How LLA sees the market landscape in Puerto Rico, USVI

Liberty Puerto Rico, a subsidiary of Liberty Latin America, seeks to build or acquire broadband communications and mobile businesses with “strong prospects” for growth in its areas of operation, the company said in its annual report filed with US Securities and Exchange Commission.

Liberty Puerto Rico provides fixed and mobile telecom services in both Puerto Rico and the US Virgin Islands (USVI).

The company also aims to achieve “organic” revenue and customer growth in its operations, mainly by developing and marketing bundled services. 

The goal, according to the telco, is to increase average revenue from each household or business, as well as to increase penetration of its video, broadband internet, fixed-line telephony and mobile services, through product bundling and upselling.

In mobile, Liberty Puerto Rico competes with T-Mobile and América Móvil’s Claro. 

The company ended 2021 with 1.02mn mobile subscribers, 822,500 of which postpaid. Puerto Rico had 3.68mn mobile lines in service by the end of January, 2.65mn of which postpaid, according to statistics from the territory’s administration. 

Statistics on market share are not available, but Claro reported over 1mn wireless subscribers in Puerto Rico at end-2021, after net disconnections of 12,000 subscribers, showing a neck-and-neck dispute with Liberty.

In its report, Liberty said its current spectrum portfolio allows the company to meet subscribers’ needs in the coming years, although the group continues to evaluate the need to acquire additional frequencies to complement its spectrum bands.

In 2020, the telco acquired CBRS (3.5GHz) band in Puerto Rico and the USVI in a spectrum auction. In Puerto Rico and USVI, the company also relies on 700MHz FirstNet (Band 14), mainly for 4G. 

FIXED

Meanwhile, in the fixed business, the company claims to be the largest provider of fixed-line video services in Puerto Rico, with 50% of market share. Its main competitors for video customers are DTH satellite providers DirecTV and Dish Network. 

Liberty sees Dish Network in particular as an “aggressive competitor,” with low introductory offers, free HD channels and, in its top tier packages, a multi-room DVR service. DirecTV is also seen as a “significant competitor,” offering similar programming in Puerto Rico compared to Dish Network. 

“In order to compete, Liberty PR focuses on offering video packages with attractive programming, including HD and Spanish language channels, plus a specialty video package of Spanish-only channels that has gained popularity. In addition, Liberty PR uses its bundled offers that include high-speed internet with download speeds of up to 600Mbps to drive its video services,” the company said.

It is also enhancing its pay-TV and video services through the deployment of fiber-to-the-home (FTTH) networks and through its existing hybrid fiber coaxial (HFC) cable networks.

Liberty has over 19,300km of HFC cable and FTTH network deployed in Puerto Rico, connecting 1.16mn homes (homes passed) as of December 2021. This network is used to offer “market-leading” 600Mbps broadband speed plans, according to the company.

In comparison, Claro’s Puerto Rican fiber infrastructure reached 17,500km and covered 407,000 premises at the end of 2021, with Claro aiming to reach 539,000 by the end of this year.

Liberty Puerto Rico ended the year with 478,900 broadband internet subscribers, 245,700 video subscribers and 252,500 fixed-line telephony subscribers.

Also, according to Liberty, its fiber ring around Puerto Rico provides interconnectivity points to the island’s other local and international telecommunications companies.

ACQUISITIONS

Liberty entered the Puerto Rican and USVI mobile markets in October 2020, after closing the acquisition of AT&T. 

Last December, Liberty PR also acquired 96% of the outstanding shares of Broadband VI for US$33mn, subject to certain post-closing adjustments. 

Prior to that, in June 2021, US regulator FCC issued a public notice authorizing US$85mn in Connect USVI funding for Broadband VI to deploy wireline networks and provide voice and broadband services to more than 46,000 locations in the US Virgin Islands. 

Given its acquisition of Broadband VI, Liberty PR will be the recipient of these funds, as well as responsible for the network expansions and upgrades committed to in the bid. 

Liberty PR will have six years to complete the network expansions and upgrades and will receive FCC funding for 10 years, the company said in its filing. 

In addition to expansions and upgrades, Broadband VI committed to a robust disaster preparation and response plan to reinforce its network and make it more resistant to storm damage.

COMPETITION

From a competitive landscape, Liberty PR said it is experiencing “significant competition” from other telecommunications operators and providers in its markets. 

According to the company, high levels of sovereign debt in the US and Puerto Rico, combined with weak growth and high unemployment, pose major risks.

These, Liberty said, “could potentially lead to fiscal reforms (including austerity measures), tax and levy increases, sovereign debt restructurings, currency instability, increased counterparty credit risk, high levels of volatility and disruptions in the credit and equity markets, as well as other outcomes that might adversely impact our company.”