Liberty Latin America Ltd. (LILA) Earnings Call Transcript & Summary

Yes. Good afternoon, everyone. I'd like to have Liberty Latin America's CEO, Balan Nair, for the very first time here presenting at our conference.

Balan, thank you very much for joining us. I guess, look, maybe just we can get the chance that this is the first presentation. Why don't you tell investors about your equity story, right? So if you can provide like an overview of the business, I think that would be great.

Thanks. Well, thanks for having us, Diego. Perhaps I should -- assuming everybody knows our story well enough to be in this room. Maybe talk about a few points and why we're excited about the business, I'll give you 5 different angles here. The first one, maybe catalyst. What are some of the catalysts to our business? I think I'll probably highlight 3. One -- the first one is we have this joint venture in Chile with our partners, Claro. I think that's a big catalyst for us, and I'll get into the details in a second. Second, synergies. We have a tremendous amount of synergies dropping starting in the fourth quarter of '23 from our AT&T acquisition in Puerto Rico; our Telefonica acquisition in Costa Rica; our Claro acquisition in Panama. Clearly, there's some synergies dropping over from our UTS acquisition in Dutch Caribbean. And then, of course, in Chile, we'll talk about that as well. Second, Puerto Rico. Puerto Rico has been a great business for us. We've doubled down multiple times there. After the hurricane, we doubled down, rebuilt the whole infrastructure in Puerto Rico. We've doubled down by buying the AT&T business in there. It's now a quad-play business. It's essentially us, Claro and T-Mobile in there, 3 great operators, all very pragmatic and very rational. We have more homes to pass there, more upside. We've got a lot of Uniendo funding, a lot FCC. It's really between us and Claro that got a lot of the FCC funding. We've got a lot of good things going on, investments going into that business. And logically, if you think about Puerto Rico, if you NPV the cash flow that we generate there, and it's about a $600-plus million EBITDA business. And if you do the NPV on that, really, it you should come to a number between [ 8/10, 9/10 ] in that business. But let's even say it's 7/10 the value of just Puerto Rico alone. Puerto Rico alone at just 7/10 is worth more than my whole company combined. Essentially, you get Puerto Rico and left over you get the rest of my business for free, Panama, our subsea business, Chile, all the Caribbean islands. It's like insanity. So really, that's the second part about why we're excited about this business. Thirdly, after our transaction in Chile, we are about 75% U.S. dollars. So it's not like a typical Latin America business. We are 75%. And a lot of it -- there's a lot -- in our Subsea business, it's all mostly contractual business -- contractual revenues. So you've got not only U.S. dollars but contractual U.S. dollars as well. Fourth, let me come back to Chile. We are really excited about this joint venture. We are partnering with a great company. Essentially, you have now a business that was all fixed, that's now fixed and mobile. You have tremendous amount of synergies that's coming out of this business. This is so accretive to both sides of that trade, both Claro us. You've got now us both investing in a country that I think is a great country. Chile, a lot of folks are like, why don't you just exit Chile. Chile is a great country. It's just going through a tough period right now. I mean the currency is out of whack, social unrest. They just had the constitutional vote, which suggests that most people in Chile are very rational because they got rejected. And so we think the future of Chile is really bright, and we want to be in Chile. We think this business, this joint venture with us and Claro will have tremendous upside if not captured today. I think in 3 years, people are going to be surprised. The amount of synergies that's in it. And fourthly, I'd say in Chile as well, this consolidation is good. This is just the beginning of the consolidation between us and Claro and I think there will be more coming in. You can see publicly, Intel has put the [ FI ] business for sale. I think some of the other folks that relied on very low-cost funding are going to be in for a surprise. And so I think in 3 years, Chile is going to be a lot different than it is today, and we'll be in there. And like I said, we've got a great partner. And then fifth, I'd say I break my business out into 2 buckets. One, our high-growth business. It's a high single-digit, low double-digit growth and stabilized business, stabilize -- let me start with the stabilized business. Stabilized business is like you can -- really if I lump them all together, it's like an infrastructure business. These are businesses like in St. Lucia, St. Kitts, Grenada, a lot of the Caribbean islands that are not going to grow very much like 2% growth, 2%, 3% growth in [ St. Lucia ], all these small islands, it's just like there's no population growth. So it's not going to grow much, but it doesn't require a lot of capital. It's all duopolies, and it generates a ton of cash. So you've got this whole bucket of businesses. Then we've got a whole bunch of pretty high growth business and that's in Panama, Costa Rica, Jamaica, Cayman, Bahamas, Puerto Rico and in 3 years, you'd say Chile would be in there as well. But for sure, now we've got -- and by the way, our LatAm B2B business, these are B2B [ attacker ] businesses where we go in B2B without any consumer business in there. So we've got a lot of that upside as well. So you look at these 5 things, it really differentiates our company dramatically, and that's why we're excited about it. But clearly, there's a disconnect right now and a huge dislocation in our price versus where we think the value should be which is why Chris, our CFO, and I are aggressively buying back stock. John Malone, always tells me dislocation, sometimes is not a bad thing. You take advantage of it. And -- so that's where we're at today.

That's super helpful, Balan. Thank you for these. So look, let's explore a little bit more about Chile, right? Because you have been facing, let's say, growing competition on the fixed side, there are like some newcomers coming with pure FTTH approach, you had to cut your price significantly early this year. So why don't you tell us what's going on in the competitive landscape, what you can do organically? And then if we can touch on the potential JV with America Movil, what can change how this business can change your position in Chile?

Sure. Chile has been our best business for the longest time. Things started to go south in October of 2019 when the social unrest happened. I mean, this place has never had any problems since Pinochet share then suddenly in 2019, you have millions of people on the street, some of our stores getting burned down. And that was the beginning of some changes. Then 4 months later, of course, COVID hit, and you ran some issues. The challenge for us in Chile is structural. There's 2 parts to the structural issue. One aspect, the social unrest, the peso dropped dramatically from about, let's say, [ 600 ] to today it's about [ 900 ]. It touched the [1,000 ] recently. And that's been -- so that's one challenge. So essentially, you look at a $300 million EBITDA business, and you lose about 30-some percent currency in U.S. dollars at least, there's some quite a bit of bleeding there in U.S. dollars, non-local currency. And then secondly, we are the largest broadband market holder. We today we have 31% market share in broadband. That's a good and bad thing. The good thing is you have 31%. The best thing is when the 6 operators, there's only one fishing pool to get from and you have 31%. So we've held that 31% at a significant cost to us. Essentially, what we've done is we've just taken price reductions all across the board and to hold market share. So we can do 1 or 2 things, give up market share and keep our high ARPU or give up ARPU and hold market share. We've chosen the latter. And it comes with 2 problems. One, you have a back book issue because we have a back book that's quite a bit higher than our front book, so that eventually has to come down. So you see then that's the bleeding on the EBITDA. And secondly, you distract your team because your team is like constantly playing defense on that. Now I'll tell you this. People say infrastructure and all that, that's all just [ BS ]. In March and April, I decided, together with my team, to take our prices down to just to be at -- not the lowest, but close to the lowest. And so we were about the same price as where Intel in their promotion. We are -- Claro, actually slightly higher than Claro's price. Just slightly higher than Telefonica's price. And it was our best month, just in the month of March, when we just took that price down, we grew 100,000 RGUs in 1 month. And now many would ask us, and even my partners, Claro would ask us, why did you then take the price up if you were having such a big success. And the answer is mostly because you have a spin-down effect of your base. We were quite surprised that the spin down from the base that hit our bottom line was more than what we had budgeted for. So what we said was, yes, here's we're going to do. We'll take the price back up. We'll get the JV done, the synergies on the JV, of course, together with our partner with the new CEO, and I'll talk about him in a second, we can then decide what our business plan is going forward. But clearly, we've proven the model. But I want to play the price game. We'll play the price game and then suddenly, you can start growing, but it's going to be very destructive to the whole market. And so you have to decide how much of the market you want to take down with you on that. Now lastly, we just announced -- we didn't announce it, but we made an internal announcement, but Intel had announced it internally and my partners in Claro had announced it internally as well. We just picked up by all the local papers that we are bringing Alfredo Parot who is from Intel. I couldn't be more excited about him joining us -- join us -- join the JV once the deal is approved, but Claro had hired him to be the CEO of Claro Chile, a super smart move. My partner, Daniel, and the folks at Claro did some really good work on that, credit to them. They brought Alfredo's name to me and I looked at him, we flew into Denver. We met with them. We got excited about him right away. And so they made the hire. And when the JV is approved, he'll become the CEO of the joint company, tremendous guy. And so we think the future in Chile is bright. The countries, the currencies will get better, the people are rational. We think consolidation -- we started the consolidation with this deal with Claro. We think there's more consolidation to happen there, and then you bring rationality. And today, there's no pricing power for anybody in the market. At some point in the future, that may come back. And if that comes back, this thing is just going to pop.

You mentioned about like further consolidation in Chile, which is something, by the way, that I truly agree that makes a lot of sense because Chile has been a very competitive market. If we think about LatAm, it's probably the most competitive market we have in the region. So would you participate in any further consolidation? And I guess the question is how the regulator would eventually view, let's say, the consolidation either like on the mobile side or on the fixed side?

Certainly, going forward, I can no longer make those decisions by myself. I have a partner now, and we'll just jointly make the decisions. But I think we would both be like-minded in trying to consolidate. I think it will be harder to consolidate on the mobile side than the fixed side. And -- but on the fixed side, I think there should be room for consolidation, more partnerships, there's a lot of infrastructure players there. One of the things we can decide to do is, I mean, between these 2 very deep-pocketed parents, we can just literally build out fiber to every home pass in a very short period of time, we choose to do that or we may choose to partner with another fiber infrastructure company to use their network --- the options are limitless to us. And that's why -- that's really why we're really excited about this partnership.

Interesting.

We're bullish in Chile. I certainly I am. I think my partner is to -- I'm pretty sure because if they weren't, they would have just sold us the business.

Well, we are looking to them. So here we go. And hopefully, they are excited as well. But look, maybe just a final question on Chile because we've been seeing like some new flow regarding like political change. Any implication from what's going on in Chile right now for the business or for the industry that we should be aware of?

No, we were happy that the -- I got to be careful I say it. Anyways, the constitution reform got turned down, it shows pragmatism in the citizens of Chile. Another reason why we're so bullish in the country. I think consolidation is going to be a positive. I think the currency is going to eventually improve once things stabilize, commodities are doing really well. Copper will come back, lithium, I guess, you can talk to anybody from Elon Musk down, lithium is becoming more and more rare and it's more and more valuable. Chile is sitting on tons of deposits. Yes, the country has got -- unlike any other country in Latin America, quite bullish and we spend billions of dollars of capital in there. My partners spend billions of dollars in capital in there, both of us want to make it work. Synergies -- did I tell you the synergies -- publicly said $180 million plus a year. I tell you, we're going to [ blow pass ] the NPV that synergies is $1 billion plus synergies, that funds a lot of things. Just the synergies alone, we can build fiber 20 times over in Chile. Just on the synergies. We don't even have to raise capital between the 2 partners. This thing, we are just sitting really well. John Malone told me when we partnered with Claro, what -- it's worth and I mentioned this to Daniel as well, we're dealing with A team here. This is 2 A teams coming together. It's going to be quite magical.

In this scenario where VTR and Claro, they consolidate themselves, how should we be thinking about like the leverage, right? Because I was just trying to do the math like at a consolidated level, I think you should be probably in the range of 5 to 5.5x, right? Again, maybe just some numbers. So how should we be thinking about, let's say, the trends and the overall progress for your leveraging there.

Sure. There's 2 parts to it. One, we're going to naturally delever. We talked about the synergy numbers. I mean, we're going to just naturally delever, and that's within 24 months or so. Secondly, the way Liberty works, there's a lot of secret sauce through this, but they're not really. I mean it's just all common sense stuff. But we are very disciplined on our debt in 2 parts. One, we silo everything on that debt. So there's no cost contamination. John, being a nautical person, this is bulkheads on each one of our debt. So everything is siloed correctly. Secondly, unlike anybody else, we hedge everything. We have very hardly any exposure on our debt at all, currency-wise or even rate-wise. And so between the two of that, when you look at Chile, and we just talked about the currencies. We are sitting on some significant derivative value here. I mean, pretty significant. In the second quarter, we kind of hinted -- we mentioned that we monetized some of that, gave a number to it. Let's just say that that's not all of it. So we're still sitting on a ton together with our partners. Once the JV is closed, we can decide what to do with that. So we're bringing in a lot of value into the transaction, just those derivative values alone delevers things quite a bit, whether debt's trading. We think it's -- that's not going to be an issue for either company. We have no covenants on the debt either. They are long-term debts so really -- if you look at the term of the debt, and I'll talk about LLA in general, but certainly it applies to Chile. We have really no debt exposure until '27, '28. We have that one convert sitting out there in '24. But really, we have no debt exposure. Everything is hedged. We're sitting pretty good in Chile, like I said, the derivatives are so much in the money right now, all the swaps, together between Chris and Carlos, if they decide to snap the finger, that's a few hundred million.

Yes. Good. So maybe let's shift gears here to talk about Panama, right, which is a quite interesting market for you. Just concluded the transaction to buy Claro's operation in that market. We also had Digicel announcing that they could likely exit this market, right, because of the very strong position that both Liberty and Millicom are enjoying in this market. So what can you tell us about Panama at this moment? And how should we be thinking about your progress in there?

We really like the Panama market. One is all U.S. dollars. Two, on the fixed side, there's 2 operators. On the mobile side, there was 4 now down to 3. And the third operator, it's under receivership or I don't even know what the right word. The government is really running it for them. Clearly, they were not happy with this when we did the Claro announcement because Digicel thought we were the right bias for their asset, and there's a law in Panama that prevents it from going to 3 to 2. So really, the strategic options are quite limited once we announced the Claro deal. That deal that we closed about 1.5 months, 2 months ago. And it's one where many people have challenges to be paid too much for it. This is -- we do our math correctly. And the business came to us in a way where there's some things that were -- like all transactions, you get surprised by a few things. But there's nothing there that we too terribly are worried about. The synergies are quite good. It will turn out to be a good transaction for us. We've always said publicly that when we do M&A, it's just one part of all the things that we do. In M&A for us, getting bigger is not our goal, making money is our goal. And we don't buy bad assets. We're not fixing up guys. We are good operators. We operate really well. But we don't buy bad businesses and think we're geniuses that can send them around. We're just good operators. We buy good businesses and just make them slightly better with scale and some of our operating secret sauce. The Panama Claro business, it's a good business. And so we bought it, the synergies are going to be great, combining it would be really good, and we're down to 2 fixed operators, 3 mobile operators, all U.S. dollars. We have quite a good partner in the government. We like Panama. Yes.

Sounds interesting, I guess. And maybe just remind me, you were targeting roughly $70 million of synergies, right?

OpEx and CapEx.

Yes, its OpEx and CapEx. How long it should take for you to get there?

Usually, it's about 24 months for us to get synergies because there's some dissynergies in the beginning, you got invest on some part especially on IT, et cetera. In this case, the government put us -- put a remedy on us that don't allow us to combine stores or commercials until like first quarter of next year. And so essentially, I've got a Claro store and my Más Móvil store right next to each other, and I can't shut down 1 of the 2 of them for another 7 months or so, 6, 7 months -- another 6 months. But eventually, I can. I've got 2 headquarters, eventually I'll be one. I've got thousands of towers, they've got thousands of towers. We're going to combine it. I don't need 3,500 towers. So all that will come to us, just be patient. We have a very methodical way of how we do integration, and it's a playbook we applied many times here.

You mentioned OpEx and CapEx. Is there anything on the revenue side that could eventually, let's say, boost this number?

I think on the revenue side, it comes from what eventually happens to Digicel. Right now, both companies, Millicom NS and [ TIGO NS ] are picking that off. And I think we'll see what happens there. the government is so inclined, we would love to make it a 2-player market in mobile as well.

This will definitely increase your pricing power significantly, right?

It would, but let me tell you one thing that we do in our company. We don't take price increases in our company. I give a lot of latitude to all my operating managers, but there is one operating -- there's many, few, but this one, everybody knows is you want to take a price increase, you need my permission, and I don't approve price increases. We want to run our business not by taking price increases. And I say that in the context of price increases make you lazy. People that put in their budget like growth and will take this price increase. I mean, I tell my managers, you want to grow revenue by taking price increase that skill set, I can find very easily. I mean even a high school kid can come in and tell me how to grow revenue by taking price increase. Growing revenue by volume and by controlling your cost, growing your margins with controlling our costs, that's a lot harder. And that's the kind of managers I look for, and that's how we run our businesses. So no, there will come a time in some years ahead, I may take a price increase, but we haven't done in the last couple of years. We don't see any price increases.

Even in a high inflationary environment?

You just have to manage your costs. You become a better manager that way.

That makes sense. And maybe just to make sure that we touched on both Puerto Rico and Costa Rica. As you mentioned, the opportunities you have after the acquisition of AT&T in Puerto Rico and Telefonica in Costa Rica. So let's start with Puerto Rico. What is the situation there, how the business is progressing so far?

It's a good business -- great business, actually, I think for all 3 participants in the market. There's really 2 quarterly players there. Claro and us and then you've got T-Mobile. T-Mobile is a fierce competitor. Make no mistake. And so we compete with 2 of the best. It makes you sharper. I mean Claro is a hugely successful company. T-Mobile is a hugely successful company. So you just got to up your game every day. And I've got a good management team on the ground. It's one that Chris and I spend a lot of time on -- we spend a lot of time on all of our businesses, but this one special for a couple of reasons. One, it's a pure-play U.S. business. We've doubled down, like I said, twice, one with rebuilding that whole market after Hurricane Maria, Irma, and secondly, buying AT&T. Third, we have this small little business today in U.S., virgin Islands that came with the AT&T acquisition. We announced that in 36 months, I will fiber to every home in U.S. Virgin Island. It will be one of the few places in the world where you're 100% fiber. And so how do we do that? And all of it we -- the U.S. government through the FCC had this funding program on Mainland to bring broadband to rural America. In Puerto Rico and U.S. Virgin Islands, they called it Uniendo. And in Puerto Rico, the Uniendo funding was really split between us and Claro. And both of us are building and upgrading. In U.S. Virgin Island, we won 100% of it. All the Uniendo funding in U.S. Virgin Islands we got and we're putting it to good work. And so we're really bullish on that. That thing is going to explode in the next 36 months as well in such a positive way. So in many ways, between the union of funding, the upside of more homes that we can pass. We have a great network in there. We've got quad-play, the AT&T business, our business. We've got the synergies coming in. We've got a very rational market. Yes, very little to not like about Puerto Rico.

I want to touch on...

It's all U.S. dollars. Yes, it's all U.S. dollars.

I want to touch on CapEx later, but I'm very curious about the unit economics of these 2 projects you have. So what is the cost for you to put like fiber on the ground like with FTTH approach in Puerto Rico and the U.S. organized.

So it is much more expensive. Good news, bad news. The good news is it much more expensive because we build some more. It's not like Chile or any of the other places in Latin America where you can aerial connect and you can build homes, fiber it's under $100 at home pass. In Puerto Rico, it's very expensive. One, all the poles are owned by either Claro or the power company or us and really hard to attach to and most -- lot of underground, and it's really hard to dig in San Juan with the old places. And so the cost there is not much different than the United States. And it's -- aerial is very expensive 3x, underground is even more expensive. And you don't have much labor in that. So you have to fly in people from Mainland to come build. And it's only 3 million homes -- I'm sorry, 3 million people, 1.1 million homes. So there's not much. It's not like some of these other places, right, in Colombia, where you've got 60 million, 70 million people of Peru or something like that. So the [ bear of entry ] is pretty high. And so we are spending most of our capital on 3.1 and fiber to new areas and fiber upgrades in San Juan. And so what's the return on that? Well, I'll tell you, it's a lot better than the government funds and provides you funding to do that with.

Yes. Interesting. Thank you, Balan. I guess moving on to the Subsea business. I mean, we saw some news flow in the past, suggesting that you can analyze, let's say, some strategic options for this business, right? So what is the status in there? Are you considering either monetizing this asset or bringing, onboarding a new partner that could eventually better evaluate these assets. So how should we think about the subsea business?

This is one that's really tormented me for a while. I'll say my Board is mostly on the page of why are you even thinking about selling this business? It's a huge cash-generative business, long-term contracts. We, ourselves, so we have about 25% of the revenue in that business ourselves. So a lot of intercompany transfers. We sell it, we provide immediately 25% guarantee. The next largest customer is about 5%, all U.S. dollars, long-term contracts. Great network, the only resilient network in the market, but it generates a ton of cash and it's cash that we love. It funds a lot of -- we are levered equity model. So you always -- every levered equity model business needs 1 machine that's like good and bad, dark days, bright days just the cash just keeps coming, and this is our business. So I hate to sell it. As a matter of fact, when I talk to buyers, I sometimes even try to talk them out and bidding into it so that I can hang on to it. But we did test the market because a couple of my board members did ask me to test the market on that. And I said, "Sure, we ought to," but we get the math behind it, and it's a very high bar for me to want to sell this. Now fortunate and unfortunately, when we did put it out to market, we had at least a couple of bidders that hit the bar. One, we were -- I mean it's a fact that we said show up with the money, and we can talk. The second one, I think, I want to do it, but the debt market closed down on them because they were going to lever it up. They would say to me that, hey, give me another 10 more months, and we're like, well, when you get the cash show up. I mean in John Malone's words Liberty worked everything for sale. You come back at the same number you just gave me, yes, we'll transact, but I'm not holding my breath and none neither -- I love that business, and hopefully, they don't come back. But if they come back at the same number, yes, we'll sell the business. But in the meantime, what I've done is I put a new General Manager over the business, a good friend of mine, and Ray Collins, he's now my Senior Vice President of Infrastructure, and he's going to run that business. And a lot of the strategic things we were contemplating with this buyer, we would just do it ourselves. It doesn't require a huge amount of capital and the upside is great. We've been running it for cash, by the way, for the last 4 years. And so the next 4 years, we'll probably run it just slightly differently. And we're really quite bullish on it, quite bullish on it.

Can you remind the unit economics of this business? Is there anything that you can share with us?

Let's put it this way. It's about if you really take a lot of the IRUs and all that out of there. It's in the $230 million range of EBITDA, very low CapEx, most of it dropped to the free cash flow line. It's made up of 2 businesses, the Subsea business and the [ attacker ] LatAm B2B business. And most of the capital actually goes to the [ attacker ] LatAm B2B business. And that's in Dominican Republic, Colombia, Guatemala, Honduras, El Salvador and it's lots of upside, it's small. So everything in Colombia, we're only like $60 million in revenues. That's really small, easy to go -- get a 100% growth there to $100 million. It's really good.

And maybe talking about like the B2B business that you mentioned, I mean, what is the outlook for this? How fast do you believe this business can grow in the coming 3 to 5 years?

B2B is a great segment for us. We break it down to 4 categories: B2B, that's an incumbent B2B. We have a lot of telco-like businesses that's incumbent. So it's a lot of defense/offense in there because we own a lot of the government contracts, et cetera. Second, we have B2B that's new entrant. That's the B2B LatAm. We're going into markets where we have no consumer business. Third, we have B2B where we are the cable company. Cable companies didn't invest much in B2B, so there's a lot outside on B2B there. And then fourthly, our wholesale B2B, the Subsea business, which is doing great. And all 4 of them have positive growth stories behind them. So we are quite happy with that.

Which one of them is growing faster?

The fastest is the LatAm B2B [ attacker ] business.

Yes.

But it's also the smallest number, so the denominator is small. So clearly, sometimes when you have a $10 business, going to $20, it's a lot easier than if you have a $1 billion business going to $2 billion. So don't mistake the percentage growth with the overall contribution growth.

Yes. Understood. And this is interesting because one of the key questions we get from investors is regarding the potential for you to consider and evaluate some cross-border M&A, right? So you mentioned that the B2B business is going to new markets for you, right, where you do not operate as a B2C company. So what can you tell us about cross-border M&A for you.

They all just -- on the B2B side, they're all just small businesses, and we're quite happy with that. We are not willing to put in big capital on that. Nor do I think it's necessary. It's not -- we never make an all-in bet on the B2B front. On other M&A, I'd say it will be opportunistic, but most of the M&A that we want to do, we've done. we Wanted to bolster Puerto Rico and get a mobile business there. We did that. We wanted to get a mobile business in Costa Rica, we did that. Claro in Panama, that was opportunistic for us. The opportunity came. We had a good counterparty there. So we said, let's do that. The joint venture in Chile, I think that's hugely accretive, we did that. I don't see us wanting to do more unless something comes in front of us that's really accretive. We do it, but I'll tell you this. It's going to be really hard to be more accretive than my stock today. I mean, its insanity, I just told you -- just Puerto Rico alone is worth more than my whole company. So it's really hard to compete with my buyback. We're just good capital allocators. We've been not like married to anything. We just move capital to its most valuable and best return. I mean, people ask us, even in Chile, does that require a lot more capital. Like in Chile, if the management team comes to us and say, we can grow the business. And we can do all these different things, and we look at the IRRs and that if it's better than my stock buyback or better than anywhere else I can deploy capital, we do it. If it's not, we won't. There's no need to -- we just put money to work. And right now, it's really hard to beat the IRRs on my stock buyback.

I Agree. Although there are like several other companies that are trading at a very, let's say, low multiples at this time, right?

Not so relevant. Everybody is whatever they trade. And everybody -- a lot of people say they sell it, but then they put a price up, they really not sell it in those prices. Everybody -- and there's no harm, no foul. I mean, we would value ourselves somewhat higher than where we trade as well. But yes, I don't see anything distressed in Latin America where anybody needs to leave at one point, Telefonica wanted to really leave, but I think they've got a new run of love for the region. I don't think they should -- they may be -- they'll leave. But we're not look -- let me state again, we're not interested in getting bigger, we're just interested in making money. So it's just because somebody is for sale doesn't mean we want to buy them. Usually, for the numbers to work for us, it probably won't work for the seller.

Yes. No, that makes sense. And I guess just to make sure that we can touch on these. I mean, your leverage is right now slightly above 4x, if I'm not mistaken. So what are the goals in here? I mean if I would think about everything that is going on with Chile, Puerto Rico, Costa Rica, Panama. So plan of synergies for you to enjoy in this market. So what is the process here in terms of deleverage, right? And what is your goal in there?

From a capital allocation, we can buy back stock and pay down debt, give out dividends fund internal projects, go buy another company, let's say, those are the 5 choices I have. In rank order, dividend would be the last that we do. Second last would be paying down debts. Third last would be buying another company. Fourth would be internal projects and then the best thing right now is buyback. Now why did I put dividend and debt pay down last. Dividend, I think -- we think is highly inefficient. Debt pay down, we'll just naturally delever based on our long-range plan and our internal. We're going to just naturally delever. Most of our debt is not due until '27, '28. We have that convert, which we'll probably take care of that in '24, which is relatively small. It's not a big deal to us. But '27, '28, we'll deal with it. By the time we get to '27 I mean our leverage ratio will be significantly lower than where we are. Now we may decide to recap, Chris and I, if we -- if the rates become favorable again, we may recap and buy back more stock or may recap and do something with it. But if the rates remained high and the cost of money remains high, we'll just naturally delever. Yes. I think the options in front of us are pretty good. I mean the goal -- primary goal is we got to operate well and generate the cash that we guided to. A good number this year. We had to reduce it because of the Claro Panama acquisition that -- based on the numbers we saw after the acquisition, we adjusted our guidance down by $30 million, but that's just a onetime thing. We will adjust it and we'll get the synergies. It's just delays things a little bit. That's all. It's fine for us. Next year, we're going to guide to the number. I think people will like and then I think every guidance of free cash flow from here on, people are just going to like it. And yes, I think it's been good. Good in that, I guess.

Yes. Okay. No, look, I guess we are running out of time. Balan, thank you so much for joining us today.

Thank you for having me.

It's been great.