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 Naji Khoury, Chief Executive Officer of Liberty Puerto Rico.

Good morning, and welcome to Liberty Latin America's Second Quarter 2020 Investors Call. At this time, all participants are in a listen-only mode. Today's formal presentation materials can be found under the Investor Relations section of Liberty Latin America's website at www.lla.com. Following today's formal presentation, instruction will be given for the question-and-answer session. As a reminder, this call is being recorded. Today's remark 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 and Form 10-Q. Liberty Latin America disclaims any obligation to update any of these forward-looking statements to reflect any changes in its expectations or in the conditions on which any 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 our Investor Relations website. I would now like to turn this call over to our CEO, Mr. Balan Nair.

Thank you, Naji, and welcome, everybody, to our second quarter results presentation. Firstly, I hope you and your families are safe and in good health. Well, for today, our running order is I'll begin by providing an update on the impact of COVID-19 across our markets and how we have been managing through it during this period using the framework I laid out in the last earnings call. Chris Noyes, our CFO, will then follow-up with a review of our financial performance and provide an overview of our capital structure, including the right offer we announced yesterday. After that, we'll 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. I'll start on Slide 4 with our key highlights. Following a strong first quarter, as anticipated, our performance in Q2 was negatively impacted by the pandemic. April was a low month. On a positive note, we started seeing improvements in May. And then in June, we had a clear plan on how to react to the challenges and how to be proactive as well in many areas. That is why even as the situation remains challenging in most markets, we have seen our business improve month-over-month. As a matter of fact, July is also better than June. Despite this difficult backdrop, we added 47,000 broadband subscribers and recorded net RGU growth adds in Q2. Across our markets, Puerto Rico performed particularly well, recording the best-ever quarter for RGU additions. To put this into context, normalizing for Puerto Rico size, this would have put us ahead of all U.S.…

Thank you, Balan. I will begin on Slide 12, and we'll touch upon both our Q2 and half year results. For the quarter, we delivered $849 million in revenue, reflecting a $134 million decline over Q2 2019. Roughly $60 million of the reported decrease in revenue is due to foreign currency translation, primarily the 20% average appreciation of the U.S. dollar against the Chilean peso and the impact from the 2019 disposal of our Seychelles asset. The rebased decline of 8% principally relates to B2B and mobile. Year-to-date, our $1.8 billion in revenue reflects a rebased decline of 3%, given we did not experience the full impact from COVID until the start of Q2. Moving to the top right, we have renamed OCF to adjusted OIBDA, albeit with no change in their definition. For Q2, adjusted OIBDA was lower as a result of an organic decrease and about a $23 million decline from a combination of foreign currency translation and the Seychelles disposal. Our $333 million in Q2 adjusted OIBDA reflects an 8% or $30 million rebased decline year-over-year. For the full six months, our year-over-year rebased decline was only 2%. On P&E additions, highlighted in the bottom left, we reported $153 million or 18% of revenue in Q2 and $286 million or 16% of revenue year-to-date. In dollar terms, each period is lower year-over-year. But notably, we continue to invest in our footprint in both new build and network capacity. Finally, turning to the bottom right, we produced our best quarter ever in adjusted free cash flow with $130 million in Q2, benefiting in part from positive trade working capital and reduced cash taxes. Q2's result brings our half year total to $81 million, which is ahead of last year's first half results after adjusting for $67 million in…

Thank you. [Operator Instructions] We'll take our first question from James Ratcliffe with Evercore ISI.

Good morning. Thanks for taking the question. Two, if I could. First of all, regarding the rights offering, why raise equity, particularly now given we're still in the period of COVID and just seeing the impact from that, and I think your stock price reflected that, and it doesn't sound like you will need cash for the Costa Rican transaction until next year. So I'm thinking about a question on the timing of that. And secondly, a lot of cost reduction year-on-year in the quarter. Can you talk about how much of that was just lower activity and sort of an offset to the lower revenue numbers? And how much of that was more structural? Thanks.

Sure. Hi, James. Let me address the cost reduction part first, and then we'll get to the rights offering, and I'll ask Chris to also jump in here on that. On the cost reduction part, of course, we have a bunch of direct costs that goes down proportionally to the revenue. In the number we quoted, the $150 million, we did not include that direct cost. These are mostly indirect costs, and you can imagine that just a part of that, that's activity related, of course. But for the most part, they are costs that we plan on taking out that we have taken out, and we intend on keeping it out permanently. And that's part of what we've been working on over the last couple of years as we improve our margins as well. On the rights offering, I'll make one couple of comments, and then I'll pass it on to Chris. We think it's a prudent capital structure that we want to get to where it's more equity raised for some of the things that we've been looking at in our pipeline as well as the Telefónica transaction. And with the Telefónica Costa Rica transaction, we thought this was a really good transaction and that all of our shareholders ought to be able to participate in it. And the rights offering is a great way for everybody to participate in what we think is a highly accretive transaction for it. I'll pass it on to Chris on comments around the timing of it.

Yes. I mean, obviously, a rights offering is an efficient mechanism in which to raise capital. In terms of timing, and if you look back at all of our transactions, we do like to derisk the purchase price and speak for the capital on the earlier side instead of waiting until close to closing. So that's – and it's also additionally – it's a good window for us in terms of raising a securities offering over the next, call it, 60 days.

Thanks, Chris.

Thank you.

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

Hi, there, guys. A couple of questions please. Just one on Puerto Rico. I wondered whether at all you could give a sense as to how the AT&T wireless business has traded over the first half of the year. I mean, probably difficult to be specific, but I just wondered is that a market where, as we've seen around the world, there's been a sort of very severe impact on mobile? Or is it one which has held its ground quite well. And then just also on Puerto Rico, the subscriber numbers look great. I think I'm right in saying you're back up to levels ahead of where you were pre hurricane. I just wondered where can this business go in terms of penetration of homes passed, obviously, seems to be performing well. And then if I could just jump in with a second question on Chile, please. I think the numbers both the revenue and the OIBDA are a bit sort of spotty from the one-off bits and pieces, which you've highlighted. But I think just to sort of focus on the cost side of things, you did call out some network and call center issues, and the business has been impacted to some degree by the volumes coming from COVID. And then I noticed, at the same time, the customer consumer protection agency's tarmac is bringing a class action suit against you for quality of service issues. So is that all sounding a bit worse than it is? If you could give a bit of clarity on what's happening there would be great. Thank you.

All right. Well, I'll answer both your questions, and I'll ask both Guillermo and Naji to be on standby as well as I'll call on you. Let me start with the Chile side. Our costs did go up slightly, mostly because call volumes were really high as well as we accelerated a lot of our network upgrade. Now our network upgrades in Chile, as I indicated earlier, was pretty significant, and we did it over a one-month period. But during that one-month period, we already had one of the highest broadband speed, all of our properties in Chile. And it really accelerated that. And so during that one-month period, during our upgrades, we did run into some network issues and we've been very transparent about that. And we are working with the government and the regulator right now on helping them understand as well that this onetime event, this COVID period, this is really a force majeure. It's not something that's just natural. But as we look at Chile going forward, Chile is coming into the winter period. It is in the winter period right now. The COVID condition that is not improving, and it's under strict lockdown. But we are powering through it, but we also realize that this is one that we are going to watch very closely over the next months or so. On Puerto Rico, you hit it right on. I mean we're not only where we were at pre hurricane, we are way beyond that already. And we think the opportunities and the runway in Puerto Rico is pretty good. That's why we're investing in new builds there. Reinvesting in upgrades, and as we've indicated before, we're also participating in the CBRS auction in Puerto Rico. So we are in Puerto Rico, and we are very bullish on it. And that's why we did the AT&T transaction, which by the way, is mostly postpaid. And that's why we feel confident about that business as we get into it. Now having said all that, I'm going to ask Guillermo to give maybe a little bit of color on – a little bit more color on Chile. And then Naji, if you can give a little bit more color on the situation on the ground in Puerto Rico as well. So Guillermo?

Yes. Thank you, Balan. I believe you said it well on the network side. Of course, we were under a challenging situation, particularly in the month of May, as people enter into lockdowns and traffic beat and some 40% and we were diligently in adding more capacity to the network at that time. Simultaneously, we also had challenges in serving costs at our call center sites. We needed to move them – we need to move all the people into a work-from-home mode. So that was also a challenge in a sense that our ability to answer to the increased volume calls was challenged during that period. That created a lot of noise in the market, of course. We are the – a number one product provider in the country and also the one that serves, let me say, people that are more noticeable and influential in the country. That, together with the number of complaints that the National Protection Agency received during that period created this loss of situation, which, of course, we regret. But as Balan said, we are very sure that it's the force major situation, and we will present our discharges when we have the chance to see the details for the loss at which we have not seen yet.

Thanks, Guillermo. Naji?

Yes, Balan. Good morning, everyone. Yes. I mean, yes, the situation on the ground in Puerto Rico, I think, the island has been doing actually very well. Despite some lockdown, you can see still activity. You had asked about the AT&T situation. I cannot give you very specific, but I can tell you that the consumer, you drive by, all the shops are open. The network has been able to take on a lot more traffic. So you see a lot of activity, so we assume that they're doing fairly well. And as Balan has mentioned, it is a postpaid environment. On the fixed side, yes, you asked a question whether there is more runway ahead of us. And I think there is, and I think its two element that we can look at that will definitely work in our favor. One is the broadband penetration. The Island broadband penetration is likely approaching somewhere between 60% and 70%, so there's room to grow beside the new build program that is in full swing that has not stopped. So those two will definitely contribute in adding broadband. And sometimes we don't talk about video, but video as well is growing for us. And if you look at our strategy and the correct pricing, the correct cost structure, we saw what happened, for example, Charter. We're adding video subscriber, while others are losing some. So we feel that we have the right formula. We have the right ingredients and the right cost structure to be able to continue growing the RGU base in Puerto Rico, so fairly optimistic about the future.

Thanks, Naji.

Thank you.

Our next question comes from Mathieu Robilliard with Barclays.

Hi. Good morning. Can you hear me well?

Very well.

The first question I had was actually on the synergies that you mentioned with regards to the building in Costa Rica. I don't know if my math are right, but it seems to me that you probably aim for a cut in the CapEx and OpEx at the target that represents maybe 20% of the current base. Something like that. And I wanted to have a little bit of color to exactly where you see the synergies, is it content cost? Is it back on costs with the network integration, et cetera, and if I may sneak another one just in terms of the capital increase. So you mentioned in the press release that it's expected to use balanced acquisitions, including the Costa Rica one, and I was just wondering if there's just a statement that leaves the door open without, at the moment, any precise ideas of what acquisitions in addition to Costa Rica you could be doing. Or are you guys looking at different things and some of them could be interesting and, therefore, you have flexibility to act if you want to materialize other transactions?

Well, thanks, Mathieu. Firstly, on the synergies, we kind of indicated it's about 1/10 of synergies in that transaction. That's on our math. And you hit it pretty much close to where we would look at, and it's quite traditional. But in the case of Costa Rica, we are in, in-country synergies between the cable company and the mobile company. So you can imagine you don't need two marketing groups. You don't need a lot of things that are duplicated between the two organizations. In addition to that, we also have our submarine cable coming into Costa Rica, which you can imagine that we'll be moving a lot of traffic as well back into our network. So there's a number of things that – we always get excited about synergies, in-country synergies, because those you can really nail it. Now you had a second question around the rights offering and the monies we are raising and future M&A. Let's just say that there's a lot of opportunities out there, and our pipeline is quite active, but we are going to be very disciplined. It's like the Costa Rica deal as well, where we look at very specific metrics and where we're really confident about the business that we're acquiring as well as the synergy numbers as well as the opportunity for us. That's when we really strike. And as we look at the rest of the region, there are a few of that, but like I've said many times before, our goal is to not get bigger. Our goal is to create value. If we wanted to get bigger, we would have actually announced some other deals in the first quarter – the second quarter of this year. And – but that's not our plan. Our plan is to create value here, and if we see valuable transactions, we see things that work for us and as well works for the seller, it's got to work for both of us, then you'll see us doing some announcements. And the Telefónica one is a good example of something that works well for us and works – I think worked really well for Telefónica as well. So – but that's how we kind of think about our pipeline.

Thank you.

Our next question comes from Kevin Roe with Roe Equity Research.

Balan, if we could turn to the Jamaican – to the Caribbean and broadband RGU trends. I know different markets are moving in different directions and net-net this quarter for Q2, it was negative. What's your outlook for the third quarter for the Caribbean as a whole for broadband net adds? Will we turn positive? And if we drill down into specific markets, you highlighted Jamaica as a standout and that positive trend continues. What's the profile of those adds in their ARPU? Are these remote workers primarily, remote learning? And if you could give us an update on the Caribbean in general, the health of the SMB segment in terms of non-pay and potential bad debt trends changing. Thanks.

Sure. I'll ask Inge to also jump in here in a bit and put some of his thoughts. I feel really good about the broadband business in the Caribbean. You saw our numbers in Jamaica, which was – I'll tell you, if you normalize for it. I mean, essentially, we grew close to about 10% of our base on broadband, and that is pretty significant. I mean there isn't too many cable companies, telephone companies, anybody that goes 10% of their base. And so you follow Charter, Kevin, and so you know that I'm quite involved there. And these numbers are very comparable, if not better, right, if you normalize them. Now the reason I feel bullish about it as well is in the second quarter, we took a lot of broadband customers that are actually receiving services from us off of our RGU count. And so the peers disconnects, but they were not really disconnects and you will see them naturally come back. They still have our modems in their home. They're getting service from us, and I think the team – we, collectively, as a team and as a company, have built a lot of goodwill with a lot of customers, where we've chosen to do the right thing. And we've always said in our company, we want to be a different kind of telecommunications company. So we didn't – our first instinct was not just to look at customers and say, how can we disconnect them. We were looking for ways to find – to make sure that they still have service even though that they can't afford to pay at this point. And I feel that will payback in many ways. And if I look at the third quarter, I actually feel bullish about our broadband numbers. I'm not going to give you a preview but July was looking a lot better than June. Let's just put it that way. In general, in the Caribbean, it really goes with the tourism industry. And eventually, it will come back. Really don't have a crystal ball on that, but we're seeing some hotels open up. We've also seen hotels open up and then close down. This will take many months. And then when the tourism industry comes back, I think all will be good because we have a great product there. And I think we've built a lot of goodwill during this COVID period. Inge, do you want to add some more color to my comments?

Thank you, Balan. Well, it's really the Caribbean today on fixed is a clear focus area. And as Balan said, we are focused on the penetration. Like in Puerto Rico, we can still penetrate much deeper. We have our new build that is working for us. We are upgrading our customers across the Caribbean in our fixed networks, and we kept them connected. So we will be focused on really making sure that we deliver the services we have to deliver to them. So very, very positive on, let's say, the fixed side of the business. S&B, it's full - you see two things happening. I think in Q2, we were – SMB customers, we kept and connected. We are there to help them through this pandemic. At the same time, we will also see new – let's say new businesses coming up, and we will also be there for the new businesses that are starting to arrive in the Caribbean to be their partners in life as they start to really shape up a new business in a digital world. So both on the fixed side – the customer side as well as on the B2B SMB side, we see good signs.

Thank you, Inge.

Thank you.

Our next question comes from Matthew Harrigan.

Thank you. There seems to be a consensus on the Street that when you get into 2021, whether it's vaccines or therapeutics, you can see some light on COVID, but you're certainly still having a rough in the interim with Chile and winter and all that. I guess one of the risks specific to your markets is some of the governments have very limited fiscal allowed to subsidize the consumer for a while as has been done in the U.S. Is there a possibility we could get a more violent and a dip off that over the next couple of quarters, even if longer term, your business looks great? And then secondly, when you look at the M&A opportunities, and you've got some large multinational telcos, some of whom you've done deals with are looking to exit the region. I mean you've got a very thin equity layer. You need to finance the multiple point or so with the synergies. Is there an imperative to try to get some of those deals done over the next year? I mean you said you don't want to grow just for the sake of growing and that Chris certainly annunciated a 4x leverage goal, ultimately. But do you feel like this is kind of a historic opportunity over the next 12 months where there's a lot of dislocations to get more M&A done before the market bumps up? Or are you more inclined to bide your time given that you've got two nice deals already in the hopper?

I'll start with the second one, and then maybe I'll ask Chris to also maybe think about his thoughts on this. There are many opportunities, but we are patient. We don't have to do any deals. And when we look at the transaction, we, of course, look at our balance sheet and how we want to capitalize ourselves to take advantage of any dislocation, but it's also got to work from the sense that it's got to be priced right. It's got to be a business that generates cash or has the potential to generate lots of cash, and it's got to have a path where we can clearly see how the business grows and how savings come out of it. So once you put all those filters on it, you're down to a really a small handful of assets that you really get excited about. And then you've got to work with the sellers, make sure that the seller also sees the excitement of wanting to part with those assets, right, at the valuation we think makes sense for us. There's quite a few deals where we'd say to the seller for it to make sense for us, it will never make sense for you. And let's not waste too much time talking to each other. And we are going to be disciplined that way. Now on the government front, almost all the governments that we work with in the countries that we operate have been actually quite prudent and have been making more right decisions than not. Many of them have got help on the IMF. Some of the government, they have really strong balance sheets, and they will just power through this. And we've been working very closely with them. My GC, John Winter and his regulatory team are very close with the governments. We keep track of their balance sheet and the actions they've been taking. And we are here to support them as well. I don't see that as a cloud space. I think if you look – if I look at the cloud space, it would just be mostly the macro around tourism in some areas. And then if you look at Chile, it's commodities and currencies. And that's how we look at it. Chris?

No. I think you hit it on the head.

Thank you, Matt.

Thanks, Balan. Thanks, Chris.

Our last question comes from Michael Rollins with Citi.

Hi, good morning. I was wondering if you just take a step back with the strategy as you're going to have in more markets, both fixed and wireless operations. Is there a holistic way that you think about the growth rate of that presence in the country by having all of those services differently than if you had one or the other?

I think, yes, we would look at it differently. And maybe I'll ask Betzalel, my Chief Operating Officer, to make some comments here as well. But certainly, the way we look at it, when you have a portfolio of products like this is what are the attach rates between them. And you use 1 to drive the other. So when we buy – like the Telefónica Costa Rica asset, you look at it and you say, okay, X amount of the mobile customers – postpaid customers, has our fixed product and X amount or Y amount of our fixed customers have the mobile product, and you just take one minus Y and one minus X and then you do the math, then you say, okay, I can get to X percentage of attach rate, and that's your revenue synergies. And so we think there's huge opportunities in many of our markets. We've been very successful in some. And in some we are just in the early stages of testing out different fixed mobile type plans. Same thing applies, by the way, to AT&T asset in Puerto Rico. Naji and Betzalel are already cooking up a whole bunch of offerings that we think, as soon as we take ownership of that asset, we can launch some things that are really compelling for the mobile subscriber and the fixed subscriber. Betzalel, do you have anything you want to add to that? Betzalel, do you have anything you want to add to that?

Thank you, Balan. I think that, yes, you're spot on. But one thing to mention, especially on the two acquisitions that we are discussing is the fact that most of our mobile customers in those two operations are postpaid. That is the best base to create that synergy or that offering of FMC. So that's why we believe those two acquisitions will give us a great opportunity for FMC offering and create the revenue synergy. As Balan said, we are planning into different markets. And really the attach rate when we are talking about postpaid, with fixed is – start showing some very good signs.

Thanks, Betzalel. And FMC, it's big mobile convergence for some of you. Yes. I think that's – is that our last question, operator?

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

Thank you, operator. I should end with a few comments. One, our business is good. We have products that everybody wants. I think we have a unique value that customers really appreciate, and we have employees that are really motivated. Our goal is to create value for our shareholders. Certainly, we want to create value for our employees. And for sure, absolutely, there's going to be value creation for our customers as well. And we plan on doing that. And we think we have a good strategy in place. We have a good team in place, and we will execute on it. And I want to thank all of you for your support. Have a great day.

Ladies and gentlemen, this concludes Liberty Latin America's Second Quarter 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 also find a copy of today's presentation materials.