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spk09: 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 Laura Pinalto, Treasury Manager of Liberty Latin America. Laura, please go ahead.
spk08: Good morning and welcome to Liberty Latin America's full year 2021 investor call. At this time, all participants are in listen-only mode. Today's forum 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 statements that are not historical facts. 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, along with the associated press release. Liberty Latin America disclaims any obligation to update any statements or information to reflect any change in its expectations or in the conditions on which any such statement or information is based. In addition, on this call, we 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 investor section of our website. I would now like to turn the call over to our CEO, Mr. Balam Nair.
spk03: Thank you, Laura, and welcome everybody to Liberty Latin America's full year results presentation. I'll begin with our group highlights and operating results before closing with an overview of our strategic focus areas in 2022. Chris Noyes, our CFO, will then follow with a review of the company's financial performance and our outlook. After that, we'll 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. As a point of housekeeping, we will both be working from slides, which you can find on our website at www. Starting on slide four, and our highlights for the year, we grew our fixed base by 269,000 RGEs in 2021, led by cable and wireless, where we added over 100,000 RGEs, with strong contributions also coming from Puerto Rico, Panama, and Costa Rica. We had a record performance in both Q4 and the year, adding 493,000 subscribers in 2021 with a growing post-paid mix. Panama and Costa Rica reported the highest additions across both periods. High-speed connectivity is at the core of our customer offering, and we invested to expand and improve our network during the year. adding or upgrading approximately 750,000 homes past across our operations, almost exclusively using fiber-to-the-home technology. We plan to continue this activity in 2022 with around 600,000 homes planned. Our principal financial guidance for 2021 was to deliver $200 million of adjusted free cash flow, and we achieved this target. We also announced an additional $200 million buyback program yesterday, which Chris will provide more details on. Finally, we continued to make progress with our inorganic strategy in 2021, announcing the acquisition of American Mobile's Panama operations and a 50-50 joint venture with American Mobile in Chile. We expect to close both transactions this year as well as making further progress integrating businesses previously acquired in Puerto Rico and Costa Rica. Turning to slide five and our fixed subscriber additions by market over the past three years. Starting with cable and wireless Caribbean networks in the upper left of the slide. Here we have delivered steady improvement over the period, including 10% growth in additions during 21. This was driven by Jamaica, where we added close to 100,000 RGUs in the year. Moving across on the slide to Liberty, Puerto Rico, we continued to deliver strong ads in the year, albeit a lower figure than 2020, where we benefited from demand driven by COVID-19. Our quarterly run rate exiting 2021 is a more normalized level for the business. Further right on the top row, we had our best year in Costa Rica. to 45,000 in 2021. Moving to the lower left at CNW Panama, here we saw a much stronger performance in 2021 as the market recovered from the prior year impacts of COVID-19. Our network in Panama is now over 80% HFC or fiber to the home, and we are focused on improving operational execution across core areas of sales, retention, and installation to drive further growth. Finally, in terms of our markets, VTR had a better year in 21 versus 20. However, the Chilean market continues to be intensely competitive, and we reported net subscriber losses in the fourth quarter. Our focus here is to stabilize our subscriber base. Overall for the group, there was a 57% increase in ads for 21 compared to 2020. Moving to slide six and our mobile performance. As with our fixed KPIs, we present annual figures from 2019 to 21 and call up postpaid additions separately. Starting in the top left of the slide with CNW, Caribbean Air Networks, we recovered strongly in 21 after the impacts of COVID-19 and associated mobility restrictions. Jamaica, the segment's largest market, led CNW in mobile growth. What we are excited about is our SMC plans working and drove 40,000 postpaid ads, our strongest performance in recent years. Then into Puerto Rico, where we acquired mobile operations in October 20. While our overall base remained relatively stable during 21, there was a notable shift in mix as we added 39,000 postpaid subscribers. Cross-selling activities should further drive postpaid ads. Moving to the right of the slide in Costa Rica, this is now our largest mobile operation in terms of subscribers and another recently acquired business. As the graph shows, the operation delivered significant additions in the four and a half months under our ownership. Post-paid subscribers represented about one-third of the total ads. On the bottom left of the slide, we present Panama's mobile subscriber This was the country where our customers experienced the most severe mobility restrictions during 2020, and we saw a significant rebound in 2021 as market conditions improved. Panama delivered the most ads across the group in the year, including record post-paid ads. In aggregate, we added close to half a million mobile subscribers in the year, including 137,000 post-paid subscribers. As we drive fixed mobile conversions across our markets, we are focused on increasing our post-pay subscription-based revenue. Next, to slide seven, and our B2B operations. In the bar chart on the left of the slide, we present our fourth quarter and four-year B2B performance with 15% and 4% rebates growth respectively. B2B is back. Following 2020, when economies were challenged, projects were put on hold. Panama and Jamaica in particular saw activity recovery, and this was accentuated in Q4 as projects returned to the marketplace in what is seasonally our strongest quarter for B2B. In the center of the slide, we provide an overview of where B2B revenue generated across the group, including our subsea operations. CNW Caribbean and Networks is our largest contributor, generating close to two-thirds of our $1.4 billion in B2B revenue annually. Panama is then the next largest operation with 18% of the pie, and Liberty Puerto Rico is now a much larger B2B business, following our acquisition with 16% of group B2B revenue. On the right of the slide, we wanted to provide some more color for our networks and LATAM business. This comprises our subsidy operations and attacker B2B operations in Latin America. These businesses, on a combined basis, represent over $400 million of annual revenue on a gross basis, as our reported figures exclude intercompany capacity sales of over $70 million in 2021. In terms of the split shown, Most of the revenue is driven by subsidy. However, there is also a diverse and fast-growing B2B business here, with Colombia representing our largest market. At this time, we are not providing any additional information as it pertains to any plans with the asset. Importantly, as evident on this slide, this business continues to charge ahead. We firmly believe this business is underappreciated with attractive characteristics. It is underpinned by U.S. dollar revenue, has strong cash flow conversion, and an adjusted OEBITDA margin of above 50% and relatively low CapEx requirements. And we have plenty of capacity given advances in technology. We continue to work on how best to optimize this unique asset. Moving to slide eight and an overview of our networks. Starting on the left with our fixed footprint by technology. The key takeaway here is that we have a strong position. 90% of homes were passed with high-speed technology at the end of 21. In the center of the slide, we show our investment activity and how it has evolved over the past years. We have built consistently, even through COVID, adding nearly 2 million homes in the four-year period. We see our network as core to the company's long-term success and will continue to invest with approximately 600,000 new homes built or upgraded expected in 2022. The other point to highlight here is our increase in FTTH technology, such that it's now used in virtually every case. Finally, on the right side of the slide, we show the significant growth in high-speed mobile service capabilities. We now have LTE coverage virtually everywhere that we operate. We also have 5G services in Puerto Rico and U.S. Virgin Islands, where approximately 95% of the population is served by a 5G-capable network. Turning to slide nine. and an inorganic strategy which we believe will drive significant free cash flow growth for the group. On the left of the slide, we show our completed and pending transactions since 2018. In terms of completed transactions, we have consistently focused on opportunities that solve for product gaps or improve existing offering, generate clear synergies, and create scale to strengthen our market position and propositions Most importantly, we look for opportunities to drive meaningful free cash flow growth. Sometimes these are smaller but very creative moves, such as the acquisition of broadband VI in the US Virgin Islands, which we closed in December last year. This will be the platform for us to build out a fixed connectivity business in the US VI, which we plan to integrate with our mobile operations to create a leading converged operator. For our pending deals, we remain very excited about the prospects for both and expect to complete the Panama acquisition in the first half and our Chile JV in the second half of this year. On the right of the slide, we wanted to provide an update on integration activity in Puerto Rico and Costa Rica. These are exciting and accretive deals. Across both transactions, we expect to deliver somewhere in the region of $90 million of synergies once integration activity is completed. This will coincide with the end of our TSA agreements with AT&T and Telefonica towards the back end of 2023. So we will have a whole year of benefits in 2024 and progressively more through this year and next. Our 2022 milestones include testing our new IT stack and establishing our mobile core by the end of the year in 434. in consolidating our brand and retail networks, as well as designing a new OSS BSS in Costa Rica. Finally, to slide 10, and our strategic focus areas as we look to 2022 and medium-term shareholder value creation. The priorities are split across three pillars. First, network and IT. As mentioned, this will include expanding and upgrading our fixed and mobile networks for our customers. Our transformation will involve some of the integration activity as well as establishing new IT stack to support our business operations. Second, our commercial approach. We aim to drive fixed mobile convergence to bring better value for our customers while creating more predictability in our cash flow. Product development includes delivering a great in-home Wi-Fi experience, set-top box solutions, eSIM, 5G, FinTech, and B2B products. This will improve service and reduce costs. Through increased use of digital channels, we will improve our customer journey, reducing friction in buying our products, increase efficiency of our search engine optimization, search engine marketing, and social networks marketing. This will increase sales and reduce channel costs for the future. Additionally, we remain focused on using technology and better tooling to reduce change, which is a significant cost for all operators in our industry. Third and finally, capital allocation. As I highlighted on the price line, we intend to drive inorganic growth through the acquisitions we have already completed, as well as those we are looking to close. Successful integration of the business we acquire is vital, both drive synergies and to optimize top-line performance. So this is a key focus for us in Puerto Rico and Costa Rica in 2022. And we have been active with our share buyback, announcing yesterday our new $200 million increase to the plan. With that, I'll pass you over to Chris Noyes, our Chief Financial Officer, who will talk you through our financial performance before we take your questions. Chris?
spk02: Thanks, Fallon. I will start by running through our key metrics, focusing on Q4 performance. For starters, Q4 revenue increased by about $180 million year-over-year to $1.3 billion, fueled by our acquisitions in Puerto Rico and Costa Rica. Our rebase growth rate was 6%, which was our second-best quarter of the year. This growth was led by double-digit top-line performances in Panama and Costa Rica as well as a 7% rebase result from cable and wireless Caribbean networks. On a full-year basis, revenue was up 4% on a rebase basis to $4.8 billion. In the upper right, we generated adjusted EBITDA of $470 million in Q4, reflecting rebase growth of 3%, an improvement from flat rebase growth in Q3. Our adjusted EBITDA margin in Q4 of 37% was adversely impacted by lower margin B2B and mobile equipment sales during the quarter, as well as about $10 million of integration expenses. Moving to the full year and consistent with revenue, our rebase growth was 4% on adjusted EBITDA of $1.8 billion. Our P&E additions in the bottom left were $257 million in Q4, or 20% of revenue. This result brings our 2021 total to $856 million, or 18% of revenue, and includes significant new build and upgrade activity, as Valen highlighted, and roughly $25 million of integration-related CapEx during the year. On the bottom right, we reported $51 million of adjusted free cash flow for Q4, bringing our full year to $200 million, a 35% increase over 2020. Next to slide 13, I wanted to make a few points about our quarterly performance and our expected phasing for 2022. Q4 2021 is the first full quarter, including our mobile business in Costa Rica, acquired from Telefonica, which contributed $71 million of revenue and $17 million in adjusted during the quarter. Q4 also tends to be seasonally strong in revenue, with higher mobile activity and equipment sales leading up to the holidays, and from significant projects awarded by businesses and governments. Looking to 2022, we expect to deliver continued revenue and adjusted EBITDA growth. However, our growth will be significantly weighted to the second half of the year. This is a function of a difficult comparison in Puerto Rico relating to the favorable net roaming we experienced in H1 2021, higher spending on integration for Puerto Rico and Costa Rica, and continued pressure in VTR and revenue and adjusted EBITDA expected for 2022. Turning to adjusted free cash flow, our quarterly phasing in 2021 was relatively consistent and there was a positive contribution across all quarters. We expect 2022 to go back to more historical phasing with Q1 and Q3 substantially lower than Q2 and Q4 due in part to interest payments. Furthermore, we would expect Q1 to be negative and Q4 to be the largest quarter of the year in terms of cash flow. Slide 14 highlights our revenue and adjusted EBITDA results by segment for Q4 and the full year. Starting with CNW Caribbean and Networks, we reported $453 million of revenue, or 7% rebase growth, and $196 million in adjusted EBITDA, or 9% rebase growth. This was led by double-digit rebase revenue growth in Jamaica and our Networks businesses, as well as high single-digit growth in Bahamas and Barbados. The strong revenue result year-over-year was driven by 10% rebase performance in mobile and 8% rebase growth in B2B, reflecting, in part, improved conditions across the region. Adjusted OIBADA grew faster than revenue as we realized operational leverage through controlling our cost base. Moving to cable and wireless Panama. Q4 was particularly robust for our team in Panama. They delivered revenue of $169 million and adjusted OIBADA of $63 million. resulting in a rebase growth of 30% and 24% respectfully. B2B revenue, particularly those associated with long-term projects, really came back during the quarter as they had been constrained last year from the impacts of COVID. Additionally, fixed residential services were up 7% year over year, building upon our continued subscriber growth throughout 2021 as we added over 60,000 RGUs during the year. Turning to Liberty Puerto Rico, we reported revenue of $376 million and adjusted EBITDA of $141 million, representing modest rebates growth of 2% in revenue and 1% in adjusted EBITDA. In terms of revenue, our legacy fixed operations grew double digits year over year, while Liberty Mobile declined slightly as subscription revenue growth was offset by lower equipment and B2B revenue. Adjusted EBITDA was impacted by higher cost principal in the areas of roaming, integration, programming, and labor on a year-over-year basis. partly offset by reduced handset costs. Next to VTR, we delivered Q4 revenue of $175 million and adjusted OIBDA of $55 million, reflecting rebase declines of 8% and 20% respectively. As we have seen throughout 2021, the rebase top line decline is due to a combination of ARPU decline and volume losses, with the market remaining extremely competitive. We expect declines to continue until such time as subscribers in ARPU have more stabilized. Additionally, our adjusted EBITDAs continue to compress faster than revenue, which is a function of several factors. Losing higher margin broadband revenue, increased programming costs, and higher network costs, including truck rolls. Ending with Costa Rica, we generated a revenue of $107 million of rebase revenue growth of 10%. This top-line performance was driven in large part by mobile, including significant growth in the underlying subscriber base and higher handset sales. We reported adjusted EBITDA of $29 million, reflecting modest rebase growth of 1%. Our growth was negatively impacted by about $3 million of integration expense and increased commissions due to customer additions. Turning to slide 15, at year end, including BTR, which is held as an asset for sale on our balance sheet, we had $9.2 billion of total debt, $1.1 billion of cash, and $1.2 billion of availability under our revolving credit lines. Consistent with Q3, we had gross leverage of five times and net leverage of 4.4 times. Since September 30th, we have been active across three of our credit silos. As we highlighted on our Q3 call, in early October, we issued $590 million of C&W term loans due 2029 at a fully swapped rate of 4.4% and repaid $500 million of 7.5% bonds and $55 million of 5.75% bonds. In December, we raised an incremental $120 million term loan at LIBOR plus 375 basis points due 2028. and used the proceeds to redeem 10% of our outstanding 6.75% bonds at Liberty Puerto Rico. And in the early part of 2022, we completed syndication of $435 million in six-year term loans in cable and wireless Panama at a fixed rate coupon of 4.25%. It is broken down in two components, a $275 million facility refinancing existing term loans and a $160 million acquisition facility to fund a large portion of the Claro Panama acquisition. Our debt maturity looks good. Only about 15% of our debt is due within the next five years. Our weighted average life is just under six years, and our fully swapped borrowing rate is just under 6% as well. Important to flag in this rising rate environment, more than 95% of our debt is fixed. Over the last three quarters, we have been active under our buyback program. As the chart highlights, we repurchased $10 million in Q2, $20 million in Q3, and $35 million in Q4. To date this year, we have continued repurchasing equity and expect to complete the $100 million program in the coming days. Additionally, as seen yesterday in our press release, our board approved a new $200 million repurchase program. Moving to the right part of the slide, we highlight our 2021 financial guidance, which we delivered, and we lay out our 2022 targets. These targets are based on our current consolidated group of assets, including the just completed acquisition in the U.S. Virgin Islands BBVI, and do not account for the impact of pending transactions. We will adjust as needed for transactions as they close. First, we are targeting P&E additions of approximately 18% of revenue, consistent with 2021. Second, we are focused on delivering adjusted free cash flow of approximately $250 million. Our 2022 adjusted FCF will be tempered due to integration costs adversely impacting both adjusted EBITDA and P&E additions, and the inclusion of the BBDI acquisition, which is expected to contribute negative free cash flow in year one of its Fiber bill. Important to also note that cash taxes are expected to be significantly higher in 2022. we expect cash taxes to range from 8% to 10% of adjusted . Moving to the final slide, we are pleased with our consolidated 2021 results. We delivered our key financial and operational targets in what was a challenging year for a region that is still suffering from the impacts of COVID and lagging behind the recoveries we have seen across North America and Europe. Our focus on growing the business is evident. Robust fixed and mobile subgrowth combined with improving B2B helped us achieve mid-single-digit rebase revenue and adjusted OIVADA growth, and a 35% increase in adjusted free cash flow. Importantly, we maintained discipline around our CapEx envelope, simultaneously supporting success-based spend, investing in our network, both in terms of fiber-to-the-home expansion and upgrading residual copper plant, and advancing our integration efforts in Puerto Rico and Costa Rica. As Balan touched upon, Efficient capital allocation is key for us as we look to drive value in two key ways. First, we have been strategic with our M&A activity. Our completed and or announced transactions over the last two years in Puerto Rico, Costa Rica, Panama, Chile, Curacao, and the U.S. Virgin Islands have several similarities. Attractive valuations in market consolidations, complementary to existing products, and highly synergistic. Second, as we have gained confidence in our recovery from COVID, As our free cash flow generation and outlook has improved and the market has provided us with an attractive opportunity to capitalize on a low share price, we have steadily ramped up our buyback activity through 2021. And as I highlighted in the previous slide, that has continued into 2022. In closing, we are excited about our 2022 prospects. It'll be a year of operational execution across our integrations and initiatives that Balan highlighted. and to close both our Panamanian and Chilean transactions. We are focused on driving free cash flow growth this year, even with the headwind of significant integration spend. And with all the work we continue to do, we believe will position us for improved growth and free cash flow performance in 2023 and beyond. With that, operator, if you can open up for questions.
spk09: Of course. The question and answer session will be conducted electronically. If you would like to ask a question regarding the company's operations, please do so by pressing star 1 to ask a question, star 2 to withdraw your question, or star 0 for operator assistance. In order to accommodate everyone, we request that you only ask one question with one follow-up, if needed. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. We'll pause for just a moment to give everyone the opportunity to signal for questions. Our first question comes from the line of Michael Rowlands from Citi. Michael, please go ahead.
spk10: Thanks and good morning. A couple questions if I could. First question, just on the numbers, can you break out the impact of the government contract in Panama and into the overall results for revenue in Uyghur and how should we think about the contribution from that over time? And then Just separately, curious if there's an update on the exploration of what to do with the subsea business as well as, you know, any other components in the portfolio. Thanks.
spk03: Thanks, Michael. You know, in Panama, on the government contracts and all that, My colleague, Guillermo, will jump in here in a bit as well. These are actually extremely good revenues. There's a component of non-recurring up front and then a monthly recurring going forward. We don't break down the components of B2B specific contracts and the value of those contracts. But I'll tell you, these are great contracts by the government of Panama, which post-COVID, they're coming up with a lot more contracts and we are just gunning for all of them. But we feel really good about the non-recurring part, which you captured up front, and then the monthly recurring that happens up in the future. Guillermo, do you want to jump in really quick? And then I'll answer the sub-C question.
spk07: Yeah, thank you, Valen. We are very happy about the performance of our B2B team in Panama. We have a strong team there, which we have been building for a long time. The relationship we have with not only with the government but other large corporations in Panama is really strong and this is you know what is represented in the numbers and in the figures you saw on the fourth quarter. Fourth quarter is usually a strong quarter for us as many entities accelerate some of the project execution over the fourth quarter and we have become the preferred partner to be and implement those projects in Panama. Performance has been really good, as I said, as pointed out by Balan. Many of these projects have a non-recurring component up front, explained by equipment and the installation of equipment, but then another important component that it's recurring revenue that we will enjoy over the next years, actually, in this kind of large project.
spk03: Thanks Guillermo. On your second question on sub C, you know we are really happy with that asset. We really like the business as I've indicated earlier on. Extremely high margin business both on an inhibitor basis and an operating free cash flow basis. And we surely believe that the SOTP and this is not fully reflected here. Now as to your specific question on the strategic options that we've been looking at, We're not going to comment on that today, but we really like the business. Maybe in the next quarter, two quarters from now, we'll probably shed some more light on it.
spk10: Thank you.
spk09: Our next question comes from the line of Diego Aragao from Goldman Sachs. Diego, please go ahead.
spk04: Yes, thank you. Good morning, Dallin, Chris. Thanks for taking my question. I guess the first one is for Chris. Your guidance on just the free cash flow in 2022 implies a 25% growth right from compared to the year 2021. So can you just help us bridge the growth you know you were assuming by region and also by business segment? That's the first question. Thank you.
spk02: Yeah, I mean, I'll talk holistically about, you know, the free cash flow and some of the information provided. First, obviously, we're focused on continuation of adjusted EBITDA growth, you know, so that plays through. We gave guidance very similar as a CapEx as a percentage of revenue, so that's 18%, similar to what it was in 21%. We did give some color around our cash tax number, so a fairly significant increase during the course of 22 as compared to 21. As a business, we are focused on working capital and working capital efficiency, and we continue to kind of focus on that to drive improvements on a year-over-year. So when you put the math components together, it translates into – call it a $50 million increase on a year-over-year basis. Thanks, Chris.
spk04: Okay, that's helpful. Just my second question is related to Chile. I just would like to get your views on the recent developments in the country, particularly the growing number of pure fiber players going to that country. And also if you can just comment quickly on the timeline to be able to require approvals for the JV which are next. That would be great.
spk03: Sure. Thanks, Diego. On the approval process, you know, I'm here with my general counsel, John Winter, as well. He's been working on that. We feel good that it's the second half of the year closing on this. And I'll ask John to maybe jump in here in a second. But that's what we've publicly stated, and we feel that that's still good. Clearly, it's a highly competitive market, as you pointed out. There's a lot of PE money coming in. There's currently right now seven fixed operators in Chile, of which we are one. So we think consolidation there just makes absolute sense. There's some, you know, some of our competitors there publicly stated that they... wanting to either exit the market or putting up their assets for sale. So I, I suspect after our announcement, there'll be more consolidation in the market and that's, that's necessary then. But, um, our joint venture with Claro American mobile, I think, uh, we'll shake up the market. We'll bring a lot of investment into the country and you can clearly see from our JV, we are bullish on Chile. We think it's going to come back. We think it's a strong market in the longterm. And that's why we are continuing to have a presence there and to do this joint venture with Claro, who has a great mobile network. We've got a great fixed network. And that combination, I think, will put up a good response to some of our competitors there. John, you want to make maybe a comment on the closing?
spk05: Yeah, sure, Balan. As Balan said, we're still optimistic and confident about being able to close in the second half of the year. It was publicly stated by the F&E in Chile that they moved us to phase two of the process, which we were expecting, and it's pretty customary in Chile for transactions of this type. And we're working with our partner to respond to the F&E, and we remain confident we'll be able to get that approved in the timeframe we outlined in September. Thanks, John. Thanks, Diego.
spk09: As a reminder, to ask any further questions, please press star followed by one on your telephone keypad. Our next question comes from the line of Kevin Rowe from Rowe Equity Research. Kevin, please go ahead.
spk01: Thank you. Good morning. Bala and I have sort of two high-level questions, first on inflation. How, in general, are you addressing inflation with equipment costs, fiber, labor, energy? Are you leaning more into price increases to keep up with inflationary pressures? And secondly, on Chile, Valen, if you could give us sort of a real-time update on the new government. I often get questions on it in terms of regulatory trends or regulatory outlook, any changes there, or even a commentary on potential tax risk. Thank you.
spk03: Sure. Hey, Kevin. Thanks. First one on inflation. Inflation, of course, is all over the map everywhere. And if you look at our region specifically because of commodity prices, et cetera, we are seeing real inflationary effects. Chile, of course, certainly some of the islands. It's kind of tempered in some of the locations where unemployment is still high because of lack of tourism. We see those headwinds in the Caribbean islands right now. And we expect that to improve. And when that does improve, inflation probably will start coming there as well. Here's our strategy on this. We are not taking price increases. We are going to tackle inflation through cost cutting. And the reason we do that is one, you know, this management team is focused and trained on driving value without taking price increases. This is a volume-driven growth business. And it's a good practice for my management team as well, especially at all levels, to run this business with discipline and not count on price increases to solve for some of the gaps in our cost structure. And I think that's going to serve us really well in the long term. And it doesn't open up, or at least it opens up a bigger gap between us and our competitors who take price increases. And I really like that strategy. On Chile specifically, you know, the government, of course, there's a new government in place. We've been very pleased with the cabinet that he has formed. And it's a very moderate cabinet with a lot of technocrats in it. And some we know very well as well. And... And then to your question on taxes, you know, there's a lot of noise out there. We'll see how it plays out, but it's going to take a while for, you know, any changes to come about. Like I said in my earlier, the previous question from Diego, we are bullish on Chile and certainly in the long-term prospects of Chile. Super. Thank you, Bala.
spk01: Thanks, Kevin.
spk09: As a reminder, to ask any further questions, please press star followed by one on your telephone keypad. Our final question comes from one of Sumit Datta from New Street Research. Sumit, please proceed.
spk06: Hi there, guys. Apologies I joined the call late. I'm going to ask a couple of questions, and hopefully they haven't been asked. If they have, again, apologies, and we can maybe take them offline. and just on first of all on the um on the buyback i was just wondering how you're thinking about the pacing of that um is that going to be sort of you guys in the market sort of you know all the time kind of regularly just sort of being part of the flow or are you going to be a little bit more selective about it how do we think about that maybe pacing over the next couple of years i think it runs through to december 24th so a bit of a steer on that would be um super interesting as a first question um secondly um again i don't know if this this has been sort of covered too much but just on the subsea kind of um strategic review my understanding was that you were going to kind of conclude what would have been a year's long a year-long process um um you know now and we were and the market was going to hear what the conclusions of that were it do we not have any conclusion from that process um That would be the second question. And then just on Chile, please, I know we're waiting for the deal to close, and that all sounds like it's absolutely on track. Obviously, the business is slipping a little bit in terms of broadband ads before that point. Is there much you can do about that, or is it a case of kind of waiting to close that deal and then obviously being in a kind of greater position of strength to compete? Thanks very much.
spk03: Sure. On the buyback, I'll start with it, and I'll ask Chris to jump in here. On the buyback, we are going to be opportunistic. You saw our numbers from the last three, four quarters, and certainly in 2020. We certainly think our stock is undervalued right now, and it's a great IRR for us to buy back, and we're quite pleased to extend the buyback program at an increased level at $200 million. as well and this gives us a lot of flexibility uh i'm going to jump through the questions and then i'll ask chris to come back to the buyback you know to give more color there on the subsea yes that question was to ask submit and um and the answer is you know we're still not uh complete in uh in our reviews and uh we'll give more color in the next quarter or two uh but we love the asset and uh yes i stated before the sotp the sum of the parts on that has not been fully reflected um but stay tuned for another quarter or two. Sorry, that's taking a long time, but this is a business that we love and we're looking at it from all angles. On the Chile part, our strategy, if you saw 2020, we took a big hit on net ads. We stabilized it in 2021. In 2022, our focus leading up to the JV is to... to grow the net ads as well now in a seven player market it's it's you know that you've got a very few levels to to play with but one of the levels is really uh pricing and you'll see that our food has declined there and we're not ashamed by that we are going to take this fight to our competitors and uh my good friend vivek who runs uh our chile operations uh He's recently been looking at it, and I think we're going to get even more creative on the value front for our customers. That's going to shake the market up as well. So I feel really good about Chile, and we are going to come into the JV with strong net ads on our side, and I think as well on the cloud side. And remember that one of the key reasons we're doing this is the fact that we can launch a converged product. and also funded by a significant amount of synergies from both sides that can fund a very nice build-out in that country. So we feel good about that. I'm going to pass it on to Chris if he wants to provide more color in the buyback.
spk02: Yeah, sure. Just a couple points. One, we will have purchased about $90 million of stock in less than 12 months. So as you can see that from our pacing, Obviously, as Balan pointed out, we're opportunistic. So we tend to buy more as the stock price is lower. So you can see that based on our behavior over the last three and a half quarters. And, you know, going forward, we'll just tend to balance the share price, the other opportunities for our free cash flow, M&A or investments within the business. And we're focused on efficient capital allocation in terms of driving longer term shareholder value. and that'll dictate the pacing. We could slow it down, we could speed it up, but net-net will be opportunistic as we look out over the coming quarters.
spk00: Okay, that's great, thank you.
spk09: That will conclude today's question and answer session. I'd like to hand back to Bilal Nair for any additional or closing remarks.
spk03: Thank you, Operator. Well, firstly, as usual, I want to thank all of you for your support of our business. It's not been an easy last couple of years, but we remain quite optimistic about the future. I think 2021, we put up some pretty good numbers, even notwithstanding some of the headwinds in Chile. And if you look at 2022, we see that momentum coming into the year. Now, clearly, we're two months into the year, and we've seen some really good stuff, some challenging parts of our business. But that's normal in a company like ours. But we remain quite optimistic about the future. And let me end by saying, once again, thank you so much for your support.
spk09: Ladies and gentlemen, this concludes Liberty Latin America's full year 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 materials.
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