Liberty Latin America Ltd. Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Group Highlights: Grew fixed and mobile bases throughout the year, adding nearly 100,000 subscribers in total. Adjusted OIBDA was $1.6 billion in the year. Invested in networks with ~400,000 homes passed or upgraded to fiber-to-the-home. Successfully refinanced $3.3 billion of C&W debt.
• C&W Caribbean: Delivered operating momentum in mobile postpaid, strong financial execution, with revenue diversified and cost efficiencies driving margin expansion.
• C&W Panama: Continued broadband momentum, mobile had record postpaid adds, revenue growth driven by Mobile and Fixed products, and posted double-digit adjusted OIBDA rebased growth.
• Liberty Costa Rica: Consistent broadband adds, expanded footprint, grew mobile base, secured spectrum, and awaits merger approval with TIGO.
• Network and IT: Investing in leading infrastructure, with 97% of fixed footprint gigabit-ready. Aiming to reduce capital intensity.
• Commercial Strategy: Traction across converge offers, FMC penetration increased, price increases in Fixed and Mobile successful, digital sales at 25% in 2024 with target of 30% in 2025, and opportunity to grow B2B business.
• Operational and Capital Allocation: Reinforced mobile operations in Puerto Rico, future-proofed capital structure at C&W, and 2025 priority is rebuilding Liberty Puerto Rico, with margin opportunity and cost reduction initiatives.

Segment Performance

• C&W Caribbean: Full year 2024 broadband adds were impacted by Hurricane Beryl, but adjusting for the event, would have added 18,000 broadband subscribers for the year. Mobile postpaid had 43,000 net adds in 2024, with postpaid base up 14% year-over-year. Revenue is well-diversified, with rebased revenue up 2% year-over-year, driven by postpaid revenue growth. Adjusted OIBDA expanded in Q4.
• C&W Panama: 2024 saw 23,000 broadband subscriber adds, a 10% year-over-year increase. Mobile postpaid had 78,000 net adds. Revenue grew 3% in the year, driven by Mobile and Fixed products up 7% and 4% respectively. Posted double-digit adjusted OIBDA rebased growth year-on-year.
• Liberty Costa Rica: Consistent quarterly broadband adds throughout the year, adding over 170,000 fiber-to-the-home homes passed in 2024. Added 114,000 postpaid subscribers in the year, with consumer mobile being the largest product at 60% of revenue. Secured 570 megahertz of spectrum.
• Liberty Networks: Enterprise was the fastest grower, up 9% year-over-year. Wholesale reported figures challenged by non-cash IRU declines, but full year rebased revenue would have been up 2% excluding IRU impact. Finalizing contract terms for Manta subsea cable system project.
• Liberty Puerto Rico: Q4 added 5,000 fixed RGUs, with broadband mostly flat adjusting for ACP discontinuation. Network upgraded, with over 90% of HFC homes on DOCSIS 3.1. Mobile postpaid had challenges, but prepaid had net adds in Q4. NPS showed improvement but more work needed.

Guidance

• CapEx: Plan to bring annual overall CapEx spend down to 14% over the next few years. 2025 and 2026 target CapEx to sales at around 14%.
• Free Cash Flow: Expect significant adjusted FCF acceleration over the next two years. 2024 delivered adjusted FCF of $116 million, constrained by Puerto Rico performance. Goal to drive adjusted OIBDA and FCF growth, and reduce leverage levels.

Risks

• Puerto Rico Challenges: 2024 was challenging with migration and recovery issues. Postpaid performance was difficult, with churn and bad debt issues. Billing and technology issues impacted NPS.
• Market Competition: Some markets are competitive, which may affect pricing and market share.
• Network Investment: Fiber-to-the-home connection costs are relatively higher, and HFC vs FTTH cost differences pose operational challenges.

Question and Answer

Q: Michael Rollins asked about bad debt in Puerto Rico and EBITDA target.

A: Balan Nair said bad debt was a catch-up due to equipment installment issues, and NPS is a leading indicator showing positive trends. On EBITDA target, the team is focused on getting back to a full handle but no specific new guidance given.

Q: Vitor Tomita inquired about CapEx guidance and Puerto Rico B2B bad debt.

A: Balan Nair said CapEx target is to reach 14% of sales, driven by completed network upgrades and lower capital intensity in mobile. On B2B bad debt, credits are tapering off and not expected to be significant in Q1.

Q: Andres Coello asked about M&A rumors.

A: Balan Nair said no active M&A plans for Puerto Rico as focused on fixing the business. Telefonica Peru has tax liabilities and insolvency issues, and Argentina is not of interest due to debt and hedging challenges.

Q: Matthew Harrigan asked about FTTH cost and pricing.

A: Balan Nair said pricing is related to market competition, not just network. Cost to connect in FTTH is higher than HFC due to drops, but CPE cost in FTTH is now lower.

Q: Mathieu Robilliard asked about Echostar integration and guidance.

A: Balan Nair said guidance on free cash flow remains to reach ~$1 billion, CapEx target is 14%, and EchoStar integration is going well with prepaid migration and a strong team in place, with handset interoperability budgeted for.