Liberty Global presentation slides on LiLAC.

Snapshot of LiLAC

Liberty Global LiLAC

What Matters the Most:

  • Speed advantages over competitors is true competitive advantage
  • Closest competitors have much bigger markets to worry about than LiLAC Latin American markets
    • Telefonica (LatAm markets are bundled under “Hispanoamerica” region, ~9 countries, represents only 24% of revenues)
    • America Movil
    • DISH Networks
    • DirecTV/ AT&T
  • Fixed broadband speeds become more important as smartphone and home broadband penetration increases
  • Cable & Wireless is heavily underpenetrated on double/triple/quad play bundling, has long runway opportunity to increase bundling, fixed-mobile convergence
  • C&W is only player in their markets to have fixed and mobile network overlap, which is huge advantage for bundling and reducing costs
  • Newbuild activity reaps solid returns on investment (VTR Chile)
  • Integration of Cable & Wireless (who is still integrated Columbus International) goes smoothly, able to get full synergy benefits on both operating and capital spending
  • Larger LiLAC is able to provider better bundles, cross-sell, have lower cost base per subscriber
  • Levered equity returns begin in 2017/2018 as Project Marlin is complete, LiLAC begins to generate free cash flow
  • LiLAC better able to access debt markets with CWC (and Columbus) businesses versus “old” LiLAC
  • Unannounced synergies at the Q3/2016 earnings call will be a catalyst
  • Increased transparency will also be a catalyst, as LiLAC still bundled under much larger “Liberty Global”

Synergies: Just Announce Them Already!

  • There has yet to be any announced synergies between CWC and LiLAC due to UK Takeover Code laws
  • Expectation of synergy announcements on 03/2016 should be a catalyst

Synergies announced 11/2014 for CWC acquisition of Columbus

Liberty Global LiLAC

Data Traffic Increasing in Latin America

Liberty Global LiLAC

  • As of 2015, Latin America has a low installed base of smart devices and connections in relation to the rest of the world, at 34%. This is expected to grow to 70% by 2020 (Cisco; see chart on right)
  • The growth in smartphone devices will have a profound impact on data traffic
  • Worldwide IPv6 mobile data traffic is estimated to compound at 102% from 2015 – 2020 (to 16.6 Exabyte’s per month)
  • As data traffic increases, there will also be a desire to utilize data anywhere/anytime, and by 2020 about 55% of cellular data traffic is estimated to be offloaded to fixed broadband
  • Furthermore, the growth in smartphones and tablets in Latin America will push both mobile and fixed broadband providers to “keep up” with the speed demands (see demand by device type on right)

Data Traffic Increasing at 50% CAGR through 2020

Liberty Global LiLAC

  • Due to the substantial amount of data increases as well as the high percentage of offloading from cellular and tablet devices, there will be an increasing demand of superior fixed broadband speeds and reliability
  • As of current, the markets in Latin America do not have the same “fiber optic” competition (such as Google Fiber) and predominantly compete with copper DSL providers with already-inferior broadband speeds There are some things DSL providers can do to increase broadband speeds (vectoring, FTTC, Gfast) but it does not compete with cable and DOCSIS 3.1 or FTTH
  • Latin America is forecast to see Mobile data traffic growth of 50% CAGR from 2015 to 2020 (Cisco)

Latin America Has “Catching Up to Do”

Liberty Global LiLAC

  • The projected average mobile network speed is the second lowest in Latin America, only better than the Middle East and Africa, despite having far more advanced economies and infrastructure than a majority of those countries
  • Estimated 27% average mobile network connection speed in Latin America from 2015 to 2020 (Cisco)
  • In 2020, average mobile speed estimated to be 4.9 Mbps, about 1/3 of Western Europe and North America
  • The growth of 4G in Latin America will help push data traffic growth
  • In 2012, Latin America averaged 54,907 Terrabytes/month in mobile data traffic
  • In 2020, Latin America is expected to have 2,091,703 Terrabutes/month in mobile data traffic

Smartphone Penetration

Liberty Global LiLAC

  • Smartphone penetration will:
    • Drive data traffic higher
    • Increase the appetite for internet, social media, online videos, etc.
    • Increase the desire and appreciation of faster internet speeds and reliability of the network
    • Increase the strain of spectrum capacity, also helping fixed broadband providers see increased demands due to offloading of mobile broadband data usage
  • 84% of broadband users in Latin America come from 6 countries (see chart right), including LiLAC market, Chile
  • VTR in Chile operates through a full MVNO model, has <1°/o market share, but as they are #1 in Chile in fixed broadband, should see increase in demand from smartphone penetration

See the full slides below.