Liberty Latin America Reports Fiscal 2017 Results

Successfully Completed Split-Off From Liberty Global

Exceeded Target with 465,000 Homes Upgraded / Added in 2017

Financial Results Impacted By Hurricanes Irma and Maria

Puerto Rican Restoration On-Track; Over 450,000 Subscribers Online

Announced Acquisition of Leading Costa Rican Cable Operator

DENVER, Colorado–(BUSINESS WIRE)–Liberty Latin America Ltd. (“Liberty Latin America”) (NASDAQ: 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:

    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 ) $ 876.3 $ 541.9 61.7 (3.8 )
Chile 101.4 94.3 7.5 2.4 383.3 339.3 13.0 8.3
Puerto Rico (12.1 ) 58.9

N.M.  

N.M.  

132.6 211.8 (37.4 ) (37.4 )
Corporate and other (9.7 ) (5.2 ) 86.5  

N.M.  

(25.1 ) (17.4 ) 44.3  

N.M.  

Total $ 294.8   $ 374.4   (21.3 ) (22.9 ) $ 1,367.1   $ 1,075.6   27.1   (6.3 )
 
OCF Margin 34.7 % 40.6 % 38.1 % 39.5 %
 

N.M. – Not Meaningful.

  • Reported OCF for the three and twelve months ended December 31, 2017
    declined by 21% and grew by 27%, respectively.

    • The three month movement was primarily due to the impacts of
      Hurricanes Irma and Maria, while the twelve month change was
      driven by the C&W acquisition.
  • 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 effects of the hurricanes negatively impacted Liberty Puerto
    Rico’s and C&W’s OCF by an estimated $65 million and $8 million,
    respectively. In FY 2017, the effects of the hurricanes negatively
    impacted Liberty Puerto Rico’s and C&W’s OCF by an estimated $80
    million and $17 million, respectively.
  • The Q4 and FY 2017 growth rates were negatively impacted by an $8
    million and $13 million reversal in Q4 and FY 2016, respectively, of a
    previously-recorded provision and related indemnification asset in
    connection with a favorable ruling on an outstanding legal case in
    Puerto Rico.
  • From a rebased perspective, including the aforementioned negative
    impacts from Hurricanes Irma and Maria, OCF declined by 23% and 6% for
    the three and twelve months ended December 31, 2017.

    • As previously identified, the FY 2017 rebased growth rate was
      negatively impacted by the C&W OCF result in Q1 2016, which was
      not comparable to preceding and subsequent quarters.

Q4 2017 Rebased OCF Growth – Segment Highlights

  • C&W: Rebased OCF decline of 6% was
    driven by (i) the aforementioned revenue drivers, (ii) negative
    impacts of Hurricanes Irma and Maria and (iii) negative impacts
    totaling $9 million for the reassessment of certain operating accruals
    and a provision for a non-cancellable lease. These factors were
    partially offset by (a) improved margin mix primarily associated with
    reduced low margin project-related B2B revenue, and (b) favorable
    impact of a reduction in our bonus accrual.
  • Chile: Rebased OCF increase of 2% was
    driven by the aforementioned solid revenue growth slightly offset by
    increases in network related expenses, marketing costs and programming
    and copyright costs.
  • Puerto Rico: Rebased OCF decline was
    driven by the aforementioned negative impacts of Hurricanes Irma and
    Maria, and the legal ruling benefit in the prior-year period.

Effective January 1, 2018, we will adopt a new accounting standard with
respect to certain defined benefit pension plans. Specifically, certain
components of our net periodic pension benefit will be reclassified to
non-operating income and, as such, will no longer be included in OCF.
During the year ended December 31, 2017, $14.5 million of such credits
were included in OCF that will be reclassified to non-operating income
(expense) upon the adoption of this new accounting standard.

Net Loss Attributable to Shareholders

  • Net losses attributable to shareholders were $401 million and $107
    million for the three months ended December 31, 2017 and 2016,
    respectively, and $778 million and $432 million for the year ended
    December 31, 2017 and 2016, respectively.

Leverage and Liquidity (at December 31, 2017)

  • Total capital leases and principal amount of debt:
    $6,398 million.
  • Leverage ratios: Consolidated gross and
    net leverage ratios of 5.5x and 5.1x, respectively. These ratios were
    calculated on a latest quarter annualized (“LQA”) basis and therefore
    impacted by the $73 million negative impact from Hurricanes Irma and
    Maria in Q4. This impact increased gross and net leverage by
    approximately 1.1x and 1.0x, respectively.
  • Average debt tenor6: 6.1
    years, with approximately 88% not due until 2022 or beyond.
  • Borrowing costs: Blended, fully-swapped
    borrowing cost of our debt was 6.3%. In February 2018, we entered into
    a new $1,875 million term loan at C&W, which was used to refinance the
    existing C&W $1,825 million term loan. The refinancing reduced our
    margin by 25 basis points to LIBOR + 3.25% and extended the tenor by
    one year to January 2026. The incremental loan proceeds were used to
    repay drawings under the C&W revolving credit facility.
  • Liquidity: Approximately $1.5 billion,
    including $530 million of cash and $938 million of aggregate unused
    borrowing capacity7 under our credit facilities.

Forward-Looking Statements and Disclaimer

This press release contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995,
including statements with respect to our strategies, future growth
prospects and opportunities; our expectations with respect to
subscribers, revenue, ARPU per RGU, OCF and Adjusted FCF; statements
regarding the impact of Hurricanes Irma and Maria on our operations in
the Caribbean, our plans regarding the markets impacted by the
hurricanes, the time it will take to restore services in the markets
impacted by the hurricanes and the amount and timing of insurance
proceeds; statements regarding the development, enhancement and
expansion of, our superior networks and innovative and advanced products
and services; plans and expectations relating to new build and network
extension opportunities; opportunities with respect to our mobile, B2B
and subsea cable businesses, our estimates of future P&E additions as a
percentage of revenue; the strength of our balance sheet and tenor of
our debt; the potential value added by our acquisition of a Costa Rican
cable operator; and other information and statements that are not
historical fact. These forward-looking statements involve certain risks
and uncertainties that could cause actual results to differ materially
from those expressed or implied by these statements. These risks and
uncertainties include events that are outside of our control, such as
hurricanes and other natural disasters, the continued use by subscribers
and potential subscribers of our services and their willingness to
upgrade to our more advanced offerings; our ability to meet challenges
from competition, to manage rapid technological change or to maintain or
increase rates to our subscribers or to pass through increased costs to
our subscribers; the effects of changes in laws or regulation; general
economic factors; our ability to obtain regulatory approval and satisfy
regulatory conditions associated with acquisitions and dispositions; our
ability to successfully acquire and integrate new businesses and realize
anticipated efficiencies from acquired businesses; the availability of
attractive programming for our video services and the costs associated
with such programming; our ability to achieve forecasted financial and
operating targets; the outcome of any pending or threatened litigation;
the ability of our operating companies to access cash of their
respective subsidiaries; the impact of our operating companies’ future
financial performance, or market conditions generally, on the
availability, terms and deployment of capital; fluctuations in currency
exchange and interest rates; the ability of suppliers and vendors
(including our third-party wireless network provider under our MVNO
arrangement) to timely deliver quality products, equipment, software,
services and access; our ability to adequately forecast and plan future
network requirements including the costs and benefits associated with
network expansions; and other factors detailed from time to time in our
filings with the Securities and Exchange Commission, including our most
recently filed Form 10-K. These forward-looking statements speak only as
of the date of this release. We expressly disclaim any obligation or
undertaking to disseminate any updates or revisions to any
forward-looking statement contained herein to reflect any change in our
expectations with regard thereto or any change in events, conditions or
circumstances on which any such statement is based.

About Liberty Latin America

Liberty Latin America is a leading telecommunications company operating
in over 20 countries across Latin America and the Caribbean under the
consumer brands VTR, Flow, Liberty, Más Móvil and BTC. The
communications and entertainment services that we offer to our
residential and business customers in the region include combinations of
services comprised of digital video, broadband internet, telephony and
mobile services. Our business products and services include
enterprise-grade connectivity, data center, hosting and managed
solutions, as well as information technology solutions with customers
ranging from small and medium enterprises to international companies and
governmental agencies. In addition, Liberty Latin America operates a
sub-sea and terrestrial fiber optic cable network that connects over 40
markets in the region.

Liberty Latin America has three separate classes of common shares, which
are traded on the NASDAQ Global Select Market under the symbols “LILA”
(Class A) and “LILAK” (Class C), and on the OTC link under the symbol
“LILAB” (Class B).

For more information, please visit www.lla.com.

Footnotes

1.  

For the definition of Operating Cash Flow (“OCF”) and
required reconciliations, please see OCF Definition and
Reconciliation
below.

2.

OCF guidance is based on FX rates as of February 9, 2018.

3.

For the definition of Adjusted Free Cash Flow (“Adjusted
FCF”) and required reconciliations, please see Adjusted Free
Cash Flow Definition and Reconciliation
below. For more
detailed information concerning our operating, investing and
financing cash flows, see the consolidated statements of cash
flows included in our Form 10-K.

4.

The indicated growth rates are rebased for acquisitions and
FX. Please see Revenue and Operating Cash Flow for
information on rebased growth.

5.

Please see Footnotes for Operating Data and Subscriber
Variance Tables
for the definition of RGUs. Organic figures
exclude RGUs of acquired entities at the date of acquisition and
other nonorganic adjustments, but include the impact of changes in
RGUs from the date of acquisition. All subscriber/RGU additions or
losses refer to net organic changes, unless otherwise noted.

6.

For purposes of calculating our average tenor, total debt
excludes vendor financing.

7.

Our aggregate unused borrowing capacity of $938 million
represents the maximum undrawn commitments under our subsidiaries’
applicable facilities without regard to covenant compliance
calculations or other conditions precedent to borrowing. Upon
completion of the relevant December 31, 2017 compliance reporting
requirements for our credit facilities, and assuming no further
changes from quarter-end borrowing levels, we anticipate the full
amount of unused borrowing capacity will continue to be available
to be borrowed under each of the respective subsidiary facilities.
For information regarding limitations on C&W’s ability to access
this cash, see the discussion under “Liquidity and Capital
Resources” in our Form 10-K.

 

Balance Sheets, Statements of Operations and Statements of Cash Flows

The consolidated balance sheets, statements of operations and statements
of cash flows of Liberty Latin America are included in our Annual Report
on Form 10-K.

Rebase Information

For purposes of calculating rebased growth rates on a comparable basis
for all businesses that we owned during 2017, we have adjusted our
historical revenue and OCF for the three and twelve months ended
December 31, 2016 to (i) include the pre-acquisition revenue and OCF of
certain entities acquired during 2016 and 2017 in our rebased amounts
for the three and twelve months ended December 31, 2016 to the same
extent that the revenue and OCF of such entities are included in our
results for the three and twelve months ended December 31, 2017 and (ii)
reflect the translation of our rebased amounts for the three and twelve
months ended December 31, 2016 at the applicable average foreign
currency exchange rates that were used to translate our results for the
three and twelve months ended December 31, 2017.

Contacts

Liberty Latin America
Investor Relations
Kunal Patel,
+1 786 376 9294

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