Liberty Latin America Ltd.
Q1 2021 Earnings Call Transcript

Published: 9 May 2021

[Operator:]

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 John Winter, Chief Legal Officer of Liberty Latin America.

[John Winter:]

Good morning, and welcome to Liberty Latin America's First Quarter 2021 Investor Call. At this time all participants are in listen-only mode. Today's formal presentation materials can be found under the Investor Relations section of Liberty Latin America's website at www.lla.com. 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. Additional information on factors or risks that could cause results to differ is available in Liberty Latin America's most recently filed Form 10-K and Form 10-Q. Liberty Latin America disclaims any obligation to update any of these forward-looking statements to reflect any change in its expectations or in the conditions on which any such statement is based.

[Balan Nair:]

Thank you. John. And welcome everybody to Liberty Latin America’s first quarter results presentation. I'll begin by taking you through our group highlights and operating results before handing over to Chris Noyes, our CFO who will follow with a review of the company's financial performance. After that, we will get straight to your questions. As always, I'm joined by my executive team from across the region, and I will get them involved as needed during the Q&A following our prepared remarks. To point of housekeeping, we will both be working from slides, which you can find on our website at www.lla.com. Well, let's start on slide four and our highlights for the quarter. Overall, all markets are steadily recovering from the worst impacts of the pandemic. However, our operating environment remains quite challenging in the first quarter, with reduced tourism in general, and restrictions still in place across a number of our markets. Against this backdrop, though, we had a strong start to the year with a record Q1 RGU additions of 76,000. The group's performance is led by Cable and Wireless and Puerto Rico, and we were pleased to deliver growth across all of our operating segments in the quarter. Our financial performance was also solid, with a 3% rebase on adjusted or OIBDA growth. This was driven by another strong quarter for Liberty, Puerto Rico, and we continue to be excited about the value we plan to create there as we integrate our fixed and mobile operations. We previously outlined our plans to build or upgrade approximately 600,000 homes in 2021, a 50% increase on 2020, and we delivered 130,000 homes in the first quarter, 98% of which were fiber-to-the-home. Bringing high-speed connectivity to more households in the region continues to be a core focus of our company. Finally, I am happy to say that we also reported a very strong first quarter free cash flow result, positioning us well for full year guidance of approximately $200 million. Moving to slide five. I wanted to cover the first quarter highlights across our key markets before running through our performance by product category in the following slides. Starting with Jamaica, which was the largest contributor of fixed and mobile adds in Cable and Wireless.

[Christopher Noyes:]

Thanks, Balan. Beginning on slide 11. Two housekeeping items. Our Q1 2021 results include Liberty Mobile for the entire quarter. And given our recent executive management changes, we are now presenting Cabletica as a separate segment. For Q1 we delivered $1.16 billion in revenue, with a year-over-year increase fueled primarily by the contribution from Liberty Mobile. We achieved flat rebased growth year-over-year, which is a solid result, given many of our markets are still experiencing COVID related restrictions and suffering from compressed economic activity. In terms of products, we achieve rebased growth in both fixed and mobile residential revenue, which was offset entirely by continued softness in B2B, which has not fully recovered to pre-COVID levels.

[Operator:]

Thank you. We'll take our first question from Soomit Datta, New Street Research. Please go ahead. Your line is open.

[Soomit Datta:]

Oh, sorry. I think I was on mute. Yeah, two or three quick questions, please. Just on subsea cable, first of all, is there an update at all on a monetization process? You suggested you were still beginning to look into that. But the full years I just wondered if there was any kind of update, please. Secondly, could you just refresh thinking on the potential buyback, obviously, you're still looking to do $200 million of equity free cash flow this year, I just wanted to get a quick update on your thinking about cash returns, please. And then just finally, and I guess this might take a little bit longer, but just on Chile, I was just you know, having a look at some of the price points in the market. And obviously some of the peers are kind of quite cheap. And I think you mentioned that in the remarks. I just wondered, really, you know what really can you do when you have some very kind of aggressive, cheap competition coming in? How can you differentiate yourself? You know, it's difficult as the kind of incumbent operator to defend against that. But I'd love to hear a little bit more about, what you can do against some of those very aggressive price points? Thank you.

[Christopher Noyes:]

Morning, Soomit. Thanks. So let me address your three questions. Subsea cable, we've been doing a lot of work in the last couple of months, a couple of three months, in, you know, separating that business out throughout both legally, financially, the accounts and trying to reallocate the cost and make sure that we have a clear line of sight into that as a standalone business. And my sense is that, you know, we'll be going through a bunch of different deliberations internally in our company on that. But clearly, from a sum-of-the-parts perspective, this asset is actually quite an amazing asset. And we'll come back to you and the larger investment community over the next few months on any strategic direction. That's different than what we've kind of hinted at in the past. On the buybacks, yes, you know, the board has approved a buyback process. And we did do some buybacks back in 2020 and we’ll be kind of opportunistic in this matter if - when we see you know, if the equity trades off, we’ll certainly jump in, but we remain opportunistic on that front. And on Chile, I think you read it right that you know, this is a highly competitive market. I mean, we've been in this market for a long time and we've always had it very competitive. We used to go up against Claro, Movistar, Entel. And I think I've said it before many years ago, a couple of years ago that we compete very fiercely against these other three folks. Now in the last six to nine months, we've got more entrants coming into the market and you saw that they'll fit even a wholesale regime. And pricing has been disrupted in that marketplace. And the way we look at this is, you know, you look at your front book and your acquisition pricing, and then you look at what you have in your back book. And Vivek, who's our general manager, has been very actively looking at both and trying to normalize the front book and backwards, but clearly, when you look at the front book, and you look at your gross adds, I mean, our pricing is working. Now, we do have some parts of our base that's still on some legacy pricing that we would eventually have to adjust, and we are not afraid to do that. So there's a lot of analysis that's going into pricing right now. I think we have a very competitive product. Like I said, our front book is working really well. Now, since you asked the question on Chile, I'm going to ask our new General Manager in Chile, Vivek, who's been on the - you know, on the job here for the last few months now. And maybe he can share some of his perspective on that.

[Vivek Khemka:]

Yeah. Thanks, Balan. Thanks, Soomit for the question. Yeah, I would say, as Balan pointed out from a pricing standpoint, you know, our Q1 of 2021 has been really good gross add. So there is clear demand for our product. There's definitely market continues grow. And that pricing is working. I think we just need to adjust some of the back book pricing, and manage churn. I think you also asked how do we expect to compete in a market where pricing is so low. And I think the focus will be on product, whether it is our network, our customer experience, our video product, our speed, that's basically the focus on how we're going to compete in this market. And we do believe we have a very compelling product and an offering a great footprint. And we passed more homes than any of our competitors do. So I think combined – we combine all of that – we’re going to compete in this market in a really good way.

[Christopher Noyes:]

Thanks, Vivek.

[Soomit Datta:]

Sorry, and a quick - that's super helpful. A very quick follow-up. May be sensitive, but can you give any sense as to the back book, front book differential? Is it kind of been somewhat extreme? Or is it just need a bit of tweaking?

[Balan Nair:]

Its not extreme at all. As a matter of fact, I'd say, just around one number, but more than 60% of back book is already close to our front book, and then the remaining one is the gap that's actually not that wide.

[Soomit Datta:]

Okay, that's great. Thank you.

[Operator:]

We'll take our next question from James Ratcliffe with Evercore ISI.

[James Ratcliffe:]

Great. Thanks for taking the question. Two if I could. Just talk - first of all to follow up on Chile. Can you just talk about the status of the VTR brand at this point? And to what degree is the COVID experiences impacted of that and your relative brand position versus other providers and how you rebuild that advantage? And secondly, any thoughts regarding the restructuring at Televisa and the potential appeal of the Mexican market, knowing that your Chairman sits in the Televisa Board, so I'm curious how that could - that market could potentially fit into your thinking about footprint expansion? Thanks.

[Balan Nair:]

Sure. Let me answer the Televisa one question and then I'll pass it on to Vivek on the on the VTR brand. Really on Televisa, apparently, we're close, of course, to the Group Televisa and Alfonso, who's the CEO that sits on our board. And - but, you know, they did a really amazing transformational deal themselves. And then what's in the future, I think that lots of speculation, but right now, our focus is running our business. And that's how we're looking at it. So, Vivek, you want to answer the VTR brand?

[Vivek Khemka:]

Yeah, you know, of course, VTRs had a very good brand in Chile over the years. We did have a little bit of a brand impairment last year, given our network issues. But when I look at relative brand impairment compared to all of the other providers, you know, I think we are roughly still in the same boat, as an industry. And we all have work to do to improve our brand. So we have to reposition our brand. And I think we'll do that with our product and our service. And I don't think it's insurmountable to get back to a brand position that we had before.

[James Ratcliffe:]

Great, thank you.

[Operator:]

Thank you. 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:]

Well, let me end by saying this, one, we feel really good about this year. We realized the challenge in Chile and - but we're not afraid of it and we're going to take it on, straight on. And if I look at the rest of our business, I feel really optimistic about the rest of business and even more optimistic about the combination of mobile and fixed in Costa Rica. So it is going to be a very good year. And I do thank all of you for your support.

[Operator:]

Ladies and gentlemen, this concludes Liberty Latin America's first quarter 2021 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.