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Liberty Latin America Reports Fiscal 2017 Results


 Tags:   News: Telecomms                This was published: 14 Feb 2018 - 10:26 pm         Print article: Printer friendly page
          

Liberty Latin America Ltd. ("Liberty Latin America") (NASDAQ-NMS: LILA and LILAK, OTC Link: LILAB) today announced its financial and operating results for the three months ("Q4") and twelve months ("2017" or "FY 2017") ended December 31, 2017.



CEO Balan Nair stated, "We are entering an exciting new phase for Liberty Latin America having completed the split-off from Liberty Global. We believe we have a significant opportunity to grow through our unique asset base, encompassing a comprehensive range of telecommunications services from our extensive subsea network and B2B operations to our high-speed consumer mobile and fixed networks. Our assets are well-positioned across a region that remains underpenetrated and underserved by high-speed telecommunications products."

"To drive this growth, we are committed to building the best networks and delivering innovative products to enhance the experience for our customers. In 2017, we upgraded or newly built approximately 465,000 homes and there is more room to grow with a fifth of our network footprint at Cable & Wireless still served by low-speed copper connections and many homes in our markets yet to be passed. We also accelerated the roll-out of our WiFi Connect Boxes during the year, with 40% of our customers in Chile now benefiting from a market-leading in-home broadband connectivity experience."

"In addition to the organic growth potential in our existing markets, we also see a significant consolidation opportunity across a fragmented region where we can leverage our scale to drive synergies and improve operating performance. Our recently announced acquisition in Costa Rica is a clear example of the high quality assets available in the region and the potential for us to add value through the application of our operating model."

"Looking to 2018, it will be a challenging year as we work towards recovery in several of our Caribbean markets following the hurricanes, however, we are on-track to getting our networks and customers back on-line. Combined with strong ongoing performance in Chile and momentum building at Cable & Wireless, we are establishing an exciting platform for sustainable growth."

Key Business Highlights

  • VTR delivered another year of strong performance:
    • Reported rebased revenue and OCF1 growth of 6% and 8%, respectively
    • Best broadband additions in a decade with 90,000 internet additions in 2017
    • Built / upgraded 196,000 homes in 2017; ~50% higher than 2016
  • C&W building operating momentum:
    • 45,000 RGUs added in 2017; Q4 strongest quarter since acquisition with 30,000 RGUs added
    • 254,000 homes added / upgraded in 2017; creating a platform for future growth
    • Mobile data growing – upgraded or added 390,000 LTE subscribers in 2017
  • Liberty Puerto Rico rebuild on-track:
    • Over 450,000 subscribers back on-line as of February 8, 2018; 530 miles of cable restored
    • Operations turned OCF positive in December 2017
    • Successfully negotiated leverage maintenance covenant holiday for one year

Liberty Latin America 2018 Financial Guidance2

In 2018, we expect:

  • Greater than $1.4 billion of OCF; and
  • P&E additions as a percentage of revenue between 19% and 21%.
Liberty Latin America     Q4 2017    

YoY
Growth/(Decline)*

    FY 2017    

YoY
Growth/(Decline)*

Subscribers

Organic RGU net additions (31,200 ) N.M. 65,900 (30 %)
 

Financial (in USD millions)

Revenue $ 850 (10 %) $ 3,590 (2 %)
OCF $ 295 (23 %) $ 1,367 (6 %)
Property & equipment additions $ (273 ) $ (777 )
As a percentage of revenue 32 % 22 %
 
Operating loss $ (244 ) N.M. $ (148 ) N.M.
 
Adjusted FCF3 $ (6 ) N.M. $ (92 ) N.M.
Cash provided by operating activities $ 181 $ 574
Cash used by investing activities $ (186 ) $ (640 )
Cash provided by financing activities $ 5 $ 42
 
N.M. – Not Meaningful.
* Revenue and OCF YoY growth rates are on a rebased basis(4).
 

Definitions for OCF and Adjusted FCF were changed effective December 31, 2017. All prior year amounts reflect these new definitions.

  • Under our new definition we are now including charges from Liberty Global in OCF. During 2017 and 2016, these charges were $12.0 million and $8.5 million, respectively. We will continue to incur charges from Liberty Global post split-off under a framework services agreement.
  • With respect to Adjusted FCF, under our new definition we are deducting distributions to non-controlling interests, which are reflected as a component of cash provided by financing activities. During 2017 and 2016, these distributions were $45.9 million and $61.9 million, respectively.

Subscriber Growth5

    Three months ended     Year ended
December 31, December 31,
2017     2016 2017     2016
Organic RGU net additions (losses) by product
Video (21,000 ) (6,200 ) (13,400 ) 11,600
Data 13,500 14,500 110,000 100,200
Voice (23,700 ) (8,500 ) (30,700 ) (17,800 )
Total (31,200 ) (200 ) 65,900   94,000  
 
Organic RGU net additions (losses) by segment
C&W 30,100 (20,400 ) 44,600 (4,700 )
Chile 3,700 10,300 81,900 76,500
Puerto Rico (65,000 ) 9,900   (60,600 ) 22,200  
Total (31,200 ) (200 ) 65,900   94,000  
 
Organic Mobile SIM additions (losses) by product
Postpaid 400 3,300 29,200 33,100
Prepaid (33,600 ) 58,600   (86,900 ) 14,300  
Total (33,200 ) 61,900   (57,700 ) 47,400  
 
Organic Mobile SIM additions (losses) by segment
C&W (41,900 ) 48,500 (106,400 ) 13,200
Chile 8,700   13,400   48,700   34,200  

Total

(33,200 ) 61,900   (57,700 ) 47,400  
  • Product Additions: Organic fixed RGU losses of 31,000 in Q4 2017.
  • C&W: Added 30,000 RGUs during Q4, including 21,000 broadband and 6,000 fixed telephony RGUs.
    • Broadband additions were driven by network upgrades, leading to gains of 15,000 RGUs in Jamaica. In Panama, we recorded an overall decline of 1,000 subscribers as higher sales of Mast3r bundles were offset by churn on our legacy products.
    • Excluding DTH losses of 4,000 in Panama, our fixed video RGUs grew by 7,000 across C&W's markets. This performance represented an improvement compared to prior quarters as we drove increased uptake of our bundle propositions and promoted Flow Sports - the leading sports channel in the English speaking Caribbean.
    • Fixed voice additions resulted from our increased focus on promoting bundles, particularly in Jamaica and Trinidad.
    • Mobile: subscribers declined by 42,000 in Q4 as continued growth in Jamaica (23,000 additions) was more than offset by declines in Panama (61,000 decline) and the Bahamas (11,000 decline). The decline in Panama reflects our ongoing focus on higher ARPU customers and competitive intensity in the market, while increased competition continued to impact the Bahamas.
  • Chile: VTR added 4,000 RGUs in Q4, a seasonally slower period, driven by 17,000 broadband subscriber additions, partially offset by fixed-line voice attrition. The strong broadband performance reflects our speed leadership in Chile.
    • Mobile: We added 9,000 postpaid subscribers in Q4 as we continued to penetrate our fixed subscriber base with our mobile product.
  • Puerto Rico: Our subscriber base fell by 65,000 in Q4. This figure represents the net number of subscribers that disconnected from our services during the quarter.

Revenue Highlights

C&W was acquired on May 16, 2016, and accordingly, is included in our financial results under our U.S. GAAP accounting policies since the acquisition date. The following table presents (i) revenue of each of our reportable segments for the comparative periods and (ii) the percentage change from period-to-period on both a reported and rebased basis:

    Three months ended   Increase/(decrease)   Year ended   Increase/(decrease)
December 31, December 31,
2017   2016 %   Rebased % 2017   2016 %   Rebased %
in millions, except % amounts
 
C&W $ 584.9 $ 590.7 (1.0 ) (2.6 ) $ 2,322.1 $ 1,444.8 60.7 (1.3 )
Chile 250.3 227.6 10.0 4.7 952.9 859.5 10.9 6.4
Puerto Rico 16.9 105.2 (83.9 ) (83.9 ) 320.5 420.8 (23.8 ) (23.8 )
Intersegment eliminations (2.0 ) (0.6 )

N.M.  

N.M.  

(5.5 ) (1.3 )

N.M.  

N.M.  

Total $ 850.1   $ 922.9   (7.9 ) (9.9 ) $ 3,590.0   $ 2,723.8   31.8   (2.1 )
 

N.M. – Not Meaningful.

  • Reported revenue for the three and twelve months ended December 31, 2017 declined by 8% and grew by 32%, respectively.
    • The Q4 reported decline reflects the negative impact of Hurricanes Irma and Maria, partially offset by beneficial exchange rate movements, organic revenue growth at VTR and inclusion of certain previously carved-out entities at C&W. The 2017 reported growth was primarily driven by the acquisition of C&W in the second quarter of 2016.
  • In September 2017, Hurricanes Irma and Maria impacted a number of our markets in the Caribbean. During the three months ended December 31, 2017, the hurricanes negatively impacted Liberty Puerto Rico’s and C&W's revenue by an estimated $90 million and $7 million, respectively. For FY 2017, the effects of the hurricanes negatively impacted Liberty Puerto Rico’s and C&W's revenue by an estimated $109 million and $10 million, respectively.
  • From a rebased perspective, revenue declined by 10% and 2% for the three and twelve months ended December 31, 2017, respectively, driven by the impact of Hurricanes Irma and Maria partially offset by rebased growth in Chile.

Q4 2017 Rebased Revenue Growth - Segment Highlights

  • C&W: Rebased revenue declined 3% overall.
    • Lower revenue was driven by (i) a decline in Bahamas' mobile performance where we continue to be impacted by the entry of a new mobile competitor, (ii) reduced fixed-line revenue in Caribbean markets impacted by the hurricanes and lower carrier revenue in Jamaica, and (iii) a fall in low margin project-related B2B revenue in Panama compared to a very strong performance in Q4 2016. This decline was partly offset by (a) continued growth in Jamaica's mobile revenue, (b) increased penetration of high-speed fixed services, particularly in Panama and Jamaica and (c) growth in our wholesale capacity business.
  • Chile: Rebased revenue growth of 5% was primarily related to increases in (i) residential cable subscription revenue, mainly from higher ARPU per RGU and an increase in the average number of subscribers, (ii) mobile subscription revenue, driven by subscriber growth and (iii) B2B subscription revenue due to growth in SOHO RGUs.
  • Puerto Rico: Rebased revenue decline of 84% was driven by impacts related to Hurricanes Irma and Maria.
    • In 2018, we anticipate there will be a continued adverse impact on our financial performance as we rebuild our business, however we are making good progress reconnecting our customers, with over 450,000 RGUs back online as of February 8, 2018.

Operating Income (Loss)

  • Operating income (loss) was ($244 million) and $141 million in Q4 2017 and Q4 2016, respectively, and ($148 million) and $319 million for the year ended December 31, 2017 and 2016, respectively.
  • The FY 2017 decrease was primarily driven by increases in impairments and depreciation and amortization, which were partially offset by higher OCF as further described below. During 2017, we recorded $660 million of impairments, primarily resulting from the hurricanes and our annual goodwill testing at C&W. The increase in depreciation and amortization was primarily driven by the acquisition of C&W.

Operating Cash Flow Highlights

The following table presents (i) OCF of each of our reportable segments for the comparative periods and (ii) the percentage change from period to period on both a reported and rebased basis:

<td class="bwpadl0 bwnowrap


Further information:
Organisation name:    Liberty Latin America Ltd.
Organisation stock symbol: NASDAQ:LILA


Latest stock price data for NASDAQ:LILA

    Three months ended   Increase/(decrease)   Year ended   Increase/(decrease)
December 31, December 31,
2017   2016 %   Rebased % 2017   2016 %   Rebased %
in millions, except % amounts
 
C&W $ 215.2 $ 226.4 (4.9 ) (6.2 ) $
 


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