficult the migration and recovery would be.
Speaker Change: However, our business still has a unique combination of leading mobile and fixed infrastructure.
and we are determined to rebuild this business in 2025.
Speaker Change: Our strategy is simple. We are going back to basics. We're going to grow the top line, leveraging our best-in-class networks and FMC capabilities, and focusing on customer care and churn reduction.
Speaker Change: We're going to recover margin exercising cost controls through efficiency initiatives.
Speaker Change: And we're going to preserve liquidity, reducing capital intensity as our fixed network is well invested and future proof with 95% of our footprint being gigabit ready and our mobile network continues to be the most reliable on the island.
Speaker Change: Moving to slide 11 and an overview of our infrastructure assets.
Speaker Change: On the left of the slide you can see that across our consumer markets 97% of our networks can support very high speed through either HFC or fiber-to-the-home.
Speaker Change: We continue to build fiber and migrate our customers from copper to fiber technology.
Speaker Change: Over the past year alone, our fiber-to-the-home proportion has increased by 9 percentage points.
as we expanded our footprint and upgraded our copper plant.
Speaker Change: Having begun our journey with 7% of our network at this standard in 2018, we advanced in 2024 and anticipated further progress this year.
Speaker Change: On the right of the slide, we show fixed and mobile network information by market.
Speaker Change: Notably, we are 100% fiber in Barbados and the majority of our footprint is FTTH in Panama, Jamaica and the Bahamas, with great strides made in Costa Rica where we ended the year with 45% fiber, more than double where we were a year ago.
Speaker Change: During 2024, we also launched 5G in 3 more markets for a total of 5, with all the remaining ones operating on LTE.
Speaker Change: Overall, I'm proud to say that we have some of the best in-class networks across the regions as recognized by the loyalty of customers as well as external parties.
Speaker Change: BTC in the Bahamas secured award from Ookla for the best fixed network, fastest fixed network, best fixed gaming experience, and best mobile video experience.
Speaker Change: MassMobile and Panama are among the fastest fixed and mobile networks according to Ookla.
Speaker Change: Liberty Puerto Rico was named the island's fastest fixed network by UCLU for the 8th consecutive year and the most reliable mobile network by Global Wireless Solutions for the 17th consecutive year.
Speaker Change: Finally, to slide 12, in our strategic focus areas, recognizing progress made in 2024 and focus areas for 2025 driving towards longer term shareholder value creation.
Speaker Change: These priorities are split across three pillars and consistent with those we have previously identified.
Speaker Change: First, network and IT. We are investing in leading infrastructure to support our customers in the region as I covered on the previous slide.
Speaker Change: We will continue to do this, while at the same time having an opportunity to reduce our capital intensity, as Chris will cover in his section.
Second, our commercial strategy.
Speaker Change: We saw traction across our CONVERGE office, closing the year with over 30% FMC penetration in Panama, Jamaica and Costa Rica, which represents an increase of between 6 and 8 percentage points year over year.
Speaker Change: In 2025, we will focus on driving penetrations through fresh converged offerings.
Speaker Change: In 2024, we successfully completed price increases in both fixed and mobile processor main markets.
return in line or below expectations.
Speaker Change: This will provide a lever to drive top-line future in future years.
Speaker Change: We believe that delivering a strong digital platform is vital to meeting our customers where they want to interact with us, improving their customer journey and a driver of cost efficiency.
In 2024, we achieved 25% digital sales across the group.
Speaker Change: exceeding our goal for the year and our target is to approach the 30s in 2025.
Speaker Change: I also want to note that we continue to see significant opportunity to grow our B2B business in the region.
Speaker Change: including through targeting specific segments such as hospitality where we can leverage our leading infrastructure and balance sheet strength.
Speaker Change: In 2024, we reinforce our mobile operations in Puerto Rico by completing the acquisition of Spectrum and subscribers from EchoStar.
Speaker Change: We started the process of future-proofing our capital structure at CMW, which we have now completed.
Speaker Change: We invested over $300 million in our equity through the redemption of the remainder of our convertible note and stock purchases.
Speaker Change: in 2025, our operational priority will be rebuilding Liberty, Puerto Rico.
Speaker Change: In addition, we believe we have a substantial margin opportunity across our business and are working on several cost reduction initiatives to increase operational leverage, as Chris will cover in more detail in his sections.
Speaker Change: This was a success story in 2024 and will provide further tailwinds in the coming years.
Finally, we are excited about our opportunities in Peru.
Speaker Change: The business finished the year with over 3.1 million homes passed and approximately half a million internet RGUs.
Speaker Change: According to the latest data from the regulator, WOW is the fastest growing broadband provider in Peru.
Speaker Change: Overall, we appreciate the overhang Liberty Puerto Rico has created, and it is on us to demonstrate value.
Speaker Change: But I tell you, we still believe that the true worth of our company is not reflected in the current stock price.
Speaker Change: With that, I'll pass you over to Chris Noyes, our Chief Financial Officer, who will talk you through our financial performance before we take your questions.
Chris!
Thanks, Balan.
Speaker Change: I will start by running through our key metrics, focusing on Q4 performance. Sequentially, Q4 revenue improved $61 million to $1.15 billion, as compared to Q3, with each of our operating segments delivering increases.
Speaker Change: while CWP and Liberty Costa Rica accounted for the largest moves on the back of B2B. In addition, both C&W Caribbean and Liberty Puerto Rico were up sequentially.
Speaker Change: Year over year, Q4 revenue was 2% lower on a rebase basis, as organic growth in Liberty, Costa Rica, C&W Caribbean, and C&W Panama was more than offset by declines in Liberty, Puerto Rico, and Liberty Networks.
Speaker Change: At the bottom of the slide, Q4 adjusted OIVD of $427 million, increased 6% sequentially on a reported basis, and was lowered by 2% on a year-over-year rebate basis.
Slide 15 recaps our segment results for Q4.
Speaker Change: Starting with CNW Caribbean, we've reported $371 million of revenue in Q4, reflecting 2% year-over-year rebase growth.
Speaker Change: The primary driver of our top-line performance was residential mobile, which grew 7% year-over-year, helped in large part by the continued growth in our postpaid base, with 43,000 postpaid additions since the beginning of 2024, and higher ARPU following price increases, primarily in Jamaica.
Speaker Change: Adjusted OivaDA expanded in Q4 to 168 million dollars for 6% rebase growth. Sequentially, Adjusted OivaDA grew by 7% on a reported basis.
Speaker Change: For revenue, adjusted OEBDA and P&E additions in Q4, we estimate that the business was impacted by the aftermath of Hurricane Beryl to the tune of $5 million, $6 million, and $9 million, respectively.
Next, moving to cable and wireless Panama.
Speaker Change: CWP generated $209 million of revenue, representing 1% year-over-year rebates growth.
Speaker Change: Mobile residential revenue was up by 20%, primarily driven by subscription enhanced equipment growth following the addition of 78,000 postpaid subscribers over the last 12 months and improved prepaid ARPU as our products and promotions led to increased recharge activity.
Speaker Change: Mobile residential revenue growth was partly offset by a 13% decrease in B2B revenue driven by lower revenue from government related projects, some of which we anticipate will come through in 2025.
Speaker Change: We posted 79 million dollars of adjusted OEBDA in Q4 for 19% year-on-year rebase growth driven by product mix and synergies from the Claro Panama acquisition.
Adjusted OEBDA was 16% higher sequentially on a reported basis.
Speaker Change: Turning to Liberty Networks, we generated 110 million dollars in revenue and 61 million dollars in adjusted OEBDA on Q4, resulting in a rebase decline of 2% for revenue and flat adjusted OEBDA performance.
Speaker Change: Top line was driven by lower wholesale network revenue as compared to the prior year period when we won a significant new contract.
Speaker Change: This was partly offset by higher enterprise revenue due primarily to continued growth in managed services and B2B connectivity.
Sequentially, adjusted oibida growth was 3% on a reported basis.
Second from the right, Liberty Puerto Rico.
Speaker Change: Q4 revenue was $317 million, reflecting a 13% rebate decline year-over-year. Residential fixed revenue declined by 2% year-over-year, primarily due to lower ARPU caused by retention-related discounts.
Speaker Change: Residential mobile revenue was 20% lower compared to the prior year period. This was driven by a reduction in mobile subscribers and ARPU year-over-year, impacted by disruption related to the migration of customers to our mobile network and lower equipment sales due to promotional activities.
Speaker Change: B2B revenue declined by 21% year-over-year, primarily reflecting the cancellation of the FCC's Emergency Connectivity Fund, which led to a reduction of 61,000 mobile postpaid subs over the past year.
Speaker Change: as well as a reduction in subscribers related to migration challenges and associated credits issued for billing adjustments.
Speaker Change: We reported $80 million in adjusted OEBDOT during the quarter representing a rebase decline of 24% as compared to Q4 2023.
Speaker Change: The performance was driven by the impact of our revenue decline and increased bad debt charges, partly offset by lower other operating costs and expenses due to the termination of our TSA with AT&T following migration, and lower staff costs due to efficiency programs.
Speaker Change: Sequentially, adjusted OEBDA declined 9% or $8 million on a reported basis.
Speaker Change: We had expected a sequential increase in adjusted OEBDA in Q4.
Speaker Change: However, we had a $10 million increase in bad debt in Q4 to further reserve for receivables from migrated customers that had previously churned, including a higher than normal default rate on equipment installment receivables.
Speaker Change: Additionally, we provided incremental credits to customers in the quarter related primarily to billing corrections post-migration.
Speaker Change: Concluding with Costa Rica on the far right, we delivered Q4 revenue of $168 million and adjusted OEBDA of $67 million, reflecting 9% rebased revenue growth and 11% rebased growth in adjusted OEBDA.
Speaker Change: The year-over-year rebates performance was mainly driven by higher mobile revenue, primarily due to post-paid subscriber growth.
adjusted Oividok grew by 32% sequentially on a reported basis.
Speaker Change: Turning to slide 16, we incurred P&E additions of 725 million dollars or 16 percent of revenue in line with our annual target. During 2024 we passed or upgraded approximately 400,000 homes including more than 90,000 in Q4.
Speaker Change: In addition, we launched 5G across several markets during the year. In terms of spend by category,
Speaker Change: CPE represented 22% and new build upgrade and capacity accounted for 22% and 14% of fiscal year 2024 total spend, respectively.
Speaker Change: As it pertains to P&E additions across the group, we are focused on bringing annual overall spend down to 14% over the next few years, as we benefit in part from lower infrastructure deployment.
Speaker Change: Looking at adjusted FCF before partner distributions, we delivered a robust Q4 of $196 million, bringing our full year to $116 million.
Speaker Change: Our annual result was constrained by Puerto Rico performance and taxes related to the tower transaction.
Speaker Change: However, we are well positioned at LLA for significant adjusted FCF acceleration over the next two years.
Speaker Change: Moving to slide 17, we have been focused on improving our margins across our operations through revenue growth together with cost-saving initiatives and CapEx discipline.
Speaker Change: We wanted to highlight two of our best performing operations in 2024, CNW Caribbean and CWP, both of which are poised for further improvement in 2025.
Speaker Change: First, in C&W Caribbean, we increased our adjusted OEBDA and adjusted OEBDA-LSP&E addition margins by 180 basis points to 43.3% and 260 basis points to 27.8% respectively.
Speaker Change: On adjusted OEBDA, we reduced our direct and indirect operating costs by $7 million year-over-year, in part due to renegotiation of vendor contracts, automation initiatives, and sales channel transformation.
Speaker Change: We also improved our P&E additions to revenue by 90 basis points to 15.5% and we see it going lower in 2025.
Speaker Change: Second, in cable and wireless Panama, Adjusted Oividal Margin increased by 470 basis points during 2024, driven by revenue expansion, together with $21 million of lower direct and indirect costs, primarily from synergies obtained after the Clara Panama acquisition, combined with labor cost reduction.
Speaker Change: Additionally, our adjusted OEBDALS P&E additions margin was up 670 basis points in 2024 as compared to 2023, helped in part by P&E additions as a percent of revenue lowered by 200 basis points year-over-year.
Speaker Change: Across our operating segments, we believe achieving greater than 30% adjusted OEBDA LSP&E additions as a percent of revenue is a worthy operating objective over time, with the exceptions of our networks business, which is already over 40%.
Speaker Change: Turning to slide 18, adjusted for the recent CNW transactions, we finished 2024 with $8.2 billion of debt and roughly $700 million of cash. With adjusted OEBDON, adjusted FCF expanding in Q4, our LLA net leverage sequentially decreased from 4.8 times at Q3 to 4.5 times at Q4.
Speaker Change: A primary focus of ours over the past six months has been to significantly term out our largest credit silo, which is C&W. As a reminder, the standalone silo consists of three of our operating segments, the Caribbean, Panama, and Networks.
Speaker Change: We completed three transactions, $1 billion in senior secure notes during Q4, and $1.5 billion in term loans and $755 million in senior notes post-year end.
Speaker Change: The CNW Credit Silo's maturity profiles pre- and post-refinancing are highlighted in the two charts and clearly show the significant improvement in weighted average life.
Speaker Change: For the silo, we now have an approximate weighted average life of six and a half years with more than 75% of our silo debt maturing in 2032 and beyond.
Speaker Change: Not shown, but adjusting for the refinancing, LLA on a consolidated basis has close to 70% of its debt due 2029 and beyond.
Balan Nair: Moving to the final slide and our closing remarks. As Balan highlighted, subscriber losses in Puerto Rico have begun to moderate. We are strengthening our CVPs and further improving our retention efforts on postpaid mobile. Our fixed and prepaid business lines have been moving in the right direction.
Balan Nair: Obviously we still have work to do on improving operations in Puerto Rico and it is a significant focus of both local and LLA management.
Balan Nair: We are actively engaged in driving OPEX lower through efficiency gains and expect our efforts to build throughout the year. This is a key component, combined with subscriber performance, to enable us to return to adjusted OEBDA growth in the near term.
Balan Nair: Beyond Puerto Rico our other operations are executing well. We continue to build subscriber volumes through our FMC plans and other strategies that target both broadband and postpaid volumes.
Balan Nair: As I highlighted, we believe our Caribbean and Central American businesses have significant opportunity to further drive margin expansion, as our efforts in 2024 will carry over in 2025, and we continue to find ways to improve our service delivery and customer journeys.
Balan Nair: Additionally, we believe the completion of the TIGO Costa Rica transaction will be quite value accretive given the synergy opportunity. As we flagged earlier, our Peruvian investment has gained considerable scale quickly and certainly presents us with a range of attractive strategic and operating options.
Balan Nair: To recap, 2024 is a tough year for us given the PR migration, but our other businesses performed well, demonstrating resilience and growth.
Balan Nair: Key for us in 2025 is to drive both adjusted OEBDA and FCF growth across the company as well as continue to reduce our leverage levels through adjusted OEBDA expansion.
Balan Nair: We remain focused on achieving our previously announced three-year guidance targets on adjusted OEBDA and adjusted SCF before partner distributions.
Balan Nair: and as noted earlier, we'll look to drive capital intensity lower. With eight quarters to go, we're obviously behind where we hoped to be after year one, given Puerto Rico. So driving outperformance in other businesses and returning Puerto Rico to sustain growth are critical.
Balan Nair: Notwithstanding at LLA, we feel very good about our 2025 prospects overall and have good momentum carrying into the year. 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, 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 ask only one question with one follow-up if needed. If you're using a speakerphone, 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.
Thank you for watching!
Speaker Change: Our first question will be from the line of Michael Rollins with Citigroup. Please go ahead, your line is open.
Michael Rollins: Thanks and good morning. A couple questions on Puerto Rico. The first, you mentioned the bad debt picked up in the fourth quarter. I'm curious, does that infer that churn could be worse in the first quarter before it gets better as that bad debt could just churn into some disconnect risk?
Michael Rollins: And then within that, if you're able just to share, if you have some visibility, I think you did mention that you're expecting trends to get better. You know, what are you seeing in the details of the analytics on your customers that are encouraging in terms of, you know, where that performance.
Speaker Change: may be going. And then just secondly, also on Puerto Rico, you previously described, I believe, a monthly EBITDA target of 45 million. Curious if you could give us an update on whether that's still the target that Liberty is pursuing.
Speaker Change: and, you know, what's the trend to get there, whether it's in the first quarter or over the course of 25. Thank you.
Speaker Change: Sure. Good morning, everybody. Thanks. Good questions. On the bad debt, you know, the bad debt issue was really a catch-up. We did record the churn, first quarter, second quarter, you saw the numbers.
Speaker Change: And there was an element in the bet that we had to catch up relative, not so much the subscriber.
Speaker Change: The handset that they owe us on left us and our ability to collect them, as it turns out, was quite challenging.
Speaker Change: and so there was a bunch of hints that really catch up which is what happened and and we think we've got that mostly under control but it's something that was the leakage that happened to us.
Speaker Change: And two ways that we are trying to fix that, of course, clearly one with the collection agencies and the credit ratings, and two, a better way in our process when somebody ports out from our base.
Speaker Change: So, a lot of the bad debt issues, but not so much whether we did capture the right amount of churn, it's just the right amount of leakage was not captured.
Speaker Change: Secondly, on green shoots, you saw the numbers on NPS. NPS is kind of a leading indicator. Usually, it's a couple of months before it actually shows up operating-wise.
But the trends are very positive.
One of the leading
Speaker Change: problems for us in our customer dissatisfaction was not so much just the technology in our IT systems but some of the processes that we had in actually capturing the right billing amount for our customers.
Speaker Change: and there were a lot of credits going back and forth.
Speaker Change: When we migrated customers from AT&T, there were a lot of failures in the way the data was transferred to us. So in our systems, we didn't capture some of the discounts that our customers were enjoying in the prior billing systems.
Speaker Change: So in the new billing system, some of the codes or the discounts were not there, so it's not so much a technology issue, it was a data transfer issue when we did the migration, and we're catching up on that as well. So you're fixing a lot of the billing issues. We've seen the NPS improve.
Speaker Change: You saw me talk about our coverage in Puerto Rico. We have the best network. And may I highlight, you know, when you look at the NPS numbers,
You saw that the big jump.
Speaker Change: in 23, and a big part of that is really coming, sorry, 22, a big part of that's coming from the hurricane recovery, which shows two things. One,
Speaker Change: Our commitment to the island, but two, our network was actually one of the best networks because we have batteries everywhere. During the hurricanes, we were the ones that stopped.
Speaker Change: And our network continues to be the best network. And so we just need to capture that. The best fixed network, the best mobile network, we gotta fix a lot of the basics, and then we go out with a good proposition for our customers. So we've seen some green shoots there as well.
Speaker Change: Now to your last question on the 45 million in EBITDA.
Speaker Change: You know, I think in the last call I indicated, you know, there's a lot of things that we need to fix in Puerto Rico, a lot of the back office systems. I just talked about the customer experience as well. So there's a number of moving parts here, which is why I said, you know what, I'm not going to give any more guidance on it.
Speaker Change: But since you asked me, I'll tell you that our target is to get to a four-handle back again on EBITDA. You clearly saw we didn't do that in the fourth quarter, but the target is to get back into a four-handle and the team is quite focused on that.
Thank you. Thank you.
Thank you.
Speaker Change: Our next question will be from the line of Vito Tomita with Goldman Sachs. Please go ahead, your line is now open.
Vito Tomita: Hello, good morning all and thanks for taking our questions. Two quick questions. The first one is on the CapEx guidance. If you could give us a little more color on the rationale for it.
Speaker Change: to reduce capexious cells to a level that is lower than most cells globally or in the region.
Speaker Change: Just to confirm, my understanding is that the goal is to approach 13% in 2025 and 2026.
to average out 14% in the three-year guidance period.
Correct me if I got these wrong.
Speaker Change: Have you been able to achieve a planned network improvement with less cash than expected, or is this mostly driven by reprioritizing projects that you had planned?
Speaker Change: And should we see this as a more temporary reduction over the last few years to build up cash flow? Or do you see this level as sustainable in the longer run?
Speaker Change: And our second question would be on Puerto Rico. You discussed a bit that that impact related to...
Speaker Change: with equipment installment sales, mostly related to past sales in the context of the migration. And also, the earnings release cites some bidding adjustments in to B2B clients that were also relevant to B2B revenue reduction in the quarter.
Speaker Change: Can you give some more color on how relevant those were for Q4, since those are impacts that I believe maybe might not have to expect in Q1. Thank you very much.
Speaker Change: Sure. On the first one, on the CAPEX guidance, I think what we plan on doing and what we meant to say is that it's going to drop to 14%.
Speaker Change: and we may get to 13% in 26, but my goal is to do 14, 14, that's the plan.
Speaker Change: and the reason we could drop by two points is one, a lot of our bills and upgrades and primarily the upgrades from our copper plant is complete.
Speaker Change: Yeah, we just have some stragglers left, but it's mostly complete. This is like a six-year project.
Speaker Change: Secondly, we've expanded our mobile networks as well. When we took over this business, we were literally less than 50% LTE.
Speaker Change: So we've upgraded LTE and we've upgraded to 5G in a key market.
Speaker Change: I don't expect us to do many other 5G upgrades in the next 24 months.
partly because in a lot of these other locations...
Speaker Change: Even the handsets are not even 5G. It's like 60, 70% of the handsets are not 5G. As a matter of fact, we still have a whole bunch of 3G handsets in those areas. So it makes no sense for us to do a 5G upgrade. So for where I wanna upgrade my mobile network, my fixed network, we've done it.
Speaker Change: Now, listen, when we did the fiber-to-the-home upgrades, the strategy was very clear. It's to upgrade from a copper twisted plant, twisted copper plant.
Speaker Change: not from our HFC, even though we've done some of that in Puerto Rico and Costa Rica. But going forward, I think we have a great network already. The second part of where the CAPEX helps us as well is our CPE. Our cost of CPE continues to drop.
Speaker Change: And our focus right now is on mobile. You'll see, and you saw in our numbers, our growth is in post-paid. And that's a lot less capital intensive. So when we look at our numbers.
14%
Speaker Change: This is going to be a good year in investment and running the business with that number.
Speaker Change: and of course clearly it also is going to contribute to it the free cash flow guidance.
Speaker Change: Now, on your question on the EIP in Puerto Rico and...
and the B2B.
Speaker Change: I think the way you should think about this on the B2B side, it's mostly on credits. So for some of our large customers, we give them credits during the period.
Speaker Change: And this is in reflection of some of the, you know, errors in our billing systems. But for the most part, most of the credits are all tapering off. So I don't expect to see big adjustments in the first quarter.
Speaker Change: We feel, I think, on a good trajectory for the next four quarters. There may be still a little bit of noise, but not to the extent that you saw in 2024 on any adjustments like that. And then we're going to try to wean off a lot of the credits that we've been giving out to fix some of the setbacks we had in our billing systems.
Speaker Change: And then on the EIP, I think we've got a lot of work going on in our teams. We just recently, just this last week, loaded up again to the credit agencies.
you know, loads of customers that.
Speaker Change: have taken our handsets and not paid us for it. So work is going on on that front. And...
Speaker Change: You know, 24, I think we're going to go into 20, sorry 25, going into 25 with a lot better operating principles than we did in 24.
Thank you.
All right, thank you very much.
Thank you for watching!
Speaker Change: Our next question will be from the line of Andres Coelho with Scotiabank. Please go ahead, your line is open.
Thank you. So, there's been a number of press articles...
Speaker Change: mentioning LLA as interested in a number of M&A transactions in the region. I think that there was an article saying that you could sell your Puerto Rico business to Verizon. And there were other articles saying that you could buy the Telefónica businesses in Argentina and Peru.
Speaker Change: So I'm wondering what are your thoughts on M&A for this year. Thank you.
Speaker Change: Thank you, Andres. On the Puerto Rico rumors, we came out and said we don't confirm or deny.
and many more. Thank you.
Speaker Change: listen if you were going to do something I would have said something on this call there's nothing going on there you know we are focused on fixing the business
Speaker Change: staging a really nice comeback in Puerto Rico. That is our plan.
Speaker Change: And clearly, if you look at our EBITDA right now, it's suboptimal for me to trade that asset at this point.
Speaker Change: We are going to fix it, we're going to grow that EBITDA, and I think it's going to be a great asset for anybody.
Now, on the Telefonica front...
Speaker Change: Clearly you know all the issues. Just to reassure everybody on this call.
Speaker Change: The Telefonica Peru asset has a lot of tax liabilities, it's in insolvency right now, it's not one that...
Speaker Change: if it's of any interest to us. And the second one, Argentina.
Speaker Change: listen you can't put any debt in Argentina and it's all going to be in US dollars and you can't hedge it so clearly in a levered equity model that doesn't work for us so hopefully that that kind of answers the question
Thank you.
Understood, thank you.
Thank you.
Thank you.
Speaker Change: Our next question will be from the line of Matthew Harrigan with The Benchmark Company. Please go ahead, your line is open.
Matthew Harrigan: Thank you. Notwithstanding the more moderate approach from the CAPEX side, you've got a fair amount of FTTH in place. And I know it's early, but can you talk empirically about what you think are the benefits on a long term?
Matthew Harrigan: and the cost improvements that you see, I assume we need a more durable, reliable network clearly over a period of time. And then how much does it cost to actually connect?
Matthew Harrigan: customers relative to what you have on the traditional HFC topology. Thank you.
Matthew Harrigan: Sure, amen. Two things. On pricing, I would say pricing is really in many ways not related to the network. It's really related to how many people operate in that market.
Thank you.
Speaker Change: and where we had challenges in pricing, I can go back to Chile. It had nothing to do with our network or anybody else had fiber-to-the-home. Remember, we competed with 300 fiber-to-the-home network for years and we were fine. It's when the fifth and sixth operators showed up and started playing the price game. That's when we had problems.
Matthew Harrigan: Now, back to our business today. In Panama, it's a duopoly.
Matthew Harrigan: In Puerto Rico, it's a duopoly on the fixed network. In most of all the Caribbean, it's a duopoly.
Matthew Harrigan: In Costa Rica, I indicated earlier, we have a lot of fixed operators there, but we started the consolidation process.
Matthew Harrigan: with DIGO and us coming together. And I hope that this starts a way for consolidation in Costa Rica. And that's how we stabilize pricing and then you get pricing power. It's the number of competitors, not so much the network. Having said that.
Matthew Harrigan: we also have the best network. So I think we're in a very good position. And one thing that I am very happy with.
Matthew Harrigan: Our strategy over the last four years have been on volume, not on price. So we actually do have a nice positive price arbitrage against our competitors.
Matthew Harrigan: in most markets, you know, we do have pricing power now and we do actually have room between us and our competitors.
Matthew Harrigan: and we fully intend to take advantage of it and we've talked about price increases already so we've we focus a lot on volume and then now we're pivoting to volume and price and I think that strategy is working and you can see
Matthew Harrigan: You can see really the tailwinds that came into 24 and now coming into 25.
Matthew Harrigan: And so this is the flywheel that we were looking for and it is working.
Matthew Harrigan: So, I feel really good about pricing going forward and the market structures everywhere we offer it.
Matthew Harrigan: Your second question was on connecting and the cost to connect. Clearly in HFC, the cost to connect is a lot lower, only because it's a plant that we own and we already have drops to most homes.
Matthew Harrigan: The cost to get a new customer in Fiverr to the home is a little bit higher right now because it's a newer network. And when a customer calls us for service, more often than not, we have to pull a drop to the home.
Matt: So it's a drop down. One interesting data point for you would be, Matt, would be that the cost of CPE
Matt: in fiber-to-home is actually now a lot less than it is in HSE. Who would have thought? And so it's the cost of drop and then now the CPE and the CPE is much lower cost.
Matt: And there are reasons for that we can get into, you know, with Broadcom and the chips and all that.
Matt: but we are now sitting a lot better and it's a much more competitive market in fiber-to-the-home with our vendors so we've got the costs really well on fiber-to-the-home and like I said it's cheaper on HSE because there's no drops.
Matthew Harrigan: Thanks, Balan. I'm glad you realized it's not a good time to sell the Puerto Rican operation. Have a great year.
Hey, thanks.
Speaker Change: As a reminder, for any further questions regarding the company's operations, please press star 1 now. And our next question will be from the line of Matthew Robiliar with Barclays. Please go ahead, your line is open.
Bye.
Matthew Robiliar: Good morning and thank you for the presentation. I had two questions. One is around Puerto Rico, but not about all the questions I've been asked before, but really about the EcoSTAR integration.
Matthew Robiliar: to face some interoperability issues between the handsets of the customers that you acquired and your technology, if you can clarify that and how it's going. And then just a very quick one on guidance. I realize you reiterated guidance, but can you confirm that the ranges and the numbers that you've put in your Q4 2023 presentation are still valid? Because maybe I missed it, but I haven't seen it anywhere in 2024.
Thank you.
Matthew Robiliar: Sure. I think, let me answer your second question first. As Chris indicated, right, we are reconfirming our guidance on free cash flow. If you recall,
Matthew Robiliar: We had originally guided to greater than 1 billion in free cash flow. What we're saying, it's going to be about a billion and and the difference is, you know
Matthew Robiliar: Like Chris said, 24 was a challenging year for us in Puerto Rico. Now, I'll tell you, when I put a guidance out, we don't just put the $1 billion out, we actually have buffers against that $1 billion.
Matthew Robiliar: And I must say that the challenges in Puerto Rico in 2024 pretty much ate up most of my buffers.
Matthew Robiliar: but the path to a 1 billion in free cash flow is still clear to us.
Matthew Robiliar: And the other parts of the guidance, the EBITDA was supposed to be in the mid-single.
Matthew Robiliar: We're going to be around the hoop there on those numbers. You'll see, you know, 25 performance and 26 performance. We'll come in around that, you know, that guidance. And finally, on CapEx.
Matthew Robiliar: As Chris indicated, we're going to drop our CapEx. We originally were planning on 16%.
Matthew Robiliar: We did spend a little north of 16% in 2024. We expect to spend 14% in 2025.
Matthew Robiliar: and probably come in around 14% in 26 as well. And that's kind of where it's gonna lay out in the guidance.
on Puerto Rico in the Echostar integration.
Speaker Change: I'll tell you, Eduardo, our lead in Puerto Rico, our general manager, he's got a full handle on this. Remember, he came to us from Tracfone, where he did a huge prepaid migration between Tracfone and Verizon.
Speaker Change: and he's assembled a team that helped him do that migration in Puerto Rico. And because, remember, the EchoStar migration here from Boost, it's all prepaid.
Speaker Change: Prepaid is a lot easier to migrate than postpaid. That's why when you look at our Puerto Rico migration from AT&T, our prepaid business, our NPS has remained high.
Speaker Change: Those customers have come in, we're actually growing that business. It was the postpaid that we ran into issues. So, in the EchoStar integration, I feel a lot more confident because one, it's prepaid, and two, I have Eduardo there and the team that he's built around it. And the issue on handset interoperability remains.
Speaker Change: they will be hinted at interoperability. We have budgeted in our plans.
Speaker Change: a migration of handsets. People would come into our stores or as people upgrade or change plans they would get a new handset and that is in our budget already. So and and we do have a good plan on how we would do that operationally for our customers.
Speaker Change: As you can see right now, most of our customers that come in on prepaid when they upgrade, we put them on our platform as opposed to the existing platform. So if you've already started the work, and a lot more work will happen in the second and third quarters this year, we expect to get it all mostly completed in the fourth quarter of this year.
Hopefully that answers your question. Thank you very much.
Absolutely. Thanks.
and Danilo Fernandez. Thank you.
Speaker Change: That will conclude today's question and answer session. I'd like to hand back to Balan Nair for any additional or closing remarks.
Balan Nair: Yeah, well, a few things I want to say. Thank you so much, operator.
Firstly...
Balan Nair: you saw that we have a lot of challenges in Puerto Rico. And it is a cloud on not only, you know, how the business performed and our equity, but also I guess on the management team, a lot of us take this very seriously. This is something we know we've let you down on in 2024.
Thank you.
I am focused.
Balan Nair: 100% in 2025 to fix a lot of the challenges we had in 2024. We've built a strong team, we've made a number of changes in the fourth quarter and earlier this year as well in the team to put us on a different trajectory in 2025.
Balan Nair: But I must also point out to you, we have a great business.
Balan Nair: The cloud on Puerto Rico has somehow distorted the fact that the rest of our business is killing it.
Costa Rica, Panama, the Caribbean islands, a subsea networks business.
Balan Nair: A lot of those businesses, if you remember when we started this journey.
would not wear the hat today.
Balan Nair: Panama missed their budget every year for like five years in a row. We've turned that business around.
It is a strong business. We fixed the market structure.
Balan Nair: put in great management, it is running really well. It's a good flywheel. Costa Rica, who would have thought? We integrated a whole business there from Telefonica smoothly without much disruption to our customers.
Balan Nair: It is now a good growth, you know highly competitive market We're growing a fixed business and we were number three in mobile in Costa Rica and we are now number one
We know how to operate businesses.
The Caribbean Islands
This was one that
Balan Nair: from way back when we bought this, have never achieved its full potential. But today it is more than exceeded the potential that we even thought for it. Our management team that's doing a great job.
Balan Nair: The flywheel is great. And if you look at the string of competitors that compete with us, many of them have challenges. Some of them gone bankrupt. Some of them are no longer in business. We are strong. We know what we're doing. We had a hiccup in Puerto Rico. We're gonna fix it.
Balan Nair: and 25 is when we are going to show you that we will fix it and I am eternally optimistic about this business.
Balan Nair: The rest of our business is going great. I just need to fix Puerto Rico and I tell you, this business will do very well.
Balan Nair: So, I thank you for your support and your patience with this.
Balan Nair: This management team is going to work really hard for you.
Thank you.
Thank you. Thank you. Thank you.
Speaker Change: Ladies and gentlemen, this concludes Liberty Latin America's full year 2024 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.lla.com. There you can also find a copy of today's presentation materials.
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