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 2020 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 endedMarch 31, 2021 and 2020. •Material Changes in Financial Condition. This section provides an analysis of our corporate and subsidiary liquidity, condensed consolidated statements of cash flows and contractual commitments. Unless otherwise indicated, convenience translations intoU.S. dollars are calculated, and operational data (including subscriber statistics) are presented, as ofMarch 31, 2021 . 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, product, 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; foreign currency risks; interest rate risks; compliance with debt, financial and other covenants; our future projected contractual commitments and cash flows; the Telefónica-Costa Rica Acquisition, including the expected closing date; the effects and potential impacts of COVID-19 on our business and results of operations; reductions in operating and capital costs; the remediation of material weaknesses; our 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 2020 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 and the ability to acquire programming;
•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; •the impact of restrictions contained in certain of our subsidiaries' debt instruments; 32 --------------------------------------------------------------------------------
•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 Telefónica-Costa Rica 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 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;
33 --------------------------------------------------------------------------------
•the availability of capital for the acquisition and/or development of telecommunications networks and services, including property and equipment additions;
•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
•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 residential and B2B services in (i) over 20 countries, primarily inLatin America and theCaribbean , through C&W Caribbean and Networks and C&W Panama, (ii)Puerto Rico , through Liberty Puerto Rico, (iii)Chile through VTR and (iv)Costa Rica through Cabletica. Through our Networks & LatAm business, C&W Caribbean and Networks also provides (i) B2B services in certain other countries inLatin America and theCaribbean and (ii) wholesale communication services over its subsea and terrestrial fiber optic cable networks that connect over 40 markets in that region. Operations AtMarch 31, 2021 , we (i) owned and operated fixed networks that passed 7,959,500 homes and served 6,262,300 RGUs, comprising 2,797,900 broadband internet subscribers, 1,957,100 video subscribers and 1,507,300 fixed-line telephony subscribers, and (ii) served 4,506,200 mobile subscribers. 34 -------------------------------------------------------------------------------- During the first quarter of 2021, we completed an organizational change with respect to the management of CWP, VTR and Cabletica. As a result of this organizational change, VTR and Cabletica are now operating and reportable segments. Accordingly, as ofMarch 31, 2021 , our reportable segments are as follows: •C&W Caribbean and Networks; •C&W Panama; •Liberty Puerto Rico; •VTR; and •Cabletica. As a result of the aforementioned segment change, we have revised the presentation of the discussion and analysis set forth below in order to align with the current segment presentation included in our condensed consolidated financial statements. COVID-19 InDecember 2019 , COVID-19 was reported inWuhan, China . OnMarch 11, 2020 , theWorld Health Organization declared the outbreak a "pandemic," pointing to the sustained risk of further global spread. To date, confirmed cases of COVID-19 have been experienced in each of the markets in which we operate. COVID-19 negatively impacted our operations during 2020 and has continued into the three months endedMarch 31, 2021 , primarily within our C&W Caribbean and Networks, C&W Panama and VTR segments, due to resulting lockdowns, moratoriums, cancellation of live sporting events, and mobility, travel and tourism restrictions across many of the markets in which we operate. These factors collectively resulted in negative impacts to revenue, particularly within our B2B and mobile operations. The extent to which COVID-19 continues to impact our operational and financial performance will depend on certain developments, which include, among other factors: •the duration and spread of the outbreak; •the ability of governments and medical professionals in our markets to respond further to the outbreak, including securing access to a vaccine and vaccinating citizens; •the actions by governments to require the extension of services for individuals regardless of payment status; •the impact of changes to, or new, government regulations imposed in response to the pandemic, including laws and moratoriums; •the impact on our customers and our sales cycles; •the impact on actual and expected customer receivable collection patterns; •the impact on our employees, including that from labor shortages or work from home initiatives; •the impacts on foreign currency and interest rate fluctuations; and •the effect on our vendors and adverse impacts on our supply chain thereby impacting our customers' ability to use our services. Given the impacts of COVID-19 continue to evolve, the extent to which COVID-19 may further impact our financial condition or results of operations continues to be uncertain and cannot be predicted at this time. The heightened volatility of global markets resulting from COVID-19 further expose us to risks and uncertainties. As COVID-19 continues to spread, we have taken, and expect to continue to take, a variety of measures to promote the safety and security of our employees, and ensure the availability of our communication services. Telefónica-Costa Rica Acquisition OnJuly 30, 2020 , we entered into a definitive agreement to acquire Telefónica S.A.'s wireless operations inCosta Rica in an all-cash transaction based upon an enterprise value of$500 million on a cash- and debt-free basis. The transaction is subject to certain customary closing conditions, including regulatory approvals, and is expected to close during the middle of 2021. Material Changes in Results of Operations The comparability of our operating results during the three months endedMarch 31, 2021 and 2020 is affected by acquisitions, a disposal and FX. As we use the term, "organic" changes exclude FX and the impacts of acquisitions and disposals, each as further discussed below. In the following discussion, we quantify the estimated impact on the operating results of the periods under comparison that is attributable to acquisitions and disposals. We (i) acquired (a) AT&T's wireless and wireline operations inPuerto Rico and theU.S. Virgin Islands inOctober 2020 and (b) a small B2B operation in theCayman Islands inJuly 2020 , and (ii) in connection 35 -------------------------------------------------------------------------------- with the AT&T Acquisition and as further described in note 4 to our condensed consolidated financial statements, disposed of certain B2B operations inPuerto Rico inJanuary 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. With respect to disposals, the prior-year period operating results of disposed entities are excluded from organic changes and the calculations of our organic change percentages to the same extent that those operations are not included in the current-year period. Changes in foreign currency exchange rates may have a significant impact on our operating results, as VTR, Cabletica 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 financial statements) for theU.S. dollar per one Chilean peso depreciated by 10% for the three months endedMarch 31, 2021 , as compared to the corresponding period in 2020. 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 certain subsidiaries of C&W and Cabletica 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 to (i) determine how to allocate resources to segments and (ii) evaluate the effectiveness of our management for purposes of incentive compensation plans. 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 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 (loss). A reconciliation of total operating income (loss), the nearestU.S. GAAP measure, to Adjusted OIBDA on a consolidated basis, is presented below. Three months ended March 31, 2021 2020 in millions Operating income$ 178.2 $ 107.8 Share-based compensation expense 23.0 23.8 Depreciation and amortization 245.9 213.5 Impairment, restructuring and other operating items, net 2.2 18.8 Consolidated Adjusted OIBDA
36 -------------------------------------------------------------------------------- The following table sets forth organic and non-organic changes in Adjusted OIBDA for the period indicated: C&W Caribbean Liberty Puerto Intersegment and Networks C&W Panama Rico (a) VTR Cabletica Corporate eliminations Consolidated in millions Adjusted OIBDA for the three months ending: March 31, 2020$ 187.0 $ 45.8
-$ 363.9 Organic changes related to: Revenue (16.9) (16.3) 21.1 (16.8) 5.2 5.4 (1.1) (19.4) Programming and other direct costs 6.5 6.2 (2.9) 1.4 (2.1) - 0.6 9.7 Other operating costs and expenses 6.7 8.3 (1.8) (1.1) (1.2) (3.1) 0.5 8.3 Non-organic increases (decreases): FX (2.4) - - 6.9 (1.1) - - 3.4 Acquisitions/disposition, net 0.4 - 83.0 - - - - 83.4 March 31, 2021$ 181.3 $ 44.0 $ 149.9 $ 70.5 $ 14.1 $ (10.5) $ -$ 449.3 (a)The organic change to Adjusted OIBDA resulting from an acquisition includes$8 million of net inbound roaming revenue. Adjusted OIBDA Margin The following table sets forth the Adjusted OIBDA margins (Adjusted OIBDA divided by revenue) of each of our reportable segments: Three months ended March 31, 2021 2020 % C&W Caribbean and Networks 42.2 41.4 C&W Panama 36.1 33.1 Liberty Puerto Rico 41.5 48.3 VTR 33.5 38.8 Cabletica 39.0 39.5 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 LibertyPuerto Rico is primarily related to the inclusion of Liberty Mobile operations following the AT&T Acquisition that generate a lower Adjusted OIBDA margin relative to the legacy operations. The decrease in the Adjusted OIBDA margin for VTR is primarily related to a decline in revenue, as further discussed below. 37 --------------------------------------------------------------------------------
Revenue
All of our segments derive their revenue primarily from (i) residential fixed services, including video, broadband internet and fixed-line telephony, (ii) with the exception of Cabletica, residential mobile services, and (iii) with the exception of Cabletica, 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. 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. For the comparisons below, revenue variances, including changes in ARPU, were also influenced by the impacts of COVID-19, as further discussed below and in Overview above.
The following table sets forth revenue by reportable segment:
Three months ended March 31, Increase (decrease) 2021 2020 $ % in
millions, except percentages
C&W Caribbean and Networks$ 429.8 $ 452.0 $ (22.2) (5) C&W Panama 122.0 138.3 (16.3) (12) Liberty Puerto Rico 361.3 104.6 256.7 245 VTR 210.3 206.4 3.9 2 Cabletica 36.2 33.7 2.5 7 Corporate (a) 5.4 - 5.4 N.M Intersegment eliminations (5.1) (4.0) (1.1) N.M. Total$ 1,159.9 $ 931.0 $ 228.9 25 N.M. - Not meaningful. (a)Amount relates to services we provide for mobile handset insurance following the closing of the AT&T Acquisition. Consolidated. The increase during the three months endedMarch 31, 2021 , as compared to the corresponding period in 2020, includes (i) an increase of$242 million associated with the impact of acquisitions, (ii) a decrease of$5 million associated with the impact of a disposal and (iii) an increase of$11 million attributable to the impact of FX. Excluding the effects of acquisitions, a disposal and FX, revenue decreased$19 million or 2%. The organic decrease primarily includes increases (decreases) of ($17 million ), ($16 million ),$21 million , ($17 million ) and$5 million at C&W Caribbean and Networks, C&W Panama, Liberty Puerto Rico, VTR, and Cabletica, respectively, as further discussed below. 38 -------------------------------------------------------------------------------- C&W Caribbean and Networks. C&W Caribbean and Networks's revenue by major category is set forth below: Three months ended March 31, Increase (decrease) 2021 2020 $ % in millions, except percentages Residential revenue: Residential fixed revenue: Subscription revenue: Video $ 34.3$ 37.3 $ (3.0) (8) Broadband internet 66.6 61.4 5.2 8 Fixed-line telephony 16.5 19.3 (2.8) (15) Total subscription revenue 117.4 118.0 (0.6) (1) Non-subscription revenue 10.7 13.1 (2.4) (18) Total residential fixed revenue 128.1 131.1 (3.0) (2) Residential mobile revenue: Service revenue 71.8 78.8 (7.0) (9)
Interconnect, inbound roaming, equipment sales and other (a)
11.4 13.7 (2.3) (17) Total residential mobile revenue 83.2 92.5 (9.3) (10) Total residential revenue 211.3 223.6 (12.3) (6) B2B revenue: Service revenue 150.8 157.7 (6.9) (4) Subsea network revenue 67.7 70.7 (3.0) (4) Total B2B revenue 218.5 228.4 (9.9) (4) Total$ 429.8 $ 452.0 $ (22.2) (5)
(a) Revenue from inbound roaming was
The details of the changes in C&W Caribbean and Networks's revenue during the three months endedMarch 31, 2021 , as compared to the corresponding period in 2020, are set forth below (in millions): Increase (decrease) in residential fixed subscription revenue due to change in: Average number of RGUs (a)$ 7.8 ARPU (b) (6.1) Decrease in residential fixed non-subscription revenue (c) (2.1) Total decrease in residential fixed revenue (0.4) Decrease in residential mobile service revenue (d) (5.3)
Decrease in residential mobile interconnect, inbound roaming, equipment sales and other (e)
(2.1) Decrease in B2B service revenue (f) (5.8) Decrease in B2B subsea network revenue (g) (3.3) Total organic decrease (16.9) Impact of an acquisition 2.0 Impact of FX (7.3) Total$ (22.2) (a)The increase is primarily attributable to higher average broadband internet RGUs, which is partially attributable to an increase in telecommuting during COVID-19 due to work-from-home mandates. (b)The decrease is primarily due to lower ARPU from fixed-line telephony and video services. (c)The decrease is primarily attributable to lower volumes of interconnect revenue across most markets of this segment. 39 -------------------------------------------------------------------------------- (d)The decrease is due to (i) lower average numbers of mobile subscribers as a result of COVID-19 impacts, and (ii) lower ARPU from mobile services as COVID-19 lockdowns and travel restrictions reduced (a) outbound roaming activity and (b) demand for mobile services. (e)The decrease is primarily attributable to the net effect of (i) an organic decrease in inbound roaming fees, primarily related to travel restrictions associated with COVID-19, (ii) an increase in interconnect revenue and (iii) lower volumes of handset sales due to the temporary closure or reduced hours of physical stores, as a result of COVID-19-related lockdowns. (f)The decrease is primarily due to (i) lower revenues from mobile and fixed services partially due to reduced or suspended service across our markets as a result of the COVID-19 lockdowns, and (ii) lower wholesale call volumes. (g)The decrease is primarily attributable to the net effect of (i) a decrease related to$10 million recognized on a cash basis during the three months endedMarch 31, 2020 for services provided to a significant customer, (ii) a$6 million increase associated with the renegotiation of a customer contract during the three months endedMarch 31, 2021 , and (iii) an increase associated with continued demand for telecommunications capacity on our subsea network during COVID-19. C&W Panama. C&W Panama's revenue by major category is set forth below: Three months ended March 31, Increase (decrease) 2021 2020 $ % in millions, except percentages Residential revenue: Residential fixed revenue: Subscription revenue: Video $ 6.2$ 7.6 $ (1.4) (18) Broadband internet 10.7 9.6 1.1 11 Fixed-line telephony 4.3 5.0 (0.7) (14) Total subscription revenue 21.2 22.2 (1.0) (5) Non-subscription revenue 2.5 3.8 (1.3) (34) Total residential fixed revenue 23.7 26.0 (2.3) (9) Residential mobile revenue: Service revenue 39.3 44.2 (4.9) (11)
Interconnect, inbound roaming, equipment sales and other (a)
10.3 11.8 (1.5) (13) Total residential mobile revenue 49.6 56.0 (6.4) (11) Total residential revenue 73.3 82.0 (8.7) (11) B2B service revenue 48.7 56.3 (7.6) (13) Total$ 122.0 $ 138.3 $ (16.3) (12) The details of the changes in C&W Panama's revenue during the three months endedMarch 31, 2021 , as compared to the corresponding period in 2020, are set forth below (in millions): Increase (decrease) in residential fixed subscription revenue due to change in: Average number of RGUs (a)$ 1.3 ARPU (b) (2.3) Decrease in residential fixed non-subscription revenue (c)
(1.3)
Total decrease in residential fixed revenue
(2.3)
Decrease in residential mobile service revenue (d)
(4.9)
Decrease in residential mobile interconnect, inbound roaming, equipment sales and other revenue (e)
(1.5)
Decrease in B2B service revenue (f) (7.6) Total organic decrease$ (16.3) 40
-------------------------------------------------------------------------------- (a)The increase is primarily attributable to higher average broadband internet RGUs, partially attributable to an increase in telecommuting during COVID-19 due to work-from-home mandates. (b)The decrease is primarily due to lower ARPU from fixed-line telephony and video services. (c)The decrease is primarily attributable to a decrease in payphone revenue. (d)The decrease is due to (i) lower ARPU from mobile services as a result of (a) COVID-19 lockdowns negatively impacting customers' ability to recharge handset devices and (b) increased competition and (ii) lower average numbers of mobile subscribers, primarily resulting from the impacts of COVID-19. (e)The decrease is primarily attributable to lower volumes of handset sales, as COVID-19 related lockdowns negatively impacted customers' ability to purchase handsets. (f)The decrease is primarily due to lower revenues from managed services, primarily driven by certain non-recurring projects that have been put on hold due to the economic uncertainty of the impact of COVID-19. LibertyPuerto Rico . LibertyPuerto Rico's revenue by major category is set forth below: Three months ended March 31, Increase (decrease) 2021 2020 $ % in millions, except percentages Residential fixed revenue: Subscription revenue: Video $ 38.6$ 35.3 $ 3.3 9 Broadband internet 61.4 45.5 15.9 35 Fixed-line telephony 7.0 5.9 1.1 19 Total subscription revenue 107.0 86.7 20.3 23 Non-subscription revenue 4.2 4.6 (0.4) (9) Total residential fixed revenue 111.2 91.3 19.9 22 Residential mobile revenue: Service revenue 117.4 - 117.4 N.M.
Interconnect, inbound roaming, equipment sales and other (a)
72.1 - 72.1 N.M. Total residential mobile revenue 189.5 - 189.5 N.M. Total residential revenue 300.7 91.3 209.4 229 B2B service revenue 52.1 13.3 38.8 292 Other revenue (b) 8.5 - 8.5 N.M. Total$ 361.3 $ 104.6 $ 256.7 245 N.M. - Not Meaningful. (a)Revenue from inbound roaming was$19 million during three months endedMarch 31, 2021 . (b)Amount relates to funds received from theFCC related to Liberty Mobile following the closing of the AT&T Acquisition. 41 -------------------------------------------------------------------------------- The details of the changes in Liberty Puerto Rico's revenue during the three months endedMarch 31, 2021 , as compared to the corresponding period in 2020, are set forth below (in millions): Increase in residential fixed subscription revenue due to change in: Average number of RGUs (a) $
8.1
ARPU (b)
12.2
Decrease in residential fixed non-subscription revenue
(0.4)
Total increase in residential fixed revenue 19.9 Increase in B2B service 1.2 Total organic increase 21.1 Impact of an acquisition and a disposition, net 235.6 Total$ 256.7 (a)The increase is primarily attributable to higher average broadband internet and video RGUs. The higher average broadband internet RGUs are partially due to higher demand as a result of COVID-19 work-from-home mandates, which subsequently led to increased purchases of video products as a result of bundling offers. (b)The increase is primarily due to (i) higher ARPU from broadband internet and video services and (ii) the impact to the comparison resulting from$2 million of credits provided to customers during 2020 in connection with the earthquakes that impactedPuerto Rico inJanuary 2020 . 42 --------------------------------------------------------------------------------
VTR. VTR's revenue by major category is set forth below:
Three months ended March 31, Increase (decrease) 2021 2020 $ % in millions, except percentages Residential revenue: Residential fixed revenue: Subscription revenue: Video $ 78.3$ 75.6 $ 2.7 4 Broadband internet 84.8 81.9 2.9 4 Fixed-line telephony 20.0 19.6 0.4 2 Total subscription revenue 183.1 177.1 6.0 3 Non-subscription revenue 3.4 4.9 (1.5) (31) Total residential fixed revenue 186.5 182.0 4.5 2 Residential mobile revenue: Service revenue 13.2 14.6 (1.4) (10)
Interconnect, inbound roaming, equipment sales and other
2.3 2.0 0.3 15 Total residential mobile revenue 15.5 16.6 (1.1) (7) Total residential revenue 202.0 198.6 3.4 2 B2B service revenue 8.3 7.8 0.5 6 Total$ 210.3 $ 206.4 $ 3.9 2 The details of the changes in VTR's revenue during the three months endedMarch 31, 2021 , as compared to the corresponding period in 2020, are set forth below (in millions): Decrease in residential fixed subscription revenue due to change in: Average number of RGUs (a)$ (6.9) ARPU (b)
(5.1)
Decrease in residential fixed non-subscription revenue (c)
(1.8)
Total decrease in residential fixed revenue
(13.8)
Decrease in residential mobile service revenue (d)
(2.7)
Change in residential mobile interconnect, inbound roaming, equipment sales and other revenue
- Decrease in B2B service revenue (0.3) Total organic decrease (16.8) Impact of FX 20.7 Total$ 3.9 (a)The decrease is attributable to lower average broadband internet, video and fixed-line telephony RGUs. (b)The decrease is primarily due to lower ARPU from broadband internet and video services, partially a result of continued high levels of competition. (c)The decrease is primarily attributable to lower activations, installations and reconnects. (d)The decrease is due to lower ARPU from mobile services and lower average numbers of mobile subscribers. 43 --------------------------------------------------------------------------------
Cabletica. Cabletica's revenue by major category is set forth below:
Three months ended March 31, Increase (decrease) 2021 2020 $ % in millions, except percentages Residential revenue: Residential fixed revenue: Subscription revenue: Video $ 19.5$ 19.4 $ 0.1 1 Broadband internet 14.0 12.5 1.5 12 Fixed-line telephony 1.1 0.7 0.4 57 Total subscription revenue 34.6 32.6 2.0 6 Non-subscription revenue 1.6 1.1 0.5 45 Total $ 36.2$ 33.7 $ 2.5 7 The details of the changes in Cabletica's revenue during three months endedMarch 31, 2021 , as compared to the corresponding period in 2020, are set forth below (in millions): Increase in residential fixed subscription revenue due to change in: Average number of RGUs (a) $
1.5
ARPU (b)
3.0
Increase in residential fixed non-subscription revenue 0.7 Total organic increase 5.2 Impact of FX (2.7) Total$ 2.5 (a)The increase is primarily attributable to higher average broadband internet RGUs. (b)The increase is primarily due to higher ARPU from video and 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, 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. Consolidated. The following table sets forth the organic and non-organic changes in programming and other direct costs of services on a consolidated basis. Increase (decrease) from: Three months ended March 31, Acquisitions 2021 2020 Increase FX (disposition), net Organic in millions Programming and copyright$ 111.8 $ 100.6 $ 11.2 $ 3.6 $ 3.0$ 4.6 Interconnect 66.4 66.3 0.1 (0.8) 8.7 (7.8) Equipment and other 102.0 43.9 58.1 0.2 64.4 (6.5) Total programming and other direct costs$ 280.2 $ 210.8 $ 69.4 $ 3.0 $ 76.1$ (9.7) 44
--------------------------------------------------------------------------------
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.
Increase (decrease) from: Three months ended March 31, Increase 2021 2020 (decrease) FX An acquisition Organic in millions Programming and copyright $ 23.7$ 24.8 $ (1.1) $ (0.5) $ -$ (0.6) Interconnect 37.6 44.6 (7.0) (1.7) - (5.3) Equipment and other 16.6 16.5 0.1 (0.2) 0.9 (0.6) Total programming and other direct costs $ 77.9$ 85.9 $ (8.0) $ (2.4) $ 0.9$ (6.5) •Interconnect: The organic decrease is primarily due to (i) lower wholesale call volumes and (ii) other individually insignificant decreases. 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 2021 2020 decrease in millions Programming and copyright $ 3.7$ 4.2 $ (0.5) Interconnect 9.9 10.4 (0.5) Equipment and other 17.6 22.8 (5.2) Total programming and other direct costs $
31.2
•Equipment and other: The organic decrease is primarily due to (i) a decrease driven by certain non-recurring projects that have been put on hold due to the economic uncertainty of the impact of COVID-19 and (ii) lower volumes of mobile handset sales. 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 from: Three months ended March 31, Acquisition 2021 2020 Increase (disposition), net Organic in millions Programming and copyright$ 27.2 $ 22.0 $ 5.2 $ 3.0$ 2.2 Interconnect 11.5 2.1 9.4 8.7 0.7 Equipment and other 63.5 - 63.5 63.5 - Total programming and other direct costs$ 102.2 $ 24.1 $ 78.1 $ 75.2$ 2.9
•Programming and copyright: The organic increase is primarily attributable to (i) higher programming rates and (ii) a higher average number of video subscribers.
45 --------------------------------------------------------------------------------
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 Increase (decrease) from: 2021 2020 (decrease) FX Organic in millions Programming and copyright $ 48.4$ 41.3 $ 7.1 $ 4.8$ 2.3 Interconnect 9.6 11.2 (1.6) 1.0 (2.6) Equipment and other 4.0 4.7 (0.7) 0.4 (1.1)
Total programming and other direct costs $ 62.0
•Programming and copyright: The organic increase is primarily due to an increase of$2 million in the foreign currency impact of programming contracts denominated inU.S. dollars. In addition, the change includes (i) a net increase in basic content costs due to higher rates, which were partially offset by lower volumes and (ii) a decrease in premium content cost rates. •Interconnect: The organic decrease is primarily due to lower rates. •Equipment and other: The organic decrease is primarily due to lower volumes of equipment sales. Cabletica. The following table sets forth the organic and non-organic changes in programming and other direct costs of services for our Cabletica segment. Three months ended March 31, Increase (decrease) from: 2021 2020 Increase FX Organic in millions Programming and copyright$ 8.8 $ 8.3 $ 0.5 $ (0.7)$ 1.2 Interconnect 1.4 1.2 0.2 (0.1) 0.3 Equipment and other 0.8 0.2 0.6 - 0.6
Total programming and other direct costs
•Programming and copyright: The organic increase is primarily due to an increase in certain premium content costs. 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, 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, travel and entertainment and other operating-related costs; and
•Share-based compensation expense that relates to (i) SARs, RSUs and PSUs issued to our employees and Directors and (ii) bonus-related expenses that will be paid in the form of equity. 46 --------------------------------------------------------------------------------
Consolidated. The following table sets forth the organic and non-organic changes in other operating costs and expenses on a consolidated basis.
Increase (decrease) from: Three months ended March 31, Increase Acquisitions 2021 2020 (decrease) FX (disposition), net Organic in millions
Personnel and contract labor
$ 13.9 $ 0.5 $ 20.7$ (7.3) Network-related 77.2 63.9 13.3 1.1 8.2 4.0 Service-related 47.5 38.3 9.2 0.7 7.7 0.8 Commercial 52.4 42.1 10.3 1.7 7.8 0.8 Facility, provision, franchise and other 114.9 87.5 27.4 0.3 33.7
(6.6)
Share-based compensation expense 23.0 23.8 (0.8) 0.2 0.4
(1.4)
Total other operating costs and expenses$ 453.4 $ 380.1 $ 73.3 $ 4.5 $ 78.5$ (9.7) For additional information regarding our share-based compensation, see Results of Operations (below Adjusted OIBDA) discussion and analysis below. 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. Increase (decrease) from: Three months ended March 31, Increase 2021 2020 (decrease) FX An acquisition Organic in millions
Personnel and contract labor $ 64.3
$ (3.0) $ (0.9) $ 0.7$ (2.8) Network-related 37.8 35.4 2.4 (0.6) - 3.0 Service-related 17.7 18.9 (1.2) (0.1) - (1.1) Commercial 11.2 13.2 (2.0) (0.4) - (1.6) Facility, provision, franchise and other 39.6 44.3 (4.7) (0.5) -
(4.2)
Share-based compensation expense 6.2 6.9 (0.7) - 0.4
(1.1)
Total other operating costs and expenses$ 176.8 $ 186.0 $ (9.2) $ (2.5) $ 1.1$ (7.8) •Personnel and contract labor: The organic decrease is primarily due to lower salaries and other personnel costs, mainly associated with the benefit of certain ongoing restructuring activities. •Network-related: The organic increase is primarily due to higher maintenance costs. •Commercial: The organic decrease is primarily due to lower marketing and sales costs, largely due to reductions in promotional and sponsorship costs, as a result of certain adverse economic impacts caused by the COVID-19 pandemic across our markets. •Facility, provision, franchise and other costs: The organic decrease is primarily due to (i) lower travel and entertainment costs due to the curtailment of such costs as a result of the impact of COVID-19 and (ii) lower bad debt provisions. 47 --------------------------------------------------------------------------------
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 2021 2020 (decrease) in millions Personnel and contract labor $ 17.2$ 20.6 $ (3.4) Network-related 9.8 11.5 (1.7) Service-related 3.9 4.3 (0.4) Commercial 5.1 5.7 (0.6) Facility, provision, franchise and other 10.8 13.0 (2.2) Share-based compensation expense 0.7 0.5 0.2 Total other operating costs and expenses $
47.5
•Personnel and contract labor: The organic decrease is primarily due to lower salaries and other personnel costs, primarily associated with the benefit of certain ongoing restructuring activities. •Network-related: The organic decrease is primarily due to lower maintenance costs. •Facility, provision, franchise and other costs: The organic decrease is primarily due to lower bad debt provisions. 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, Acquisition 2021 2020 Increase (disposition), net Organic in millions Personnel and contract labor$ 32.4 $ 10.8 $ 21.6 $ 20.0$ 1.6 Network-related 9.2 1.2 8.0 8.2 (0.2) Service-related 10.4 3.0 7.4 7.7 (0.3) Commercial 12.0 2.6 9.4 7.8 1.6 Facility, provision, franchise and other 45.2 12.4 32.8 33.7 (0.9) Share-based compensation expense 3.0 1.4 1.6 - 1.6
Total other operating costs and expenses
$ 80.8 $ 77.4$ 3.4 •Personnel and contract labor: The organic increase is primarily due to higher salaries and other personnel costs. •Service-related: We incurred$1 million of integration costs associated with the AT&T Acquisition in each of the first quarters of 2021 and 2020. The integration costs incurred during 2021 are included in the increase from an acquisition (disposition), net, in the above table and are expected to grow significantly in future quarters. •Commercial: The organic increase is primarily due to higher call center volumes. 48 --------------------------------------------------------------------------------
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: 2021 2020 (decrease) FX Organic in millions Personnel and contract labor $ 16.1$ 14.9 $ 1.2 $ 1.6$ (0.4) Network-related 19.3 14.3 5.0 1.9 3.1 Service-related 10.1 8.6 1.5 0.9 0.6 Commercial 22.3 19.8 2.5 2.3 0.2 Facility, provision, franchise and other 10.0 11.5 (1.5) 0.9
(2.4)
Share-based compensation expense 1.9 1.9 - 0.2
(0.2)
Total other operating costs and expenses $ 79.7
$ 0.9 •Network-related: The organic increase is primarily due to higher volumes of network access-related contracted labor. •Commercial: The organic increase is primarily due to the net effect of (i) higher call center volumes and (ii) a decrease in marketing and advertising expenses. •Facility, provision, franchise and other costs: The organic decrease is primarily due to lower bad debt provisions. Cabletica. The following table sets forth the organic and non-organic changes in other operating costs and expenses for our Cabletica segment. Three months ended March 31, Increase Increase (decrease) from: 2021 2020 (decrease) FX Organic in millions Personnel and contract labor $ 3.4$ 4.8 $ (1.4) $ (0.2)$ (1.2) Network-related 2.1 2.0 0.1 (0.2) 0.3 Service-related 0.8 0.4 0.4 (0.1) 0.5 Commercial 1.8 0.8 1.0 (0.2) 1.2 Facility, provision, franchise and other 3.0 2.7 0.3 (0.1) 0.4 Share-based compensation expense 0.1 0.2 (0.1) -
(0.1)
Total other operating costs and expenses $ 11.2
$
1.1
•Service-related: During the first quarter of 2021, we have incurred a minor amount of integration costs related to the pending Telefónica-Costa Rica Acquisition. These costs are expected to grow during the remainder of 2021. 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 2021 2020 (decrease) in millions Personnel and contract labor $ 5.0$ 6.1 $ (1.1) Service-related 4.6 3.1 1.5 Facility, provision, franchise and other 6.3 3.6 2.7 Share-based compensation expense 11.1 12.9 (1.8) Total other operating costs and expenses $
27.0
49 -------------------------------------------------------------------------------- •Facility, provision, franchise and other: The organic increase is primarily attributable to higher expenses associated with a mobile handset insurance program that began during the fourth quarter of 2020 following the closing of the AT&T Acquisition. Results of Operations (below Adjusted OIBDA) Share-based compensation expense (included in other operating costs and expenses) Share-based compensation expense remained relatively flat during the three months endedMarch 31, 2021 , as compared to the corresponding period in 2020. Depreciation and amortization Our depreciation and amortization expense increased$32 million or 15% during the three months endedMarch 31, 2021 , as compared to the corresponding period in 2020, primarily due to the net effect of (i) an increase of$30 million following the closing of the AT&T Acquisition, (ii) an increase in property and equipment additions, primarily associated with the installation of CPE, baseline related additions and the expansion and upgrade of our networks and other capital initiatives and (iii) a decrease associated with certain assets becoming fully depreciated. Impairment, restructuring and other operating items, net We recognized impairment, restructuring and other operating items, net, of$2 million and$19 million during the three months endedMarch 31, 2021 and 2020, respectively. During the three months endedMarch 31, 2021 , we recognized a gain of$9 million on the disposition of certain B2B operations in our Liberty Puerto Rico segment that was completed inJanuary 2021 , which was more than offset by direct acquisition costs of$7 million , and impairment and restructuring costs. During the three months endedMarch 31, 2020 , we incurred (i) impairment charges of$2 million , (ii) restructuring charges of$9 million and (iii) direct acquisition costs of$8 million . The restructuring charges, which are primarily related to C&W Caribbean and Networks and VTR, include (i) employee severance and termination costs related to certain reorganization activities and (ii) contract termination and other related charges. The direct acquisition costs primarily related to the AT&T Acquisition. Interest expense Our interest expense decreased$17 million during the three months endedMarch 31, 2021 , as compared to the corresponding period in 2020, primarily due to the net effect of (i) lower weighted-average interest rates and (ii) higher average outstanding debt balances. For additional information regarding our outstanding indebtedness, see note 8 to our condensed consolidated financial statements. It is possible that the interest rates on (i) any new borrowings could be higher than the current interest rates on our existing indebtedness and (ii) our variable-rate indebtedness could increase in future periods. As further discussed in note 5 to our condensed consolidated financial statements, we use derivative instruments to manage our interest rate risks. 50 -------------------------------------------------------------------------------- Realized and unrealized gains on derivative instruments, net Our realized and unrealized gains or losses on derivative instruments primarily include (i) unrealized changes in the fair values of our derivative instruments that are non-cash in nature until such time as the derivative contracts are fully or partially settled and (ii) realized gains or losses upon the full or partial settlement of the derivative contracts. The details of our realized and unrealized gains on derivative instruments, net, are as follows: Three months ended March 31, 2021 2020 in millions Cross-currency and interest rate derivative contracts (a)$ 119.5 $ 9.3 Foreign currency forward contracts 0.7 10.5 Weather Derivatives (b) (5.3) (2.4) Total$ 114.9 $ 17.4 (a)The gain during the three months endedMarch 31, 2021 is primarily attributable to the net effect of (i) changes in interest rates and (ii) changes in FX rates, predominantly due to changes in the value of the Chilean peso relative to theU.S. dollar. In addition, the gain during the 2021 period includes a net loss of$21 million resulting from changes in our credit risk valuation adjustments. The gain during the three months endedMarch 31, 2020 is 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 theU.S. dollar and (ii) changes in interest rates. In addition, the gain during the 2020 period includes a net gain of$33 million resulting from changes in our credit risk valuation adjustments, which is primarily due to increased credit risk stemming from market reaction to the COVID-19 outbreak. (b)Amounts represent the amortization of the 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 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 losses, net, are as follows: Three months ended March 31, 2021 2020 in millions
$ (4.1) $ (158.7)
Intercompany payables and receivables denominated in a currency other than the entity's functional currency
(16.2) 3.2 Other (5.1) (8.8) Total$ (25.4) $ (164.3) Losses on debt extinguishment We recognized losses on debt extinguishment of$23 million and$3 million during the three months endedMarch 31, 2021 and 2020, respectively. The losses during 2021 are associated with (i) the write-off of unamortized discounts and deferred financing costs related to the repayment of the 2026 SPV Credit Facility, (ii) the payment of breakage fees and the write-off of unamortized deferred financing costs related to the repayments of the VTR TLB-1 Facility and VTR TLB-2 Facility and (iii) the payment of redemption premiums and the write-off of unamortized deferred financing costs related to the partial redemption of the 2028 VTR Senior Secured Notes. The losses during 2020 are associated with the write-off of unamortized discounts and deferred financing costs associated with the repayment of the C&W Term Loan B-4 Facility. 51 -------------------------------------------------------------------------------- For additional information concerning our losses on debt extinguishment, see note 8 to our condensed consolidated financial statements. Other income, net Our other income and expense, net, generally includes (i) certain amounts associated with our defined benefit plans, including interest expense and expected return on plan assets, and (ii) interest income on cash, cash equivalents and restricted cash. We recognized other income (expense), net, of ($1 million ) and$7 million during the three months endedMarch 31, 2021 and 2020, respectively. During the first quarter of 2020, we generated interest income on restricted cash held in escrow in advance of the closing of the AT&T Acquisition. Income tax expense We recognized income tax expense of$28 million and$6 million during the three months endedMarch 31, 2021 and 2020, respectively. For the three months endedMarch 31, 2021 and 2020, the income tax expense attributable to our earnings (loss) before income taxes differs from the amounts computed using the statutory tax rate, primarily due to the net detrimental effects of international rate differences, increases in valuation allowances, changes in uncertain tax positions, and negative effects of permanent tax differences, such as non-deductible expenses. These negative impacts to our effective tax rate were partially offset by the beneficial effects of permanent tax differences, such as non-taxable income. For additional information regarding our income taxes, see note 13 to our condensed consolidated financial statements. Net earnings (loss) The following table sets forth selected summary financial information of our net earnings: Three months ended March 31, 2021 2020 in millions Operating income$ 178.2 $ 107.8 Net non-operating expenses$ (60.8) $ (286.8) Income tax expense$ (28.0) $ (5.6) Net earnings (loss)$ 89.4 $ (184.6) 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 (loss) attributable to noncontrolling interests of$2 million and ($4 million ) during the three months endedMarch 31, 2021 and 2020, respectively. 52 -------------------------------------------------------------------------------- Material Changes in Financial Condition Sources and Uses of Cash As ofMarch 31, 2021 , we have four primary "borrowing groups," which include the respective restricted parent and subsidiary entities of C&W, Liberty Puerto Rico, VTR and Cabletica. Our borrowing groups, which typically generate cash from operating activities, held a significant portion of our consolidated cash and cash equivalents atMarch 31, 2021 . Our ability to access the liquidity of these and other subsidiaries may be limited by tax and legal considerations, the presence of noncontrolling interests, foreign currency exchange restrictions and other factors. Cash and cash equivalents The details of theU.S. dollar equivalent balances of our cash and cash equivalents atMarch 31, 2021 are set forth in the following table (in millions): Cash and cash equivalents held by:Liberty Latin America and unrestricted subsidiaries: Liberty Latin America (a)$ 197.7 Unrestricted subsidiaries (b) 359.4 Total Liberty Latin America and unrestricted subsidiaries 557.1 Borrowing groups (c): C&W 474.7 Liberty Puerto Rico 128.1 VTR 138.5 Cabletica 7.2 Total borrowing groups 748.5 Total cash and cash equivalents$ 1,305.6 (a)Represents the amount held byLiberty Latin America on a standalone basis. (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. Liquidity ofLiberty Latin America and its unrestricted subsidiaries 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. 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. 53 -------------------------------------------------------------------------------- InMarch 2020 , our Directors approved the Share Repurchase Program. There were no share repurchases under this program during the three months endedMarch 31, 2021 . For additional information regarding our Share Repurchase Program, see note 16 to our condensed consolidated financial statements and Part II-Item 2 Unregistered Sales ofEquity Securities and Use of Proceeds below. Liquidity 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, 2021 , see note 8 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 property and equipment additions, 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 information regarding our borrowing groups' commitments and contingencies, see note 17 to our condensed consolidated financial statements. 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, 2021 , 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, 2021 , the outstanding principal amount of our debt, together with our finance lease obligations, aggregated$8,939 million , including$163 million that is classified as current in our condensed consolidated balance sheet and$7,395 million that is not due until 2027 or thereafter. AtMarch 31, 2021 ,$8,533 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, 2021 is$170 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 8 to our condensed consolidated financial statements. 54 -------------------------------------------------------------------------------- The weighted average interest rate in effect atMarch 31, 2021 for all borrowings outstanding pursuant to each debt instrument, including any applicable margin, was 5.1%. 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, 2021 was as follows: Borrowing group Increase to borrowing costs C&W 0.66 % Liberty Puerto Rico 0.39 % VTR 0.48 % Cabletica 1.26 % Liberty Latin America borrowing groups 0.53 % 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 6.0% atMarch 31, 2021 . 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.
Condensed Consolidated Statements of Cash Flows
General. Our cash flows are subject to variations due to FX.
Summary. Our condensed consolidated statements of cash flows for the three
months ended
© Edgar Online, source