Inorganic growth expected to drive Liberty Latin America free cash flow

Liberty Latin America is betting on an inorganic strategy to drive “significant free cash flow growth” and deliver opportunities for cash flow expansion. 

“Sometimes these [opportunities] are smaller but very creative moves, such as the acquisition of Broadband VI in the US Virgin Islands,” CEO Balan Nair said during the Q4 investors presentation.

Liberty Latin America completed the acquisition of Broadband VI in December. 

Financial guidance for 2021 was to deliver US$200mn of adjusted free cash flow. The company achieved that target and announced a US$200mn buyback program afterwards.

For 2022, Liberty Latin America has set a target of US$250mn, even with significant integration spending.

Liberty Latin America has completed consolidation in Costa Rica, the Virgin Islands and Puerto Rico. Pending transactions include the acquisition of Claro Panamá, projected for the first half of 2022, and a joint venture with Claro Chile, expected for the second half.

“In terms of completed transactions, we have consistently focused on opportunities that sealed product gaps on existing offer, generate clear synergies and create scale to strengthen our market position and propositions,” Nair added. 

The 2022 goal is following integration processes in Puerto Rico and Costa Rica, including a new IT stack and core system, and the completion of the mobile core by year-end in Puerto Rico. In Costa Rica, the aim is to consolidate brands and design new OSS/BSS.

Fourth-quarter revenue increased by about US$180mn year-over-year to US$1.3bn, fueled by the acquisitions in Puerto Rico and Costa Rica. Oibda margin was 36.7%, impacted by a lower margin, B2B and mobile equipment sales and about US$10mn of integration expenses. 

For the full year, the company reported US$4.8bn revenue, US$81mn operating income, and US$1.83bn in adjusted Oibda. 

FIBER

Liberty Latin America added over 269,000 revenue generating units in 2021 and more than 493,000 mobile subscribers. Panama and Costa Rica reported the highest additions. 

During 2021, Liberty Latin America added over 750,000 fiber homes passed, while 600,000 new ones are planned for 2022. 

Liberty Latin America has 8.4mn homes passed in the region, 73% with two-way HFC (hybrid cable and fiber optics) and 17% with fiber to the home. About 10% of the network is DSL (copper) or HFC one way. 

The planned joint venture with Claro Chile includes a target of 6mn homes passed with fiber by 2025.