Liberty Latin America Ltd (LILA) 2018 Q1 法說會逐字稿

Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Liberty Latin America's Full Year 2017 Investor Call. This call and the associated webcast are the property of Liberty Latin America, and any redistribution, retransmission or rebroadcast of this call or webcast in any form without the expressed written consent of Liberty Latin America is strictly prohibited.

(Operator Instructions)

As reminder, this call is being recorded on this date, February 15, 2018.

Page 2 of the slides details the company's safe harbor statements regarding forward-looking statements. Today's presentation may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including the company's expectation with respect to its outlook and future growth prospects and other information and statements that are not historical fact. These forward-looking statements involve certain risks that could cause actual results to differ materially from those expressed or implied by these statements. These risks include those detailed from time to time in Liberty Latin America's filings with the Securities and Exchange Commission, including its most recently filed Form 10-K. Liberty Latin America disclaims any obligation to update any of these forward-looking statements to reflect any change in its expectations or in the conditions on which any such statement is based. Also note that nothing stated on today's call constitutes an offer of any securities for sale.

I would now like to turn the call over to Mr. Mike Fries.

All right. Thanks, operator, and welcome, everyone, to Liberty Latin America's first official results call as a separate public company. First of all, a quick thank you to those who have been shareholders through the tracking stock phase and a special welcome to new shareholders.

This is an exciting time and exciting moment for Liberty Latin America. That's for sure. I can remember our first investor call as Liberty Global after we spun out of Liberty Media some 13 years ago, and we knew it was going to be a great journey. I can tell you, the executives and the great Board of Directors who we put together for Liberty Latin America feel the same way.

I think the company starts its publicly listed life with a ton of advantages, including fixed and mobile networks in more than 20 countries and that reached 5 million video voice and broadband customers and 4 million mobile subs. And through upgrade, newbuild and converge products, this represents a stellar opportunity, in our view, to drive penetration, drive usage and drive revenue. The company has the best subsea fiber network in the region with over 50,000 kilometers of fiber untapped capacity and a nice on-ramp into new markets. And then I think most importantly, Liberty Latin America has an outstanding management team led by Balan Nair. And the whole team really leverages the best of our existing leadership in the region and an extremely talented group from Europe and Denver.

And I'm going to keep my remarks brief here, but I do want you to know that there are 3 things you can expect from this team and from this board. First and foremost is a commitment to growth that's driven by network and product innovation across the footprint, relying in many cases on the billions of investment already made and deployed in Europe. Second, a disciplined approach to acquisitions based on building strategic scale in a market that's screaming for consolidation. The deal we just announced in Costa Rica, which we've been working on for over a year, is a great example of that. And I'll tell you, the pipeline is full of both large and small opportunities. And then lastly, smart management of a capital structure, from the balance sheet to currency hedges to creative financings. Unlike many of our peers in the region, we want to focus on the things we can control and minimize the volatility from those we can't, especially in this part of the world where we've learned a few things over the last 20 years.

So as Executive Chairman, really looking forward to providing guidance to the troops, helping to drive the broader strategic agenda. And I think most importantly, continuing to work closely with Balan, who is a terrific talent on so many levels and someone I'm really, really proud of. So Balan, over to you.

Thank you, Mike, and welcome once again to our first call as Liberty Latin America. I'll start by taking you through a review of 2017 and where we stand today before moving on to talk about our strategic vision for 2018 and beyond. We have a great opportunity to bring technology and products to our region, and we're convinced that there's a huge appetite for what we can deliver with the younger demographics and the ever-growing demand for data.

So looking at what we've achieved in 2017.

Having the right organizational structure is key to being able to execute our organic and inorganic plans, and we now have that following the split-off. For our organic aspirations, we have experienced, capable and driven leaders who will leverage the scale we have to drive improved top line performance and greater cost efficiency. And for our acquisition ambitions, we now have an operating model which will enable efficient integration of businesses while retaining our core structure.

I've been in the role as CEO of Liberty Latin America for about 7 weeks now. And having visited colleagues in 7 of our operations in that time, I'm more convinced of our ability to execute against this great opportunity.

We also have scale. In 2017, despite challenges we faced from hurricane Irma and Maria, we delivered $3.59 billion of revenue and came in slightly ahead of our updated guidance at $1.37 billion of OCF, which is a great platform from which we can grow in the coming years. I'll cover the hurricanes in more detail on the next slide, but I must say, we've seen exceptional efforts from our colleagues in Puerto Rico in the Cable & Wireless markets to rebuild their respective communities and to ensure that we can deliver core communications services enabling people to recover and connect to the world. Puerto Rico is recovering, and we are on track to rebuild what was and will again be the leading high-speed broadband provider on the island. More on this in the following slides.

In Cable & Wireless, we started to see some encouraging operational trends in Q3, and these have continued in Q4 as we see benefits of investments we are making in our infrastructure and also products, packages and, very importantly, to improve the customer experience, something which will be vital in attracting and retaining customers.

Finally, VTR continued to show what we are capable of operationally, led by broadband performance [ramp]. This year, we added the highest number of RGUs in a decade.

Moving to Slide 6, we wanted to provide an update on our rebuilding efforts following hurricanes Irma and Maria last year. Note that Chris will update on where we are in the insurance recovery process in his section. Starting with Puerto Rico, where we saw the most material impact across the group. Here, we faced a unique scenario as LCPR went from over 400 million of annual revenue to 0 overnight. The scale of the task in Puerto Rico is massive, but we are approaching it with a clear work plan made up of 2 tracks, a network rebuild track and a commercial track. We have organized over 240 crews, both local and international, to help us rebuild the network and reconnect customers. Rebuilding and repairing over 530 fiber miles and 730 core actual miles to date. We should have all major links restored in Q1, with the last parts being in the mountains where the damages were quite severe.

Our team on the island is extremely committed and doing an excellent job, and although we have much more to do, we are ahead of schedule, and I'm confident we can get there with close to 60% of our pre-hurricane RGUs already back online. Key to our success is the ability to adapt quickly to the ever-changing situation on the ground in Puerto Rico.

The chart on the right shows our progress by month since the hurricane hit last September. We've clearly seen some increased churn as factors outside of our control impact the island, such as migration to the mainland and power restoration, which is now running at around 70% of the island. But importantly, this trend is improving, and we're close to the point of new RGUs offsetting any disconnections as the strength of our product offering is winning customers in the market. In fact, our ground strategy to visit neighborhoods, knock on every door, and provide technical assistance has not only assisted our customers to come back online, but it has increased our penetration by as much as 200 bps in several areas. Once we know the service is operational, we simultaneously go through streets, door by door to make sure equipment and connections into the home are working properly.

At the same time, as I mentioned, this is a unique opportunity to gain customers from our competitors. We remain the speed leader on the island with our entry speed now at 100 megabits per second, including a superior in-home WiFi experience through the Connect Box. In addition, our triple-play offer continues to resonate in the market with our leading video product and solid value proposition.

In Puerto Rico, over 90,000 of our existing customers have the Connect Box, which representing approximately 30% of our broadband base. And we also have seen great results across our B2B customers where we've managed to reconnect an even higher proportion to date with over 75% back online at the end of January. As we enter 2018, we're now generating positive monthly OCF, and we anticipate good sequential growth as we move through the year.

Moving to Cable & Wireless, where we saw some devastating impacts. These markets represented less than 5% of Cable & Wireless pre-hurricane revenue. The strength of Cable & Wireless and across the group more generally is our full suite of telecommunications products. This has helped us recover relatively quickly and generate revenue despite the events, particularly in mobile. Digging into this a little more, we have seen a significant increase in mobile data usage where there is a lack of fixed broadband availability as customers substitute their method of connectivity depending on what is available. We also saw mobile revenue grow in the immediate aftermath of the hurricanes due to increased roaming, both inbound, connected to the restoration efforts, and also outbound, as our customers went to other islands.

As with Puerto Rico, it's going to take time and capital to get our businesses in these markets back on track, particularly in BVI, Dominica and Anguilla where we saw the most significant damage. Having said that, the rebuilding process is underway. We'll look to a mix of restoring networks as they were, rebuilding with fiber-to-the-home, and in some areas, leveraging our mobile network strength to deliver fixed wireless solutions. In each case, we'll use the most efficient solutions in terms of the customer experience and return for the business. And finally, our unique and resilient subsea network at C&W remain fully operational.

On Slide 7, we thought it would be helpful to highlight our uniquely diversified group, both in terms of markets and products. This not only have the capacity to protect us, as we outlined in the Cable & Wireless experience following last year's hurricanes, but it also provide a number of exciting opportunities for growth.

Taking each in turn, [rebuilding] [indiscernible] we are looking at our markets. Cable & Wireless is the largest of our 3 operations. However, when breaking out our individual markets, the mix of our businesses is diverse. The largest single market is Chile with just over 1/4 of our group revenue. This has also been our strongest markets in terms of financial performance in recent years and delivered rebase revenue and OCF growth of 6% and 8%, respectively, in 2017. On the right-hand side of the slide, we present our revenue mix. Again, we have healthy diversification with just under half of our revenue coming from the 3 core residential fixed products of broadband, the lead, video and fixed voice. This should generate growth as we focus on penetrating our existing expanded footprint in the coming years and leverage our product set. Next, we have our B2B segment at 30% of the pie. This includes the full suite of telecommunication services to businesses, both fixed and wireless, our unique subsea assets and managed services. This segment is underpinned by increasing bandwidth demand.

Sharing products and best practices should also drive B2B expansion in Chile and Puerto Rico, which have historically had smaller B2B and SOHO offerings.

The final segment to note is mobile representing 20% of 2017 revenue for Liberty Latin America. This is predominantly through Cable & Wireless and will continue to be a prominent and valuable element of our offerings as market moves to a converged service delivery across fixed and wireless connections.

So we have a great foundation of assets and capabilities in which to build.

Moving to Slide 8. I want to lay out our strategic vision into the medium term and to give you some examples of what we're doing today and what you can expect to see from us in the future.

Firstly, we are leveraging our scale. To date, this is driving procurement and content savings for the group, but there is so much more to do. You will see a share functions for efficiencies, but mostly to drive focus. Product and technology is getting more complicated, and having common platform improves innovation and time to market. We will do this where it makes sense. Next, we will be delivering new product for our customers. We've talked about the power of the Connect Box to transform our customers' in-home WiFi experience. However, most of our customers have yet to experience this, and we'll be rolling out more of these boxes in the coming quarters. We now have over 600,000 boxes deployed, which is the equivalent of about 30% of our broadband subscribers. We're also going to benefit from being on the Liberty Global product road map, and we plan to bring leading set-top box platforms to our market in 2018 and beyond.

On the B2B front, we are bullish about opportunity. This is a significant part of Liberty Latin America's future. However, for now, this is predominantly within C&W. So we see an opportunity to expand our capabilities into Chile, Puerto Rico and potentially other markets as we grow our footprint over time. In Puerto Rico, as an example, the LCPR team has been working with Cable & Wireless business to gain access to a larger range of industry-recognized products and more powerfully respond to RFPs with end-to-end solutions. As we win customers with our differentiated products and experience, we also need to manage that base, and we have a lot of skills and capabilities that we can share amongst our operations. We will manage both our front book and back book with more sophisticated tools. This includes how we price our retention and how we increase the attach rates between our RGUs. This will be rolled out over the next few quarters.

We also recently launched a customer retention center of excellence in Trinidad, which has already started to show results. I was at the center last week, and we will focus this team of experts with specialist trainings and tools and incentives to deal with any leave requests across our contact channels. We will look to roll out measures such as this across the business.

Finally, in this regard, we'll look to increase our mobile postpaid mix in C&W over time as convergence grows in the region. This should drive higher ARPUs and lower churn.

One area that is near and dear to me is our need to deliver a leading customer experience. At C&W's Caribbean flow of business, we had a 6 percentage point improvement in NPS as the volume of calls into our call centers reduced by 12%, and we increased the number of calls answered within target by 15% in 2017. We also plan to introduce technology to improve the efficiency of our channels and to create new channels for demographics that do not want to interact with us in our traditional way. We will scale systems that we already have deployed in other parts of our company.

Underpinning our customer service and products, we need to and are investing in our networks. This has been very visible through our upgrade programs in 2017, notably adding -- or upgrading 254,000 homes across the C&W markets, 196,000 in Chile and 14,000 in Puerto Rico prior to the hurricane hitting. We continue to see healthy returns from these investments and are planning another year of investments during 2018 albeit shifting focus slightly to penetrating our existing base in addition to building out our footprint. In Panama, for example, we now have about 20% penetration of cable video across our upgraded 2-way HFC footprint.

We are also investing in our mobile networks. During 2017, we added 3 new LTE markets to our C&W portfolio and increased population coverage elsewhere leading to LTE subscriber growth of close to 400,000 during the year. At Cable & Wireless, LTE penetration of mobile subscribers has more than doubled to 22% in 2017.

Finally, as we showed earlier this week with the announcement of our acquisition of a leading cable operator in Costa Rica, we are searching for opportunities to consolidate the region. Cabletica is a great example of the type of deal we can do by leveraging our regional scale and expansive subsea networks to deliver accretive acquisitions. In this case, adding a leading and growing cable TV provider in Costa Rica to our group of businesses. We have a significant M&A pipeline filled with attractive opportunities, and we'll be very disciplined on how we allocate capital to drive value.

To wrap up, I see tremendous opportunities in bringing world-class technology innovation and scale to the region, expanding our network coverage and deploying exciting new service offerings to our residential and business customers in a region that is currently served by a highly fragmented range of operators as well as customer penetration rates roughly half of more mature markets. We see significant prospects for long-term growth organically as well as through strategic M&A.

I'll now pass you to Chris Noyes, our Chief Financial Officer, who will go through our 2017 and Q4 performance in greater detail. Chris?

Thank you, Balan. I'll begin on Slide 10 and summarize our 2017 full year subscriber results on both fixed and mobile.

We added 66,000 subscribers across all 3 business units, with broadband delivering 110,000 net adds while we had modest declines of 13,000 in video and 31,000 in fixed telephony. VTR posted strong annual growth of 82,000 net adds in 2017, and C&W delivered 45,000 net adds led by solid performances in Jamaica, Panama and Trinidad. Importantly, C&W gained 30,000 RGUs in Q4, its best quarter since we acquired the business in May 2016.

In Puerto Rico, we lost 61,000 subscribers in 2017. This reflects additions in the early part of the year, which were more than offset by subscribers that have disconnected from our services since the hurricanes. Notwithstanding, as Balan mentioned earlier, we have seen improvements so far in 2018 in Puerto Rico. We have continued to see declines in our subscriber count, but the pace of such declines has continued to slow, especially as we have ramped up our sales efforts.

Turning to mobile. We lost 58,000 subscribers in 2017, with VTR gaining 49,000 while C&W lost 106,000. Our mobile subscriber growth in Chile was our best result in 5 years, particularly impressive given the intense competition in the market.

With respect to C&W mobile, our net loss was principally related to the Bahamas and Panama, due in part to competition. And in the case of Panama, we've had a more focused approach on higher-value customers. These declines were offset in part by continued growth in Jamaica mobile where we continue to gain market share.

This slide provides a snapshot for our consolidated full year 2017 results. We reported $3.59 billion in revenue and $1.37 billion in OCF, with declines in rebased revenue and OCF year-over-year as one would expect, given our Q4 guidance on hurricane impacts. We will see in more detail in the next slide, but we estimate that the hurricanes adversely impacted our 2017 performance by roughly $120 million in revenue and $100 million in OCF. Important to note that we changed our OCF definition in Q4 in anticipation of the split-off. Related party charges to Liberty Global are no longer excluded from OCF, which resulted in a $12 million reduction to OCF in 2017 under the new definition. P&E additions totaled $777 million in 2017 or 21.6% of revenue. This result was slightly above the upper end of our reduced 19% to 21% target, reflecting higher P&E additions in LCPR, which I will comment upon on the next slide.

As illustrated in the bottom left corner of the slide, adjusted FCF was a negative $92 million in 2017 and was adversely impacted by the hurricanes and a substantial pension contribution at C&W in Q3. Similar to OCF, we also changed our definition of adjusted FCF in Q4 and now deduct third party dividends to our partners as we believe is a better measure of our FCF.

For 2018, we would expect modest negative adjusted free cash flow.

Moving to the bottom right, our net leverage based on LQA OCF was 5.1x, approximately 1 turn higher as a result of the Q4 impact on OCF stemming from the hurricanes.

A few key points to highlight around capital structure and liquidity.

First, we finished 2017 with over $500 million of cash on hand and total available lines of over $900 million.

Second, as you most probably saw in mid-December, we reached an agreement with our Puerto Rican lenders for a covenant holiday in 2018, which provides us with significant operational flexibility to get the business back to where it needs to be.

Third, in the last 2 weeks, we refinanced $1.8 billion in C&W term loans in a pretty tough market environment, saving 25 basis points, extending maturity 1 year to 2026 and upsizing the loan by $50 million to repay our CF drawings.

And finally, as it pertains to stock repurchases, we were not active during Q4. Over the coming months, we will be evaluating with our board a share repurchase program as we take into account our overall liquidity position and the capital required for both hurricane recovery, M&A and other strategic initiatives.

On Slide 12, I'll take you through our 2017 performance for each of our operations. Starting with Cable & Wireless, our annual results in terms of rebased growth were adversely impacted by the outlier preacquisition Q1 2016 results and also the hurricanes. During 2017, we delivered $2.3 billion of revenue, down 1% on a rebased basis, and $876 million of OCF, a rebased decline of 4%. The hurricane impact reduced our 2017 revenue by $10 million and our OCF by $17 million as both results came in slightly better than anticipated in our Q3 report, due primarily to over-performance in our mobile businesses in the impacted markets. Despite this impact, we saw revenue growth in our B2B and broadband businesses in 2017. For broadband, this was driven by continued investments in our infrastructure and further development of our data-led product offering for customers while our B2B operations continue to thrive capitalizing on the general growth and bandwidth demand. Our rebased OCF performance experienced a larger decline than rebased revenue due in part to the greater impact from hurricanes and the outlier Q1 2016 quarter. Our P&E additions totaled 19% of revenue or $432 million in 2017, in line with our target of 18% to 20% and was inclusive of 250,000 homes upgraded or built.

Moving to VTR in Chile, our largest single market, we posted strong rebased annual growth of 6% in revenue and 8% in OCF, bringing revenue to $953 million and OCF to $383 million. Growth benefited from volume increases in both RGUs and mobile subscribers as well as a continued focus on our cost structure. Our P&E additions of 22% of revenue, or $213 million, was in line with our target of 21% to 23% of revenue and was inclusive of 196,000 homes, upgraded or built.

Turning to LPCR in Puerto Rico, we generated $321 million of revenue and $133 million of OCF in 2017 with Q4 revenue of $17 million and negative Q4 OCF of $12 million. As we stated in our Q3 call, we expected that both revenue and OCF in Q4 would be significantly impacted by the storms. And for the fourth quarter alone, the estimated impact was $90 million of revenue and $65 million on OCF. Importantly, as our subscribers come back online, we are now generating positive monthly OCF and are targeting to achieve monthly OCF of around $14 million by year-end. We incurred P&E additions of $132 million in 2017 as we accelerated materials needed for network construction into the business in late December in order to continue aggressively building our network in early 2018. We are estimating our total bill relating to the hurricanes in Puerto Rico to approximate $130 million, of which roughly $50 million was recorded in 2017.

Moving to Slide 13, I wanted to provide an update on insurance. As a refresher, we have an integrated group property and business interruption insurance policy as part of our natural catastrophe risk management program covering us up to a limit of $75 million per occurrence subject to approximately $15 million per occurrence of self-insurance. So $60 million maximum per occurrence and proceeds to the group. We expect there to be at least 2 occurrences under our policy across the group. We have been engaged closely with our lead global carrier to work through the policy and the scope of what is a very complicated multi-jurisdictional set of claims.

A number of important steps have incurred in the last 90 days. We have hosted claims adjusters in our most impacted markets. We have had several direct meetings with our insurance carriers to progress the claims and have provided key documentation to support our first advancement. Earlier this week, we were notified by our lead carrier that they have agreed to an advance payment of $60 million, resulting in net cash proceeds to the group of $30 million after accounting for $30 million in self-insurance. We are targeting the cash infusion to occur before we report Q1 and are now actively working to agree in the basis of allocation for these funds and the payment mechanism in order to comply with the insurance regulatory framework and requirements in each territory. A special thanks to Allianz for working with us to reach this important milestone. I would also like to emphasize that this is not a settlement but simply an advance on what is expected to be a larger total payout. We anticipate that full settlement will most likely take at least until the end of the year.

Moving to the bottom of the slide, we present our 2018 guidance for the group. For OCF, we expect to deliver more than $1.4 billion in OCF in 2018 based on FX rates as of February 9, 2018. This would imply a rebased OCF growth of low to mid-single digits in 2018 as compared to 2017. However, it should be noted that our consolidated rebased results will be challenged until we lap the hurricane impact.

In terms of P&E additions, we are targeting 19% to 21% of revenue, a modest decrease compared to our 2017 full year results, reflecting in part a lower aggregate build across the group.

To summarize on Slide 14, we successfully completed the split-off at year-end and have put in place an operationally focused management team that's excited about the Liberty Latin America value-creation opportunity. As discussed earlier, we have made great strides in our recovery from the devastating impact of the hurricanes in September that swept across the Caribbean. Important to note that our employees have been key to the speed of our recovery, and even in the midst of personal suffering, have been dedicated and focused in getting our businesses back on track. Looking ahead, we exited 2017 with a very clear operating vision and growth mandate. Our businesses reside in attractive markets with positive underlying macro and demographic trends and penetration levels.

As Balan highlighted, we are focused in our customer, whether it's expanding the quality and reach of our network, improving our service and customer perception levels or innovating with products to enrich our customers' communications, entertainment experience. Additionally, as our recent announcement on the acquisition of Cabletica demonstrates, the region is ripe for value-enhancing consolidation. We will remain disciplined in value and smart on how we deploy our capital to drive incremental shareholder returns.

In conclusion, this year is about recovering, investing and establishing the foundation for sustained growth, and we look forward to updating our investors as we move throughout 2018. And with that, operator, I'd like to pass it back to Balan.

(Operator Instructions) And we'll take our first question from Amy Yong with Macquarie.

Chris, maybe just to clarify the CapEx guidance where you expect revenue or CapEx as a percentage of revenue to be 19% to 21%. Does that include the impact of the hurricanes and the rebuild?

Yes, it does. So the work that we'll do in 2018 is included.

Got it. And then maybe, if you can just help us think through, not necessarily looking for '19 guidance, but just some of the bigger buckets of CapEx spend as you're upgrading the networks across the regions.

I think as we look at '19, the CapEx profile will change. One, the hurricane impact will be off our books. And -- but we'll look at some other investments as well, especially newbuild. We are very, very bullish on that. And there will be some investments in improving the customer experience as well. And that allocation will -- as we get closer to '19, we'll look at that.

We'll take our next question from Mathieu Robilliard with Barclays.

In terms of M&A opportunities, so obviously, you just announced a very interesting deal. And I was wondering if you could elaborate a little bit about the kind of synergies you can generate there because you don't really have a presence, as far as I know, certainly not in mobile, or in any [customer] in Costa Rica. And that's also the case, I guess, in a number of Central American countries where you're not present, but you may be looking at opportunities and I'd like to understand what kind of synergies you could generate there, with your current asset base. If I can follow up on that right away. I mean Panama, we're seeing some potential changes to the legislation that could facilitate consolidation there. And I was wondering if you think you can be a beneficiary of that in any ways.

Okay. Thanks, Mathieu. The first question on M&A, we are very excited about the Costa Rica transaction, and there will be synergies as well. We have our sub-marine cable network coming into the country as well as we have a team that works on our B2B products. So there will be some synergies. And usually, when we look at these acquisitions, we bring some scale to it, some procurement benefits and some other benefits as well on the product side that will help. As far as Panama is concerned, we are very supportive of that bill. It makes sense. Consolidation makes sense. And our team locally have been very supportive as that law goes through its approval process.

If I may follow up on Panama, I mean, you are one of the largest players there. Do you think you could be an active participant? I don't know if that's going too far, or just benefit from a more rational competitive environment because other players merge. I mean, I get the question (inaudible) from regulatory point of view.

Well, one, we won't comment on any potential transaction. But certainly, we will benefit from consolidation as you get more rationality into that market. Four mobile operators in a small country like that is probably one - two too many.

We'll take our next question from Jason Bazinet with Citi.

I just had a question on M&A. Given the lack of free cash and the elevated leverage that you have because of the hurricanes, and the -- your stock hasn't really inflicted up, I've been -- I was operating under the assumption that M&A would be difficult for you guys to do until some of those factors changed. Clearly, I was wrong with what you did in Costa Rica. But my interest was just piqued because you said you have this very full acquisition pipeline. You mentioned it twice on the call. How -- what am I missing? I don't -- it's hard for me to understand how you can affect major transactions given all those variables, whether it's the leverage or the free cash or the lack of currency.

I think -- and I'll pass this on to Chris in a second as well. And we have the benefit of Mike Fries here in the room and he'll probably share some of his thoughts, too. But I'll say this, that we will be very opportunistic. We will be very disciplined in how we value assets. And as Chris pointed out, we have liquidity as well as we have access in either using our equity as currency or tapping the markets. And -- but we will be very prudent, and we will be looking for value. So with that, maybe Chris or Mike, you want to?

Well, I'll let Chris address the liquidity point, Jason, but there is I think $1.5 billion of liquidity nominally in the group today that consists, in no small part, of revolving credit facilities, principally at VTR. So there is liquidity in the group. Some of it's trapped, of course. Some of it's available. Second thing I'd say is many of the targets aren't levered to the 4 to 5x range. So if you were to see the pipeline or come up with a pipeline of your own, you'd see that there is borrowing capacity generally on the target. The third thing I'd say is I think the group is going to be very creative and opportunistic around partnering. So in the case of Costa Rica, the local partner retained a 20% stake. That lowered the requirement. There are no -- there's a number of both private and local partners who would love to be in business with us. If you look at Puerto Rico with Searchlight or even local regional strategic partners. So I think when you look at the overall sources of liquidity, there are many -- and I think what we have to do, as I said in my remarks, is be really thoughtful and creative and smart about how we assemble that capital while minimizing dilution to the shareholders on this call. That's as ever, we're highly sensitive to that. So I think the last thing we'll be utilizing as currency is the equity that everybody on this call owns, but that doesn't mean down the road, we won't be able to tap that or do something that -- to the benefit of all parties.

Understood. [A helpful] response.

And I think -- yes, and just to add, I think we've kind of covered the potential sources. But for example, in Cabletica in Costa Rica, we are doing local borrowing, is the intent. So we'll do 3 to 4x on that asset, until the equity check is relatively small.

We'll take our next question from Soomit Datta with New Street Research.

A question, please, on free cash flow for 2018. I don't think there's any explicit guidance out there. When I look at the OCF and what you're talking about in terms of CapEx and insurance proceeds, it looks like you should be able to get to circa like $100 million, $150 million of free cash flow under your new definition. Am I thinking about that broadly, correctly? Maybe not in terms of specifically commenting on numbers, but it feels like we should be able to get positive free cash flows. Is that the right way to think about it? And then just as a quick follow-up just -- sorry, yes, please go ahead.

No, go ahead.

No, just a follow-up on CWC, I think one of the markets which stands out at the moment is Jamaica. The broadband business is growing well. Across the board, the RGUs are strong. Thinking about 2018, is there another market which you're particularly excited about? Or is Jamaica likely to be the one which drives the RGU growth next year as well or in 2018 as well?

Yes. I'll take the cash flow question. I did, in my remarks, mention that we did expect modest negative adjusted free cash flow in 2018. And just to put it in context, I think we're being prudent on how we guide the market around cash flow. And I think to the extent which we're successful on the recovery from insurance, that will be an additive or positive to our free cash flow story. And then I think as you think about the components, we did provide, obviously, an OCF guidance. If you kind of break down into the sort of free cash flow merits, overall debt is around $6.4 billion, at a little over 6% on a weighted basis. So if you just do the math on that, it will be around $400 million of interest. And then cash taxes is another question that we get frequently. And if you look at what we did in 2017, we had $110 million of cash taxes, but it also included a refund in Chile. So if you gross that up, it was more around $140 million. And if you think about that on a go-forward basis, it's generally kind of upward sloping is the way I would think about it. So that should give you at least some parameters to model out the cash flow figures.

On the Jamaica question, I'll ask Betzalel, our Chief Operating Officer, to comment on that.

Thank you, Balan. Jamaica, definitely, will continue to be our key growth driver for next year. We expect leveraging our expansion on the network and our good position in the market. But I expect next year also to see some positive trends in the other markets, mainly driven by 2 factors: Improving our BASE management. We are doing a lot in leveraging our capabilities to manage our BASE better and lower churn. And on the other hand, adjusting our product offering in our go-to-market that will deliver a gross add improvement in -- we expect that in Trinidad, in Panama and in the other markets We have to also remember that we have a new build that will deliver growth in those markets. And as we go, we improve our delivery and execution in those new build areas.

And we'll take our next question from Kevin Roe with Roe Equity Research.

On Puerto Rico you mentioned the issue of migration. What is your estimate of how much the addressable market at the end of the day may have shrunk on sort of a permanent basis? And on power restoration, I guess that's a key variable for hitting your exit OCF target, monthly target for Puerto Rico. What's your expectation for power restoration between now and year-end?

Okay. On the migration question, obviously, there is migration to the mainland. And we expect the household would probably drop probably in the 10% range. However, in our RGU story, we don't expect to just sit back and then take the lower homes path. Naji and his team is fully focused on capturing additional share in that market. So the bottom of that market for us is not going to be the same as the amount of households that would no longer exist on the island. And I'll ask Naji to add some color on that as well. And on the power side, that's been a very slow process, and Naji can probably give you better guidance on the forecast on the island. Naji?

Yes, Balan. Thank you. On the power restoration, based on today's figure, we're approaching 75%. And based on the information we have, it will likely reach 100% sometime towards the end of Q2. They're probably getting to the point where it is slower than expected, simply as you reach the area heavily devastated in the mountains. So we do anticipate the power will be back 100%. It's just the last 20%, 25% is going to take a bit longer.

We'll take our next question from Andres Coello with Scotiabank.

On assets available for sale in your balance sheet specifically and the asset in Trinidad, I was wondering if you can give us an update on how that sale is going? When do you expect to monetize that asset? And my second question is on the timing of the Costa Rica acquisition, if we should expect that to be consolidated after this Q1 or it may take a few more quarters?

Well, on the for Costa Rica, I think we expect 6 to 8 months for it to close with all the regulatory approvals, et cetera. And in Trinidad, on the TSTT asset, I recently met with some of the government officials a couple of weeks ago. I think there is a path there for us to dispose the assets; it's a lot more clearer now than it ever has been, but it's still not a done deal yet. But suffice to say, the teams are working pretty hard on it to exit that business.

And we'll take our next question from Julio Arciniegas with RBC Capital Markets.

About the M&A strategy and pipeline, is LILAC more focused on Central America, Caribbean? Or do you see also some pipeline opportunities in South America? And my second question would be what should we expect of the extra cost that LILAC will have as an independent entity after the spin?

Okay. I'll answer the first one. I don't know if I caught the second question really well. But I'll pass it on to Chris Noyes to answer that. On the first one, on the M&A opportunities, we will be opportunistic across the whole region, and we're not looking at one specific area of the region, be it Central, or Caribbean or South America. There are good opportunities across the board. And like I said, we would look at the value. We would do the right due diligence and be very disciplined about it. And of course, looking at the state of the target companies as well. Now on the second question, I'll pass it on to Chris.

Yes. I mean, I think in terms of corporate costs, you'll see in 2017, it was $25 million. In Q4, specifically, it was $10 million. So it gives you a little bit of an indication of what the inflection in incremental corporate costs are. There will be costs, obviously, for public company expense and board. We have a separate 10-K, et cetera. So I think if you look at that, that Q4-type number and add increment to that to reflect a more fulsome staff to handle the public company commands, that will provide you, I think, a little bit of guidance about where that figure will be.

And the last question we'll take is from Steve Malcolm with Arete Research.

Yes. I just wanted to come back on the Puerto Rico question. First of all, well done on making the progress you have. In my long, many years covering this sector, I can't remember a situation as tough as that. So well done. But as you work through the restoration, I mean, just coming back to sort of what the new normal [indiscernible] comments looks like, and you came into it at 400,000 subs spending $75 a month roughly. As you reconnect customers, are they taking the same sort of bundles they were (inaudible)? Basically, are you seeing kind of accelerated cord cutting if people kind of rightsize their packages? Some color on that would be extremely helpful. And then just on the Cabletica deal, I mean, it looks to me like you need to find sort of $60 million, $70 million, $80 million outside local leverage, which I guess comes from 1 of 3 places, Cable & Wireless, [telco or VTR]. Can you give us a bit more color as to where that money would come from and were there any tax implications of upstreaming cash from VTR to fund this deal?

So on the first question on the Puerto Rico, our acquisition, I'll tell you, the bundling ratio on the acquisition is not that far off from what it was before. So we're not seeing any changes in, or cord cutting as you would say. We think we can actually grow the business even more after this, or at least our share of the business will grow. It's becoming very clear that broadband and our broadband product resonates with customers. And we have increased across the base everybody's speeds. And our entry product now is 100 megabits. So we think we have a winning proposition there. On the Cabletica and the financing on it, I'll pass this on to Chris right now.

Yes, Steve. It will come from either cash on hand or draw on either the VTR line or the CWC line, and I wouldn't expect any significant tax leakage from any upstream.

Good. (inaudible) I assume that's ongoing? You may have said something previous that I might have missed. But that will be funded presumably from central cash if it is ongoing?

What was that? You broke up there.

On the buyback, I haven't seen any sort of update on the buyback plans and how that would be funded. I may have missed it, but I just wanted to check if I had missed it or not.

We had mentioned something in the prepared remarks. We did not purchase stock in Q4, and we will be -- it will be an item that we'll continue to discuss with our board regarding the stock repurchase plan over the coming months.

So do we assume it's on hold for now as you tend to work through Cabletica and LCPR.

Yes.

So I guess we've come to the end of this call. I want to thank everybody for joining us on our first earnings call for Liberty Latin America. We are really, really excited about this business. We see tremendous opportunities, and we appreciate you supporting it. Thank you.

Ladies and gentlemen, this concludes Liberty Latin America's Full Year 2017 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.