Liberty Latam eyeing M&A in 2018

Liberty Latin America (LLA) will embark on an M&A spree this year as the company seeks to position itself as a third regional player behind Telefónica and América Móvil.

Guillermo Ponce (pictured), CEO of Chilean unit VTR, told journalists that the strategy is to build out three regional clusters through acquisitions to complement the operations of Cable & Wireless Communications and Liberty Puerto Rico, as well as VTR in the Southern Cone.

At the beginning of January, Liberty Latin America completed a split-off from the European operations of Liberty Global to focus on Latin America.

The executive would not go into detail of which countries or types of companies were being looked at, but said that everything was on the table.

Cable operators would be the most similar fit for VTR and Liberty Puerto Rico, though VTR has a small MVNO mobile business, while CWC has a more diversified focus of mobile, fixed line, corporate services and international communication with an extensive submarine network.

Ponce said that the company's aim is to take advantage of synergies among the three units.

In February, LLA made its first acquisition, buying 80% of Costa Rican cable operator Cabletica, which has an enterprise value of US$250mn.

In terms of financing, Ponce said that LLA has pre-approved credit lines.

Another company that could challenge Liberty as a third regional player is Millicom, an operator with mobile, fixed line, cable and TV infrastructure in Central America, Colombia, Paraguay and Bolivia.

In 1Q18, Liberty Latin America posted a 3.5% drop in revenue in Q1 to US$910mn, as gains in VTR could not offset losses from the CWC and Liberty Puerto Rico units due to damage from hurricanes Irma and María.

LLA said Liberty Puerto Rico revenues fell US$45mn in the first quarter. Chile's VTR saw 15% growth in revenues to US$264mn.

REGIONAL HUB

Ponce added that Chile was due to become a regional innovation hub as well as a cluster of companies for the Southern Cone.

The company is eyeing emerging technology trends such as artificial intelligence and machine learning to introduce new products and services. It has already implemented the Mercury router, which uses beam forming to aim and cover blind spots like balconies and reduce interference from neighboring networks. VTR is piloting "pods" that use machine learning to identify and recommend the areas of a home which require the most bandwidth.

The average bandwidth contracted by VTR customers is 109Mbps. Some 46% of those are using Mercury routers.

The company has an alliance with Netflix and sees itself continuing to cooperate with over-the-top players.