Executive Summary / Key Takeaways

• Liberty Latin America operates a diverse portfolio of fixed, mobile, and subsea network assets across Latin America and the Caribbean, with strong underlying performance in most segments driving robust OIBDA growth and margin expansion.
• The company possesses key technological differentiators, including extensive FTTH and DOCSIS 3.1 fixed networks providing gigabit speeds, a growing 5G mobile footprint, and a unique subsea cable network (Liberty Networks) generating exceptional free cash flow and poised for expansion with projects like MANTA.
• While the integration of the acquired AT&T business in Puerto Rico presented significant operational and financial challenges in 2024, impacting consolidated results and leading to the withdrawal of prior guidance, management has a clear plan focused on cost reduction, operational improvements, and commercial initiatives to drive recovery in H2 2025.
• Strategic initiatives, including the planned joint venture in Costa Rica with Millicom and the integration of EchoStar's Boost assets in Puerto Rico, are expected to enhance market positioning, generate synergies, and fuel future growth.
• The company is targeting significant year-over-year growth in adjusted OIBDA and adjusted free cash flow before partner distributions in 2025, supported by operational leverage, cost efficiencies, and a planned reduction in capital intensity to approximately 14% of revenue in 2025 and 2026.

The Regional Powerhouse and Its Strategic Core

Liberty Latin America Ltd. ($LILA) stands as a significant telecommunications provider spanning the vibrant and diverse markets of Latin America and the Caribbean. Forged through a series of strategic acquisitions and sustained infrastructure investment, LILA has built a portfolio encompassing fixed-line services (broadband, video, voice), mobile connectivity, and critical subsea and terrestrial fiber optic networks. This regional focus differentiates LILA from larger, more globally diversified peers like Telefónica (TEF) or América Móvil (AMX), allowing for tailored strategies within its operating footprint across over 20 countries.

The company's strategic narrative is fundamentally built upon convergence and infrastructure leadership. Recognizing the increasing demand for seamless connectivity, LILA has aggressively pursued a Fixed Mobile Convergence (FMC) strategy. This involves leveraging its dual fixed and mobile assets to offer bundled services, aiming to reduce churn and create a more predictable revenue profile. In its most successful markets, FMC penetration has already surpassed 30%, demonstrating the efficacy of this approach. Complementing this is a strong emphasis on digital channels, with digital sales reaching 25% across the group in 2024, exceeding targets and contributing to cost efficiencies.

LILA's history is marked by deliberate inorganic expansion to build this converged footprint. Key moves include the acquisition of Cabletica in Costa Rica (2018), AT&T's (T) Puerto Rico operations (around 2020), Telefónica's mobile business in Costa Rica (2021), and Claro's mobile business in Panama (2022). These transactions, while complex, have been instrumental in establishing LILA's market positions, often creating or strengthening duopoly or triopoly structures in key markets like Panama and the Caribbean islands, where competition is described as rational and customer-focused. This contrasts with more intensely competitive fixed markets like Costa Rica, where five nationwide players operate, necessitating strategic responses like the planned joint venture with Millicom (TIGO).

Technological Edge and Network Evolution

A cornerstone of LILA's competitive positioning is its robust and evolving network infrastructure. The company has made substantial investments to upgrade its fixed networks, achieving approximately 97% gigabit readiness across its footprint by the end of 2024 through deployments of Fiber-to-the-Home (FTTH) and DOCSIS 3.1 technologies. Specifically, FTTH now constitutes 65% of homes passed in CW Panama and nearly half of the network in Liberty Costa Rica, with significant expansion efforts continuing (e.g., over 170,000 FTTH homes passed in Costa Rica in 2024). While the cost to connect a new customer on FTTH can be higher than on traditional HFC due to the need to pull a drop, the cost of Customer Premises Equipment (CPE) for FTTH is now notably lower than for HFC, contributing to operational efficiency.

In the mobile domain, LILA is actively deploying 5G technology, having launched services in five markets by the end of 2024, including being the first operator to launch 5G in Panama and Costa Rica. The company is judicious in its 5G investments, prioritizing markets where handset penetration supports the technology and where LILA holds a leading market position. In Puerto Rico, the company is enhancing its mobile network by firing up acquired 600MHz spectrum, expected to improve coverage and depth.

Beyond consumer services, LILA's Liberty Networks segment operates a critical subsea and terrestrial fiber optic cable network connecting over 30 markets. This infrastructure is a significant differentiator, providing high reliability and serving the growing demand from enterprise customers and hyperscalers. The company is further investing in this area with the MANTA subsea cable system project, a collaboration with Sparkle and Gold Data. This system, spanning over 5,500km with six new access points and routes connecting Mexico and the US, is specifically designed to serve the increasing traffic requirements driven by the shift to cloud and AI innovations, positioning Liberty Networks for strong future revenue growth, expected to materialize around 2027. This network asset provides a competitive moat, particularly against competitors with less extensive or reliable regional backbones.

Performance Across the Portfolio

LILA's operational and financial performance in early 2025 paints a picture of strength across most of its segments, albeit with a significant challenge in one key market.

In the first quarter of 2025, the company reported consolidated revenue of $1,083.5 million and Adjusted OIBDA of $406.6 million, representing an 8% rebased growth year-over-year for Adjusted OIBDA. This growth was primarily fueled by robust performance in the C&W credit silo, which includes CW Caribbean, CW Panama, and Liberty Networks.

CW Caribbean delivered a very strong financial execution in Q1 2025, with Adjusted OIBDA growing 16% on a rebased basis to $173.3 million, resulting in a margin of 47.6%. This was driven by cost management efforts and operational leverage, despite flat rebased revenue ($363.9 million), which was impacted by lower B2B project revenue. The segment saw a return to fixed broadband growth and continued positive postpaid mobile additions (15,000 adds in Q1 2025), supported by increasing FMC penetration (over 35%).

CW Panama was the fastest-growing segment in Q1 2025, with rebased revenue up 5% to $177.0 million and Adjusted OIBDA up 15% to $64.6 million, achieving a 36.5% margin. Growth was driven by residential mobile (up 16% rebased) and fixed (up 3% rebased), benefiting from subscriber base expansion and pricing actions. The market consolidation from four to two players in recent years has contributed to a more constructive operating environment.

Liberty Networks continued to generate exceptional U.S. dollar free cash flow. In Q1 2025, revenue grew 3% rebased to $110.4 million, although Adjusted OIBDA saw a slight rebased decline of 2% to $57.9 million (52.4% margin), impacted by higher network maintenance and interconnect costs. Wholesale revenue, excluding non-cash IRU declines, showed strong underlying growth (7% rebased in Q1 2025), while Enterprise grew 4% rebased, highlighting the strength of recurring revenue streams.

Liberty Costa Rica saw continued broadband additions in Q1 2025, partly offsetting ARPU pressure in the competitive fixed market. Mobile performance was strong, adding 30,000 postpaid subscribers in the quarter, the most successful segment for postpaid adds. FMC penetration reached almost 35%. Revenue grew 2% rebased to $158.2 million, but Adjusted OIBDA declined slightly by 1% rebased to $58.9 million (37.2% margin), due to higher equipment costs and bad debt. The planned JV with Millicom is expected to improve market rationalization.

The Puerto Rico Challenge and Recovery Path

The primary headwind impacting LILA's consolidated performance and outlook has been the Liberty Puerto Rico segment. In Q1 2025, this segment reported an 11% rebased revenue decline to $298.4 million. This was driven by lower fixed volume (partly due to the discontinuation of the ACP program and retention discounts offsetting price increases) and a significant decline in mobile revenue (lower postpaid subscribers post-migration, ARPU declines, and the termination of the ECF program).

The complex carve-out migration of the AT&T business in 2024, requiring the build-out of a new network and billing stack, led to platform disruptions, data transfer issues, increased churn, and higher bad debt (including a $10 million increase in bad debt in Q4 2024 related to migrated customers and equipment installment receivables). Management acknowledged underestimating the difficulty of this process, which delayed the expected recovery.

Despite these challenges, there are signs of improvement. Liberty Puerto Rico's Adjusted OIBDA grew 16% rebased in Q1 2025 to $81.5 million (27.3% margin), benefiting from lower integration and transition services costs compared to Q1 2024. Management is focused on a clear recovery plan: stabilizing the mobile subscriber base, improving churn (voluntary churn has fallen significantly), refreshing customer value propositions (like the FMC offering "Loop"), leveraging digital distribution channels, and implementing aggressive cost reductions targeting headquarter staff while minimizing frontline impact. While the return to positive postpaid adds has been slower than desired, management anticipates better KPI trends and a lower cost structure to positively impact run rate performance in H2 2025. The integration of EchoStar's (SATS) Boost prepaid business and spectrum assets, which closed in September 2024 and is expected to see migrations completed in H2 2025, is also anticipated to increase scale in the prepaid market, although handset compatibility remains a concern.

Financial Position and Outlook

As of March 31, 2025, LILA held $575.5 million in cash and cash equivalents and had $800 million available under its revolving credit facilities. Total debt stood at $8.2 billion, resulting in a net leverage of 4.6x. The company's debt structure is characterized by ring-fenced credit silos for its main borrowing groups (CW, Liberty Puerto Rico, Liberty Costa Rica), with no cross guarantees.

A key focus has been on strengthening the maturity profile. Recent refinancings within the CW credit silo have significantly extended maturities, with approximately 50% of the total debt now due in 2031 and beyond, and over 75% of the CW silo debt maturing in 2032 and beyond. The fully swapped borrowing cost was 6.5% as of March 2025, with a weighted average life exceeding five years. While the Liberty Puerto Rico debt matures sooner (2027-2029), management aims to improve the business's financial results before targeting refinancing in mid-to-late 2026.

In the Q1 2025 earnings call, LLA withdrew its prior three-year guidance (2024-2026), citing the slower-than-expected recovery in Puerto Rico. However, the company maintains a constructive outlook for 2025, positioning for significant year-over-year growth in adjusted OIBDA and adjusted free cash flow before partner distributions. This outlook is supported by the strong performance and operational leverage in the non-Puerto Rico segments, ongoing cost management initiatives across the group, and a planned reduction in capital intensity. LLA expects CapEx to be approximately 14% of revenue in both 2025 and 2026, down from prior levels, reflecting the maturity of network upgrade cycles across the portfolio.

Risks and Competitive Dynamics

LILA operates in a dynamic and competitive environment across its markets. Key competitors include large regional players like América Móvil, Telefónica, and Millicom, as well as local operators and, increasingly, indirect competitors like satellite providers (e.g., Starlink) and tech giants offering cloud services. Competition impacts subscriber numbers, ARPU, and B2B revenue across all segments. While LILA benefits from constructive duopoly structures in many markets, intense competition in areas like Costa Rica's fixed market necessitates strategic responses like consolidation.

LILA's competitive advantages lie in its extensive and technologically advanced infrastructure (FTTH, 5G, unique subsea network) and its focus on converged offerings. Its subsea network provides a reliability edge, while its fixed and mobile network quality is recognized externally (e.g., Ookla awards). However, LILA faces vulnerabilities, including the execution risk associated with integrations (as seen in Puerto Rico), high debt levels relative to some peers, and the need to maintain technological pace in areas like 5G deployment relative to larger rivals.

Beyond direct competition, LILA is exposed to macroeconomic factors, including inflation, currency fluctuations (though largely hedged or operating in USD/pegged currencies), and potential impacts from changing international trade policies like tariffs, which could affect equipment costs. Regulatory risks, contingent liabilities from legal/tax disputes, and the inherent risks of operating in regions susceptible to natural disasters (like hurricanes, mitigated by insurance programs) also pose potential challenges to financial performance and liquidity. The pace of recovery in Puerto Rico remains a critical factor to monitor, as it significantly influences the consolidated financial trajectory.

Conclusion

Liberty Latin America presents a compelling, albeit complex, investment narrative. The company has successfully built a diversified portfolio of telecommunications assets across Latin America and the Caribbean, underpinned by strategic acquisitions, significant infrastructure investments in fiber and 5G, and a focus on fixed-mobile convergence. The strength of its operations outside of Puerto Rico is evident in robust OIBDA growth and margin expansion, driven by effective cost management and operational execution in markets with constructive competitive dynamics. The Liberty Networks segment stands out as a high-margin, strong cash-generating asset with exciting growth potential from projects like MANTA.

While the challenges faced in integrating the Puerto Rico business have created a significant headwind, impacting recent results and necessitating the withdrawal of prior guidance, management has clearly articulated a focused recovery plan centered on operational improvements, cost reductions, and commercial initiatives. The expected stabilization and return to growth in Puerto Rico in the second half of 2025, combined with the continued strong performance of the other segments and a planned reduction in capital intensity, position LLA for significant year-over-year growth in adjusted OIBDA and free cash flow in 2025. The strategic initiatives in Costa Rica and the integration of Boost assets further enhance the long-term growth potential. For investors, the story is one of unlocking value from a portfolio of strong regional assets, contingent on the successful execution of the turnaround plan in Puerto Rico and the continued realization of synergies and operational efficiencies across the group, leveraging its foundational network infrastructure and convergence strategy.