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Liberty Latin America Reports Fiscal 2018 Results

DENVER, Colorado--(BUSINESS WIRE)--

Rebased Revenue Growth of 2% to $3.7 billion

Record Broadband Additions Drive Total RGU Growth of 192,000

Operating Loss of $24 million, Improved by 86% Year-over-Year

OCF1 of $1.5 billion, 8% Higher YoY; Growth Across All Segments

Launching Scalable Operations Center in Panama in 2019

Delivered 2018 Guidance for all Financial and Operating Metrics

Liberty Latin America Ltd. ("Liberty Latin America" or "LLA") (NASDAQ: LILA and LILAK, OTC Link: LILAB) today announced its financial and operating results for the three months ("Q4") and fiscal year ("2018" or "FY 2018") ended December 31, 2018.

CEO Balan Nair commented, "In our first year as a separately listed company, we successfully established a strong team and culture, delivered all of our 2018 financial guidance targets and created great operational momentum heading into 2019."

"Our region remains underpenetrated by high-speed connectivity. During 2018, we continued to expand our leading fixed networks by either upgrading or adding approximately 330,000 premises to our footprint. The combination of this growing network and our leading product offerings helped us achieve our highest RGU additions since we acquired C&W, led by a record number of broadband additions."

"LTE penetration across the group's mobile businesses also grew during the year, as we added 435,000 LTE subscribers. We launched our 'Moments that Move Us' brand campaigns in Cable & Wireless and saw improvement in mobile subscriber results as we moved through the fourth quarter into January. Our B2B growth continued as we leveraged our unique and extensive combination of mobile, terrestrial and subsea networks to deliver a comprehensive and growing suite of B2B and B2G solutions, more than offsetting any headwinds from legacy products."

"In terms of our financial performance, we delivered rebased OCF growth of 8% in 2018, as we focused on driving efficiencies and benefited from insurance settlements. Looking ahead to 2019, we are targeting robust OCF growth, reduced capital intensity and substantially higher Adjusted FCF2."

"In 2018, we completed two accretive acquisitions, in Costa Rica and Puerto Rico, and reviewed a number of other opportunities. We are committed to remaining disciplined and diligent in evaluating potential transactions as we focus on creating shareholder value."

"Our value creation strategy also includes driving operating and cost efficiencies. During 2018, we started our digital transformation initiative, and recently announced plans to launch our operations center in Panama, which will enable us to better capitalize on our scale and knowledge across our footprint."

"Overall, I am pleased with our 2018 performance and excited by the opportunities ahead as we look to leverage our operating model and unique asset base to generate sustainable OCF and Adjusted FCF growth."

Business Highlights

  • C&W building foundation for future growth:
    • RGU gains more than doubled YoY to 96,000 in 2018; growth across all fixed products
    • Expanded footprint through either upgrade or new build of 165,000 premises
    • "Moments that Move Us" campaign and value propositions launched in Panama and the Bahamas
  • VTR/Cabletica delivered another strong year:
    • 78,000 broadband RGU gains powered VTR's full-year subscriber performance
    • Reported 2018 rebased revenue growth of 5% and OCF growth of 6%
    • Cabletica managed by VTR team; included in reporting segment from October 1, 2018
  • Liberty Puerto Rico fully operational and building momentum following successful rebuild:
    • Strong finish to 2018 with 31,000 RGU additions in Q4, best quarter since 2005
    • 2018 rebased revenue growth of 5%; rebased OCF growth of 48% due to insurance settlements and recovery from the hurricanes
    • Network restoration completed by Q3 2018; speed leader with up to 400 Mbps available

Liberty Latin America 2019 Financial Guidance

In 2019, we expect:

  • >$1.525 billion of OCF
    • Based on USDCLP of 670 and USDJMD of 130
  • P&E additions as a percentage of revenue at ~19%
    • C&W Borrowing Group: P&E additions as a percentage of revenue between 15% and 17%
    • VTR Borrowing Group: P&E additions as a percentage of revenue between 20% and 22%
  • ~$125 million of Adjusted FCF

Financial Highlights

Liberty Latin America

   

Q4 2018

   

Q4 2017

   

YoY
Growth/(Decline)*

   

FY 2018

   

FY 2017

   

YoY
Growth/(Decline)*

 
(in millions, except % amounts)
Revenue $ 949 $ 850 10 % $ 3,706 $ 3,590 2 %
OCF $ 428 $ 291 45 % $ 1,487 $ 1,353 8 %
Property & equipment additions $ 190 $ 273 (30 %) $ 771 $ 777 (1 %)
As a percentage of revenue 20 % 32 % 21 % 22 %
 
Operating loss $ (385 ) $ (247 ) 56 % $ (24 ) $ (163 ) (86 %)
 
Adjusted FCF $ 45 $ (6 ) $ 19 $ (93 )
Cash provided by operating activities $ 208 $ 181 $ 817 $ 573
Cash used by investing activities $ (389 ) $ (186 ) $ (981 ) $ (640 )
Cash provided by financing activities $ 39 $ 5 $ 256 $ 53

* Revenue and OCF YoY growth rates are on a rebased basis3.

Subscriber Growth4

    Three months ended     Year ended
December 31, December 31,
2018     2017 2018     2017
Organic RGU net additions (losses) by product
Video 8,100 (21,000 ) 37,800 (13,400 )
Data 45,900 13,500 164,600 110,000
Voice 2,400   (23,700 ) (10,000 ) (30,700 )
Total 56,400   (31,200 ) 192,400   65,900  
 
Organic RGU net additions (losses) by segment
C&W 26,000 30,100 96,300 44,600
VTR/Cabletica (700 ) 3,700 47,700 81,900
Liberty Puerto Rico 31,100   (65,000 ) 48,400   (60,600 )
Total 56,400   (31,200 ) 192,400   65,900  
 
Organic Mobile SIM additions (losses) by product
Postpaid 5,400 400 22,400 29,200
Prepaid (12,900 ) (33,600 ) (154,100 ) (86,900 )
Total (7,500 ) (33,200 ) (131,700 ) (57,700 )
 
Organic Mobile SIM additions (losses) by segment
C&W (18,000 ) (41,900 ) (173,100 ) (106,400 )
VTR/Cabletica 10,500   8,700   41,400   48,700  
Total (7,500 ) (33,200 ) (131,700 ) (57,700 )
 
  • Customer additions/losses: Organic fixed customer additions of 29,000 in Q4 2018.
  • Product additions/losses: Organic fixed RGU additions of 56,000 and organic mobile subscriber losses of 8,000 in Q4 2018.
  • C&W added 26,000 fixed RGUs during Q4, with growth across all three products, supported by continued upgrade and expansion of our network and improved service levels.
    • Broadband additions totaled 13,000, driven by success in Jamaica where we added 7,000 RGUs and continued to penetrate our expanding high-speed network. We also added broadband RGUs across all of our other C&W markets, where high-speed fixed broadband penetration remains relatively low.
    • Video RGU additions of 8,000 represented our fifth consecutive quarter of growth and best quarterly C&W performance since the acquisition of the company in May 2016. Panama had a particularly strong quarter, adding 5,000 RGUs, through successful promotion of our broadband and video double-play packages, marking their best quarterly video RGU growth since Q2 2017.
    • Fixed-line telephony RGU additions of 5,000 represented our sixth consecutive quarter of growth and were in part driven by our successful bundling strategy, particularly in Jamaica and Trinidad.
    • Mobile subscribers declined by 18,000 in Q4, which was our best performance since Q1 2017. Jamaica added 17,000 subscribers, but this was more than offset by subscriber losses in Panama and the Bahamas of 31,000 and 4,000, respectively. In both of these markets we launched our "Moments that Move Us" campaigns and new value propositions towards the end of 2018, which led to better year-over-year results for the fourth quarter and which we believe will drive improved performance over time. C&W's LTE subscriber base grew by more than 50% over the year, to a total of 1.1 million by the end of 2018.
  • VTR/Cabletica RGU performance was relatively flat during Q4. Cabletica added 14,000 RGUs in total, mainly driven by broadband additions over our high-speed network. VTR lost 14,000 RGUs as a result of (1) continued fixed-line voice attrition, (2) video losses due to higher churn as is typically experienced during the fourth quarter of the year and (3) the impact of increased competition, which were partially offset by broadband additions.
    • VTR's mobile subscribers grew by 11,000 in Q4, as we continued to sell mobile services to our fixed customer base. At December 31, 2018, our mobile subscriber base totaled 256,000, of which 97% were on postpaid plans.
  • Liberty Puerto Rico added 31,000 fixed RGUs in Q4, its best quarter in many years. This growth was driven by our compelling product propositions, including our leading mid-tier triple-play offer with broadband speeds of 150Mbps, as well our superior network, which has been fully restored following Hurricanes Irma and Maria in 2017 ("2017 Hurricanes").

Revenue Highlights

The following table presents (i) revenue of each of our reportable segments for the comparative periods and (ii) the percentage change from period-to-period on both a reported and rebased basis:

    Three months ended     Increase/(decrease)     Year ended     Increase/(decrease)
December 31, December 31,
2018     2017 %     Rebased % 2018     2017 %     Rebased %
in millions, except % amounts
 
C&W $ 582.8 $ 584.9 (0.4 ) (0.2 ) $ 2,333.1 $ 2,322.1 0.5 (0.1 )
VTR/Cabletica 273.8 250.3 9.4 5.1 1,043.7 952.9 9.5 5.3
Liberty Puerto Rico 93.9 16.9 N.M. N.M. 335.6 320.5 4.7 4.8
Intersegment eliminations (2.0 ) (2.0 ) N.M. N.M. (6.7 ) (5.5 ) N.M. N.M.
Total $ 948.5   $ 850.1   11.6   10.3   $ 3,705.7   $ 3,590.0   3.2   1.7  

N.M. – Not Meaningful.

  • Our reported revenue for the three months and year ended December 31, 2018 increased by 12% and 3%, respectively.
    • Reported revenue growth in Q4 2018 was primarily driven by (1) an increase of $77 million at Liberty Puerto Rico, mainly driven by the favorable comparison against the prior-year quarter and strong recovery from the 2017 hurricanes and (2) an increase of $33 million related to the acquisition of Cabletica, partially offset by a negative foreign exchange ("FX") impact of $22 million, primarily related to the Chilean peso.
    • Reported revenue growth for FY 2018 was primarily driven by (1) organic growth at VTR, (2) an increase of $42 million related to the Cabletica and C&W Carve-out acquisitions, (3) $11 million received by Liberty Puerto Rico from the FCC, and (4) the net impact of $6 million in FX gains.

Q4 2018 Rebased Revenue Growth – Segment Highlights

  • C&W: Rebased revenue performance was broadly flat.
    • Mobile revenue attrition of 10% on a rebased basis was mostly offset by revenue growth of 5% in residential fixed and 4% in B2B.
    • The decrease in mobile revenue was primarily attributable to lower subscription revenue in Panama and the Bahamas where continued competition drove decreases in the average number of subscribers and ARPU per subscriber.
    • Residential fixed revenue growth was led by broadband performance where organic subscribers were up by 44,000 over the last twelve months. Overall, growth in broadband and video revenue more than offset a decline in fixed voice revenue.
    • B2B growth (excluding subsea) was driven by Jamaica and our LatAm markets. Our sub-sea operations also grew, driven by increasing demand for bandwidth. These factors more than offset reduced revenue in Panama, mainly due to lower fixed voice contribution and broadband tariff reductions.
  • VTR/Cabletica: Rebased revenue growth of 5% was primarily driven by improvement in (1) residential fixed subscription revenue from increases in ARPU per RGU and the average number of subscribers and (2) B2B service revenue, driven by growth in SOHO RGUs.
  • Liberty Puerto Rico: Revenue increased by $77 million to $94 million in the fourth quarter of 2018, driven by the favorable comparison against the prior-year quarter and our strong recovery from the 2017 hurricanes.

Operating Loss

  • Operating loss was $385 million and $247 million in Q4 2018 and Q4 2017, respectively, and $24 million and $163 million for the year ended December 31, 2018 and 2017, respectively.
    • Operating loss increased during Q4 2018, as compared with Q4 2017, primarily due to a goodwill impairment charge of $608 million in our Panama operations resulting from a significant increase in competition, particularly with respect to the prepaid mobile business. This negative impact was partially offset by improvement in OCF, as further discussed below.
    • Operating loss declined for the year ended December 31, 2018, as compared with 2017, primarily due to improvement in OCF, as further discussed below, and a decrease in impairment, restructuring and other operating items, net. During 2017, we incurred impairment charges of $678 million mostly due to the 2017 Hurricanes and greater than expected impacts of competition in certain of C&W's markets.

Operating Cash Flow Highlights

The following table presents (i) OCF of each of our reportable segments and our corporate category for the comparative periods and (ii) the percentage change from period to period on both a reported and rebased basis:

    Three months ended     Increase     Year ended     Increase/

(decrease)

December 31, December 31,
2018     2017 %     Rebased % 2018     2017 %     Rebased %
in millions, except % amounts
 
C&W $ 236.5 $ 211.4 11.9 11.1 $ 915.7 $ 861.8 6.3 5.0
VTR/Cabletica 110.9 101.4 9.4 6.7 421.1 383.3 9.9 6.1
Liberty Puerto Rico 92.1 (12.1 ) N.M. N.M. 195.8 132.6 47.7 48.1
Corporate (11.2 ) (9.7 ) 15.5   15.5   (46.1 ) (25.1 ) 83.7   83.7
Total $ 428.3   $ 291.0   47.2   45.2   $ 1,486.5   $ 1,352.6   9.9   8.0
 
OCF Margin 45.2 % 34.2 % 40.1 % 37.7 %

N.M. – Not Meaningful.

  • Our reported OCF for the three months and year ended December 31, 2018 increased by 47% and 10%, respectively.
    • Reported OCF growth in Q4 2018 was primarily driven by (1) the OCF impact of insurance settlements, totaling $64 million, and (2) the favorable comparison against the prior-year quarter and strong recovery from the 2017 hurricanes driving $55 million of the overall increase at Liberty Puerto Rico.
    • Reported OCF growth for FY 2018 was primarily driven by (1) the OCF impact of insurance settlements, totaling $64 million, (2) organic growth at C&W and VTR/Cabletica, (3) $11 million received by Liberty Puerto Rico from the FCC and (4) an increase of $10 million related to the acquisition of Cabletica.

Q4 2018 Rebased OCF Growth – Segment Highlights

  • C&W: Rebased OCF growth of 11% was driven by insurance settlements of $13 million and a net decrease in costs, including lower content costs associated with (i) the impact of a $5 million charge during Q4 2017 resulting from the reassessment of certain content accruals and (ii) savings from renegotiated contracts.
  • VTR/Cabletica: Delivered rebased OCF growth of 7%, mainly driven by the aforementioned revenue growth, which was partially offset by a net increase in costs, including higher content expenses.
  • Liberty Puerto Rico: The year-over-year increase of $104 million was primarily driven by our strong recovery from the 2017 Hurricanes and the insurance settlements resulting in a $49 million benefit to OCF.
  • Corporate: The increase in corporate costs was primarily attributable to incremental costs associated with being a separate public company, including increases in personnel costs and professional services.

Net Loss Attributable to Shareholders

  • Net loss attributable to shareholders was $233 million and $401 million for the three months ended December 31, 2018 and 2017, respectively, and $345 million and $778 million for the year ended December 31, 2018 and 2017, respectively.

Property and Equipment Additions and Capital Expenditures

The table below highlights the categories of the property and equipment additions for the indicated periods and reconciles those additions to the capital expenditures that are presented in the consolidated statements of cash flows included in our Form 10-K.

    Three months ended     Year ended
December 31, December 31,
2018     2017 2018     2017
in millions, except % amounts
 
Customer Premises Equipment $ 56.5 $ 60.3 $ 264.0 $ 285.0
New Build & Upgrade 31.5 83.6 208.6 178.8
Capacity 34.8 29.6 104.9 87.7
Baseline 41.1 61.9 110.0 134.5
Product & Enablers 24.6 37.8 82.4 90.7
Cabletica 1.5     1.5    
Property and equipment additions 190.0 273.2 771.4 776.7
Assets acquired under capital-related vendor financing arrangements (13.5 ) (7.7 ) (53.9 ) (54.9 )
Assets acquired under capital leases (0.3 ) (0.5 ) (3.9 ) (4.2 )
Changes in current liabilities related to capital expenditures 7.2   (73.2 ) 62.8   (78.3 )
Capital expenditures1 $ 183.4   $ 191.8   $ 776.4   $ 639.3  
 
Property and equipment additions as % of revenue 20.0 % 32.1 % 20.8 % 21.6 %
 
Property and Equipment Additions of our Reportable Segments:
C&W $ 116.4 $ 151.2 $ 378.7 $ 431.8
VTR/Cabletica 49.8 55.4 214.7 212.7
Liberty Puerto Rico 22.4 66.6 161.9 132.2
Corporate 1.4     16.1    
Property and equipment additions $ 190.0   $ 273.2   $ 771.4   $ 776.7  
1.   The capital expenditures that we report in our consolidated statements of cash flows do not include amounts that are financed under capital-related vendor financing or capital lease arrangements. Instead, these amounts are reflected as non-cash additions to our property and equipment when the underlying assets are delivered and as repayments of debt when the principal is repaid.
 

Segment Highlights

  • C&W: Property and equipment additions of $116 million represented 20% of revenue in Q4, a reduction compared to 26% in the prior-year period and 16% of revenue in FY 2018 compared to 19% in FY 2017.
    • During 2018, we completed the restoration of damaged networks in markets impacted by the 2017 Hurricanes, spending $34 million (bringing the total restoration to $47 million).
    • In 2018, new build and upgrade initiatives delivered approximately 165,000 new or upgraded homes. Looking ahead, we expect to continue our new build and upgrade program in 2019, with an estimated 225,000 homes to be either added or upgraded.
  • VTR/Cabletica: Property and equipment additions of $50 million represented 18% of revenue in Q4, a reduction compared to 22% in the prior-year period and 21% of revenue in FY 2018 compared to 22% in FY 2017.
    • In 2018, new build and upgrade initiatives delivered approximately 150,000 either new or upgraded homes in Chile. Looking ahead, we expect to continue our new build and upgrade program in 2019, with an estimated 150,000 homes to be either added or upgraded at VTR.
  • Liberty Puerto Rico: Property and equipment additions of $22 million represented 24% of revenue in Q4, a reduction compared to the prior-year period, and 48% of revenue in FY 2018 compared to 41% in FY 2017.
    • During 2018, we completed the restoration of our damaged network impacted by the 2017 Hurricanes, spending $92 million (bringing the total restoration to $142 million).
    • Looking ahead, we expect to restart our new build program in 2019, with an estimated 25,000 homes to be added.

Leverage and Liquidity (at December 31, 2018)

  • Total principal amount of debt and capital leases: $6,724 million.
  • Leverage ratios: Consolidated gross and net leverage ratios of 4.2x and 3.8x, respectively. These ratios were calculated on a latest two quarters annualized ("L2QA") basis and therefore include the $64 million of positive contribution from the insurance settlements of Hurricanes Irma, Maria and Matthew in Q4 2018. This contribution decreased our gross and net leverage ratios by approximately 0.4x.
  • Average debt tenor5: 5.6 years, with approximately 93% not due until 2022 or beyond.
  • Borrowing costs: Blended, fully-swapped borrowing cost of our debt was approximately 6.5%.
  • Cash and borrowing availability: $631 million of cash and $1,043 million of aggregate unused borrowing capacity6 under our credit facilities.

Forward-Looking Statements and Disclaimer

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements with respect to our strategies, financial performance, operational momentum, future growth prospects, growth rates in our markets, and opportunities, including inorganic growth opportunities and the potential benefits from such opportunities; our expectations with respect to subscribers, customer data usage, revenue, ARPU per RGU, OCF and Adjusted FCF; statements regarding the development, enhancement, and expansion of, our superior networks (including our plans to deliver new or upgraded homes in 2019 and our plans to expand LTE coverage and usage) and the anticipated impacts of such activity; statements regarding the deployment of digital technologies to enhance experience and reduce customer friction; our estimates of future P&E additions and operating expenditures, each as a percentage of revenue; statements regarding the establishment of a new Operations Center in Panama; the strength of our balance sheet and tenor of our debt; and other information and statements that are not historical fact. These forward looking statements involve certain risks and uncertainties that could cause actual results to differ materially from those expressed or implied by these statements. These risks and uncertainties include events that are outside of our control, such as hurricanes and other natural disasters, the ability and cost to restore networks in the markets impacted by hurricanes; the continued use by subscribers and potential subscribers of our services and their willingness to upgrade to our more advanced offerings; our ability to meet challenges from competition, to manage rapid technological change or to maintain or increase rates to our subscribers or to pass through increased costs to our subscribers; the effects of changes in laws or regulation; general economic factors; our ability to obtain regulatory approval and satisfy conditions associated with acquisitions and dispositions; our ability to successfully acquire and integrate new businesses and realize anticipated efficiencies from acquired businesses; the availability of attractive programming for our video services and the costs associated with such programming; our ability to achieve forecasted financial and operating targets; the outcome of any pending or threatened litigation; the ability of our operating companies to access cash of their respective subsidiaries; the impact of our operating companies' future financial performance, or market conditions generally, on the availability, terms and deployment of capital; fluctuations in currency exchange and interest rates; the ability of suppliers and vendors (including our third-party wireless network provider under our MVNO arrangement) to timely deliver quality products, equipment, software, services and access; our ability to adequately forecast and plan future network requirements including the costs and benefits associated with network expansions; and other factors detailed from time to time in our filings with the Securities and Exchange Commission, including our most recently filed Form 10-K. These forward-looking statements speak only as of the date of this press release. 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 change in events, conditions or circumstances on which any such statement is based.

About Liberty Latin America

Liberty Latin America is a leading telecommunications company operating in over 20 countries across Latin America and the Caribbean under the consumer brands VTR, Flow, Liberty, Más Móvil, BTC and Cabletica. The communications and entertainment services that we offer to our residential and business customers in the region include digital video, broadband internet, telephony and mobile services. Our business products and services include enterprise-grade connectivity, data center, hosting and managed solutions, as well as information technology solutions with customers ranging from small and medium enterprises to international companies and governmental agencies. In addition, Liberty Latin America operates a subsea and terrestrial fiber optic cable network that connects over 40 markets in the region.

Liberty Latin America has three separate classes of common shares, which are traded on the NASDAQ Global Select Market under the symbols "LILA" (Class A) and "LILAK" (Class C), and on the OTC link under the symbol "LILAB" (Class B).

For more information, please visit www.lla.com.

Footnotes

1.   For the definition of Operating Cash Flow ("OCF") and required reconciliations, see OCF Definition and Reconciliation below.
2. For the definition of Adjusted Free Cash Flow (“Adjusted FCF”) and required reconciliations, see Adjusted Free Cash Flow Definition and Reconciliation below.
3. The indicated growth rates are rebased for the estimated impacts of adopting Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers, acquisitions and FX. See Revenue and Operating Cash Flow for information on rebased growth.
4. See Footnotes for Operating Data and Subscriber Variance Tables for the definition of RGUs. Organic figures exclude RGUs of acquired entities at the date of acquisition and other nonorganic adjustments, but include the impact of changes in RGUs from the date of acquisition. All subscriber/RGU additions or losses refer to net organic changes, unless otherwise noted.
5. For purposes of calculating our average tenor, total debt excludes vendor financing.
6. At December 31, 2018, we had undrawn commitments of $1,043 million. At December 31, 2018, the full amount of unused borrowing capacity under our subsidiaries' credit facilities was available to be borrowed, both before and after completion of the December 31, 2018 compliance reporting requirements. For information regarding limitations on our ability to access this cash, see the discussion under "Liquidity and Capital Resources" in our most recently filed Form 10-K.
 

Balance Sheets, Statements of Operations and Statements of Cash Flows

The consolidated balance sheets, statements of operations and statements of cash flows of Liberty Latin America are included in our Annual Report on Form 10-K.

Rebase Information

For purposes of calculating rebased growth rates on a comparable basis for all businesses that we owned during 2018, we have adjusted our historical revenue and OCF for the three months and year ended December 31, 2017 to (i) include the pre-acquisition revenue and OCF of certain entities acquired during 2018 and 2017 in our rebased amounts for the three months and year ended December 31, 2017 to the same extent that the revenue and OCF of such entities are included in our results for the three months and year ended December 31, 2018, (ii) reflect the estimated impacts of adopting Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers, for the three months and year ended December 31, 2017 and (iii) reflect the translation of our rebased amounts for the three months and year ended December 31, 2017 at the applicable average foreign currency exchange rates that were used to translate our results for the three months and year ended December 31, 2018. We have included Cabletica in whole or in part in the determination of our rebased revenue and OCF for the three months ended December 31, 2017. We have included Cabletica and the Carve-out Entities in whole or in part in the determination of our rebased revenue and OCF for the year ended December 31, 2017. We have reflected the revenue and OCF of the acquired entities in our 2017 rebased amounts based on what we believe to be the most reliable information that is currently available to us (generally pre-acquisition financial statements), as adjusted for the estimated effects of (a) any significant differences between U.S. GAAP and local generally accepted accounting principles, (b) any significant effects of acquisition accounting adjustments, (c) any significant differences between our accounting policies and those of the acquired entities and (d) other items we deem appropriate. We do not adjust pre-acquisition periods to eliminate nonrecurring items or to give retroactive effect to any changes in estimates that might be implemented during post-acquisition periods. As we did not own or operate the acquired businesses during the pre-acquisition periods, no assurance can be given that we have identified all adjustments necessary to present their revenue and OCF on a basis that is comparable to the corresponding post-acquisition amounts that are included in our historical results or that the pre-acquisition financial statements we have relied upon do not contain undetected errors. The adjustments reflected in our rebased amounts have not been prepared with a view towards complying with Article 11 of Regulation S-X. In addition, the rebased growth percentages are not necessarily indicative of the revenue and OCF that would have occurred if these transactions had occurred on the dates assumed for purposes of calculating our rebased amounts or the revenue and OCF that will occur in the future. The rebased growth percentages have been presented as a basis for assessing growth rates on a comparable basis, and are not presented as a measure of our pro forma financial performance. The following table provides adjustments made to the 2017 amounts to derive our rebased growth rates. Due to rounding, certain rebased growth rate percentages may not recalculate.

    Revenue     OCF

Three months ended
December 31, 2017

   

Year ended
December 31, 2017

Three months ended
December 31, 2017

   

Year ended
December 31, 2017

in millions
 
Acquisitions $ 29.3 $ 37.5 $ 10.3 $ 11.9
Adoption of new accounting standard 2.1 9.9 2.0 10.2
Foreign currency (22.1 ) 4.3   (8.7 ) 1.3
Total $ 9.3   $ 51.7   $ 3.6   $ 23.4
 

OCF Definition and Reconciliation

As used herein, OCF has the same meaning as the term "Adjusted OIBDA" that is referenced in our Form 10-K. OCF is the primary measure used by our chief operating decision maker to evaluate segment operating performance. OCF 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 annual and other incentive compensation plans. As we use the term, OCF is defined as operating income (loss) before depreciation and amortization, share-based compensation, provisions and provision releases related to significant litigation and impairment, restructuring and other operating items. Other operating items include (i) gains and losses on the disposition of long-lived assets, (ii) third-party costs directly associated with successful and unsuccessful acquisitions and dispositions, including legal, advisory and due diligence fees, as applicable, and (iii) other acquisition-related items, such as gains and losses on the settlement of contingent consideration. Our internal decision makers believe OCF 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. Effective January 1, 2018, we adopted Accounting Standards Update No. 2017-07, Improving the Presentation of the Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which resulted in certain pension-related credits being reclassified from SG&A expense to non-operating income (expense) and, as such, are no longer included in OCF. Such credits totaled $2 million and $4 million during the three months ended December 31, 2018 and 2017, respectively, and $12 million and $15 million during the year ended December 31, 2018 and 2017, respectively. This change has been given effect for all periods presented. We believe our OCF 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 measure may not be directly comparable to similar measures used by other public companies. OCF should be viewed as a measure of operating performance that is a supplement to, and not a substitute for, operating income, net earnings or loss, cash flow from operating activities and other U.S. GAAP measures of income or cash flows. A reconciliation of our operating income to total OCF is presented in the following table:

    Three months ended     Year ended
December 31, December 31,
2018     2017 2018     2017
in millions
 
Operating loss $ (384.9 ) $ (247.4 ) $ (23.6 ) $ (162.9 )
Share-based compensation expense 13.0 2.3 39.8 14.2
Depreciation and amortization 215.1 207.2 829.8 793.7
Impairment, restructuring and other operating items, net 585.1   328.9   640.5   707.6  
Total OCF $ 428.3   $ 291.0   $ 1,486.5   $ 1,352.6  
 

Summary of Debt, Capital Lease Obligations & Cash and Cash Equivalents

The following table details the U.S. dollar equivalent balances of the outstanding principal amounts of our debt, capital lease obligations and cash and cash equivalents at December 31, 2018:

    Debt    

Capital lease
obligations

   

Debt and
capital lease
obligations

   

Cash and
cash
equivalents

in millions
 
Liberty Latin America1 $ $ 1.6 $ 1.6 $ 74.3
C&W 4,032.1 10.9 4,043.0 416.2
VTR 1,611.4 0.4 1,611.8 112.2
Liberty Puerto Rico 942.5 942.5 19.8
Cabletica 124.7     124.7   8.5
Total $ 6,710.7   $ 12.9   $ 6,723.6   $ 631.0
1.   Represents the amount held by Liberty Latin America on a standalone basis plus the aggregate amount held by subsidiaries of Liberty Latin America that are outside our borrowing groups. Subsidiaries of Liberty Latin America that are outside our borrowing groups rely on funds provided by our borrowing groups to satisfy their liquidity needs.
 

Adjusted Free Cash Flow Definition and Reconciliation

We define Adjusted FCF as net cash provided by our operating activities, plus (i) cash payments for third-party costs directly associated with successful and unsuccessful acquisitions and dispositions,(ii) expenses financed by an intermediary and (iii) insurance recoveries related to damaged and destroyed property and equipment, less (a) capital expenditures, (b) distributions to noncontrolling interest owners, (c) principal payments on amounts financed by vendors and intermediaries and (d) principal payments on capital leases. Effective December 31, 2018, and in connection with our hurricane insurance settlements, we changed the way we define adjusted free cash flow to include proceeds from insurance recoveries related to damaged and destroyed property and equipment. We believe this change is appropriate as such cash proceeds effectively partially offset payments for capital expenditures to replace the property and equipment that was damaged or destroyed as a result of the Hurricanes. On January 1, 2018, we retroactively adopted Accounting Standards Update 2016-18, Statement of Cash Flows–Restricted Cash, which resulted in an immaterial decrease in cash from operating activities for the year ended December 31, 2017. We believe that our presentation of Adjusted FCF provides useful information to our investors because this measure can be used to gauge our ability to service debt and fund new investment opportunities. Adjusted FCF should not be understood to represent our ability to fund discretionary amounts, as we have various mandatory and contractual obligations, including debt repayments, which are not deducted to arrive at this amount. Investors should view Adjusted FCF as a supplement to, and not a substitute for, U.S. GAAP measures of liquidity included in our consolidated statements of cash flows. The following table provides the reconciliation of our net cash provided by operating activities to Adjusted FCF for the indicated periods:

    Three months ended     Year ended
December 31, December 31,
2018     2017 2018     2017
in millions
 
Net cash provided by operating activities $ 208.1 $ 180.9 $ 816.8 $ 573.2
Cash payments for direct acquisition and disposition costs 9.8 1.4 12.9 4.2
Expenses financed by an intermediary1 52.6 25.8 171.7 82.7
Capital expenditures (183.4 ) (191.8 ) (776.4 ) (639.3 )
Recovery on damaged or destroyed property and equipment2 20.7 20.7
Distributions to noncontrolling interest owners (2.9 ) (12.6 ) (22.7 ) (45.9 )
Principal payments on amounts financed by vendors and intermediaries (58.6 ) (7.3 ) (196.5 ) (59.4 )
Principal payments on capital leases (1.8 ) (1.9 ) (7.7 ) (8.6 )
Adjusted FCF $ 44.5   $ (5.5 ) $ 18.8   $ (93.1 )
1.   For purposes of our consolidated statements of cash flows, expenses, including value-added taxes, financed by an intermediary are treated as hypothetical operating cash outflows and hypothetical financing cash inflows when the expenses are incurred. When we pay the financing intermediary, we record financing cash outflows in our consolidated statements of cash flows. For purposes of our Adjusted FCF definition, we add back the hypothetical operating cash outflow when these financed expenses are incurred and deduct the financing cash outflows when we pay the financing intermediary.
2. Represents the classification of a portion of insurance advance payments received during the first three quarters of 2018 to investing activities upon settlement of the insurance claims and the final allocation of the insurance proceeds in the fourth quarter of 2018. Prior to the settlement, the insurance advances had previously been presented entirely as cash inflows from operating activities, pending the allocation of insurance proceeds to the appropriate cash flow activities based on the final settlement.
 

ARPU per Customer Relationship

The following table provides ARPU per customer relationship for the indicated periods:

   

Three months ended
December 31,

        FX-Neutral1
2018     2017 % Change % Change
 
Liberty Latin America2,3,4 $ 47.13 $ 50.06 (5.9 %) (1.4 %)
C&W2 $ 45.43 $ 45.26 0.4 % 0.8 %
VTR/Cabletica4 $ 48.05 $ 53.16 (9.6 %) (2.8 %)

VTR

CLP 33,409 CLP 33,659 (0.7 %) (0.7 %)
 

Mobile ARPU

The following tables provide ARPU per mobile subscriber for the indicated periods:

   

Three months ended
December 31,

        FX-Neutral1
2018     2017 % Change % Change
 
Liberty Latin America2:
Including interconnect revenue $ 16.16 $ 17.07 (5.3 %) (6.6 %)
Excluding interconnect revenue $ 14.76 $ 15.84 (6.8 %) (8.2 %)
 
C&W2:
Including interconnect revenue $ 15.69 $ 16.51 (5.0 %) (4.6 %)
Excluding interconnect revenue $ 14.34 $ 15.31 (6.3 %) (6.0 %)
 
VTR:
Including interconnect revenue $ 22.29 $ 26.30 (15.2 %) (8.9 %)
Excluding interconnect revenue $ 20.18 $ 24.53 (17.7 %) (11.5 %)
1.   The FX-neutral change represents the percentage change on a year-over-year basis adjusted for FX impacts and is calculated by adjusting the prior-year figures to reflect translation at the foreign currency rates used to translate the current year amounts.
2. In order to provide a more meaningful comparison of ARPU per customer relationship and ARPU per mobile subscriber, we have reflected any nonorganic adjustments in the customer and mobile subscriber figures used to calculate ARPU per customer relationship and ARPU per mobile subscriber for the three months ended December 31, 2018 and 2017.
3. Due to the uncertainties surrounding our Q4 2017 customer count in Puerto Rico as a result of the hurricanes, we have omitted Liberty Puerto Rico ARPU for each of the three months ended December 31, 2018 and 2017. For the three months ended December 31, 2018, Liberty Puerto Rico ARPU was $75.29. In order to provide a more meaningful comparison, Liberty Puerto Rico ARPU has been omitted from consolidated Liberty Latin America ARPU for each of the three months ended December 31, 2018 and 2017. Including Liberty Puerto Rico, consolidated Liberty Latin America ARPU was $50.63 for the three months ended December 31, 2018.
4. The amounts for the three months ended December 31, 2017 do not include Cabletica.
 

Additional Information | Borrowing Groups

Cable & Wireless Borrowing Group:

Effective Q4, C&W changed its basis of accounting from International Financial Reporting Standards as issued by the International Accounting Standards Board to generally accepted accounting principles in the United States (U.S. GAAP). Accordingly, the following table reflects preliminary unaudited selected financial results for the three months and years ended December 31, 2018 and 2017 in accordance with U.S. GAAP.

    Three months ended         Year ended    
December 31,

Rebased
change1

December 31,

Rebased
change1

2018     2017 2018     2017
in millions, except % amounts
Residential revenue:
Residential fixed revenue:
Subscription revenue:
Video $ 43.1 $ 41.9 $ 172.0 $ 164.8
Broadband internet 58.1 51.8 225.3 207.8
Fixed-line telephony 23.2   29.1   101.0   115.3  
Total subscription revenue 124.4 122.8 498.3 487.9
Non-subscription revenue 18.0   14.2   68.3   68.4  
Total residential fixed revenue 142.4   137.0   4.6 % 566.6   556.3   2.2 %
Residential mobile revenue:
Subscription revenue 140.0 158.0 594.2 643.0
Non-subscription revenue 25.1   26.6   89.6   88.5  
Total residential mobile revenue 165.1   184.6   (9.9 %) 683.8   731.5   (6.3 %)
Total residential revenue 307.5   321.6   (3.7 null