LIBERTY LATIN AMERICA LTD. See the Glossary of defined terms at the beginning of this Quarterly Report on Form 10-Q.
The following discussion and analysis, which should be read in conjunction with our 2021 Form 10-K and the condensed consolidated financial statements and accompanying notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q, is intended to assist in providing an understanding of our financial condition, changes in financial condition and results of operations and is organized as follows:
•Forward-looking Statements. This section provides a description of certain factors that could cause actual results or events to differ materially from anticipated results or events.
•Overview. This section provides a general description of our business and recent events.
•Material Changes in Results of Operations. This section provides an analysis of
our results of operations for the three months ended
•Material Changes in Financial Condition. This section provides an analysis of our liquidity, condensed consolidated statements of cash flows and contractual commitments.
Unless otherwise indicated, operational data (including subscriber statistics)
is presented as of
Forward-looking Statements
Certain statements in this Quarterly Report on Form 10-Q constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. To the extent that statements in this Quarterly Report on Form 10-Q are not recitations of historical fact, such statements constitute forward-looking statements, which, by definition, involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. In particular, statements under Part I, Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations, Item 3. Quantitative and Qualitative Disclosures About Market Risk, and Item 4. Controls and Procedures may contain forward-looking statements, including statements regarding: our business, products, foreign currency and finance strategies; subscriber growth and retention rates; changes in competitive, regulatory and economic factors; anticipated changes in our revenue, expenses, or growth rates; debt levels; our liquidity and our ability to access the liquidity of our subsidiaries; credit risks; internal control over financial reporting and the remediation of material weaknesses; foreign currency risks; interest rate risks; compliance with debt, financial and other covenants; our projected sources and uses of cash; the Telefónica Costa Rica Acquisition; the timing and impacts of proposed transactions, including the pending Claro Panama Acquisition; the pending formation of the Chile JV; the effects and potential impacts of COVID-19 on our business and results of operations; reductions in operating and capital costs; our 2022 Share Repurchase Program; the outcome and impact of pending litigation; and other information and statements that are not historical fact. Where, in any forward-looking statement, we express an expectation or belief as to future results or events, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the expectation or belief will result or be achieved or accomplished. In addition to the risk factors described in Part I, Item 1A in our 2021 Form 10-K, the following are some but not all of the factors that could cause actual results or events to differ materially from anticipated results or events:
•economic and business conditions and industry trends in the countries in which we operate;
•the competitive environment in the industries in the countries in which we operate, including competitor responses to our products and services;
•fluctuations in currency exchange rates, inflation rates and interest rates;
•our relationships with third-party programming providers and broadcasters, some of which are also offering content directly to consumers, and our ability to maintain access to desirable programming on acceptable economic terms;
•our relationships with suppliers and licensors and the ability to maintain equipment, software and certain services;
•instability in global financial markets, including sovereign debt issues and related fiscal reforms;
•our ability to obtain additional financing and generate sufficient cash to meet our debt obligations;
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--------------------------------------------------------------------------------•the impact of restrictions contained in certain of our subsidiaries' debt instruments;
•consumer disposable income and spending levels, including the availability and amount of individual consumer debt;
•changes in consumer viewing preferences and habits, including on mobile devices that function on various operating systems and specifications, limited bandwidth, and different processing power and screen sizes;
•customer acceptance of our existing service offerings, including our video, broadband internet, fixed-line telephony, mobile and business service offerings, and of new technology, programming alternatives and other products and services that we may offer in the future;
•our ability to manage rapid technological changes;
•the impact of 5G and wireless technologies on broadband internet;
•our ability to maintain or increase the number of subscriptions to our video, broadband internet, fixed-line telephony and mobile service offerings and our average revenue per household and mobile subscriber;
•our ability to provide satisfactory customer service, including support for new and evolving products and services;
•our ability to maintain or increase rates to our subscribers or to pass through increased costs to our subscribers;
•the impact of our future financial performance, or market conditions generally, on the availability, terms and deployment of capital;
•changes in, or failure or inability to comply with, government regulations in the countries in which we operate and adverse outcomes from regulatory proceedings;
•government intervention that requires opening our broadband distribution networks to competitors;
•our ability to renew necessary regulatory licenses, concessions or other operating agreements and to otherwise acquire future spectrum or other licenses that we need to offer new mobile data or other technologies or services;
•our ability to obtain regulatory approval and satisfy other conditions necessary to close acquisitions and dispositions, and the impact of conditions imposed by competition and other regulatory authorities in connection with acquisitions, such as with respect to the pending formation of the Chile JV and the pending Claro Panama Acquisition; •our ability to successfully acquire new businesses and, if acquired, to integrate, realize anticipated efficiencies from and implement our business plan with respect to the businesses we have acquired or that we expect to acquire, such as with respect to the Chile JV, the pending Claro Panama Acquisition and the Telefónica Costa Rica Acquisition;
•changes in laws or treaties relating to taxation, or the interpretation
thereof, in the
•changes in laws and government regulations that may impact the availability and cost of capital and the derivative instruments that hedge certain of our financial risks;
•the ability of suppliers and vendors, including third-party channel providers and broadcasters (including our third-party wireless network provider under our MVNO arrangement), to timely deliver quality products, equipment, software, services and access; •the availability of attractive programming for our video services and the costs associated with such programming, including retransmission and copyright fees payable to public and private broadcasters;
•uncertainties inherent in the development and integration of new business lines and business strategies;
•our ability to adequately forecast and plan future network requirements, including the costs and benefits associated with our network extension and upgrade programs;
•the availability of capital for the acquisition and/or development of telecommunications networks and services, including property and equipment additions;
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--------------------------------------------------------------------------------•problems we may discover post-closing with the operations, including the internal controls and financial reporting process, of businesses we acquire, such as with respect to the AT&T Acquired Entities and with respect to the Telefónica Costa Rica Acquisition;
•the effect of any of the identified material weaknesses in our internal control over financial reporting;
•piracy, targeted vandalism against our networks, and cybersecurity threats or other security breaches, including the leakage of sensitive customer data, which could harm our business or reputation;
•the outcome of any pending or threatened litigation;
•the loss of key employees and the availability of qualified personnel;
•the effect of any strikes, work stoppages or other industrial actions that could affect our operations;
•changes in the nature of key strategic relationships with partners and joint venturers;
•our equity capital structure;
•our ability to realize the full value of our intangible assets;
•changes in and compliance with applicable data privacy laws, rules, and regulations;
•our ability to recoup insurance reimbursements and settlements from third-party providers;
•our ability to comply with economic and trade sanctions laws, such as the
•the impacts of climate change such as rising sea levels or increasing frequency and intensity of certain weather phenomena; and
•events that are outside of our control, such as political conditions and unrest in international markets, terrorist attacks, malicious human acts, hurricanes, volcanoes and other natural disasters, pandemics, including the COVID-19 pandemic, and other similar events. The broadband distribution and mobile service industries are changing rapidly and, therefore, the forward-looking statements of expectations, plans and intent in this Quarterly Report on Form 10-Q are subject to a significant degree of risk. These forward-looking statements and the above described risks, uncertainties and other factors speak only as of the date of this Quarterly Report on Form 10-Q, and we expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein, to reflect any change in our expectations with regard thereto, or any other change in events, conditions or circumstances on which any such statement is based. Readers are cautioned not to place undue reliance on any forward-looking statement. Overview General
We are an international provider of fixed, mobile and subsea telecommunications services. We provide,
A.residential and B2B services in:
i.over 20 countries across
ii.Puerto Rico, through our reportable segment Liberty Puerto Rico;
iii.Chile, through our reportable segment VTR; and
iv.
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B.through our Networks & LatAm business of our C&W Caribbean and Networks
segment, (i) B2B services in certain other countries in Latin America and the
Caribbean and (ii) wholesale communication services over its subsea and
terrestrial fiber optic cable networks that connect approximately 40 markets in
that region.
At
Competition and Management Focus
We are experiencing significant competition from other telecommunications operators and other communication service providers in all of our markets, and in particular in our operations inChile as competitors continued to expand and upgrade their networks. In addition, technological advances and product innovations have increased and are likely to continue to increase giving customers several options for the provision of their communications services. In all markets, we seek to differentiate our communications services by focusing on customer service and competitive pricing, and offering quality high-speed connectivity. For example, in March, VTR introduced a new pricing plans for new and existing customers. The significant competition we are experiencing inChile has adversely impacted our revenue, RGUs and ARPU. For additional information regarding the revenue impact of changes in the RGUs and ARPU, see discussion below.
Material Changes in Results of Operations
The comparability of our operating results during the three months ended
In the following discussion, we quantify the estimated impact on the operating results of the periods under comparison that is attributable to acquisitions. We acquired (i) Telefónica's operations inCosta Rica inAugust 2021 and (ii) 96% ofBroadband VI, LLC's operations in theU.S. Virgin Islands effective December, 31 2021. With respect to acquisitions, organic changes and the calculations of our organic change percentages exclude the operating results of an acquired entity during the first 12 months following the date of acquisition. Changes in foreign currency exchange rates may have a significant impact on our operating results, as VTR,Costa Rica and certain entities within C&W have functional currencies other than theU.S. dollar. Our primary FX exchange risk relates to the Chilean peso. For example, the average FX rate (utilized to translate our condensed consolidated statements of operations) for theU.S. dollar per one Chilean peso appreciated by 11% for the three months endedMarch 31, 2022 , as compared to the corresponding period in 2021. The impacts to the various components of our results of operations that are attributable to changes in FX are highlighted below. For information concerning our foreign currency risks and applicable foreign currency exchange rates, see Item 3. Quantitative and Qualitative Disclosures About Market Risk-Foreign Currency Rates below. The amounts presented and discussed below represent 100% of the revenue and expenses of each reportable segment and our corporate operations. As we have the ability to control certain subsidiaries that are not wholly-owned, we include 100% of the revenue and expenses of these entities in our condensed consolidated statements of operations despite the fact that third parties own significant interests in these entities. The noncontrolling owners' interests in the operating results of (i) certain subsidiaries of (a) C&W and (b) Liberty Puerto Rico, and (ii)Costa Rica are reflected in net earnings or loss attributable to noncontrolling interests in our condensed consolidated statements of operations. We are subject to inflationary pressures with respect to certain costs and foreign currency exchange risk with respect to costs and expenses that are denominated in currencies other than the respective functional currencies of our reportable segments. Any cost increases that we are not able to pass on to our customers would result in increased pressure on our operating margins.
Consolidated Adjusted OIBDA
On a consolidated basis, Adjusted OIBDA is a non-U.S. GAAP measure. Adjusted OIBDA is the primary measure used by our chief operating decision maker to evaluate segment operating performance. Adjusted OIBDA is also a key factor that is used by our internal decision makers determine how to allocate resources to segments. Our internal decision makers believe Adjusted OIBDA is a meaningful measure because it represents a transparent view of our recurring operating performance that is unaffected by our capital structure and allows management to (i) readily view operating trends, (ii) perform analytical comparisons and benchmarking between segments and (iii) identify strategies to improve operating performance in the different 36 -------------------------------------------------------------------------------- countries in which we operate. We believe our Adjusted OIBDA measure is useful to investors because it is one of the bases for comparing our performance with the performance of other companies in the same or similar industries, although our measures may not be directly comparable to similar measures used by other public companies. Adjusted OIBDA should be viewed as a measure of operating performance that is a supplement to, and not a substitute for, operating income or loss, net earnings or loss and otherU.S. GAAP measures of income or loss.
A reconciliation of total operating income, the nearest
Three months ended
March 31,
2022 2021
in millions
Operating income $ 188.3 $ 181.0
Share-based compensation expense 30.0 23.0
Depreciation and amortization 214.1 243.1
Impairment, restructuring and other operating items, net 7.8 2.2
Consolidated Adjusted OIBDA $ 440.2 $ 449.3
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The following table sets forth organic and non-organic changes in Adjusted OIBDA for the period indicated:
C&W Caribbean Liberty Intersegment
and Networks C&W Panama Puerto Rico VTR Costa Rica Corporate eliminations Consolidated
in millions
Adjusted OIBDA for the
three months ending:
March 31, 2021 $ 181.3 $ 44.0 $ 149.9 $ 70.5 $ 14.1 $ (10.5) $ - $ 449.3
Organic changes related
to:
Revenue 22.4 (0.1) 5.1 (19.6) 1.0 0.2 (1.4) 7.6
Programming and other
direct costs (5.3) (0.3) (4.9) (0.6) 0.1 - 0.2 (10.8)
Other operating costs
and expenses (3.4) (3.1) (6.3) 1.8 (1.7) (3.5) 1.2 (15.0)
Non-organic increases
(decreases):
FX (2.5) - - (5.6) (0.7) - - (8.8)
Acquisitions - - 0.5 - 17.4 - - 17.9
March 31, 2022 $ 192.5 $ 40.5 $ 144.3 $ 46.5 $ 30.2 $ (13.8) $ - $ 440.2
Adjusted OIBDA Margin
The following table sets forth the Adjusted OIBDA margin (Adjusted OIBDA divided by revenue) of each of our reportable segments:
Three months ended March 31,
2022 2021
%
C&W Caribbean and Networks 43.3 42.2
C&W Panama 31.8 34.6
Liberty Puerto Rico 39.1 41.5
VTR 27.2 33.5
Costa Rica 28.1 39.0
Adjusted OIBDA margin is impacted by organic changes in revenue, programming and
other direct costs of services and other operating costs and expenses, as
further discussed below. The decrease in the Adjusted OIBDA margin for VTR is
primarily related to a decline in revenue, as further discussed below and in the
Overview above. The decrease in the Adjusted OIBDA margin for Costa Rica is
primarily related to the inclusion of the Telefónica Costa Rica operations
following the Telefónica Costa Rica Acquisition, which generates lower Adjusted
OIBDA margin relative to the legacy operations.
Revenue
All of our segments derive their revenue primarily from (i) residential fixed
services, including video, broadband internet and fixed-line telephony, (ii)
residential mobile services, and (iii) B2B services. C&W Caribbean and Networks
also provides wholesale communication services over its subsea and terrestrial
fiber optic cable networks.
While not specifically discussed in the below explanations of the changes in
revenue, we are experiencing significant competition in all of our markets. This
competition has an adverse impact on our ability to increase or maintain our
RGUs and/or ARPU.
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Variances in the subscription revenue that we receive from our customers are a
function of (i) changes in the number of RGUs or mobile subscribers during the
period and (ii) changes in ARPU. Changes in ARPU can be attributable to (i)
changes in prices, (ii) changes in bundling or promotional discounts, (iii)
changes in the tier of services selected, (iv) variances in subscriber usage
patterns, and (v) the overall mix of fixed and mobile products during the
period. In the following discussion, we discuss ARPU changes in terms of the net
impact of the above factors on the ARPU that is derived from our video,
broadband internet, fixed-line telephony and mobile products.
The following table sets forth the organic and non-organic changes in revenue by
reportable segment.
Three months ended March 31, Increase Increase (decrease) from:
2022 2021 (decrease) FX Acquisitions Organic
in millions
C&W Caribbean and Networks $ 444.9 $ 429.8 $ 15.1 $ (7.3) $ - $ 22.4
C&W Panama 127.2 127.3 (0.1) - - (0.1)
Liberty Puerto Rico 369.3 361.3 8.0 - 2.9 5.1
VTR 170.8 210.3 (39.5) (19.9) - (19.6)
Costa Rica 107.4 36.2 71.2 (1.8) 72.0 1.0
Corporate 5.6 5.4 0.2 - - 0.2
Intersegment eliminations (6.5) (5.1) (1.4) - - (1.4)
Total $ 1,218.7 $ 1,165.2 $ 53.5 $ (29.0) $ 74.9 $ 7.6
C&W Caribbean and Networks. C&W Caribbean and Networks' revenue by major
category is set forth below:
Three months ended March 31, Increase (decrease)
2022 2021 $ %
in millions, except percentages
Residential revenue:
Residential fixed revenue:
Subscription revenue:
Video $ 32.6 $ 34.3 $ (1.7) (5)
Broadband internet 70.6 66.6 4.0 6
Fixed-line telephony 18.5 16.5 2.0 12
Total subscription revenue 121.7 117.4 4.3 4
Non-subscription revenue 9.1 8.5 0.6 7
Total residential fixed revenue 130.8 125.9 4.9 4
Residential mobile revenue:
Service revenue 76.5 71.8 4.7 7
Interconnect, inbound roaming, equipment sales and other (a)
14.5 13.6 0.9 7
Total residential mobile revenue 91.0 85.4 5.6 7
Total residential revenue 221.8 211.3 10.5 5
B2B revenue:
Service revenue 158.2 150.8 7.4 5
Subsea network revenue 64.9 67.7 (2.8) (4)
Total B2B revenue 223.1 218.5 4.6 2
Total $ 444.9 $ 429.8 $ 15.1 4
(a)Revenue from inbound roaming was
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The details of the changes in C&W Caribbean and Networks' revenue during the
three months ended March 31, 2022 , as compared to the corresponding period in
2021, are set forth below (in millions):
Increase (decrease) in residential fixed subscription revenue due to change
in:
Average number of RGUs (a) $ 7.1
ARPU (b) (0.8)
Increase in residential fixed non-subscription revenue 0.7
Total increase in residential fixed revenue 7.0
Increase in residential mobile service revenue (c) 6.0
Increase in residential mobile interconnect, inbound roaming, equipment sales and other revenue
1.0
Increase in B2B service revenue (d) 10.5
Decrease in B2B subsea network revenue (e) (2.1)
Total organic increase 22.4
Impact of FX (7.3)
Total $ 15.1 (a)The increase is primarily attributable to higher average broadband internet and fixed-line telephony RGUs.
(b)The decrease is primarily due to lower ARPU from video services, partially offset by higher ARPU from fixed-line telephony.
(c)The increase is attributable to higher average numbers of mobile subscribers, mostly due to an increase in sales initiatives and growth from fixed-mobile convergence efforts.
(d)The increase is primarily due to higher revenue from (i) certain non-recurring B2B contracts, and (ii) fixed and mobile services.
(e)The decrease is primarily due to (i) the net negative impact associated with
the recognition of deferred revenue and penalties upon termination of customer
contracts during the first quarter of 2022 and 2021, partially offset by (ii)
increased demand for telecommunications capacity on our subsea network.
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--------------------------------------------------------------------------------C&W Panama. C&W Panama's revenue by major category is set forth below:
Three months ended March 31, Increase (decrease)
2022 2021 $ %
in millions, except percentages
Residential revenue:
Residential fixed revenue:
Subscription revenue:
Video $ 7.1 $ 6.2 $ 0.9 15
Broadband internet 12.4 10.7 1.7 16
Fixed-line telephony 4.2 4.3 (0.1) (2)
Total subscription revenue 23.7 21.2 2.5 12
Non-subscription revenue 2.2 2.5 (0.3) (12)
Total residential fixed revenue 25.9 23.7 2.2 9
Residential mobile revenue:
Service revenue 43.0 44.6 (1.6) (4)
Interconnect, inbound roaming, equipment sales and other 10.4 10.3 0.1 1
Total residential mobile revenue 53.4 54.9 (1.5) (3)
Total residential revenue 79.3 78.6 0.7 1
B2B service revenue 47.9 48.7 (0.8) (2)
Total $ 127.2 $ 127.3 $ (0.1) -
The details of the changes in C&W Panama's revenue during the three months ended
March 31, 2022 , as compared to the corresponding period in 2021, are set forth
below (in millions):
Increase (decrease) in residential fixed subscription revenue due to change
in:
Average number of RGUs (a) $ 3.4
ARPU (0.9)
Decrease in residential fixed non-subscription revenue (0.3)
Total increase in residential fixed revenue 2.2
Decrease in residential mobile service revenue (b) (1.6)
Increase in residential mobile interconnect, inbound roaming, equipment sales and other revenue
0.1
Decrease in B2B service revenue (c) (0.8)
Total organic decrease $ (0.1) (a)The increase is primarily attributable to higher average broadband internet and video RGUs.
(b)The decrease is primarily due to the net effect of (i) lower ARPU from prepaid mobile services, mainly attributable to lower recharging activity, and (ii) higher average numbers of postpaid mobile subscribers.
(c)The decrease is primarily due to the net effect of (i) a decrease in the volume of certain government-related projects, (ii) higher revenue from data services and (iii) increased mobile services revenue.
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Liberty Puerto Rico . Liberty Puerto Rico's revenue by major category is set
forth below:
Three months ended March 31, Increase (decrease)
2022 2021 $ %
in millions, except percentages
Residential fixed revenue:
Subscription revenue:
Video $ 39.7 $ 38.6 $ 1.1 3
Broadband internet 68.9 61.4 7.5 12
Fixed-line telephony 7.2 7.0 0.2 3
Total subscription revenue 115.8 107.0 8.8 8
Non-subscription revenue 5.4 4.2 1.2 29
Total residential fixed revenue 121.2 111.2 10.0 9
Residential mobile revenue:
Service revenue 116.8 116.5 0.3 -
Interconnect, inbound roaming, equipment sales and other (a)
63.2 73.0 (9.8) (13)
Total residential mobile revenue 180.0 189.5 (9.5) (5)
Total residential revenue 301.2 300.7 0.5 -
B2B service revenue 57.8 52.1 5.7 11
Other revenue (b) 10.3 8.5 1.8 21
Total $ 369.3 $ 361.3 $ 8.0 2
(a)Revenue from inbound roaming was
The details of the changes in Liberty Puerto Rico's revenue during the three months endedMarch 31, 2022 , as compared to the corresponding periods in 2021, are set forth below (in millions): Increase (decrease) in residential fixed subscription revenue due to change in: Average number of RGUs (a)$ 7.5 ARPU (1.0) Increase in residential fixed non-subscription revenue 0.6 Total increase in residential fixed revenue 7.1 Increase in residential mobile service revenue (b) 0.3 Decrease in residential mobile interconnect, inbound roaming, equipment sales and other revenue (c) (9.8) Increase in B2B service (d) 5.7 Increase in other revenue (e) 1.8 Total organic increase 5.1 Impact of an acquisition 2.9 Total$ 8.0
(a)The increase is primarily attributable to higher average broadband internet and video RGUs.
(b)The increase is primarily due to a higher average number of mobile subscribers that was mostly offset by lower ARPU from mobile services.
(c)The decrease is primarily due to (i) higher promotions associated with handset sales, and (ii) lower inbound roaming revenue.
(d)The increase is primarily due to higher revenue from equipment sales and mobile services.
(e)The increase is primarily attributable to funds received from the
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--------------------------------------------------------------------------------VTR. VTR's revenue by major category is set forth below:
Three months ended March 31, Decrease
2022 2021 $ %
in millions, except percentages
Residential revenue:
Residential fixed revenue:
Subscription revenue:
Video $ 65.9 $ 78.3 $ (12.4) (16)
Broadband internet 65.8 84.8 (19.0) (22)
Fixed-line telephony 17.9 20.0 (2.1) (11)
Total subscription revenue 149.6 183.1 (33.5) (18)
Non-subscription revenue 3.1 3.4 (0.3) (9)
Total residential fixed revenue 152.7 186.5 (33.8) (18)
Residential mobile revenue:
Service revenue 9.3 13.2 (3.9) (30)
Interconnect, inbound roaming, equipment sales and other 1.1 2.3 (1.2) (52)
Total residential mobile revenue 10.4 15.5 (5.1) (33)
Total residential revenue 163.1 202.0 (38.9) (19)
B2B service revenue 7.7 8.3 (0.6) (7)
Total $ 170.8 $ 210.3 $ (39.5) (19)
The details of the changes in VTR's revenue during the three months ended March
31, 2022 , as compared to the corresponding period in 2021, are set forth below
(in millions):
Decrease in residential fixed subscription revenue due to change in: Average number of RGUs (a)
$ (4.0) ARPU (b) (12.1) Change in residential fixed non-subscription revenue - Total decrease in residential fixed revenue (16.1) Decrease in residential mobile service revenue (c) (2.9)
Decrease in residential mobile interconnect, inbound roaming, equipment sales and other revenue
(1.0)
Increase in B2B service revenue 0.4
Total organic decrease (19.6)
Impact of FX (19.9)
Total $ (39.5) (a)The decrease is primarily attributable to lower average broadband internet and video RGUs.
(b)The decrease is primarily due to lower ARPU from broadband internet services, mainly associated with (i) increased competition that generally resulted in (a) the churn of higher-ARPU customers and (b) the addition of lower-ARPU customers, and (ii) strategic initiatives implemented during the first quarter of 2022. Higher discounts and lower premium subscribers related to video services also contributed to the decline in ARPU.
(c)The decrease is due to (i) lower ARPU from mobile services and (ii) lower average numbers of mobile subscribers.
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Three months ended March 31, Increase (decrease)
2022 2021 $ %
in millions, except percentages
Residential revenue:
Residential fixed revenue:
Subscription revenue:
Video $ 17.3 $ 19.5 $ (2.2) (11)
Broadband internet 16.3 14.0 2.3 16
Fixed-line telephony 1.1 1.1 - -
Total subscription revenue 34.7 34.6 0.1 -
Non-subscription revenue 0.8 1.6 (0.8) (50)
Total residential fixed revenue 35.5 36.2 (0.7) (2)
Residential mobile revenue:
Service revenue 46.2 - 46.2 N.M.
Interconnect, inbound roaming, equipment sales and other (a)
16.5 - 16.5 N.M.
Total residential mobile revenue 62.7 - 62.7 N.M.
Total residential revenue 98.2 36.2 62.0 171
B2B service revenue 9.2 - 9.2 N.M.
Total $ 107.4 $ 36.2 $ 71.2 197
N.M. - Not Meaningful.
(a)Amount includes
The details of the changes inCosta Rica's revenue during three months endedMarch 31, 2022 , as compared to the corresponding period in 2021, are set forth below (in millions): Increase (decrease) in residential fixed subscription revenue due to change in: Average number of RGUs (a)$ 3.5 ARPU (b) (1.7) Decrease in residential fixed non-subscription revenue (0.8) Total organic increase 1.0 Impact of an acquisition 72.0 Impact of FX (1.8) Total$ 71.2
(a)The increase is primarily attributable to higher average broadband internet RGUs.
(b)The decrease is primarily due to lower ARPU from video services and the impact of product mix, partially offset by an increase in ARPU from broadband internet services.
Programming and other direct costs of services
Programming and other direct costs of services include programming and copyright
costs, interconnect and access costs, equipment costs, which primarily relate to
costs of mobile handsets and other devices, and other direct costs related to
our operations. Programming and copyright costs, which represent a significant
portion of our operating costs, may increase in future periods as a result of
(i) higher costs associated with the expansion of our digital video content,
including rights associated with ancillary product offerings and rights that
provide for the broadcast of live sporting events, (ii) rate increases or (iii)
growth in the number of our video subscribers.
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--------------------------------------------------------------------------------Consolidated. The following table sets forth the organic and non-organic changes in programming and other direct costs of services on a consolidated basis.
Three months ended March 31, Increase Increase (decrease) from:
2022 2021 (decrease) FX Acquisitions Organic
in millions
Programming and copyright $ 109.3 $ 111.8 $
(2.5) $ (6.1) $ - $ 3.6
Interconnect 85.7 80.6 5.1 (2.3) 7.2 0.2
Equipment and other 107.2 91.3 15.9 (0.5) 9.4 7.0
Total programming and other
direct costs of services $ 302.2 $ 283.7 $
18.5
C&W Caribbean and Networks. The following table sets forth the organic and non-organic changes in programming and other direct costs of services for our C&W Caribbean and Networks segment.
Three months ended March 31, Increase Increase (decrease) from:
2022 2021 (decrease) FX Organic
in millions
Programming and copyright $ 23.1 $ 23.7 $ (0.6) $ (0.4) $ (0.2)
Interconnect 37.6 37.6 - (1.3) 1.3
Equipment and other 20.4 16.6 3.8 (0.4) 4.2
Total programming and other direct costs
of services $ 81.1 $ 77.9 $ 3.2 $ (2.1)
•Equipment and other: The organic increase is primarily due to higher costs associated with certain non-recurring B2B contracts.
C&W Panama. The following table sets forth the organic changes in programming and other direct costs of services for our C&W Panama segment.
Three months ended March 31, Organic
2022 2021 Increase
in millions
Programming and copyright $ 4.0 $ 3.7 $ 0.3
Interconnect 15.2 15.2 -
Equipment and other 17.6 17.6 -
Total programming and other direct costs of services $ 36.8
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-------------------------------------------------------------------------------- LibertyPuerto Rico . The following table sets forth the organic and non-organic changes in programming and other direct costs of services for our Liberty Puerto Rico segment. Increase (decrease) from: Three months ended March 31, Increase 2022 2021 (decrease) An acquisition Organic in millions Programming and copyright $ 27.6$ 27.2 $ 0.4 $ -$ 0.4 Interconnect 19.4 20.6 (1.2) 0.6 (1.8) Equipment and other 59.3 52.8 6.5 0.2 6.3 Total programming and other direct costs of services$ 106.3 $ 100.6
•Interconnect: The organic decrease is primarily due to lower roaming costs, mainly due to lower volumes.
•Equipment and other: The organic increase is primarily associated with (i)
higher volumes of handset sales and (ii)
VTR. The following table sets forth the organic and non-organic changes in programming and other direct costs of services for our VTR segment.
Three months ended March 31, Increase (decrease) from:
2022 2021 Decrease FX Organic
in millions
Programming and copyright $ 45.7 $ 48.4 $ (2.7) $ (5.3) $ 2.6
Interconnect 7.7 7.8 (0.1) (0.9) 0.8
Equipment and other 1.1 4.0 (2.9) (0.1) (2.8)
Total programming and other direct costs
of services $ 54.5 $ 60.2 •Programming and copyright: The organic increase is primarily due to (i) basic content costs, in part from higher rates, and (ii) a settlement associated with a programming contract.
•Interconnect: The organic increase is primarily due to the net effect of (i) higher national leased capacity and (ii) lower MVNO charges.
•Equipment and other: The organic decrease is primarily due to lower volumes of equipment sales.
Costa Rica . The following table sets forth the organic and non-organic changes in programming and other direct costs of services for ourCosta Rica segment. Increase (decrease) from: Three months ended March 31, 2022 2021 Increase FX An acquisition Organic in millions Programming and copyright $ 8.9$ 8.8 $ 0.1 $ (0.4) $ -$ 0.5 Interconnect 7.2 0.6 6.6 (0.1) 6.6 0.1 Equipment and other 9.3 0.8 8.5 - 9.2 (0.7) Total programming and other direct costs of services $ 25.4$ 10.2 $ 15.2 $ (0.5) $ 15.8$ (0.1) 46
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Other operating costs and expenses
Other operating costs and expenses set forth in the tables below comprise the following cost categories:
•Personnel and contract labor-related costs, which primarily include salary-related and cash bonus expenses, net of capitalizable labor costs, and temporary contract labor costs;
•Network-related expenses, which primarily include costs related to network access, system power, core network, and CPE repair, maintenance and test costs;
•Service-related costs, which primarily include professional services, information technology-related services, audit, legal and other services;
•Commercial, which primarily includes sales and marketing costs, such as advertising, commissions and other sales and marketing-related costs, and customer care costs related to outsourced call centers;
•Facility, provision, franchise and other, which primarily includes facility-related costs, provision for bad debt expense, franchise-related fees, bank fees, insurance, vehicle-related, travel and entertainment and other operating-related costs; and
•Share-based compensation expense that relates to (i) equity awards issued to our employees and Directors and (ii) certain bonus-related expenses that are paid in the form of equity.
Consolidated. The following table sets forth the organic and non-organic changes in other operating costs and expenses on a consolidated basis.
Three months ended March 31, Increase (decrease) from:
2022 2021 Increase FX Acquisitions Organic
in millions
Personnel and contract labor $ 153.2 $ 138.4 $ 14.8 $ (2.8) $ 4.3 $ 13.3 Network-related 82.6 79.0 3.6 (3.1) 5.7 1.0 Service-related 51.2 47.5 3.7 (1.0) 5.0 (0.3) Commercial 65.5 52.4 13.1 (2.8) 11.6 4.3 Facility, provision, franchise and other 123.8 114.9 8.9 (1.6) 13.8
(3.3)
Share-based compensation expense 30.0 23.0 7.0 (0.4) 0.6
6.8
Total other operating costs and expenses$ 506.3 $ 455.2 $ 51.1 $ (11.7) $ 41.0 $ 21.8 C&W Caribbean and Networks. The following table sets forth the organic and non-organic changes in other operating costs and expenses for our C&W Caribbean and Networks segment. Three months ended March 31, Increase Increase (decrease) from: 2022 2021 (decrease) FX Organic in millions Personnel and contract labor $ 63.6$ 64.3 $ (0.7) $ (1.1) $ 0.4 Network-related 38.8 37.8 1.0 (0.7) 1.7 Service-related 18.4 17.7 0.7 (0.1) 0.8 Commercial 11.2 11.2 - (0.3) 0.3 Facility, provision, franchise and other 39.3 39.6 (0.3) (0.5) 0.2 Share-based compensation expense 7.2 6.2 1.0 - 1.0
Total other operating costs and expenses
•Personnel and contract labor: The organic increase is primarily due to higher contract labor costs, as higher compensation levels were offset by a reduction in employees.
•Network-related: The organic increase is primarily due to higher utilities costs.
47
--------------------------------------------------------------------------------•Service-related: The organic increase is primarily due to charges allocated from our Corporate operations, partially offset by lower audit, legal and consultancy fees.
•Facility, provision, franchise and other: The organic increase is primarily due to the net impact of (i) higher costs associated with the addition of new cell sites, (ii) higher utility charges and (iii) the positive impact of an accrual release during the first quarter of 2022 related to a favorable court ruling associated with an industry levy on franchise fees.
C&W Panama. The following table sets forth the organic changes in other operating costs and expenses for our C&W Panama segment.
Three months ended March 31, Organic increase
2022 2021 (decrease)
in millions
Personnel and contract labor $ 18.9 $ 17.2 $ 1.7
Network-related 9.9 9.8 0.1
Service-related 4.6 3.9 0.7
Commercial 5.9 5.1 0.8
Facility, provision, franchise and other 10.6 10.8 (0.2)
Share-based compensation expense 1.3 0.7 0.6
Total other operating costs and expenses $
51.2
•Personnel and contract labor: The organic increase is primarily due to higher staff costs related to increased sales activities.
LibertyPuerto Rico . The following table sets forth the organic and non-organic changes in other operating costs and expenses for our Liberty Puerto Rico segment. Increase (decrease) from: Three months ended March 31, Increase 2022 2021 (decrease) An acquisition Organic in millions Personnel and contract labor $ 40.6$ 32.4 $ 8.2 $ 0.5$ 7.7 Network-related 10.9 10.8 0.1 0.1 - Service-related 11.5 10.4 1.1 0.4 0.7 Commercial 12.1 12.0 0.1 - 0.1 Facility, provision, franchise and other 43.6 45.2 (1.6) 0.6 (2.2) Share-based compensation expense 3.2 3.0 0.2 - 0.2
Total other operating costs and expenses
•Personnel and contract labor: The organic increase is primarily due to higher salaries and other personnel costs.
•Network-related: We incurred network-related integration costs associated with
the AT&T Acquisition of
•Service-related: We incurred service-related integration costs associated with the AT&T Acquisition of$1 million during each of the three months endedMarch 31, 2022 and 2021. The service-related integration costs are expected to grow in future periods. •Facility, provision, franchise and other: The organic decrease is driven by individually insignificant changes across various facility, provision, franchise and other expenses. 48
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VTR. The following table sets forth the organic and non-organic changes in other operating costs and expenses for our VTR segment.
Three months ended March 31, Increase Increase (decrease) from:
2022 2021 (decrease) FX Organic
in millions
Personnel and contract labor $ 14.0 $ 16.1 $ (2.1) $ (1.6) $ (0.5)
Network-related 18.5 21.1 (2.6) (2.2) (0.4)
Service-related 7.4 10.1 (2.7) (0.8) (1.9)
Commercial 22.6 22.3 0.3 (2.6) 2.9
Facility, provision, franchise and other 7.3 10.0 (2.7) (0.8) (1.9)
Share-based compensation expense 3.2 1.9 1.3 (0.4) 1.7
Total other operating costs and expenses $ 73.0
$ (0.1)
•Service-related: The organic decrease is primarily due to lower professional services.
•Commercial: The organic increase is due to higher marketing and advertising costs, primarily related to a commitment to sponsor a music festival that has been postponed during each of the past two years due to COVID-19.
•Facility, provision, franchise and other costs: The organic decrease is primarily due to lower operating lease expense as a result of ceasing the amortization of our right of use assets in connection with held for sale accounting of the Chile JV Entities, as further described in note 8 to our condensed consolidated financial statements..
Increase (decrease) from:
Three months ended March 31,
2022 2021 Increase FX An acquisition Organic
in millions
Personnel and contract labor $ 7.4 $ 3.4 $ 4.0 $ (0.2) $ 3.8 $ 0.4
Network-related 8.7 2.9 5.8 (0.2) 5.6 0.4
Service-related 5.4 0.8 4.6 - 4.6 -
Commercial 13.7 1.8 11.9 (0.1) 11.6 0.4
Facility, provision, franchise and
other 16.6 3.0 13.6 (0.1) 13.2 0.5
Share-based compensation expense 0.9 0.1 0.8 - 0.6
0.2
Total other operating costs and expenses $ 52.7$ 12.0 $ 40.7 $ (0.6) $ 39.4$ 1.9 •Service-related: During the three months endedMarch 31, 2022 , we incurred$2 million of integration costs associated with the TelefónicaCosta Rica Acquisition that are primarily included in the increase from an acquisition set forth in the table above. Integration costs are expected to grow significantly during the remainder of 2022. 49
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Corporate. The following table sets forth the organic changes in other operating costs and expenses for our corporate operations.
Three months ended March 31, Organic increase
2022 2021 (decrease)
in millions
Personnel and contract labor $ 9.1 $ 5.0 $ 4.1
Service-related 3.6 4.6 (1.0)
Facility, provision, franchise and other 6.7 6.3 0.4
Share-based compensation expense 14.4 11.1 3.3
Total other operating costs and expenses $
33.8
•Personnel and contract labor: The organic increase is primarily attributable to higher salaries and other personnel costs, mainly resulting from higher staffing levels in the operations inPanama .
Results of Operations (below Adjusted OIBDA)
Share-based compensation expense (included in other operating costs and expenses)
Share-based compensation expense increased$7 million during the three months endedMarch 31, 2022 , as compared to the corresponding period in 2021, primarily due to additional equity awards granted to our employees and Directors.
Depreciation and amortization
Our depreciation and amortization expense decreased$29 million or 12% during the three months endedMarch 31, 2022 , as compared to the corresponding period in 2021, primarily due to the net effect of (i) a$43 million decline at VTR as we ceased recording depreciation expense during the third quarter of 2021 when we began accounting for the Chile JV Entities as held for sale, (ii) an increase in ourCosta Rica segment resulting from the Telefónica Costa Rica Acquisition, and (iii) an increase in property and equipment additions mainly at ourPuerto Rico segment.
Impairment, restructuring and other operating items, net
The details of our impairment, restructuring and other operating items, net, are
as follows:
Three months ended March 31,
2022 2021
in millions
Impairment charges $ 1.9 $ 2.3
Restructuring charges 2.7 1.8
Other operating items, net (a) 3.2 (1.9)
Total $ 7.8 $ 2.2
(a)The 2022 amount primarily includes direct acquisition costs. The 2021 amount
primarily includes a gain of $9 million on the disposition of certain B2B
operations in our Liberty Puerto Rico segment that was completed in January
2021 , which was more than offset by direct acquisition costs of $7 million , and
impairment and restructuring costs.
Interest expense
Our interest expense increased$3 million during the three months endedMarch 31, 2022 , as compared to the corresponding period in 2021. The increase is primarily attributable to higher amortization of debt financing costs, premiums and discounts.
For additional information regarding our outstanding indebtedness, see note 9 to our condensed consolidated financial statements.
50
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It is possible that the interest rates on (i) any new borrowings could be higher
than the current interest rates on our existing indebtedness and (ii) our
variable-rate indebtedness could increase in future periods. As further
discussed in note 5 to our condensed consolidated financial statements, we use
derivative instruments to manage our interest rate risks.
Realized and unrealized gains or losses on derivative instruments, net
Our realized and unrealized gains or losses on derivative instruments primarily
include (i) unrealized changes in the fair values of our derivative instruments
that are non-cash in nature until such time as the derivative contracts are
fully or partially settled and (ii) realized gains or losses upon the full or
partial settlement of the derivative contracts. The details of our realized and
unrealized gains (losses) on derivative instruments, net, are as follows:
Three months ended
March 31,
2022 2021
in millions
Cross-currency and interest rate derivative contracts (a) $ (17.6) $ 119.5
Foreign currency forward contracts (8.3) 0.7
Weather Derivatives (b) (7.8) (5.3)
Total $ (33.7) $ 114.9
(a)The gains (losses) during the three months ended March 31, 2022 and 2021 are
primarily attributable to the net effect of (i) changes in FX rates,
predominantly due to changes in the value of the Chilean peso relative to the
U.S. dollar, and (ii) changes in interest rates. These amounts include net
losses associated with changes in our credit risk valuation adjustments of $5
million and $21 million , respectively. Included in these amounts are net gains
(losses) of $2 million and ($4 million ), respectively, related to the Chile JV
Entities.
(b)Amounts represent the amortization of premiums associated with our Weather Derivatives.
For additional information concerning our derivative instruments, see notes 5 and 6 to our condensed consolidated financial statements and Item 3. Quantitative and Qualitative Disclosures about Market Risk below.
Foreign currency transaction gains or losses, net
Our foreign currency transaction gains or losses primarily result from the
remeasurement of monetary assets and liabilities that are denominated in
currencies other than the underlying functional currency of the applicable
entity. Unrealized foreign currency transaction gains or losses are computed
based on period-end exchange rates and are non-cash in nature until such time as
the amounts are settled. The details of our foreign currency transaction gains
(losses), net, are as follows:
Three months ended
March 31,
2022 2021
in millions
$ 118.0 $ (4.1)
Intercompany payables and receivables denominated in a currency other than the entity's functional currency
8.1 (16.2)
Other (a) (29.5) (5.1)
Total $ 96.6 $ (25.4)
(a) Primarily includes (i) third-party receivables and payables denominated in
a currency other than an entity's functional currency, (ii) cash denominated in
a currency other than an entity's functional currency and (iii) U.S.
dollar-denominated debt issued by a CRC functional currency entity.
Gains or losses on debt modification and extinguishment, net
Our gains or losses on debt modification and extinguishment generally include
(i) redemption premiums, (ii) the write-off of unamortized deferred financing
costs, premiums and/or discounts and/or (iii) breakage fees.
51
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We recognized losses on debt extinguishment of nil and $23 million during the
three months ended March 31, 2022 and 2021, respectively. The losses during 2021
are primarily associated with refinancing activity at Liberty Puerto Rico and
VTR.
For additional information concerning our losses on debt extinguishment, see note 9 to our condensed consolidated financial statements.
Other income or expense, net
Our other income or expense, net, generally includes (i) certain amounts
associated with our defined benefit plans, including interest expense and
expected return on plan assets, (ii) interest income on cash and cash
equivalents, and (iii) share of affiliate income or loss. Other income or
expense was not material for the three months ended
Income tax expense
We recognized income tax expense of
For the three months endedMarch 31, 2022 , the income tax expense attributable to our earnings before income taxes differs from the amounts computed using the statutory tax rate, primarily due to the net detrimental effects of international rate differences, increases in valuation allowances, and negative effects of permanent tax differences, such as non-deductible expenses. These negative impacts to our effective tax rate were partially offset by the beneficial effects of permanent tax differences, such as non-taxable income. For the three months endedMarch 31, 2021 , the income tax expense attributable to our earnings before income taxes differs from the amounts computed using the statutory tax rate, primarily due to the net detrimental effects of international rate differences, increases in valuation allowances, changes in uncertain tax positions, and negative effects of permanent tax differences, such as non-deductible expenses. These negative impacts to our effective tax rate were partially offset by the beneficial effects of permanent tax differences, such as non-taxable income.
For additional information regarding our income taxes, see note 14 to our condensed consolidated financial statements.
Net earnings or loss
The following table sets forth selected summary financial information of our net
earnings:
Three months ended March 31,
2022 2021
in millions
Operating income $ 188.3 $ 181.0
Net non-operating expenses $ (71.6) $ (60.8)
Income tax expense $ (23.5) $ (29.5)
Net earnings $ 93.2 $ 90.7
Gains or losses associated with (i) changes in the fair values of derivative
instruments and (ii) movements in foreign currency exchange rates are subject to
a high degree of volatility and, as such, any gains from these sources do not
represent a reliable source of income. In the absence of significant gains in
the future from these sources or from other non-operating items, our ability to
achieve earnings is largely dependent on our ability to increase our aggregate
Adjusted OIBDA to a level that more than offsets the aggregate amount of our (i)
share-based compensation expense, (ii) depreciation and amortization, (iii)
impairment, restructuring and other operating items, (iv) interest expense, (v)
other non-operating expenses and (vi) income tax expenses.
Due largely to the fact that we seek to maintain our debt at levels that provide
for attractive equity returns, as discussed under Material Changes in Financial
Condition-Capitalization below, we expect that we will continue to report
significant levels of interest expense for the foreseeable future.
Net earnings or loss attributable to noncontrolling interests
We reported net earnings attributable to noncontrolling interests of
52
--------------------------------------------------------------------------------Material Changes in Financial Condition
Sources and Uses of Cash
As ofMarch 31, 2022 , we have four primary "borrowing groups," which include the respective restricted parent and subsidiary entities of C&W, Liberty Puerto Rico, VTR andCosta Rica . Our borrowing groups, which typically generate cash from operating activities, held a significant portion of our consolidated cash and cash equivalents atMarch 31, 2022 . Our ability to access the liquidity of these and other subsidiaries may be limited by tax and legal considerations, the presence of noncontrolling interests, foreign currency exchange restrictions with respect to certain C&W subsidiaries and other factors. For details of the restrictions on our subsidiaries to make payments to us through dividends, loans or other distributions see note 9 to our condensed consolidated financial statements.
Cash and cash equivalents
The details of the
Cash and cash equivalents held by:
$ 21.2 Unrestricted subsidiaries (b) 141.3 TotalLiberty Latin America and unrestricted subsidiaries 162.5 Borrowing groups (c): C&W 541.3 LibertyPuerto Rico 103.6 VTR (d) 32.1Costa Rica 17.1 Total borrowing groups 694.1 Total cash and cash equivalents$ 856.6
(a)Represents the amount held by
(b)Represents the aggregate amount held by subsidiaries ofLiberty Latin America that are outside of our borrowing groups. All of these companies rely on funds provided by our borrowing groups to satisfy their liquidity needs.
(c)Represents the aggregate amounts held by the parent entity of the applicable borrowing group and their restricted subsidiaries.
(d)Cash of$67 million associated with the Chile JV Entities has been reflected in assets held for sale on ourMarch 31, 2022 condensed consolidated balance sheet. Accordingly, the cash of VTR set forth in the table above reflects certain cash and cash equivalent balances of the Chile JV Entities thatLiberty Latin America is able to retain upon the formation of the Chile JV and are therefore not classified as held for sale.
Liquidity and capital resources of
Our current sources of corporate liquidity include (i) cash and cash equivalents held byLiberty Latin America and, subject to certain tax and legal considerations,Liberty Latin America's unrestricted subsidiaries, and (ii) interest and dividend income received on our and, subject to certain tax and legal considerations, our unrestricted subsidiaries' cash and cash equivalents and investments. From time to time,Liberty Latin America and its unrestricted subsidiaries may also receive (i) proceeds in the form of distributions or loan repayments fromLiberty Latin America's borrowing groups upon (a) the completion of recapitalizations, refinancings, asset sales or similar transactions by these entities or (b) the accumulation of excess cash from operations or other means, (ii) proceeds upon the disposition of investments and other assets ofLiberty Latin America and its unrestricted subsidiaries and (iii) proceeds in connection with the incurrence of debt byLiberty Latin America or its unrestricted subsidiaries or the issuance of equity securities byLiberty Latin America . No assurance can be given that any external funding would be available toLiberty Latin America or its unrestricted subsidiaries on favorable terms, or at all. As noted above, various factors may limit our ability to access the cash of our borrowing groups. 53
-------------------------------------------------------------------------------- Our corporate liquidity requirements include (i) corporate general and administrative expenses and (ii) other liquidity needs that may arise from time to time. In addition,Liberty Latin America and its unrestricted subsidiaries may require cash in connection with (i) the repayment of third-party and intercompany debt, (ii) the satisfaction of contingent liabilities, (iii) acquisitions and other investment opportunities, (iv) the repurchase of debt securities, (v) tax payments or (vi) any funding requirements of our consolidated subsidiaries. During the three months endedMarch 31, 2022 , the aggregate amount of our share repurchases was$56 million . For additional information regarding our Share Repurchase Programs, see note 16 to our condensed consolidated financial statements and Part II-Item 2 Unregistered Sales ofEquity Securities and Use of Proceeds below.
Liquidity and capital resources of borrowing groups
The cash and cash equivalents of our borrowing groups are detailed in the table above. In addition to cash and cash equivalents, the primary sources of liquidity of our borrowing groups are cash provided by operations and borrowing availability under their respective debt instruments. For the details of the borrowing availability of our borrowing groups atMarch 31, 2022 , see note 9 to our condensed consolidated financial statements. The aforementioned sources of liquidity may be supplemented in certain cases by contributions and/or loans fromLiberty Latin America and its unrestricted subsidiaries. The liquidity of our borrowing groups generally is used to fund capital expenditures, debt service requirements and income tax payments. From time to time, our borrowing groups may also require liquidity in connection with (i) acquisitions and other investment opportunities, (ii) loans toLiberty Latin America , (iii) capital distributions toLiberty Latin America and other equity owners or (iv) the satisfaction of contingent liabilities. No assurance can be given that any external funding would be available to our borrowing groups on favorable terms, or at all.
For additional information regarding our cash flows, see the discussion under Condensed Consolidated Statements of Cash Flows below.
Capitalization
We seek to maintain our debt at levels that provide for attractive equity returns without assuming undue risk. When it is cost effective, we generally seek to match the denomination of the borrowings of our subsidiaries with the functional currency of the operations that support the respective borrowings. As further discussed under Item 3. Quantitative and Qualitative Disclosures about Market Risk and in note 5 to our condensed consolidated financial statements, we also use derivative instruments to mitigate foreign currency and interest rate risks associated with our debt instruments. Our ability to service or refinance our debt and to maintain compliance with the leverage covenants in the credit agreements of our borrowing groups is dependent primarily on our ability to maintain covenant EBITDA of our operating subsidiaries, as specified by our subsidiaries' debt agreements (Covenant EBITDA), and to achieve adequate returns on our property and equipment additions and acquisitions. In addition, our ability to obtain additional debt financing is limited by incurrence-based leverage covenants contained in the various debt instruments of our borrowing groups. For example, if the Covenant EBITDA of one of our borrowing groups were to decline, our ability to support or obtain additional debt in that borrowing group could be limited. No assurance can be given that we would have sufficient sources of liquidity, or that any external funding would be available on favorable terms, or at all, to fund any such required repayment. AtMarch 31, 2022 , each of our borrowing groups was in compliance with its debt covenants. We do not anticipate any instances of non-compliance with respect to the debt covenants of our borrowing groups that would have a material adverse impact on our liquidity during the next 12 months. AtMarch 31, 2022 , the outstanding principal amount of our debt, together with our finance lease obligations, excluding VTR, aggregated$7,707 million , including$118 million that is classified as current in our condensed consolidated balance sheet and$6,710 million that is not due until 2027 or thereafter. AtMarch 31, 2022 ,$7,303 million of our debt and finance lease obligations have been borrowed or incurred by our subsidiaries. Included in the outstanding principal amount of our debt atMarch 31, 2022 is$118 million of vendor financing, which we use to finance certain of our operating expenses and property and equipment additions. These obligations are generally due within one year, other than for certain licensing arrangements that generally are due over the term of the related license. For additional information concerning our debt, including our debt maturities, see note 9 to our condensed consolidated financial statements. 54 -------------------------------------------------------------------------------- The weighted average interest rate in effect atMarch 31, 2022 for all borrowings outstanding pursuant to each debt instrument, including any applicable margin, was 4.9%. The interest rate is based on stated rates and does not include the impact of derivative instruments, deferred financing costs, original issue premiums or discounts and commitment fees, all of which affect our overall cost of borrowing. The weighted average impact of the derivative instruments, excluding forward-starting derivative instruments, on our borrowing costs atMarch 31, 2022 was as follows: Borrowing group Increase to borrowing costs C&W 0.60 % LibertyPuerto Rico 0.40 %Costa Rica 0.40 %Liberty Latin America borrowing groups combined
0.49 %
Including the effects of derivative instruments, original issue premiums or discounts, including the discount on the Convertible Notes associated with the instrument's conversion option, and commitment fees, but excluding the impact of financing costs, the weighted average interest rate on our indebtedness was 5.6% atMarch 31, 2022 . We believe that we have sufficient resources to repay or refinance the current portion of our debt and finance lease obligations and to fund our foreseeable liquidity requirements during the next 12 months. However, as our debt maturities grow in later years, we anticipate that we will seek to refinance or otherwise extend our debt maturities. No assurance can be given that we will be able to complete refinancing transactions or otherwise extend our debt maturities. In this regard, it is difficult to predict how political, economic and social conditions, sovereign debt concerns or any adverse regulatory developments will impact the credit and equity markets we access and our future financial position. Our ability to access debt financing on favorable terms, or at all, could be adversely impacted by (i) the financial failure of any of our counterparties, which could (a) reduce amounts available under committed credit facilities and (b) adversely impact our ability to access cash deposited with any failed financial institution, and (ii) tightening of the credit markets. In addition, any weakness in the equity markets could make it less attractive to use our shares to satisfy contingent or other obligations, and sustained or increased competition, particularly in combination with adverse economic or regulatory developments, could have an unfavorable impact on our cash flows and liquidity.
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