Earnings Call Transcript - LILA Q3 2021

Operator, Operator

Good morning, ladies and gentlemen, and thank you for standing by. Today's call is being recorded. I'll now turn the call over to Veenod Kurup, Interim Chief Technology Officer of Liberty Latin America.

Veenod Kurup, Interim Chief Technology Officer

Good morning, and welcome to Liberty Latin America's Third Quarter 2021 Investor Call. Today's formal presentation materials can be found under the Investors section of Liberty Latin America's website at www.lla.com. As a reminder, this call is being recorded and will be available under the Investors section of our website. Today's remarks may include forward-looking statements, including the company's expectations with respect to its outlook and future growth prospects and other information and statements that are not historical fact. Actual results may differ materially from those expressed or implied by these statements. For more information, please refer to the risk factors discussed in Liberty Latin America's most recently filed annual report on Form 10-K and the most recent Form 8-K filed with the SEC, along with the associated press release. Liberty Latin America disclaims any obligation to update any forward-looking statements or information to reflect any change in its expectations or in the conditions on which such statements or information is based. In addition, on this call, we will refer to certain non-GAAP financial measures, which are reconciled to the most comparable GAAP financial measures, which can be found in the appendices to this presentation, which is accessible under the Investors section of our website. I would now like to turn this call over to our CEO, Mr. Balan Nair.

Balan Nair, CEO

Thank you, Veenod, and welcome, everybody to Liberty Latin America's results presentation for the third quarter of 2021. I'll begin with our group highlights and operating results before handing over to Chris Noyes, our CFO, who will provide a review of the company's financial performance. After that, we will get straight to your questions. As always, I'm joined by my executive team from across the region, and I'll get them involved as needed during Q&A following our prepared remarks. As a point of housekeeping, we will both be working from slides, which you can find on our website at www.lla.com. Starting on Slide 4 and our highlights. We delivered 84,000 fixed RGU adds in Q3, representing our strongest quarter of the year so far. This continued our momentum from the first half, and we've now added nearly 0.25 million RGUs year-to-date. C&W Panama and C&W Caribbean & Networks drove the majority of additions. In mobile, we had another strong quarter, adding 74,000 new subscribers, about half of which were postpaid. We also saw good initial contributions from our mobile operations in Costa Rica, which we acquired from Telefónica on August 9. As we've previously highlighted, new build and upgrade plans are a core element of our growth strategy, and we continue to build aggressively in the third quarter, taking our year-to-date homes added or upgraded to approximately 600,000. About 99% of these adds have been through fiber-to-the-home technology. Free cash flow is our key focus, and we delivered a strong performance in the quarter with year-to-date adjusted free cash flow now at $149 million to the end of September. We are clearly on track to exceed our guidance of $200 million this year, and Chris will cover this further in his section. Finally, we have made some important inorganic announcements with the acquisition of América Móvil’s Panama operations and a 50-50 joint venture with América Móvil in Chile, both of which are expected to close next year. These transactions will enable us to improve our networks and customer proposition, including delivering converged solutions in Chile, while also generating significant synergies and value for our stakeholders. Turning to Slide 5 and our fixed consumer business. On the left of the slide, we present our quarterly RGU adds since Q1 2020. This shows the initial impacts of COVID-19 and our recovery since then with consistent additions through this year, culminating in Q3's strong performance. In terms of our markets, C&W Panama was the main driver for the group's third quarter results, adding 30,000 RGUs, which was more than Panama had contributed in the entire first half of 2021. We have invested in our networks and products in Panama and are pleased to see operating results coming through. C&W Caribbean & Networks also delivered another strong quarter with 25,000 net adds, led by Jamaica, which has now added 100,000 RGUs over the last 12 months. Puerto Rico and Costa Rica continue to grow their subscriber bases in Q3 led by broadband RGUs, which contributed over 2/3 of their combined total adds. Chile remains intensely competitive. However, we have reported another quarter of stable subscriber numbers and are excited about the potential for our joint venture with América Móvil, which I will cover later in the presentation. On the right of the slide, we have shown our new build and upgrade progress over the same period. We remain committed to investing in our networks and product offerings to deliver greater access to high-speed connectivity solutions for our customers and have already built or upgraded 50% more homes in the first 3 quarters of 2021 than we did through all of 2020. Importantly, nearly all of our builds are now fiber-to-the-home, and we continue to plan on deploying this technology for the rest of our builds. Moving to Slide 6 and our mobile performance, but again, we have presented quarterly evolutions from the beginning of 2020. In Q3, we included, for the first time, the mobile operations which we acquired from Telefónica in Costa Rica. We are in the early phases of integrating our businesses in Costa Rica and are pleased with what we have seen so far from what is now our largest mobile operation in terms of subscribers. In the period during the quarter under our ownership, Costa Rica contributed 37,000 mobile subscribers. Of our other markets, C&W Caribbean and Networks and C&W Panama were again the largest contributors to the group's results, delivering 24,000 net adds each. In aggregate, we added 74,000 mobile subscribers in the quarter with a blended ARPU of $13 across our base. On the bottom of the slide, we present our postpaid adds over the same period. We have been successful in building momentum in postpaid through targeted promotions, including our nascent converged offerings. Costa Rica and Puerto Rico are our largest postpaid markets, and they led the group in Q3 with 15,000 and 40,000 adds, respectively. C&W Caribbean & Networks and C&W Panama have also been steadily growing their postpaid bases, adding 16,000 postpaid subscribers in aggregate during the quarter. Next to Slide 7 and our B2B operations. In the bar charts, we break out the performance for C&W Caribbean & Networks, C&W Panama and Liberty Puerto Rico over the past 2 years. These segments include the majority of our B2B operations, representing over 95% of total B2B revenue in the third quarter. On the far left, we show C&W Caribbean & Networks revenue with the subsea components split out. The subsea business has been consistent throughout the period and slightly higher in the latest quarter. This speaks to its resilience, which is further reinforced by its U.S. dollar rating. The non-subsea B2B operations in C&W Caribbean & Networks were impacted more severely by COVID-19, but are steadily recovering. Next to C&W Panama or Más Móvil in the center. Panama was one of our most severely impacted markets in 2020 and early 2021, but the segment is now back to pre-COVID revenue levels, and we are looking for further progression from here. Finally, to Liberty Puerto Rico. This chart shows the scale of B2B operations we acquired in the AT&T transaction. The Q3 2021 figure includes B2B operations we acquired net to the B2B asset we disposed. With our converged propositions, we believe this can be a growth driver for Puerto Rico. On the right of the slide, we have broken out our B2B customer segments and provided an indication of their respective sizes. Finally, the Slide 8 and a review of the inorganic progress we have made. Before going through some of the details, I want to share how excited we are about these transactions. Previously, we stated the best M&A are in-country transactions that solve for product gaps or existing offerings, generate clear synergies, create scale to strengthen our market positioning and propositions and, most importantly, drive meaningful free cash flow growth. Moving to a bit more detail, on the left of the slide, we've outlined the rationale for our announced 50-50 joint venture with América Móvil in Chile. Through this transaction, we will combine a strong fixed operator with a strong mobile operator. This new company will have the scale to provide all communication needs to both consumers and businesses. We plan on investing in more fiber-to-the-home, increasing 5G coverage, strengthening our B2B propositions, increasing our digital channels and possibly partnering with other operators on our networks. The combined business plans to generate significant synergies of over $180 million. We feel that this transaction makes sense for Chile, where the combined company will only be the third largest provider behind Entel and Telefónica and, hopefully, be a catalyst for more consolidation in that market. We expect the transaction will close in the second half of 2022 and have also noted some key elements of the structure on the slide. Turning to the right of the slide, we also announced the acquisition of América Móvil’s Panama operations. This transaction will consolidate the market from four to three players. This will create a healthy situation for all three remaining players. We will also bring scale to CWP on both consumer and B2B propositions and distribution. It improves network coverage and customer experience. As with the Chile transaction, we expect to generate significant synergies. Note that this acquisition will be funded at the asset level in Panama. In addition to these announced transactions, we were pleased to complete the acquisition of Telefónica Costa Rica operations in August. Integrating this mobile business with our fixed operations at Cabletica will enable us to create compelling product offerings for our customers as well as drive synergy benefits. We are also making progress in the integration of our Puerto Rico operations, where we are one year into our three-year plan and recently completed an important milestone as we rebranded fixed and mobile operations to Liberty. Overall, as we approach the year-end, we are focused on delivering our guidance targets and establishing a platform for sustained organic growth across our operations. We are also working diligently to integrate operations we have acquired as well as to close the transactions announced. We remain confident that together, these actions will create additional value and position us to deliver adjusted free cash flow growth in the coming years. With that, I'll pass you over to Chris Noyes, our Chief Financial Officer, who will talk you through our financial performance before we take your questions.

Christopher Noyes, Chief Financial Officer

Thanks, Balan. One housekeeping item to start: we closed the Telefónica Costa Rica acquisition on August 9. So their results are only in for a portion of this quarter. Our reported revenue increased by 34% or about $300 million to reach revenue of $1.19 billion in Q3, helped in large part by the positive impact from acquisitions. On a rebased basis, our revenue grew 3%, led by strong year-over-year performances in Costa Rica and Panama. From a product perspective, our residential mobile business picked up steam and delivered rebased growth of 6% in the quarter, while residential fixed and B2B also grew. On a year-to-date basis, rebased revenue maintained a consistent 4% growth rate. Turning to adjusted OIBDA, we posted $446 million in Q3, reflecting reported growth of 24% and flat rebased growth, consistent with our Q2 statement regarding lower expected rebased rates in the second half of the year. Cost increases varied across certain markets, but in aggregate, we experienced a combination of higher direct costs, including programming and roaming, and higher operating costs. Similar to revenue, our year-to-date adjusted OIBDA rebased growth was 4%. The Slide 11 summarizes our revenue and adjusted OIBDA performance by operating segment for Q3, and the bottom of the slide displays year-over-year adjusted OIBDA results. Beginning with C&W Caribbean & Networks, we reported $435 million of revenue or 4% rebased growth, led by double-digit revenue growth in Jamaica. Mobile revenue performance was the largest contributor to our top line progression with rebased growth of 9%, reflecting modest recovery from COVID and early success from our focus on converged offerings. Additionally, we experienced year-over-year rebased revenue growth of 3% in both B2B and fixed residential. Adjusted OIBDA was $182 million or up 3% on a rebased basis in the quarter, as both direct and operating costs increased year-over-year caused in part by higher activity. Next, Cable & Wireless Panama. Q3 revenue and adjusted OIBDA grew 9% and 11% on a rebased basis, respectively, delivering revenue of $129 million and adjusted OIBDA of $48 million. Momentum is building in Panama, led by rebased revenue growth of 15% in B2B and 10% residential fixed, while residential mobile posted modest growth over Q3 2020. On residential fixed, we have added 70,000 RGUs in the last 12 months, with roughly 40% of these in the current quarter, which should help propel growth into the fourth quarter. Highlighted in the middle of the slide is Liberty Puerto Rico. We reported revenue of $359 million and adjusted OIBDA of $142 million, representing modest rebased growth in Q3 of 2% revenue and 3% in adjusted OIBDA. In terms of revenue, our legacy fixed operations once again grew double digits year-over-year, while Liberty Mobile declined as subscription revenue growth was offset by lower equipment B2B and roaming revenue. Adjusted OIBDA was impacted by higher costs, principally in the areas of roaming, programming, and labor on a year-over-year basis. The sequential decline in adjusted OIBDA from Q2 was due in large part to lower net roaming and greater losses from equipment sales. We also incurred integration costs of $2 million, which we assume will step up considerably in the fourth quarter. Turning to VTR. Q3 revenue of $193 million and adjusted OIBDA of $65 million reflect rebased declines of 5% and 18%, respectively. Sequentially, our results in U.S. dollar terms reflect an average depreciation of the Chilean peso by approximately 8% in Q3 as compared to Q2. Consistent with prior quarters, our year-over-year rebased revenue decline was largely due to volume losses and ARPU declines in broadband. Compared to last year, adjusted OIBDA is compressed faster than revenue due in part to much higher programming costs relating to the return of live soccer matches. One positive in the quarter was that VTR's adjusted OIBDA in Chilean pesos was marginally positive to the second quarter results. Ending with Costa Rica, including the mobile assets for about 50 days of the quarter, we generated revenue of $77 million of rebased revenue growth of 11%. This top line performance was driven in large part by a combination of mobile and broadband growth, reflecting the increases in the subscriber bases over the last year. We reported adjusted OIBDA of $24 million, reflecting rebased growth of 13%. In the quarter, the Telefónica assets contributed $41 million of revenue and $11 million of adjusted OIBDA. Integration activity should begin to ramp in Q4. On Slide 12, we reported P&E additions of $232 million for Q3 and $599 million year-to-date. Our spend equates to 20% of revenue for Q3 and 17% of revenue for the 9-month period. The increase in quarterly spend was due in part to the significant expansion in our new build activity, which is up threefold in terms of homes passed and/or upgraded compared to last year. We will continue to have elevated capital spending in the fourth quarter, reflecting our investments in network, subscriber growth, and integration and are on track to deliver full year P&E additions of approximately 18% of revenue. With respect to adjusted free cash flow, we delivered our fourth consecutive quarter of positive free cash flow with $56 million in Q3, bringing our total to roughly $150 million for the nine months. We are currently tracking to exceed our $200 million guidance for 2021. On Slide 13, we have broken down our consolidated results by revenue. Roughly 65% of our reported revenue in Q3 is U.S. dollar, U.S. dollar-linked or pegged. Importantly, Puerto Rico and Panama account for 40% of our total revenue, and that will increase post the Claro acquisition in Panama. Additionally, post our JV in Chile, overall value will still be impacted by the trajectory of the Chilean peso theoretically. But our consolidated reported results will be U.S. dollar oriented to over 75%. In comparison to other publicly traded operators in the region, this U.S. dollar mix, we believe, is a key positive differentiator. Moving to our financing metrics on Slide 14. During Q3, we funded the acquisition of Telefónica in Costa Rica with local debt borrowings and cash from LLA and our 20% partner. In early October, we completed a roughly $600 million 8-year refinancing in C&W at a fully swap rate of about 4.4%. This results in over $14 million of annual free cash flow savings beginning in 2022. At September 30, including VTR, which is held as an asset for sale on our balance sheet, we had $9.2 billion of total debt, $1.1 billion of cash and $1.2 billion of availability under our revolving credit lines. We had gross leverage of 5x and net leverage of 4.4x, inclusive of VTR. Our ratios will fall slightly after adjusting for a full quarter impact of Telefónica Costa Rica. Our maturity schedule in the upper right remains long dated. And finally, an important development that we discussed in Q2 is that we restarted our share buyback. We repurchased $10 million in Q2, we doubled that in Q3 to $20 million and have definitely continued into Q4. Through Q3, we have $60 million remaining under our current repurchase authorization, which expires next spring. Turning to Slide 15. As we have highlighted today, we've been very active in the quarter. We are executing on our plan to drive future value to both customers and shareholders, driving subscriber revenue and adjusted OIBDA growth year-to-date, expanding our network investments, and making strategic non-organic moves, which we believe are highly accretive and which strengthen our product offerings for our customers. We are on track to deliver our 2021 guidance targets on new builds, P&E additions and, most importantly, free cash flow, which is a key metric for us on how we run our business. Given the share weakness we have seen over the last few months and our view on our free cash flow trajectory and relatively quiet near-term acquisition pipeline, we have ramped up our buyback activity, capitalizing on what we believe is a valuation disconnect and a high capital return opportunity. In Q4, we are focusing on customer acquisition, new build, digital implementation, and integration activities, which should set the stage for our 2022 performance. With that, operator, we are ready to take questions.

Operator, Operator

And we will take our first question from Jeffrey Wlodarczak with Pivotal Research Group.

Jeffrey Wlodarczak, Analyst

I had a couple of questions on Puerto Rico. I was hoping you could provide more color on the wireless revenue decline. Is it fair to say that's mostly COVID-related? And then if you could give any color on when you guys intend on rolling out a converged offer to consumers in Puerto Rico, that would be helpful. And I had one follow-up.

Balan Nair, CEO

Jeff, let me maybe address that a bit, and then I'll ask Naji to jump in here. The wireless business in Puerto Rico is actually doing really well. We added postpaid subscribers in the quarter. We did have some headwinds, but it's not really COVID-related. It's bouncing around a bit on roaming and some of the equipment deals moved off a bit. But I'd be quite bullish on that front. And on the converged side, we've already started our converged offering, and we're going to improve even more so once the systems cut over to our side. Naji, do you want to add on to that?

Naji Khoury, Executive

Yes, sure, Balan. Jeffrey, yes, I mean, to echo Balan's point, for us, the fundamentals are very strong. If you look at service revenue, both sequentially and year-over-year, it's growing. There's some volatility a bit on the roaming, as Balan discussed, as well as the seasonal revenue. As you know as well, the iPhone launched late September, and the peak was in October. People usually hold their purchase until the new phone comes in, so we see that seasonality. In most cases, it is also a negative contributor as well when it comes to revenue. On the roaming, I think it was expected. There is seasonality, and more people are traveling as well, which, in some cases adds expense and, in some cases reduces revenue as well. For the convergence, I'm really excited about the way this is unfolding. As Balan had mentioned, we converged our brand on September 28, and the feedback has been really positive. Our offers are converging now, and our sales channels are converging as well, so customers are working into our retail stores, so they are able to purchase both fixed and mobile. Initial results are really positive. And again, we're just literally four weeks into this, so I’m really excited and very optimistic about the future from that perspective.

Jeffrey Wlodarczak, Analyst

And then is there any update on your subsea assets? You're thinking about selling a portion of that, I think you were going to let us know in the fourth quarter. Is that not happening? You're still thinking about it? Any update would be great.

Balan Nair, CEO

Well, Jeff, you can clearly see that business is a very good, strong business, very stable and predictable cash flow. We've been thinking about the sum of the parts of it and giving a better and clearer line of sight to it. I expect that in our February call, we'll give you a very clear view of what our plans are under the asset.

Operator, Operator

And up next, we'll take a question from Michael Rollins with Citi.

Michael Rollins, Analyst

Curious if you could discuss when you have fixed and mobile convergence in the market, what are the typical revenue or margin advantages over not having that level of convergence?

Balan Nair, CEO

Sure. There are a few drivers for the convergence. Clearly, the bundle gives a better ARPC for the average revenue per customer. Secondly, it improves the churn as well. Thirdly, especially in our case where we have a lot of prepaid customers, FMC, this convergence actually moves many of our unpredictable prepaid customers to postpaid, even in some cases, a hybrid postpaid setup. The goal really is to get the customer to stick with us longer, create value through the bundle, have them see or actually experience much better service from us and, theoretically, better value for them. It is working, and it's working very strongly. As Naji pointed out, in Puerto Rico, we started that in the last quarter, and we are seeing not only green shoots but actual growth. Our fixed business had one of its best performances this last quarter, driven significantly by FMC. In Costa Rica, we just acquired the Telefónica asset, and it is working now already with our Cabletica business and Telefonica's business in that combination. We are launching some very innovative products. In Cable & Wireless, our general manager there has introduced really innovative FMC products. We are seeing success as well, moving prepaid to postpaid. That's why we're driving it. Clearly, margin improves, along with predictability of that cash flow.

Operator, Operator

And up next, we'll hear from James Ratcliffe with Evercore ISI.

James Ratcliffe, Analyst

Two, if I could. First of all, on the margin front, I know there's a lot of noise in the data with COVID plus M&A and the like. But can you help us look through that to what the underlying margin trends look like, particularly at Cable & Wireless? And how much more room do you have to run in your cost reduction work there? And secondly, fixed telephony continues to be surprisingly strong. Can you talk about what you're doing with that product? What's the impact in terms of ARPU and churn and what the strategy around it is?

Balan Nair, CEO

So on the cost margins, Cable & Wireless, and my General Manager there, Inge, is on the call as well. I'll ask you to maybe provide some thoughts on the cost reductions that she's taken on. We think there's going to be margin expansion on two fronts. One, on the OpEx side. We've actually also improved on the COGS side. Clearly, as time goes on, even on the CapEx side, we expect a few more points in the combination of all those three cost segments. Inge has done some really good work both at the center as well as in the islands in driving some of the cost reductions. Maybe, Inge, if you want to comment on that?

Inge Smidts, General Manager

Yes. Indeed. James, we look at it line for line, business line or business, we really work through every single aspect of whether it's the OpEx side or whether it's the COGS side and really looking for the return on investment. We really started that work in the last few years, and next year, we will continue and also in the next quarter to drive that piece of time, like Balan said, both in markets and at the center. There is clearly some room to improve that side.

Balan Nair, CEO

Thanks, Inge. And then on your second question on fixed telephony, this is an interesting thing. Clearly, this product is not a super growth product, but we found still a way where customers, through the bundle, via an innovative pricing proposition, are getting our existing customers to add on voice to the service. You can imagine the gross margin on this is close to 100%. We've just taken advantage to drive more and more of it. It's working in some areas. We're not counting on this as a growth driver for our business. While it is in our long-range plan as a driver, when you get it, you take it. We saw an opportunity, and we put our salespeople on it, and we were able to put up some good numbers.

Operator, Operator

And up next, we'll hear from Soomit Datta with New Street Research.

Soomit Datta, Analyst

A couple of questions, please. One, just on Chile, please. You talked about the subsea kind of stabilizing a little bit, but the broadband adds are particularly weak, I think. So we've seen accelerating broadband losses throughout this year. So I just wondered how you thought about the momentum in that business. And again, as a kind of joint question, how do you see the deal you're doing in Chile kind of helping on the fixed side in particular? Is there anything you can do before that deal closes to help the broadband business?

Balan Nair, CEO

Sure. I'll ask Vivek to jump in here in a bit as well. The broadband business there has been all over the map. Our gross adds on broadband are really good. There's some leakage clearly, and that's why the net adds went off. But there are three things that we're doing. One, we're improving our retention on broadband, and we're getting a lot more creative on that as well. Two, as you can imagine, we are repricing a product, and you can see that in our EBITDA. That has also slowed a lot of the churn part of broadband. And third, we are going to re-vector many of our sales teams to focus just specifically on broadband. You'll see some numbers stand on that. Our gross adds are coming in still strong on broadband; it's just the churn level. So we are trying to address the churn part of that broadband proposition. Vivek, would you mind adding a bit more to that?

Vivek Khemka, Executive

Yes, thanks, Balan. Thanks, Soomit, for the question. Yes, I think as Balan said, we are really focusing on the churn side of that equation, which continues to be challenged due to the competitive intensity here. Our competitors are expanding their footprint, and our churn improvement initiatives have led to reductions in technical services, calls, truck rolls, etc. Those should show a lagging effect, and we should see the upside of churn in a while. However, we have been having some record months on gross adds. Given the seasonality, we've seen probably the best growth adds we have done in the last few years on the broadband side, of course, also fueled by some of the new builds we have added into the market. I would say the competitive intensity continues to be difficult, which is reflected in the numbers, but the opportunity for continuing to add broadband subscribers is still there.

Soomit Datta, Analyst

Okay. That's great. And can I follow up, please, just with just a quick question for Chris actually on cash flow? I think the integration costs are coming in a little bit lower this year. Could you just give us a quick update, please, on as we move into 2022, what will the delta be between integration costs this year and next year and also then synergies? What would be the movement to free cash flow from the combination of all those things, please?

Christopher Noyes, Chief Financial Officer

Yes. We are currently working on our plans for next year and the budget process. Regarding the integration in Puerto Rico, we anticipate that the Q4 integration costs will be approximately $10 million, which is a slight increase from our year-to-date figures. This would bring the total integration costs for this year to around $15 million. As of now, we expect that integration costs will be higher next year in 2022. A lot of the foundational work that Naji and the T&I team are undertaking regarding the mobile core and other related efforts will be carried out throughout next year. Therefore, I expect an increase in costs in that area. We will also continue to allocate capital expenditures for integration, which should remain stable next year as well. We will provide more details regarding some of the synergies and our outlook for Puerto Rico when we report in February.

Operator, Operator

And we'll take a follow-up question from Jeffrey Wlodarczak with Pivotal Research Group.

Jeffrey Wlodarczak, Analyst

I had a couple on Chile and this VTR Claro deal, which, given how competitive it's getting, looks like a particularly smart transaction. What are the regulatory milestones we should be looking for? The deal is moving towards getting approved. I guess that's the first question. You're lighting up a lot of two-way enabled homes in Chile right now. Is that something you can modify so you aren't kind of overbuilding your future network? Or is it already kind of built in? And then third, are there any opportunities post-deal to potentially monetize towers or anything like that that we're not aware of?

Balan Nair, CEO

I will address questions two and three, while John Winter, our General Counsel, will handle question one. Regarding our new builds, we are committed to aggressively developing fiber-to-the-home. We cannot coordinate with our partner yet, so we are proceeding independently until the deal is finalized. Nevertheless, we are very optimistic about the new builds. Chris may have mentioned that we are currently in a lockbox situation following the signing, and all expenditure at this stage is related to the joint venture. You had a second question; what was the third question again? Oh, towers. There won't be much activity in towers. You can see what Telesites has achieved in that area. We don't anticipate significant tower activities. While we do own some towers, they are not particularly noteworthy. John, would you like to discuss the regulatory aspect?

John Winter, General Counsel

Yes, sure. Thanks, Balan. We filed with the regulator at the end of last week the formal application process. We had already been working with our partner and the regulator on that. So that got filed formally, which kicks off the Phase 1 process, which will take about 45 to 60 days, maybe 90 days to get through and answer their questions. We do expect that it will go on to a Phase 2, given the competitive environment and everything in Chile. But we feel good about the approval process. We feel good about the advantages this will bring to Chile and the consumers. Eventually, it will get closed. It's just a longer process in Chile, and we're still expecting closing in the second half of next year.

Operator, Operator

And there are no further questions in the queue. I'll turn the call back over to Balan Nair for additional remarks.

Balan Nair, CEO

Thank you, operator. I want to thank you all on the call. To reiterate, we feel good about the quarter. Strong operational growth, organic growth in RGUs, good numbers on postpaid and fixed. I would also say that our new builds; we are really excited about them and continue to do that. We're really leaning into our thesis. The cash flow numbers that Chris talked about are clearly meeting and exceeding guidance on that front. As you pointed out and as well, Jeff, on the call, we made some really smart M&A decisions and transactions that we executed on this last quarter. For all those reasons and more, we remain really bullish about this business and the future for LLA. Thank you so much for your support, and have a great day.

Operator, Operator

And this concludes today's call. We thank you again for your participation, and you may now disconnect.