Liberty Latin America Ltd (LILA) 2020 Q4 法說會逐字稿

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 Ray Collins, Chief Strategy Officer of Liberty Latin America.

Good morning, and welcome to Liberty Latin America's Full Year 2020 Investor Call. (Operator Instructions) Today's formal presentation materials can be found under the Investor Relations section of Liberty Latin America's website at www.lla.com. (Operator Instructions) 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 and statements that are not historical facts. Actual results may differ materially from those expressed or implied by these statements. Additional information on factors or risks that could cause results to differ is available in Liberty Latin America's 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.

In addition, on this call, we will 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 and on our Investor Relations website.

I would now like to turn the call over to our CEO, Mr. Balan Nair.

Thank you, Ray, and welcome, everybody, to our full year results presentation.

I'll begin by taking you through our group highlights and operating results for each of our reporting segments before closing with an overview of our strategic focus in 2021. Chris Noyes, our CFO, will then follow with a review of the company's financial performance and our outlook. After that, we will get straight to your questions.

As always, I'm joined by my executive team from across the region and I'll 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.lla.com.

Well, let's start on Slide 4 and our highlights for the year. Operationally, we added 170,000 RGUs driven by strong performance in Cable & Wireless and a record result in Puerto Rico where broadband demand drove subscriber growth of more than double our 2019 additions. Our key financial objective is to deliver positive free cash flow in 2020. And I am pleased to say that we generated close to $150 million in a very challenging year.

In terms of momentum, even excluding AT&T's contribution, our results continued to improve in quarter 4 as we reported revenue at a similar level to the pre-COVID quoted quarter 1 and adjusted OIBDA, which was, in fact, higher than in the first quarter of the year.

We also made significant progress with our inorganic strategy as we completed the acquisition of AT&T's Puerto Rico and U.S. Virgin Island operations, adding over 1 million mainly postpaid mobile subscribers to the group. The operations are off to a good start. And I'll cover our integration plans in more detail later in the presentation.

Finally, we continue to lean into our investment thesis despite COVID with the addition of approximately 400,000 new or upgraded homes in 2020. Over 80% of these homes were passed using fiber-to-the-home technology. And we have exciting plans to increase our build by 50% in 2021.

Moving to Slide 5 and a summary of our quarterly fixed and mobile subscriber adds. Starting with our fixed RGU evolution on the left of the slide. Here, you can see that we grew our RGU base in each quarter through the year with a dip in the second quarter as our markets adjusted to the impact of the pandemic.

One of these impacts was reduced mobility, which drove higher demand for residential data connectivity as customers increasingly worked and learned from home. As a result, our broadband adds contributed over 90% of our net subscriber additions in the year. We believe there is a significant opportunity to bring high-speed connectivity to more households in the region. And this underpins our organic growth strategy in the coming years.

On the right of the slide, we show our mobile subscriber evolution. Subscriber losses in the first half were primarily the result of mobility restrictions, which limited the ability for customers to access services and reduce demand for top-ups generally as customers spend an increasing amount of time in their homes.

In the second half, restrictions were eased across most markets and we saw a recovery in subscriber numbers. However, this did not offset our first half subscriber losses. I'll cover the specific trends in more detail over the coming slides.

Turning to Slide 6 in our Cable & Wireless Caribbean & Networks reporting segment. Note that this represents the Cable & Wireless segment as reported in prior quarters, however, excluding Cable & Wireless Panama, which we now disclose separately due to a change in our internal organizational structure. This change has no impact on our borrowing groups or legal structure.

Starting with the RGU trends on the left and a similar evolution to the prior slide. We had a good year in fixed, adding over 100,000 subscribers led by 92,000 adds in Jamaica, which was close to 3x that market's 2019 performance. Broadband was once again the main driver contributing over half of Jamaica's ads.

During 2020, over 80% of our new build and upgrade volume in Cable & Wireless Caribbean & Networks was in Jamaica, which is the segment's largest market. Mobile steadily recovered in the second half, once again led by Jamaica. However, we recorded losses for the year due to the second quarter's adverse performance.

In the center of the slide, we present an overview of our revenue mix and the sequential growth rates we saw in the fourth quarter. Our fixed operations remained robust and mobile revenue grew as prepaid recharges continued to recover.

Subsea benefited from increased demand for international bandwidth and delivered healthy sequential growth of 5%. Finally, B2B service revenues was 2% lower sequential overall. However, this is a tale of 2 different businesses, with our Lat Am operations growing whilst our incumbent Caribbean market was slightly down in the quarter.

Taking subsea, including intercompany revenue, which is eliminated in our consolidated reporting and B2B Lat Am in aggregate, this represents a business with approximately $400 million of mainly U.S. dollar revenue and an OIBDA margin above 50%.

Finally, I want to highlight that this segment actually grew adjusted OIBDA on a rebased basis in 2020 despite the impact of COVID-19. This was a great achievement by the team in a very tough year.

Next to Slide 7 in Cable & Wireless Panama, where we experienced the most severe COVID-19 restrictions across our operations. This created a challenging operating backdrop leading to fixed and mobile subscriber losses in the second quarter, as shown on the left of the slide, which we recovered to an extent in the second half of the year as restrictions were eased.

In our residential fixed business, we delivered 35,000 net RGU adds for the year with second half additions more than offsetting second quarter's losses. Mobile adds improved in the second half but were impacted by increased competitive intensity and did not recover losses from earlier in the year.

In the center of the slide, you can see that revenue from each of our products grew sequentially in the fourth quarter. Note that B2B growth of 20% was driven by some significant contract wins. As we look to continue growing our fixed operations, we are focused on expanding our product and network offerings.

In combination with our new build activity where we added nearly 100,000 fiber-to-the-home passings in 2020, we have also launched our Hub TV platform, bringing greater differentiation to our product bundle.

Overall, we believe that this business has a lot of potential given the fixed market structure and relatively strong economic environment. Our organizational changes give Panama more senior management focus and should provide a catalyst to drive improved performance.

Turning to Slide 8 in our VTR/Cabletica segment. Starting with RGU evolution on the left of the slide. We've previously discussed the challenges we faced in Chile following the initial spike in bandwidth demand during the second quarter leading to network reliability and service issues. We moved quickly to stabilize our network and improve customer service. And this drove better operational performance as can be seen in our RGU losses being halved in Q4 compared to Q3 and really getting to flat result in January. We see the recovery. I'll cover our approach here in more detail on the next slide.

Our Costa Rican business, Cabletica, continues to perform well during -- adding RGUs in each quarter and 18,000 in aggregate during the year. The mobile chart on the lower left represents our business in Chile, where we finished the year with 280,000 predominantly postpaid subscribers. Store closures due to COVID-19 in a highly competitive market environment drove the softer performance here in the second half.

Moving to the center of the slide and revenue by product. In contrast with the Cable & Wireless business, fixed residential services are, by far, the largest product in the VTR/Cabletica reporting segments, contributing 90% of revenue and up 3% sequentially in Q4.

Finally, a key segment of our group strategy in 2021 is to accelerate our fiber-to-the-home new build program. Across Chile and Costa Rica, we are planning to build more than 400,000 new homes, which is a significant uplift on the 2020 activity.

On Slide 9, we wanted to highlight some of the metrics that we, as a management team, are focused on as we look to improve operational and financial trends at VTR. In the upper left, we show significant reductions in both the daily number of technical calls to our representatives and our truck roll rate of 73% and 49%, respectively. These improvements follow previously discussed targeted network and customer service investments.

The points below the chart summarizes key pillars of the framework we are using to approach network and customer experience. Additional measures of our operational improvement are presented in the central chart with a reduction in the intent to disconnect and increase in retention rates over the past months.

Finally, on the upper right of the slide, we show how our new build ambitions in 2021 compares to prior years, a significant and exciting step-up which we believe will reinforce our platform for sustained growth. From a return on investment perspective, we have been successful in driving down the cost to pass homes with fiber, making these projects very attractive.

Turning to Slide 10 and our best-performing business in 2020, Liberty Puerto Rico, starting with our RGU trends on the left of the slide. As I mentioned earlier, 2020 was a record year for the business with 121,000 net RGU additions. Broadband net adds contributed 2/3 of total RGU growth and, as shown in the lower chart, our broadband base grew by nearly a 1/4 in the year. To put this into perspective, Charter, Comcast and Altice U.S.A. grew their broadband subscribers by around 8%, 9%, 7% and 4%, respectively, in 2020.

In the center of the slide, we wanted to provide a view of 2020 for our Puerto Rico operations, including a full year for the AT&T business we acquired at the end of October. We really like this market, as you can see. The acquisition provides a significant step-up in scale, taking the combined business to $1.4 billion of revenue and over $0.5 billion of adjusted OIBDA. One of the primary reasons we see a differentiated converged opportunity in Puerto Rico is that over 80% of our mobile service revenues come from postpaid customers.

Finally, we continue to innovate and invest in our networks to maintain a leading position in Puerto Rico. We are rolling out our Hub TV platform and continuing to build out our footprint. We passed 1.1 million out of a total of 1.4 million homes in Puerto Rico as at the end of 2020 and plan to continue to grow. And this is further assisted by the Uniendo funding we have won to improve broadband speeds in 43 municipalities out of 78 across the island, including San Juan and other key metro areas.

On Slide 11, we provide an update on our integration work in Puerto Rico. Our key focus areas are: Firstly, to integrate and grow as a single company. This process began on day 1 of the acquisition and we are making good progress establishing a common culture.

Secondly, I've talked previously about leveraging our product suite and putting together great propositions for our customers. This is already happening with a welcome offer which had 20% enrollment after a week and continues to grow. The offer involves free fixed broadband speed upgrades if our customer has fixed and mobile services with us.

Thirdly, it is vital to ensure that service levels are not compromised as we move to a new mobile core and new operations and business support systems. We have a comprehensive TSA agreement with AT&T to help us here and we're confident we can move to these new platforms with minimal friction.

Fourth, and something that is particularly exciting, we are creating a converged player in the market which enables us to differentiate our product offerings but also adds resilience given the fiber backbone and 5G mobile networks we now have.

And fifth, we have a unique opportunity to lead with digital channels and services that will create new IT platforms for the new business. Overall, I am very excited about the value we can generate for our customers and other stakeholders through this acquisition.

Finally to Slide 12 and our strategic focus areas as we look to 2021 as well as longer-term shareholder value creation. First, we expect to recover and grow across our markets as the economic backdrop improves. In Chile and Panama specifically, we anticipate better transforming the operational actions we have taken in 2020.

Secondly, with respect to our commercial approach, we remain focused on product innovation and are distributing our Hub TV products as we roll out new fiber-to-the-home networks. We are also developing our self-installed capabilities, which should both improve customer experience and drive cost efficiencies in the future.

Thirdly, we will continue to lean into our broadband penetration thesis for the region and add or upgrade approximately 600,000 mainly fiber-to-the-home homes in 2021, a material ramp in activity from 2020.

Fourth, our cost focus. Chris will talk to the numbers here in more detail in his section. However, I would note that we've made good progress since becoming a separately listed company. And this remains an area where we see significant potential to improve and drive value.

Finally, to M&A. Our near-term focus is on integrating the assets acquired from AT&T and closing the acquisition of Telefónica's Costa Rica business, which we anticipate will happen this summer sometime.

We see inorganic opportunities as a core driver of value creation in our region but only if done at the right value. We are very disciplined in our process to appraise assets. And accretive levered free cash flow per share remains a key metric.

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?

Thanks, Balan. I will start on Slide 14 with our financial results. 2 quick housekeeping items. Our 2020 results include Liberty Mobile, formerly AT&T Puerto Rico, for the post-acquisition period, which is for the last 2 months of Q4. And as mentioned, we are now showing Cable & Wireless Panama as a separate operating segment, reflecting the change in reporting lines. However, our Cable & Wireless credit silo will still include CWP within its results.

In the upper left, we reported Q4 revenue of $1.1 billion, including $174 million in revenue from Liberty Mobile. This compares to $975 million for Q4 2019. Our Q4 result reflects a modest 1% year-over-year rebased decline, much improved versus both Q2 and Q3 rebased levels driven in large part by our strong quarterly performance in Puerto Rico. For the full year, we generated revenue of $3.8 billion for an annual rebased decline of 3%.

Moving to adjusted OIBDA. We posted $428 million or a 4% rebased decline for Q4 and $1.5 billion or a 2% rebased decline for the full year. Liberty Mobile contributed $56 million of adjusted OIBDA in the quarter. Rebased performance in the quarter included a $13 million net decremental impact from certain nonrecurring items primarily related to content accrual and holding tax adjustments as disclosed in our earnings release.

Our P&E additions from the bottom left of the slide were $188 million in Q4 or 17% of revenue. This result brings our 2020 total to $631 million or 17% of revenue, which was 100 basis points lower than our year ago pre-COVID 2020 target. For 2021, we are targeting a modest increase to approximately 18% of revenue for P&E additions.

As Balan mentioned, we are planning to build approximately 600,000 homes in 2021, a substantial increase over 2020. And we'll have integration CapEx in Puerto Rico as we embark on our 3-year plan to fully integrate the business.

Moving to the bottom right. We generated $89 million of adjusted free cash flow in Q4 helped in part by a positive contribution from our newly acquired mobile operations in Puerto Rico. For the full year, we delivered $148 million in adjusted free cash flow, comfortably achieving our COVID-adjusted target of positive free cash flow for 2020. For 2021, we are targeting approximately $200 million of adjusted free cash flow, which is more than a 30% increase over our 2020 results.

Slide 15 highlights our continued recovery from Q2. Excluding the impact of Liberty Mobile, our Q4 revenue of $923 million was nearly back to Q1 levels. And our Q4 adjusted OIBDA of $372 million surpassed Q1 adjusted OIBDA by 2%.

As we look to 2021, we expect to build momentum as we go through the year with Q1 being our toughest comp and as we begin to lap COVID impacts in Q2. Additionally, Q4 to Q1 on an apple-to-apples basis typically steps down due to general seasonal factors.

On Slide 16, we present our Q4 financial results and quarterly adjusted OIBDA evolution by segment, starting on the left with C&W Caribbean & Networks. We generated $428 million of revenue and $182 million of adjusted OIBDA in Q4. Year-over-year, Q4 revenue was 4% lower on a rebased basis as 2% growth in fixed residential revenue was more than offset by COVID impacts across our mobile and B2B businesses which were 14% and 3% lower, respectively.

As highlighted earlier, our rebased adjusted OIBDA decline for the segment of 10% for Q4 was due in large part to roughly $13 million of net nonrecurring items. Despite these headwinds and the impact of COVID, C&W Caribbean & Networks grew adjusted OIBDA by 1% for the full year on a rebased basis and we attained a 42% adjusted OIBDA margin.

The bottom chart highlights our sequential improvement as our Q4 adjusted OIBDA result was $5 million higher than Q3 and nearly back to Q1 levels.

Moving to our new segment, Cable & Wireless Panama. Across LLA, our Panama business has suffered from the most stringent COVID-related lockdowns. Q4 revenue of $131 million and adjusted OIBDA of $51 million were 19% and 13% lower on a rebased basis, respectively, as compared to the prior year period.

Our year-over-year revenue result was driven primarily by double-digit declines in B2B and mobile. Sequentially, in Q3, the business has continued to recover as quarterly adjusted OIBDA was $8 million or 19% higher. In fact, as the bottom chart highlights, we delivered our strongest adjusted OIBDA quarter of 2020 in Q4.

Turning to VTR in Chile and Cabletica in Costa Rica. We reported Q4 revenue of $244 million, reflecting a year-over-year rebased decline of 3%. The rebased year-over-year decline was driven in large part by volume losses and ARPU pressure in VTR, which more than offset continued rebased revenue growth in Cabletica. VTR/Cabletica posted $89 million of adjusted OIBDA in Q4, which was 15% lower than the prior year period on a rebased basis. The year-over-year decline was driven by increased operating expenses at VTR as we invest in our networks and customer service initiatives and, to a lesser extent, a $3 million adverse FX impact of nonfunctional currency exposure in Chile relating to the depreciation of the Chilean peso to the U.S. dollar. Sequentially, the Q3 adjusted OIBDA was $4 million lower. However, it was above the $86 million posted in Q2.

Finally, to our strongest performing segment, Liberty Puerto Rico. As Balan mentioned, our business in Puerto Rico had both a strong Q4 and 2020. With 2 months of contribution from Liberty Mobile in the quarter, we delivered $296 million of revenue and $116 million of adjusted OIBDA plus double-digit rebased growth rates. Our cable business continued to build momentum throughout 2020. In fact, our top line growth in Q4, excluding the impact of Liberty Mobile, was our best of the year at roughly 15% rebased growth year-over-year. This result was due in large part to over 120,000 RGUs added over the last 12 months.

The newly acquired business contributed $174 million of revenue and $56 million of adjusted OIBDA in the quarter, achieving double-digit rebased growth as well. Liberty Mobile's growth was primarily driven by a combination of revenue increases driven by strong postpaid ARPU, positive outcollect roaming as well as equipment sales.

For 2021, it's important to note that we expect to incur significant integration costs in Puerto Rico as we begin to work off the 3-year TSA with AT&T and operate on a stand-alone basis. During 2021, we estimate that we will incur integration operating costs of $35 million to $40 million and CapEx integration costs of $25 million to $30 million. In terms of benefits, we anticipate generating $10 million of synergies in 2021 and to ramp towards our full run rate expectation of $70 million by the end of our integration.

Moving to Slide 17. We have managed our cost and CapEx base well throughout the pandemic. Our 2020 efforts allowed us to maintain our adjusted OIBDA margin in the 39% to 40% range while absorbing revenue contraction across many of our markets. The inclusion of Liberty Mobile in Q4 compressed our full year ROA margin by 40 basis points as Liberty Mobile's margin was 32% for the 2 months.

The middle chart highlights our nearly 200 basis point drop in P&E additions from 2019, even though we continue to invest in new build capacity expansion and subscriber growth. The net impact is outlined in the right-hand chart that we progressed our adjusted OIBDA less P&E additions to 23% of revenue, a solid increase from 2019 levels. This metric is a key focus of ours as we look to further improve our future efficiency levels.

Slide 18 summarizes our liquidity and credit profile. At year-end, we reported $8.5 billion of total debt, $900 million of cash and $1.1 billion of availability under our RCFs. During Q4, we funded the AT&T transaction and we paid our outstanding C&W RCF. As previously highlighted, our funding for the Telefónica Costa Rica acquisition is all set. We will use local borrowings of nearly $300 million and anticipate the remainder will come from cash on hand as well as a pro rata contribution from our local partner in Costa Rica. We finished Q4 with growth in net leverage of 4.8x and 4.3x, respectively. Our ratios are on an LTQA basis on adjusted OIBDA and we give full effect to Liberty Mobile for the entire 6-month period.

Turning to our debt maturity schedule on the right of the slide. We made great progress during 2020 in turning out our debt at attractive rates. We do not have any significant maturities over the next 5 years as about 85% of our debt is due in 2026 and beyond. Our fully swapped borrowing cost is in the low 6s. And most of our debt is trading above par today, implying even lower market yields. In 2021, we'll be focused on refinancing VTR's local term loans that mature over the next 2 years.

Turning to Slide 19. I'll wrap up our prepared remarks today. Continuing the theme from Q3, we sequentially improved both our absolute dollar revenue and adjusted OIBDA and maintained quarterly fixed and mobile subscriber additions, definitely, a solid improvement from our Q2 COVID-impacted lows. As both Balan and I have highlighted today, our collective view is that it will continue to take time for our markets to fully recover from the impacts of COVID and for commerce to return more broadly. It is also safe to assume our region will reasonably lag the U.S. in terms of recovery and vaccination levels. We are managing our business for the next couple of years with that in mind.

We, as a management team, are focused on what we can control: grow volume and market share, innovate for and service our customers, invest in new build and transformation and continue to reset our cost base so as to benefit from incremental operational leverage as our markets recover. Importantly, with our ability to generate free cash flow across our operating businesses, we are committed to investing for future growth, and we are targeting approximately 18% of revenue in P&E additions in 2021.

The key to our story and one that will become apparent in the coming quarters is the anticipated beneficial impact of Liberty Mobile, one that will underpin our free cash flow generation. There is a lot of integration, including systems work to be done, but the business came in stronger than expected and things are progressing well.

Separately, closing the Costa Rica transaction this summer will strengthen our market-leading cable business. And we remain very excited about fixed mobile convergence in that market.

Finally, not only are we planning for growth in revenue and adjusted OIBDA in 2021, we will continue to drive towards higher adjusted free cash flow and our goal to deliver approximately $200 million in 2021. We believe this is the right balance for LLA, lean in further while our markets are recovering.

With that, operator, we are ready to take questions.

(Operator Instructions) And we will hear first from James Ratcliffe with Evercore ISI.

Two, if I could. First of all, on subsea, thanks for the color on that business. And that seems like the kind of infrastructure asset that's really getting great multiples out there right now. Can you talk about -- is that business, to any degree, separable from the rest of the business?

And secondly, can you talk about what the rationale for changing the structure to have Panama report directly versus being part of Cable & Wireless?

Thank you. Well, I'll say -- I think your point is just right on the subsea infra business. And I think over the next quarters or so, we'll give you and everybody more clear line of sight into that business. But we kind of highlighted already it's a very good OIBDA business, about $400 million in revenue, all U.S. dollars. We're quite excited about that asset. I think over the next quarters, you'll get more visibility to it. It's positive.

On Panama, I think Panama, you can clearly see the numbers there. And we are very focused on it. We have a great government partner there. We are very excited about that part of the world, we think, in Central America, Panama and Costa Rica, the 2 best markets, and we're in both of them. And you'll see when we put more -- I think it's probably a good thing that we're going to put more attention on Panama. And over the next quarters on that, too, I think -- stay tuned. You'll start to see some positive outcomes there.

We'll now move to our next caller, and we'll hear from Michael Rollins with Citi.

Curious on 2 things, if I could. The first, could you give us an update on the framework for the overall strategy? If you look out over the next 3 to 5 years, how do you think about the evolution of your assets, both geographically as well as the product mix that you would like to have in each country or country on average?

And then just secondly, and maybe it's within this context. As investors try to contemplate where you may go next, can you highlight where your largest priorities are in terms of filling needs for the portfolio or where there might be just market that you feel like are under penetrated relative to their natural opportunity set?

Sure. Sure, Michael. Let me start by saying we are very happy with the geography that we are currently in. And I think we're in the best parts of Latin America and Central America and the Caribbean. And we see quite a bit of growth opportunity still. Broadband penetration is low, fixed broadband. LTE penetration is low. B2B, our play in B2B is also low.

So we see, if I look over the next couple or 3 years, the levers of growth for us certainly comes from our network expansion. It comes from getting to new products in B2B. We're quite excited about that. It also comes from the fact that we see lots of opportunities in our existing business on expanding margins in both our OpEx and CapEx.

And I say that in the context of -- especially on CapEx. It's not so much that we're going to cut CapEx because we are still very bullish on building out. It's our cost per build that keeps getting better and better.

So there's a number of growth drivers still in front of us on our existing geography. Where we would expand would really depend on what's available out there. We are very opportunistic. And there are a number of places that we like but I can clearly tell you where we probably won't be in. We won't probably be in Argentina. We definitely won't be in Venezuela. We are highly unlikely to be in Brazil. But the rest of Latin America, I think it's good. It's part of why we are in this region. The thesis is strong.

We'll now move to Soomit Datta with New Street Research.

A couple from me, please. Just first of all, on Chile, you've guided up on the number of homes passed. That's a pretty big increase. I know some of it's in Costa Rica but I assume most of it is in Chile. Can you give just a little bit more color on that, please? I'm kind of interested in the new expansion areas. What kind of areas are we talking here? Is that already existing high-speed coverage? Or are you going to be the first guys in this area with a genuine high-speed product? And can you maybe sort of lay a path out for penetration of these new homes passed? Should we assume a similar rate over time with your existing penetration? Or is that -- maybe it will be lower or take a little bit longer? If you could give a bit of color there, that would be super helpful.

And then secondly, if I could, just on Puerto Rico. A question for Chris really. The EBITDA, as you say, came on at a slightly higher number. It's only 2 months. It's a bit hard to kind of read too much into that maybe. But if I annualize, that's kind of $336 million. It's probably 10% ahead of where I was at. Is this kind of a slightly higher base we should think about going forward or maybe just overanalyzing 2 months of contribution?

All right, Soomit. We'll get to both questions. I'll ask Guillermo to also jump in there -- here in a bit.

We see the run rate in Chile to be very promising. It's still -- we think there's at least 4 to 5 years more bills that we can do that. The increased homes passed that we've targeted for 2021, it's mostly because we see great opportunities in some of the B, C and even some of the D neighborhoods. And this is mostly because we've been able to drive our cost per home passed down very low. And we actually -- where we've done trials where we've actually gone in, we've seen take rates that's sometimes too much to pass where we were at in our A and B neighborhoods. So it's quite positive.

And let me ask Guillermo if you can just add on his view on the commercial front of the -- these new builds.

Yes. Thank you, Balan, and good morning, Soomit. As Balan pointed out, we see a very exciting opportunity and continue to expand our current 3.8 million footprint to further cities and further municipalities in Chile. We already started doing that during 2020 with close to 190,000 new homes added in -- as you can see in the slide deck, with very positive results. We are building all our new homes in fiber-to-the-home. And we will continue doing that, providing accessibility and better quality to neighborhoods that historically have not had such kind of products in the country. So very exciting opportunity and also very proud of narrowing the digital gap in our country, which is I think that continues to improve over time.

Thanks, Guillermo. Maybe Chris, you can give some color on the Puerto Rico EBITDA?

Yes. I think, obviously, the 2 months are at the tail end of the year. Typically, as we've seen in our other businesses, Q4 tends to be a pretty strong time for the mobile businesses. So I wouldn't necessarily suggest annualizing those 2 months at this point, We did give in the balance slide the full year 2020 number so as a reference point for folks on the OIBDA -- revenue and OIBDA side.

I would also caveat, as we go into '21, we do have -- the business didn't come with the back-office and stand-alone costs. So we do -- we will be incurring those as we operate the business. And as I highlighted, in '21, we have a pretty sizable amount of integration OpEx in the business as well as CapEx.

So that kind of gets us moving towards being able to reap the synergies as we look out in year 2, year 3, et cetera. So hopefully, that provides a little bit of color for you, Soomit.

It's really helpful. Can I just -- sorry, just quickly check? The free cash flow guide, that is after all of the integration expenses you've highlighted?

Most certainly. It is.

And Matthew Harrigan with Benchmark has the next question.

If you read the Drudge Report, I guess you know that Pope Francis want to go back to Argentina. Although that could actually be Liberty international base, I think Paul -- and Paul is probably working for Tony Werner back then (inaudible).

I was just curious, when you look at the fiber-to-the-home and you're obviously not building that out in the more affluent areas, I assume, because those were already picked off by HFC networks a long time ago. But people where you have apples to apples, it really concluded the OpEx/CapEx structure as pretty superior. I know there's one operator in Denmark. Clearly, Altice U.S.A. is pretty active. Do you have any comments there?

And then as you get convergence in these technologies and the latency between DOCSIS and 5G that DOCSIS latency getting down to low milliseconds, do you feel like there's even more utility for your network for 5G? I know 5G is a ways off in some of these markets but inevitably gets there. And it feels like you've got a great opportunity to having all the quad play engineering in-house versus having to take a bit of a hodgepodge approach like some of the U.S. operators.

Matthew, okay. Let me see if I can just unpack all your questions there. One, I'll start with the fact that HFC is still strong, viable and an amazing network. We are not worried at all competing with fiber-to-the-home where we have HFC.

And I'll say that for a couple of reasons: One, the plan that we have, have for the most part all been upgraded to 1 gigahertz [NPAT]. So you have tremendous amount of capacity on it. Secondly, HFC is actually one of the most reliable as well as very low maintenance-type network like twisted pair and all these other networks.

Now I'll tell you fiber-to-home obviously is better but it doesn't mean that you cannot compete. Just look at the United States and you look at Charter and Comcast going up against Verizon Fios or AT&T's fiber-to-the-home or Google Fiber and you win every day. And we have been for the longest time as well.

Now having said that, all our new builds going forward will all be fiber-to-the-home and that's what we'll do. And we're not doing that for any other reason than, one, we've got the cost price point now to where it just makes sense to do fiber-to-the-home.

Now the second question that you had on 5G backhaul. We have never had plans to use the HFC for 5G backhaul. As a matter of fact, not even for 4G backhaul. We actually run fiber directly to these sites. So we've always used HFC as a consumer play, not necessarily a backhaul or B2B play.

Now moving to Kevin Roe, Roe Equity Research.

Balan, a couple of questions, first on Panama. Do you think -- is your crystal ball showing this could be the year for mobile consolidation? And on M&A, in general, you clearly reiterated your disciplined M&A strategy and the free cash flow-accretive benchmark. But has COVID altered your appetite at all or changed your return thresholds for acquisition targets? Has COVID over the past year bubbled up any new opportunities or closed the doors on some?

Kevin, on Panama, let me say that we've always thought that mobile consolidation, that makes sense. And we've also always said to be a buyer, you have to have a seller. And right now, everybody says that -- not everybody but at least a couple said they're sellers. But we've not been able to convince them that selling means actually selling at a price that makes sense to everybody. So as a result, not much have moved in Panama. And -- but I remain optimistic over time that it'll get rational and something will break lose there.

On the M&A front, you're right. We're very disciplined. And to your question, does COVID increase opportunities, I think all the opportunities out there are well known. And of course, we look at everything that becomes available. We are quite opportunistic.

Levered free cash flow per share remains a key metric. It's not the only metric. There's quite a few metrics that we look at but it is one of the key metrics that we look at.

And does COVID give us more opportunity or it makes us more cautious? No. I think our approach has been the same pre-COVID and post COVID. If anything on COVID that makes it maybe a little hotter, it's because where our equity stands. And therefore, returns are judged on a capital allocation basis here. I mean where -- in buying back stock, if it's more accretive to us than making an acquisition, we do that. And if you look at where our stock is at right now, you need a pretty high hurdle to justify allocating capital to an acquisition as opposed to your internal projects.

And that's how we look at it. And it's just straight math for us. And so -- and therefore, it makes it easy. There's purity in our decision-making here that makes it very, very nonemotional at all in M&A.

So following up on that comment, could we see share repurchases returning at some point in 2021?

Well, the Board has authorized this. I think $100 million in share repurchases over a period of 2 years. And you see what we're doing with new builds. You're seeing a lot of things.

So if you look at capital allocation from this, our first choice, of course, is always going to be high-return internal projects where we put money to work. And then you've got inorganic activity, buybacks, pay-down debt, doing dividends. The last 2 is probably very low likelihood in this company.

But right now, we've got lots of exciting projects. And you can see we're guiding to some pretty nice free cash flow for a very, very tough couple of years.

And we'll take our last question today from Nitin Sacheti with Papyrus Capital.

Just expanding on James' question, can you just talk about the subsea business and just how strategic you see it long term? I mean if you think about that Altice U.S.A. multiple on there, fiber backbone at your $400 million and 50% EBITDA margin, it's effectively the majority of your market cap. So just if you could talk about that? And do you see this asset strategic long term or a source of funding for M&A?

Nitin, thanks for the question. Yes, I think the subsea business clearly -- right now, we're not getting any credit on the sum of the parts. And Chris and I have been thinking about this and how we crystallize and give people more clear view on the value of this asset. And there are many strategic opportunities in front of us. Clearly, you can imagine if other things trade, all the usual suspects are knocking on our doors as well and asking the same question.

There's some work that we need to do internally. This is not an easy separation if you want to separate the business. But we're working on at least the first stages of putting the math together and doing some of the legal work and the accounting work so that people can really see the value of the stand-alone asset.

It is a very strategic asset. It's one of the best assets in the Caribbean and Central America. And it's great technology, a lot of growth potential in it. We've got great customers on it. We have one of the larger customers on it. I think -- of course, in my vested interest to say this but I think it's one of the best subsea network. And then when you link it, by the way, to the B2B sales circuit off it, so on the landing stations, we actually expanded off the landing stations. We've put in sales teams. We've got a management team that runs it.

It's a pretty significant business, very well linked. So our sales teams can sell both like an Ethernet product or a private line product in a country like Colombia as well as tie it back onto a backhaul of a landing station. So it makes a very seamless transition as well.

So it's a great asset. It's clear to the management team and I that we probably need to bring better view to that. But clearly, the sum of the parts do not reflect this really valuable thing that we have in our portfolio.

And that will conclude today's question-and-answer session. I'd like to hand the call back to Balan Nair for any additional or closing remarks.

Thank you, operator. Well, I'll tell you, 2020 was probably one of the hottest years that my management team and I experienced just because the nature of where we operate. But we started the last year -- or at least started the pandemic period with lots of concerns. We made some moves last year. If you recall, we drew down the credit lines. We were really, really worried. I'll tell you, at the end of the year and sitting where we're at right now, we could not have imagined being in a better spot.

Now having said that, I'll tell you, 2021 is still tough. We've guided a free cash flow number. It is not entirely clear that we're out of the woods yet. In many where we operate, there's still curfews in the evenings. There's still lockdowns on weekends. And so this is not super clear yet. And I imagine cruise ships will not be hitting the oceans in the Caribbean until perhaps November after the hurricane season this year.

So our management team is focused on our cost. It's focused on cash collection. It's focused on our revenue. It's focused on where we can find growth and being very creative. It's focused on getting Panama back in order. It's focused on getting Chile back on track. These are the things that we are focused on as the management team. And we are convinced that we can execute. We're not out of the woods but there's light at the end of the tunnel.

Thank you very much for all your support. And we'll talk to you in 65, 70 days.

Ladies and gentlemen, this will conclude the Liberty Latin America's Full Year 2020 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 find a copy of today's presentation materials. You may now disconnect.