Liberty Latin America Ltd. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Separation Plan: Liberty Latin America plans to separate Liberty Puerto Rico from the group to unlock value, targeting completion in first half 2026. The remaining business is expected to have lower leverage and stronger free cash flow.
• Growth Initiatives: Grew high-speed broadband and postpaid mobile base by 70,000 subscribers in first half. Residential revenue showed momentum, especially in Liberty Caribbean and Costa Rica. B2B revenue expected to improve in second half with government digitization investments.
• Network Enhancements: Liberty Puerto Rico enhanced its network with new spectrum bands, and Liberty Networks advanced Project MANTA subsea cable system. Liberty Costa Rica revamped video proposition.
• Margin Improvement: Adjusted OIBDA grew, with improved adjusted OIBDA less P&E additions. Cost-out initiatives and operational efficiencies contributed to margin expansion.

Segment Performance

• Liberty Caribbean: Q2 2025 revenue was $366 million with flat rebased year-over-year growth. Residential mobile grew 6%, while B2B and residential fixed declined. Adjusted OIBDA was $174 million, a 11% rebased growth.
• C&W Panama: Revenue was $177 million with a 10% rebased revenue decline. Adjusted OIBDA was $69 million, a 6% rebased growth. Mobile revenue was supported by postpaid adds, and fixed revenue saw broadband RGU additions.
• Liberty Networks: Revenue was $115 million with a 3% rebased decline. Adjusted OIBDA was $61 million, also a 3% rebased decline, mainly due to noncash IRU amortization timing.
• Liberty Puerto Rico: Revenue was $301 million with a 5% rebased year-over-year decline. Adjusted OIBDA increased 21% year-over-year on a rebased basis, driven by lower bad debt and reduced costs.
• Liberty Costa Rica: Revenue was $151 million with 1% rebased growth. Adjusted OIBDA was $54 million, flat rebased growth, with mobile performing strongly and fixed revenue impacted by competition.

Guidance

• Second Half Momentum: Anticipates better B2B revenue momentum in second half across regions. Continued residential growth expected from new customer value propositions.
• Capital Structure: Post-separation, remaining business expects lower leverage and potential for dividends, share buybacks, and organic deleveraging due to strong cash flow generation.
• Project MANTA: Expected to contribute to Liberty Networks' long-term profitability, targeting completion in 2027.

Risks

• Forward-Looking Statements: Actual results may differ from forward-looking statements due to various factors.
• Puerto Rico Liability Management: Uncertainties in stabilizing Liberty Puerto Rico's capital structure and potential challenges in liability management.
• Operational Challenges: Segments like Liberty Networks faced revenue declines due to noncash IRU timing, and Liberty Puerto Rico had challenges with subscriber base and ACP program discontinuation.

Question and Answer

Q: Could you give more color on the B2B headwinds in Panama and margin improvements?

A: Balan Nair and Rocio Lorenzo responded that B2B headwinds were due to phasing of government projects, but recurring B2B business was growing. Margin improvements came from OpEx and CapEx efficiencies.

Q: Clarify assets involved in spinning out Puerto Rico and leverage post-separation?

A: Balan Nair stated focus on running the business, and post-separation, the remaining group would have lower leverage with options for shareholder remuneration like dividends and buybacks.

Q: Color on impairment in Puerto Rico?

A: Balan Nair and Brian Zook explained it was due to spectrum impairment from AT&T acquisition vs. DISH spectrum valuation.

Q: Management changes in Puerto Rico and initial traction of Mix offer?

A: Balan Nair said management changes focused on operations, network/technology, and commercial go-to-market. Mix offer showed increasing ARPUs and MRC, with positive initial traction.