Liberty Latin America Ltd (NASDAQ:LILA)
Q3 2021 Earnings Call
Nov 5, 2021, 8:30 a.m. ET
- Prepared Remarks
- Questions and Answers
- Call Participants
Good morning, ladies and gentlemen, and thank you for standing by. [Operator Instructions]
I’ll now turn the call over to Veenod Kurup, Interim Chief Technology Officer of Liberty Latin America.
Veenod Kurup — Interim Chief Technology Officer
Good morning, and welcome to Liberty Latin America’s Third Quarter 2021 Investor Call. At this time, all participants are in listen-only mode. Today’s formal presentation materials can be found under the Investors 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 and will be available under the Investors section of our website.
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 and the most recent Form 8-K filed with the SEC, along with the associated press release. 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 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 GAAP financial measures, which can be found in the appendices to this presentation, which is accessible under the Investors section of our website.
I would now like to turn this call over to our CEO, Mr. Balan Nair.
Balan Nair — President and Chief Executive Officer
Thank you, Veenod, and welcome, everybody, to Liberty Latin America’s result presentation for the third quarter of 2021. I’ll begin with our group highlights and operating results before handing over to Chris Noyes, our CFO, who will provide 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. I’ll get them involved as needed during Q&A, following our prepared remarks. 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 4 and our highlights. We delivered 84,000 fixed RGU adds in Q3, representing our strongest quarter of the year so far. This continued our momentum from the first half, and we’ve now added nearly a quarter of a million RGUs year-to-date. C&W Panama and C&W Caribbean & Networks drove the majority of additions. In Mobile, we had another strong quarter, adding 74,000 new subscribers, about half of which were postpaid. We also saw good initial contributions from our mobile operations in Costa Rica, which we acquired from Telefonica on August 9th.
As we’ve previously highlighted, new build and upgrade plants are core element of our growth strategy, and we continued to build aggressively in the third quarter, taking our year-to-date homes added or upgraded to approximately 600,000. About 99% of these adds have been true fiber to the home technology. Free cash flow is our key focus, and we delivered a strong performance in the quarter, with year-to-date adjusted free cash flow now at $149 million to the end of September. We are clearly on track to exceed our guidance of $200 million this year. And Chris will cover this further in his section.
Finally, we have made some important inorganic announcements, with the acquisition of America Movil’s Panama operations and a 50-50 joint venture with America Movil in Chile, both of which are expected to close next year. These transactions will enable us to improve our networks and customer propositions, including delivering converged solutions in Chile, while also generating significant synergies and value for our stakeholders.
Turning to Slide 5 and our fixed consumer business. On the left of the slide, we present our quarterly RGU adds since Q1 2020. This shows the initial impacts of COVID-19 and our recovery since then, with consistent additions through this year, culminating in Q3’s strong performance. In terms of our markets, C&W Panama was the main driver for the group’s third quarter results, adding 30,000 RGUs, which was more than Panama had contributed in the entire first half of 2021. We have invested in our networks and products in Panama, and are pleased to see operating results coming true. C&W Caribbean & Networks also delivered another strong quarter with 25,000 net adds, led by Jamaica, which has now added 100,000 RGUs over the last 12 months.
Puerto Rico and Costa Rica continued to grow their subscriber basis in Q3, led by broadband RGUs, which contributed over two-thirds of their combined total adds. Chile remains intensely competitive. However, we reported another quarter of stable subscriber numbers, and are excited about the potential for our joint venture with America Movil, which I will cover later in the presentation. On the right of the slide, we have shown our new build and upgrade progress over the same period. We remain committed to investing in our networks and product offerings to deliver greater access to high-speed connectivity solutions for our customers and have already built or upgraded 50% more homes in the first three quarters of 2021 than we did through all of 2020. Importantly, nearly all of our builds is now fiber to the home, and we continue to plan on deploying this technology for the rest of our builds.
Moving to Slide 6 and our mobile performance. Again, we have presented quarterly evolutions from the beginning of 2020. In the upper part of the slide, the chart shows a significant impact of mobility restrictions on our operations in the first half of 2020, and our subsequent recovery. In Q3, we include for the first time the mobile operations which we acquired from Telefonica in Costa Rica. We are in the early phases of integrating our businesses in Costa Rica and are pleased with what we have seen to date from what is now our largest mobile operations in terms of subscribers. In the period during the quarter under our ownership, Costa Rica contributed 37,000 mobile subscribers.
Of our other markets, C&W Caribbean & Networks and C&W Panama were, again, the largest contributors to the group’s results, delivering 24,000 net adds each. In aggregate, we added 74,000 mobile subscribers in the quarter, with a blended RPU of $13 across our base. On the bottom of the slide, we present our postpaid adds over the same period. We have been successful in building momentum in postpaid through targeted promotions, including our nascent converged offerings. Costa Rica and Puerto Rico are our largest postpaid markets, and they led the group in Q3 with 15,000 and 40,000 adds, respectively. C&W Caribbean & Networks and C&W Panama have also been steadily growing their postpaid basis, adding 16,000 postpaid subscribers in aggregate during the quarter.
Next to Slide 7 and our B2B operations. In the bar charts, we break up the performance for C&W Caribbean & Networks, C&W Panama, and Liberty Puerto Rico over the past two years. These segments include the majority of our B2B operations, representing over 95% of total B2B revenue in the third quarter. On the far left, we show C&W Caribbean & Networks revenue, with the subsea components split out. The subsea business has been consistent throughout the period and slightly high in the latest quarter. This speaks to its resilience, which is further reinforced by its U.S. dollar rating.
The non-subsea B2B operations in C&W Caribbean & Networks were impacted more severely by COVID-19, but are steadily recovering and off their lows.
Next to C&W Panama or Mas Movil in the center. Panama was one of our most severely impacted markets in 2020 and early 2021, but the segment is now back to pre-COVID revenue levels. And we are looking for further progression from here.
Finally, to Liberty Puerto Rico. This chart shows the scale of B2B operations we acquired in the…